[Congressional Record Volume 140, Number 61 (Tuesday, May 17, 1994)]
[House]
[Page H]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
[Congressional Record: May 17, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]
TAX SIMPLIFICATION AND TECHNICAL CORRECTIONS ACT OF 1993
Mr. ROSTENKOWSKI. Mr. Speaker, I move to suspend the rules and pass
the bill (H.R. 3419) to simplify certain provisions of the Internal
Revenue Code of 1986, and for other purposes, as amended.
The Clerk read as follows:
H.R. 3419
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE, ETC.
(a) Short Title.--This Act may be cited as the ``Tax
Simplification and Technical Corrections Act of 1993''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is
expressed in terms of an amendment to, or repeal of, a
section or other provision, the reference shall be considered
to be made to a section or other provision of the Internal
Revenue Code of 1986.
(c) Table of Contents.--
Sec. 1. Short title, etc.
TITLE I--PROVISIONS RELATING TO INDIVIDUALS
Subtitle A--Provisions Relating to Rollover of Gain on Sale of
Principal Residence
Sec. 101. Multiple sales within rollover period.
Sec. 102. Special rules in case of divorce.
Subtitle B--Other Provisions
Sec. 111. De minimis exception to passive loss rules.
Sec. 112. Payment of tax by credit card.
Sec. 113. Modifications to election to include child's income on
parent's return.
Sec. 114. Simplified foreign tax credit limitation for individuals.
Sec. 115. Treatment of personal transactions by individuals under
foreign currency rules.
Sec. 116. Expanded access to simplified income tax returns.
Sec. 117. Treatment of certain reimbursed expenses of rural mail
carriers.
Sec. 118. Exclusion of combat pay from withholding limited to amount
excludable from gross income.
TITLE II--PENSION SIMPLIFICATION
Subtitle A--Simplified Distribution Rules
Sec. 201. Repeal of 5-year income averaging for lump-sum distributions.
Sec. 202. Repeal of $5,000 exclusion of employees' death benefits.
Sec. 203. Simplified method for taxing annuity distributions under
certain employer plans.
Sec. 204. Required distributions.
Subtitle B--Increased Access to Pension Plans
Sec. 211. Modifications of simplified employee pensions.
Sec. 212. Tax exempt organizations eligible under section 401(k).
Sec. 213. Duties of sponsors of certain prototype plans.
Subtitle C--Nondiscrimination Provisions
Sec. 221. Definition of highly compensated employees.
Sec. 222. Modification of additional participation requirements.
Sec. 223. Nondiscrimination rules for qualified cash or deferred
arrangements and matching contributions.
Subtitle D--Miscellaneous Simplification
Sec. 231. Treatment of leased employees.
Sec. 232. Modifications of cost-of-living adjustments.
Sec. 233. Plans covering self-employed individuals.
Sec. 234. Elimination of special vesting rule for multiemployer plans.
Sec. 235. Full-funding limitation of multiemployer plans.
Sec. 236. Alternative full-funding limitation.
Sec. 237. Distributions under rural cooperative plans.
Sec. 238. Treatment of governmental plans under section 415.
Sec. 239. Uniform retirement age.
Sec. 240. Uniform penalty provisions to apply to certain pension
reporting requirements.
Sec. 241. Contributions on behalf of disabled employees.
Sec. 242. Special rules for plans covering pilots.
Sec. 243. Treatment of deferred compensation plans of State and local
governments and tax-exempt organizations.
Sec. 244. Treatment of employer reversions required by contract to be
paid to the United States.
Sec. 245. Continuation health coverage for employees of failed
financial institutions.
Sec. 246. Date for adoption of plan amendments.
TITLE III--TREATMENT OF LARGE PARTNERSHIPS
Subtitle A--General Provisions
Sec. 301. Simplified flow-through for large partnerships.
Sec. 302. Simplified audit procedures for large partnerships.
Sec. 303. Due date for furnishing information to partners of large
partnerships.
Sec. 304. Returns may be required on magnetic media.
Sec. 305. Treatment of partnership items of individual retirement
accounts.
Sec. 306. Effective date.
Subtitle B--Provisions Related to TEFRA Partnership Proceedings
Sec. 311. Treatment of partnership items in deficiency proceedings.
Sec. 312. Partnership return to be determinative of audit procedures to
be followed.
Sec. 313. Provisions relating to statute of limitations.
Sec. 314. Expansion of small partnership exception.
Sec. 315. Exclusion of partial settlements from 1 year limitation on
assessment.
Sec. 316. Extension of time for filing a request for administrative
adjustment.
Sec. 317. Availability of innocent spouse relief in context of
partnership proceedings.
Sec. 318. Determination of penalties at partnership level.
Sec. 319. Provisions relating to court jurisdiction, etc.
Sec. 320. Treatment of premature petitions filed by notice partners or
5-percent groups.
Sec. 321. Bonds in case of appeals from TEFRA proceeding.
Sec. 322. Suspension of interest where delay in computational
adjustment resulting from TEFRA settlements.
Sec. 323. Special rules for administrative adjustment requests with
respect to bad debts or worthless securities.
TITLE IV--FOREIGN PROVISIONS
Subtitle A--Simplification of Treatment of Passive Foreign Corporations
Sec. 401. Repeal of foreign personal holding company rules and foreign
investment company rules.
Sec. 402. Replacement for passive foreign investment company rules.
Sec. 403. Technical and conforming amendments.
Sec. 404. Effective date.
Subtitle B--Treatment of Controlled Foreign Corporations
Sec. 411. Gain on certain stock sales by controlled foreign
corporations treated as dividends.
Sec. 412. Miscellaneous modifications to subpart F.
Sec. 413. Indirect foreign tax credit allowed for certain lower tier
companies.
Subtitle C--Other Provisions
Sec. 421. Exchange rate used in translating foreign taxes.
Sec. 422. Election to use simplified section 904 limitation for
alternative minimum tax.
Sec. 423. Modification of section 1491.
Sec. 424. Modification of section 367(b).
TITLE V--OTHER INCOME TAX PROVISIONS
Subtitle A--Provisions Relating to Subchapter S Corporations
Sec. 501. Authority to validate certain invalid elections.
Sec. 502. Treatment of distributions during loss years.
Sec. 503. Electing small business trusts.
Sec. 504. Other modifications.
Subtitle B--Accounting Provision
Sec. 511. Modifications to look-back method for long-term contracts.
Subtitle C--Provisions Relating to Regulated Investment Companies
Sec. 521. Repeal of 30-percent gross income limitation.
Sec. 522. Basis rules for shares in open-end regulated investment
companies.
Sec. 523. Nonrecognition treatment for certain transfers by common
trust funds to regulated investment companies.
Subtitle D--Tax-Exempt Bond Provisions
Sec. 531. Repeal of $100,000 limitation on unspent proceeds under 1-
year exception from rebate.
Sec. 532. Exception from rebate for earnings on bona fide debt service
fund under construction bond rules.
Sec. 533. Repeal of debt service-based limitation on investment in
certain nonpurpose investments.
Sec. 534. Repeal of expired provisions.
Sec. 535. Clarification of investment-type property.
Sec. 536. Effective dates.
Subtitle E--Insurance Provisions
Sec. 541. Treatment of certain insurance contracts on retired lives.
Sec. 542. Treatment of modified guaranteed contracts.
Subtitle F--Other Provisions
Sec. 551. Closing of partnership taxable year with respect to deceased
partner, etc.
Sec. 552. Modification of credit for producing fuel from a
nonconventional source.
TITLE VI--ESTATE AND GIFT TAX PROVISIONS
Sec. 601. Clarification of waiver of certain rights of recovery.
Sec. 602. Adjustments for gifts within 3 years of decedent's death.
Sec. 603. Clarification of qualified terminable interest rules.
Sec. 604. Transitional rule under section 2056A.
Sec. 605. Opportunity to correct certain failures under section 2032A.
TITLE VII--EXCISE TAX SIMPLIFICATION
Subtitle A--Provisions Related to Distilled Spirits, Wines, and Beer
Sec. 701. Credit or refund for imported bottled distilled spirits
returned to distilled spirits plant.
Sec. 702. Authority to cancel or credit export bonds without submission
of records.
Sec. 703. Repeal of required maintenance of records on premises of
distilled spirits plant.
Sec. 704. Fermented material from any brewery may be received at a
distilled spirits plant.
Sec. 705. Repeal of requirement for wholesale dealers in liquors to
post sign.
Sec. 706. Refund of tax to wine returned to bond not limited to
unmerchantable wine.
Sec. 707. Use of additional ameliorating material in certain wines.
Sec. 708. Domestically produced beer may be withdrawn free of tax for
use of foreign embassies, legations, etc.
Sec. 709. Beer may be withdrawn free of tax for destruction.
Sec. 710. Authority to allow drawback on exported beer without
submission of records.
Sec. 711. Transfer to brewery of beer imported in bulk without payment
of tax.
Subtitle B--Other Excise Tax Provisions
Sec. 721. Authority to grant exemptions from registration requirements.
Sec. 722. Repeal of expired provisions.
TITLE VIII--ADMINISTRATIVE PROVISIONS
Subtitle A--General Provisions
Sec. 801. Use of reproductions of returns stored in digital image
format.
Sec. 802. Repeal of authority to disclose whether prospective juror has
been audited.
Sec. 803. Repeal of special audit provisions for subchapter S items.
Sec. 804. Clarification of statute of limitations.
Sec. 805. Certain notices disregarded under provision increasing
interest rate on large corporate underpayments.
Subtitle B--Tax Court Procedures
Sec. 811. Overpayment determinations of Tax Court.
Sec. 812. Awarding of administrative costs.
Sec. 813. Redetermination of interest pursuant to motion.
Sec. 814. Application of net worth requirement for awards of litigation
costs.
Subtitle C--Authority for Certain Cooperative Agreements
Sec. 821. Cooperative agreements with State tax authorities.
Subtitle D--Administrative Practice and Procedural Simplification
Sec. 831. Notification of reasons for termination or denial of
installment agreements.
Sec. 832. Joint return may be made after separate returns without full
payment of tax.
Sec. 833. Offers-in-compromise.
Sec. 834. Preliminary notice requirement.
Sec. 835. Penalties under section 6672.
Sec. 836. Required content of certain notices.
Sec. 837. Required notice of certain payments.
Sec. 838. Improved procedures for notifying Service of change of
address or name.
Sec. 839. Rights and responsibilities of divorced individuals.
TITLE IX--FINANCING PROVISIONS
Sec. 901. Certain amounts derived from foreign corporations treated as
unrelated business taxable income.
Sec. 902. Special rules for rental use of dwelling for less than 15
days per year.
Sec. 903. Loss carryovers and carrybacks not excluded in applying
taxable income limitation on certain reserve deductions.
Sec. 904. Extension of withholding to certain gambling winnings.
TITLE X--TECHNICAL CORRECTIONS
Subtitle A--Revenue Provisions
Sec. 1001. Amendments related to Revenue Reconciliation Act of 1990.
Sec. 1002. Amendments related to Revenue Reconciliation Act of 1993.
Sec. 1003. Miscellaneous provisions.
Subtitle B--Income Security and Human Resource Amendments
Part I--Amendments Relating to Old-age, Survivors, and Disability
Insurance Program
Sec. 1011. Technical corrections related to OASDI in the Omnibus Budget
Reconciliation Act of 1990.
Sec. 1012. Elimination of rounding distortion in the calculation of the
old-age, survivors, and disability insurance contribution
and benefit base and the earnings test exempt amounts.
Part II--Human Resources Provisions
Sec. 1016. Corrections related to the income security and human
resources provisions of the Omnibus Budget Reconciliation
Act of 1990.
Sec. 1017. Technical corrections related to the human resource and
income security provisions of Omnibus Budget
Reconciliation Act of 1989.
Sec. 1018. Elimination of obsolete provisions relating to treatment of
the earned income tax credit.
Sec. 1019. Redesignation of certain provisions.
Subtitle C--Tariff and Customs
Sec. 1021. Technical amendments to the Harmonized Tariff Schedule of
the United States.
Sec. 1022. Clarification regarding the application of customs user
fees.
Sec. 1023. Technical amendments to the Omnibus Trade and
Competitiveness Act of 1988.
Sec. 1024. Technical amendment to the Customs and Trade Act of 1990.
Sec. 1025. Technical amendments regarding certain beneficiary
countries.
Sec. 1026. Clarification of fees for certain customs services.
Sec. 1027. Conforming amendment to section 337 of the Tariff Act of
1930.
TITLE I--PROVISIONS RELATING TO INDIVIDUALS
Subtitle A--Provisions Relating to Rollover of Gain on Sale of
Principal Residence
SEC. 101. MULTIPLE SALES WITHIN ROLLOVER PERIOD.
(a) General Rule.--
(1) Section 1034 (relating to rollover of gain on sale of
principal residence) is amended by striking subsection (d).
(2) Paragraph (4) of section 1034(c) is amended to read as
follows:
``(4) If the taxpayer, during the period described in
subsection (a), purchases more than 1 residence which is used
by him as his principal residence at some time within 2 years
after the date of the sale of the old residence, only the
first of such residences so used by him after the date of
such sale shall constitute the new residence.''
(3) Subsections (h)(1) and (k) of section 1034 are each
amended by striking ``(other than the 2 years referred to in
subsection (c)(4))''.
(b) Effective Date.--The amendments made by this section
shall apply to sales of old residences (within the meaning of
section 1034 of the Internal Revenue Code of 1986) after the
date of the enactment of this Act.
SEC. 102. SPECIAL RULES IN CASE OF DIVORCE.
(a) In General.--Subsection (c) of section 1034 is amended
by adding at the end thereof the following new paragraph:
``(5) If--
``(A) a residence is sold by an individual pursuant to a
divorce or marital separation, and
``(B) the taxpayer used such residence as his principal
residence at any time during the 2-year period ending on the
date of such sale,
for purposes of this section, such residence shall be treated
as the taxpayer's principal residence at the time of such
sale.''
(b) Effective Dates.--The amendment made by subsection (a)
shall apply to sales of old residences (within the meaning of
section 1034 of the Internal Revenue Code of 1986) after the
date of the enactment of this Act.
Subtitle B--Other Provisions
SEC. 111. DE MINIMIS EXCEPTION TO PASSIVE LOSS RULES.
(a) General Rule.--Section 469 (relating to passive
activity losses and credits limited) is amended--
(1) by striking subsection (m),
(2) by redesignating subsection (l) as subsection (m), and
(3) by inserting after subsection (k) the following new
subsection:
``(l) De Minimis Exception.--
``(1) In general.--In the case of a natural person,
subsection (a) shall not apply to the passive activity loss
for any taxable year if the amount of such loss does not
exceed $200.
``(2) Exception for items attributable to publicly traded
partnerships.--This subsection shall not apply to items
treated separately under subsection (k) (and such items shall
not be taken into account in determining whether paragraph
(1) applies to the taxpayer for the taxable year with respect
to other items).
``(3) Estates eligible.--For purposes of this subsection,
an estate shall be treated as a natural person with respect
to any taxable year ending less than 2 years after the death
of the decedent.
``(4) Married individuals filing separately.--
``(A) In general.--This subsection shall not apply to a
taxpayer who--
``(i) is a married individual filing a separate return for
the taxable year, and
``(ii) does not live apart from his spouse at all times
during such taxable year.
``(B) Limitation.--Paragraph (1) shall be applied by
substituting `$100' for `$200' in the case of a married
individual who files a separate return for the taxable year
and to whom this subsection applies after the application of
subparagraph (A).''
(b) Conforming Amendments.--
(1) Subparagraph (C) of section 56(b)(1) is amended by
striking clause (ii) and redesignating the following clauses
accordingly.
(2) Subsection (b) of section 58 is amended by inserting
``and'' at the end of paragraph (1), by striking paragraph
(2), and by redesignating paragraph (3) as paragraph (2).
(3) Paragraph (4) of section 163(d) is amended by striking
subparagraph (E).
(4) Subsection (d) of section 163 is amended by striking
paragraph (6).
(5) Subsection (h) of section 163 is amended by striking
paragraph (5).
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
1993.
SEC. 112. PAYMENT OF TAX BY CREDIT CARD.
(a) General Rule.--Section 6311 is amended to read as
follows:
``SEC. 6311. PAYMENT BY CHECK, MONEY ORDER, OR OTHER MEANS.
``(a) Authority To Receive.--It shall be lawful for the
Secretary to receive for internal revenue taxes (or in
payment for internal revenue stamps) checks, money orders, or
any other commercially acceptable means that the Secretary
deems appropriate, including payment by use of credit cards
or debit cards, to the extent and under the conditions
provided in regulations prescribed by the Secretary.
``(b) Ultimate Liability.--If a check, money order, or
other method of payment, including payment by credit card or
debit card, so received is not duly paid, or is paid and
subsequently charged back to the Secretary, the person by
whom such check, or money order, or other method of payment
has been tendered shall remain liable for the payment of the
tax or for the stamps, and for all legal penalties and
additions, to the same extent as if such check, money order,
or other method of payment had not been tendered.
``(c) Liability of Banks and Others.--If any certified,
treasurer's, or cashier's check (or other guaranteed draft),
or any money order, or any other means of payment that has
been guaranteed by a financial institution (such as a credit
card or debit card transaction which has been guaranteed
expressly by a financial institution) so received is not duly
paid, the United States shall, in addition to its right to
exact payment from the party originally indebted therefor,
have a lien for--
``(1) the amount of such check (or draft) upon all assets
of the financial institution on which drawn,
``(2) the amount of such money order upon all the assets of
the issuer thereof, or
``(3) the guaranteed amount of any other transaction upon
all the assets of the institution making such guarantee,
and such amount shall be paid out of such assets in
preference to any other claims whatsoever against such
financial institution, issuer, or guaranteeing institution,
except the necessary costs and expenses of administration and
the reimbursement of the United States for the amount
expended in the redemption of the circulating notes of such
financial institution.
``(d) Payment by Other Means.--
``(1) Authority to prescribe regulations.--The Secretary
shall prescribe such regulations as the Secretary deems
necessary to receive payment by commercially acceptable
means, including regulations that--
``(A) specify which methods of payment by commercially
acceptable means will be acceptable,
``(B) specify when payment by such means will be considered
received,
``(C) identify types of nontax matters related to payment
by such means that are to be resolved by persons ultimately
liable for payment and financial intermediaries, without the
involvement of the Secretary, and
``(D) ensure that tax matters will be resolved by the
Secretary, without the involvement of financial
intermediaries.
``(2) Authority to enter into contracts.--Notwithstanding
section 3718(f) of title 31, United States Code, the
Secretary is authorized to enter into contracts to obtain
services related to receiving payment by other means where
cost beneficial to the Government and is further authorized
to pay any fees required by such contracts.
``(3) Special provisions for use of credit cards.--If use
of credit cards is accepted as a method of payment of taxes
pursuant to subsection (a)--
``(A) a payment of internal revenue taxes (or a payment for
internal revenue stamps) by a person by use of a credit card
shall not be subject to section 161 of the Truth-in-Lending
Act (15 U.S.C. 1666), or to any similar provisions of State
law, if the error alleged by the person is an error relating
to the underlying tax liability, rather than an error
relating to the credit card account such as a computational
error or numerical transposition in the credit card
transaction or an issue as to whether the person authorized
payment by use of the credit card,
``(B) a payment of internal revenue taxes (or a payment for
internal revenue stamps) shall not be subject to section 170
of the Truth-in-Lending Act (15 U.S.C. 1666i), or to any
similar provisions of State law,
``(C) a payment of internal revenue taxes (or a payment for
internal revenue stamps) by a person by use of a debit card
shall not be subject to section 908 of the Electronic Fund
Transfer Act (15 U.S.C. 1693f), or to any similar provisions
of State law, if the error alleged by the person is an error
relating to the underlying tax liability, rather than an
error relating to the debit card account such as a
computational error or numerical transposition in the debit
card transaction or an issue as to whether the person
authorized payment by use of the debit card,
``(D) the term `creditor' under section 103(f) of the
Truth-in-Lending Act (15 U.S.C. 1602(f)) shall not include
the Secretary with respect to credit card transactions in
payment of internal revenue taxes (or payment for internal
revenue stamps), and
``(E) notwithstanding any other provision of law to the
contrary, in the case of payment made by credit card or debit
card transaction of an amount owed to a person as the result
of the correction of an error under section 161 of the Truth-
in-Lending Act (15 U.S.C. 1666) or section 908 of the
Electronic Fund Transfer Act (15 U.S.C. 1693f), the Secretary
is authorized to provide such amount to such person as a
credit to that person's credit card or debit card account
through the applicable credit card or debit card system.
``(e) Confidentiality of Information.--
``(1) In general.--Except as otherwise authorized by this
subsection, no person may use or disclose any information
relating to credit or debit card transactions obtained
pursuant to section 6103(k)(8) other than for purposes
directly related to the processing of such transactions, or
the billing or collection of amounts charged or debited
pursuant thereto.
``(2) Exceptions.--
``(A) Debit or credit card issuers or others acting on
behalf of such issuers may also use and disclose such
information for purposes directly related to servicing an
issuer's accounts.
``(B) Debit or credit card issuers or others directly
involved in the processing of credit or debit card
transactions or the billing or collection of amounts charged
or debited thereto may also use and disclose such information
for purposes directly related to--
``(i) statistical risk and profitability assessment;
``(ii) transferring receivables, accounts, or interest
therein;
``(iii) auditing the account information;
``(iv) complying with Federal, State, or local law; and
``(v) properly authorized civil, criminal, or regulatory
investigation by Federal, State, or local authorities.
``(3) Procedures.--Use and disclosure of information under
this paragraph shall be made only to the extent authorized by
written procedures promulgated by the Secretary.
``(4) Cross reference.--
``For provision providing for civil damages for violation of
paragraph (1), see section 7431.''
(b) Clerical Amendment.--The table of sections for
subchapter B of chapter 64 is amended by striking the item
relating to section 6311 and inserting the following:
``Sec. 6311. Payment by check, money order, or other means.''
(c) Amendments to Sections 6103 and 7431 With Respect to
Disclosure Authorization.--
(1) Subsection (k) of section 6103 (relating to
confidentiality and disclosure of returns and return
information) is amended by adding at the end thereof the
following new paragraph:
``(8) Disclosure of information to administer section
6311.--The Secretary may disclose returns or return
information to financial institutions and others to the
extent the Secretary deems necessary for the administration
of section 6311. Disclosures of information for purposes
other than to accept payments by checks or money orders shall
be made only to the extent authorized by written procedures
promulgated by the Secretary.''
(2) Section 7431 (relating to civil damages for
unauthorized disclosure of returns and return information) is
amended by adding at the end thereof the following new
subsection:
``(g) Special Rule for Information Obtained Under Section
6103(k)(8).--For purposes of this section, any reference to
section 6103 shall be treated as including a reference to
section 6311(e).''
(3) Section 6103(p)(3)(A) is amended by striking ``or (6)''
and inserting in lieu thereof ``(6), or (8)''.
(d) Effective Date.--The amendments made by this section
shall take effect on the day 9 months after the date of the
enactment of this Act.
SEC. 113. MODIFICATIONS TO ELECTION TO INCLUDE CHILD'S INCOME
ON PARENT'S RETURN.
(a) Eligibility for Election.--Clause (ii) of section
1(g)(7)(A) (relating to election to include certain unearned
income of child on parent's return) is amended to read as
follows:
``(ii) such gross income is more than the amount described
in paragraph (4)(A)(ii)(I) and less than 10 times the amount
so described,''.
(b) Computation of Tax.--Subparagraph (B) of section
1(g)(7) (relating to income included on parent's return) is
amended--
(1) by striking ``$1,000'' in clause (i) and inserting
``twice the amount described in paragraph (4)(A)(ii)(I)'',
and
(2) by amending subclause (II) of clause (ii) to read as
follows:
``(II) for each such child, 15 percent of the lesser of the
amount described in paragraph (4)(A)(ii)(I) or the excess of
the gross income of such child over the amount so described,
and''.
(c) Minimum Tax.--Subparagraph (B) of section 59(j)(1) is
amended by striking ``$1,000'' and inserting ``twice the
amount in effect for the taxable year under section
63(c)(5)(A)''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
1993.
SEC. 114. SIMPLIFIED FOREIGN TAX CREDIT LIMITATION FOR
INDIVIDUALS.
(a) General Rule.--Section 904 (relating to limitations on
foreign tax credit) is amended by redesignating subsection
(j) as subsection (k) and by inserting after subsection (i)
the following new subsection:
``(j) Simplified Limitation for Certain Individuals.--
``(1) In general.--In the case of an individual to whom
this subsection applies for any taxable year, the limitation
of subsection (a) shall be the lesser of--
``(A) 25 percent of such individual's gross income for the
taxable year from sources without the United States, or
``(B) the amount of the creditable foreign taxes paid or
accrued by the individual during the taxable year (determined
without regard to subsection (c)).
No taxes paid or accrued by the individual during such
taxable year may be deemed paid or accrued in any other
taxable year under subsection (c).
``(2) Individuals to whom subsection applies.--This
subsection shall apply to an individual for any taxable year
if--
``(A) the entire amount of such individual's gross income
for the taxable year from sources without the United States
consists of qualified passive income,
``(B) the amount of the creditable foreign taxes paid or
accrued by the individual during the taxable year does not
exceed $200 ($400 in the case of a joint return), and
``(C) such individual elects to have this subsection apply
for the taxable year.
``(3) Definitions.--For purposes of this subsection--
``(A) Qualified passive income.--The term `qualified
passive income' means any item of gross income if--
``(i) such item of income is passive income (as defined in
subsection (d)(2)(A) without regard to clause (iii) thereof),
and
``(ii) such item of income is shown on a payee statement
furnished to the individual.
``(B) Creditable foreign taxes.--The term `creditable
foreign taxes' means any taxes for which a credit is
allowable under section 901; except that such term shall not
include any tax unless such tax is shown on a payee statement
furnished to such individual.
``(C) Payee statement.--The term `payee statement' has the
meaning given to such term by section 6724(d)(2).
``(D) Estates and trusts not eligible.--This subsection
shall not apply to any estate or trust.''
(b) Effective Date.--The amendment made by subsection (a)
shall apply to taxable years beginning after December 31,
1993.
SEC. 115. TREATMENT OF PERSONAL TRANSACTIONS BY INDIVIDUALS
UNDER FOREIGN CURRENCY RULES.
(a) General Rule.--Subsection (e) of section 988 (relating
to application to individuals) is amended to read as follows:
``(e) Application to Individuals.--
``(1) In general.--The preceding provisions of this section
shall not apply to any section 988 transaction entered into
by an individual which is a personal transaction.
``(2) Exclusion for certain personal transactions.--If--
``(A) nonfunctional currency is disposed of by an
individual in any transaction, and
``(B) such transaction is a personal transaction,
no gain shall be recognized for purposes of this subtitle by
reason of changes in exchange rates after such currency was
acquired by such individual and before such disposition. The
preceding sentence shall not apply if the gain which would
otherwise be recognized exceeds $200.
``(3) Personal transactions.--For purposes of this
subsection, the term `personal transaction' means any
transaction entered into by an individual, except that such
term shall not include any transaction to the extent that
expenses properly allocable to such transaction meet the
requirements of section 162 or 212 (other than that part of
section 212 dealing with expenses incurred in connection with
taxes).''
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
1992.
SEC. 116. EXPANDED ACCESS TO SIMPLIFIED INCOME TAX RETURNS.
(a) General Rule.--The Secretary of the Treasury or his
delegate shall take such actions as may be appropriate to
expand access to simplified individual income tax returns and
to otherwise simplify the individual income tax returns,
including--
(1) (if appropriate) allowing taxpayers who itemize
deductions to file their return on Form 1040A, and
(2) removing or raising the taxable income limitations on
taxpayers who may file Form 1040A.
(b) Report.--Not later than the date 1 year after the date
of the enactment of this Act, the Secretary of the Treasury
or his delegate shall submit a report to the Committee on
Ways and Means of the House of Representatives and the
Committee on Finance of the Senate, a report on his actions
under subsection (a), together with such recommendations as
he may deem advisable.
SEC. 117. TREATMENT OF CERTAIN REIMBURSED EXPENSES OF RURAL
MAIL CARRIERS.
(a) In General.--Section 162 (relating to trade or business
expenses) is amended by redesignating subsection (o) as
subsection (p) and by inserting after subsection (n) the
following new subsection:
``(o) Treatment of Certain Reimbursed Expenses of Rural
Mail Carriers.--
``(1) General rule.--In the case of any employee of the
United States Postal Service who performs services involving
the collection and delivery of mail on a rural route and who
receives qualified reimbursements for the expenses incurred
by such employee for the use of a vehicle in performing such
services--
``(A) the amount allowable as a deduction under this
chapter for the use of a vehicle in performing such services
shall be equal to the amount of such qualified
reimbursements; and
``(B) such qualified reimbursements shall be treated as
paid under a reimbursement or other expense allowance
arrangement for purposes of section 62(a)(2)(A) (and section
62(c) shall not apply to such qualified reimbursements).
``(2) Definition of qualified reimbursements.--For purposes
of this subsection, the term `qualified reimbursements' means
the amounts paid by the United States Postal Service to
employees as an equipment maintenance allowance under the
1991 collective bargaining agreement between the United
States Postal Service and the National Rural Letter Carriers'
Association. Amounts paid as an equipment maintenance
allowance by such Postal Service under later collective
bargaining agreements that supersede the 1991 agreement shall
be considered qualified reimbursements if such amounts do not
exceed the amounts that would have been paid under the 1991
agreement, adjusted for changes in the Consumer Price Index
(as defined in section 1(f)(5)) since 1991.''
(b) Technical Amendment.--Section 6008 of the Technical and
Miscellaneous Revenue Act of 1988 is hereby repealed.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
1992.
SEC. 118. EXCLUSION OF COMBAT PAY FROM WITHHOLDING LIMITED TO
AMOUNT EXCLUDABLE FROM GROSS INCOME.
(a) In General.--Paragraph (1) of section 3401(a) (defining
wages) is amended by inserting before the semicolon the
following: ``to the extent remuneration for such service is
excludable from gross income under such section''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to remuneration paid after December 31, 1994.
TITLE II--PENSION SIMPLIFICATION
Subtitle A--Simplified Distribution Rules
SEC. 201. REPEAL OF 5-YEAR INCOME AVERAGING FOR LUMP-SUM
DISTRIBUTIONS.
(a) In General.--Subsection (d) of section 402 (relating to
taxability of beneficiary of employees' trust) is amended to
read as follows:
``(d) Taxability of Beneficiary of Certain Foreign Situs
Trusts.--For purposes of subsections (a), (b), and (c), a
stock bonus, pension, or profit-sharing trust which would
qualify for exemption from tax under section 501(a) except
for the fact that it is a trust created or organized outside
the United States shall be treated as if it were a trust
exempt from tax under section 501(a).''
(b) Conforming Amendments.--
(1) Subparagraph (D) of section 402(e)(4) (relating to
other rules applicable to exempt trusts) is amended to read
as follows:
``(D) Lump-sum distribution.--For purposes of this
paragraph--
``(i) In general.--The term `lump sum distribution' means
the distribution or payment within one taxable year of the
recipient of the balance to the credit of an employee which
becomes payable to the recipient--
``(I) on account of the employee's death,
``(II) after the employee attains age 59\1/2\,
``(III) on account of the employee's separation from
service, or
``(IV) after the employee has become disabled (within the
meaning of section 72(m)(7)),
from a trust which forms a part of a plan described in
section 401(a) and which is exempt from tax under section 501
or from a plan described in section 403(a). Subclause (III)
of this clause shall be applied only with respect to an
individual who is an employee without regard to section
401(c)(1), and subclause (IV) shall be applied only with
respect to an employee within the meaning of section
401(c)(1). For purposes of this clause, a distribution to two
or more trusts shall be treated as a distribution to one
recipient. For purposes of this paragraph, the balance to the
credit of the employee does not include the accumulated
deductible employee contributions under the plan (within the
meaning of section 72(o)(5)).
``(ii) Aggregation of certain trusts and plans.--For
purposes of determining the balance to the credit of an
employee under clause (i)--
``(I) all trusts which are part of a plan shall be treated
as a single trust, all pension plans maintained by the
employer shall be treated as a single plan, all profit-
sharing plans maintained by the employer shall be treated as
a single plan, and all stock bonus plans maintained by the
employer shall be treated as a single plan, and
``(II) trusts which are not qualified trusts under section
401(a) and annuity contracts which do not satisfy the
requirements of section 404(a)(2) shall not be taken into
account.
``(iii) Community property laws.--The provisions of this
paragraph shall be applied without regard to community
property laws.
``(iv) Amounts subject to penalty.--This paragraph shall
not apply to amounts described in subparagraph (A) of section
72(m)(5) to the extent that section 72(m)(5) applies to such
amounts.
``(v) Balance to credit of employee not to include amounts
payable under qualified domestic relations order.--For
purposes of this paragraph, the balance to the credit of an
employee shall not include any amount payable to an alternate
payee under a qualified domestic relations order (within the
meaning of section 414(p)).
``(vi) Transfers to cost-of-living arrangement not treated
as distribution.--For purposes of this paragraph, the balance
to the credit of an employee under a defined contribution
plan shall not include any amount transferred from such
defined contribution plan to a qualified cost-of-living
arrangement (within the meaning of section 415(k)(2)) under a
defined benefit plan.
``(vii) Lump-sum distributions of alternate payees.--If any
distribution or payment of the balance to the credit of an
employee would be treated as a lump-sum distribution, then,
for purposes of this paragraph, the payment under a qualified
domestic relations order (within the meaning of section
414(p)) of the balance to the credit of an alternate payee
who is the spouse or former spouse of the employee shall be
treated as a lump-sum distribution. For purposes of this
clause, the balance to the credit of the alternate payee
shall not include any amount payable to the employee.''
(2) Section 402(c) (relating to rules applicable to
rollovers from exempt trusts) is amended by striking
paragraph (10).
(3) Paragraph (1) of section 55(c) (defining regular tax)
is amended by striking ``shall not include any tax imposed by
section 402(d) and''.
(4) Paragraph (8) of section 62(a) (relating to certain
portion of lump-sum distributions from pension plans taxed
under section 402(d)) is hereby repealed.
(5) Section 401(a)(28)(B) (relating to coordination with
distribution rules) is amended by striking clause (v).
(6) Subparagraph (B)(ii) of section 401(k)(10) (relating to
distributions that must be lump-sum distributions) is amended
to read as follows:
``(ii) Lump-sum distribution.--For purposes of this
subparagraph, the term `lump-sum distribution' means any
distribution of the balance to the credit of an employee
immediately before the distribution.''
(7) Section 406(c) (relating to termination of status as
deemed employee not to be treated as separation from service
for purposes of limitation of tax) is hereby repealed.
(8) Section 407(c) (relating to termination of status as
deemed employee not to be treated as separation from service
for purposes of limitation of tax) is hereby repealed.
(9) Section 691(c) (relating to deduction for estate tax)
is amended by striking paragraph (5).
(10) Paragraph (1) of section 871(b) (relating to
imposition of tax) is amended by striking ``section 1, 55, or
402(d)(1)'' and inserting ``section 1 or 55''.
(11) Subsection (b) of section 877 (relating to alternative
tax) is amended by striking ``section 1, 55, or 402(d)(1)''
and inserting ``section 1 or 55''.
(12) Section 4980A(c)(4) is amended--
(A) by striking ``to which an election under section
402(d)(4)(B) applies'' and inserting ``(as defined in section
402(e)(4)(D)) with respect to which the individual elects to
have this paragraph apply'',
(B) by adding at the end the following new flush sentence:
``An individual may elect to have this paragraph apply to
only one lump-sum distribution.'', and
(C) by striking the heading and inserting:
``(4) Special one-time election.--''.
(13) Section 402(e) is amended by striking paragraph (5).
(c) Effective Dates.--
(1) In general.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1993.
(2) Retention of certain transition rules.--Notwithstanding
any other provision of this section, the amendments made by
this section shall not apply to any distribution for which
the taxpayer elects the benefits of section 1122 (h)(3) or
(h)(5) of the Tax Reform Act of 1986. For purposes of the
preceding sentence, the rules of sections 402(c)(10) and
402(d) of the Internal Revenue Code of 1986 (as in effect
before the amendments made by this Act) shall apply.
SEC. 202. REPEAL OF $5,000 EXCLUSION OF EMPLOYEES' DEATH
BENEFITS.
(a) In General.--Subsection (b) of section 101 is hereby
repealed.
(b) Conforming Amendment.--Subsection (c) of section 101 is
amended by striking ``subsection (a) or (b)'' and inserting
``subsection (a)''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
1993.
SEC. 203. SIMPLIFIED METHOD FOR TAXING ANNUITY DISTRIBUTIONS
UNDER CERTAIN EMPLOYER PLANS.
(a) General Rule.--Subsection (d) of section 72 (relating
to annuities; certain proceeds of endowment and life
insurance contracts) is amended to read as follows:
``(d) Special Rules for Qualified Employer Retirement
Plans.--
``(1) Simplified method of taxing annuity payments.--
``(A) In general.--In the case of any amount received as an
annuity under a qualified employer retirement plan--
``(i) subsection (b) shall not apply, and
``(ii) the investment in the contract shall be recovered as
provided in this paragraph.
``(B) Method of recovering investment in contract.--
``(i) In general.--Gross income shall not include so much
of any monthly annuity payment under a qualified employer
retirement plan as does not exceed the amount obtained by
dividing--
``(I) the investment in the contract (as of the annuity
starting date), by
``(II) the number of anticipated payments determined under
the table contained in clause (iii) (or, in the case of a
contract to which subsection (c)(3)(B) applies, the number of
monthly annuity payments under such contract).
``(ii) Certain rules made applicable.--Rules similar to the
rules of paragraphs (2) and (3) of subsection (b) shall apply
for purposes of this paragraph.
``(iii) Number of anticipated payments.--
``If the age of the primary annuitant on the annuity starting date is
The number of anticipated payments is:
Not more than 55..............................................300
More than 55 but not more than 60.............................260
More than 60 but not more than 65.............................240
More than 65 but not more than 70.............................170
More than 70..................................................120
``(C) Adjustment for refund feature not applicable.--For
purposes of this paragraph, investment in the contract shall
be determined under subsection (c)(1) without regard to
subsection (c)(2).
``(D) Special rule where lump sum paid in connection with
commencement of annuity payments.--If, in connection with the
commencement of annuity payments under any qualified employer
retirement plan, the taxpayer receives a lump sum payment--
``(i) such payment shall be taxable under subsection (e) as
if received before the annuity starting date, and
``(ii) the investment in the contract for purposes of this
paragraph shall be determined as if such payment had been so
received.
``(E) Exception.--This paragraph shall not apply in any
case where the primary annuitant has attained age 75 on the
annuity starting date unless there are fewer than 5 years of
guaranteed payments under the annuity.
``(F) Adjustment where annuity payments not on monthly
basis.--In any case where the annuity payments are not made
on a monthly basis, appropriate adjustments in the
application of this paragraph shall be made to take into
account the period on the basis of which such payments are
made.
``(G) Qualified employer retirement plan.--For purposes of
this paragraph, the term `qualified employer retirement plan'
means any plan or contract described in paragraph (1), (2),
or (3) of section 4974(c).
``(2) Treatment of employee contributions under defined
contribution plans.--For purposes of this section, employee
contributions (and any income allocable thereto) under a
defined contribution plan may be treated as a separate
contract.''
(b) Effective Date.--The amendment made by subsection (a)
shall apply in cases where the annuity starting date is after
December 31, 1993.
SEC. 204. REQUIRED DISTRIBUTIONS.
(a) In General.--Section 401(a)(9)(C) (defining required
beginning date) is amended to read as follows:
``(C) Required beginning date.--For purposes of this
paragraph--
``(i) In general.--The term `required beginning date' means
April 1 of the calendar year following the later of--
``(I) the calendar year in which the employee attains age
70\1/2\, or
``(II) the calendar year in which the employee retires.
``(ii) Exception.--Subclause (II) of clause (i) shall not
apply--
``(I) except as provided in section 409(d), in the case of
an employee who is a 5-percent owner (as defined in section
416) with respect to the plan year ending in the calendar
year in which the employee attains age 70\1/2\, or
``(II) for purposes of section 408 (a)(6) or (b)(3).
``(iii) Actuarial adjustment.--In the case of an employee
to whom clause (i)(II) applies who retires in a calendar year
after the calendar year in which the employee attains age
70\1/2\, the employee's accrued benefit shall be actuarially
increased to take into account the period after age 70\1/2\
in which the employee was not receiving any benefits under
the plan.
``(iv) Exception for governmental and church plans.--
Clauses (ii) and (iii) shall not apply in the case of a
governmental plan or church plan. For purposes of this
clause, the term `church plan' means a plan maintained by a
church for church employees, and the term `church' means any
church (as defined in section 3121(w)(3)(A)) or qualified
church-controlled organization (as defined in section
3121(w)(3)(B)).''
(b) Effective Date.--The amendment made by subsection (a)
shall apply to years beginning after December 31, 1993.
Subtitle B--Increased Access to Pension Plans
SEC. 211. MODIFICATIONS OF SIMPLIFIED EMPLOYEE PENSIONS.
(a) Increase in Number of Allowable Participants for Salary
Reduction Arrangements.--Section 408(k)(6)(B) is amended by
striking ``25'' each place it appears in the text and heading
thereof and inserting ``100''.
(b) Repeal of Participation Requirement.--Section
408(k)(6)(A) is amended by striking clause (ii) and by
redesignating clauses (iii) and (iv) as clauses (ii) and
(iii), respectively.
(c) Conforming Amendments.--Clause (ii) of section
408(k)(6)(C) and clause (ii) of section 408(k)(6)(F) are each
amended by striking ``subparagraph (A)(iii)'' and inserting
``subparagraph (A)(ii)''.
(d) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 1993.
SEC. 212. TAX EXEMPT ORGANIZATIONS ELIGIBLE UNDER SECTION
401(k).
(a) General Rule.--Subparagraph (B) of section 401(k)(4) is
amended to read as follows:
``(B) State and local governments not eligible.--A cash or
deferred arrangement shall not be treated as a qualified cash
or deferred arrangement if it is part of a plan maintained by
a State or local government or political subdivision thereof,
or any agency or instrumentality thereof. This subparagraph
shall not apply to a rural cooperative plan.''
(b) Effective Date.--The amendment made by this section
shall apply to plan years beginning after December 31, 1993,
but shall not apply to any cash or deferred arrangement to
which clause (i) of section 1116(f)(2)(B) of the Tax Reform
Act of 1986 applies.
SEC. 213. DUTIES OF SPONSORS OF CERTAIN PROTOTYPE PLANS.
(a) In General.--The Secretary of the Treasury may, as a
condition of sponsorship, prescribe rules defining the duties
and responsibilities of sponsors of master and prototype
plans, regional prototype plans, and other Internal Revenue
Service preapproved plans.
(b) Duties Relating to Plan Amendment, Notification of
Adopters, and Plan Administration.--The duties and
responsibilities referred to in subsection (a) may include--
(1) the maintenance of lists of persons adopting the
sponsor's plans, including the updating of such lists not
less frequently than annually,
(2) the furnishing of notices at least annually to such
persons and to the Secretary or his delegate, in such form
and at such time as the Secretary shall prescribe,
(3) duties relating to administrative services to such
persons in the operation of their plans, and
(4) other duties that the Secretary considers necessary to
ensure that--
(A) the master and prototype, regional prototype, and other
preapproved plans of adopting employers are timely amended to
meet the requirements of the Internal Revenue Code of 1986 or
of any rule or regulation of the Secretary, and
(B) adopting employers receive timely notification of
amendments and other actions taken by sponsors with respect
to their plans.
Subtitle C--Nondiscrimination Provisions
SEC. 221. DEFINITION OF HIGHLY COMPENSATED EMPLOYEES.
(a) In General.--Paragraph (1) of section 414(q) (defining
highly compensated employee) is amended to read as follows:
``(1) In general.--The term `highly compensated employee'
means any employee who--
``(A) was a 5-percent owner at any time during the year or
the preceding year, or
``(B) had compensation for the preceding year from the
employer in excess of $50,000.
The Secretary shall adjust the $50,000 amount under
subparagraph (B) at the same time and in the same manner as
under section 415(d).''
(b) Special Rule Where No Employees Treated as Highly
Compensated.--Paragraph (2) of section 414(q) is amended to
read as follows:
``(2) Special rule if no employee described in paragraph
(1).--If no employee is treated as a highly compensated
employee under paragraph (1), the highest paid officer for
the year shall be treated as a highly compensated employee.''
(c) Treatment of Family Members.--Paragraph (6) of section
414(q) is hereby repealed.
(d) Conforming Amendments.--
(1) Paragraphs (4), (5), (8), and (12) of section 414(q)
are hereby repealed.
(2)(A) Section 414(r) is amended by adding at the end
thereof the following new paragraph:
``(9) Excluded employees.--For purposes of this subsection,
the following employees shall be excluded:
``(A) Employees who have not completed 6 months of service.
``(B) Employees who normally work less than 17\1/2\ hours
per week.
``(C) Employees who normally work not more than 6 months
during any year.
``(D) Employees who have not attained the age of 21.
``(E) Except to the extent provided in regulations,
employees who are included in a unit of employees covered by
an agreement which the Secretary of Labor finds to be a
collective bargaining agreement between employee
representatives and the employer.
Except as provided by the Secretary, the employer may elect
to apply subparagraph (A), (B), (C), or (D) by substituting a
shorter period of service, smaller number of hours or months,
or lower age for the period of service, number of hours or
months, or age (as the case may be) specified in such
subparagraph.''
(B) Subparagraph (A) of section 414(r)(2) is amended by
striking ``subsection (q)(8)'' and inserting ``paragraph
(9)''.
(3) Subparagraph (A) of section 401(a)(17) is amended by
striking the last sentence.
(4) Subsection (l) of section 404 is amended by striking
the last sentence.
(5) Section 1114(c)(4) of the Tax Reform Act of 1986 is
amended by adding at the end the following new sentence:
``Any reference in this paragraph to section 414(q) shall be
treated as a reference to such section as in effect before
the Tax Simplification and Technical Corrections Act of
1993.''
(e) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 1993.
SEC. 222. MODIFICATION OF ADDITIONAL PARTICIPATION
REQUIREMENTS.
(a) General Rule.--Section 401(a)(26)(A) (relating to
additional participation requirements) is amended to read as
follows:
``(A) In general.--In the case of a trust which is a part
of a defined benefit plan, such trust shall not constitute a
qualified trust under this subsection unless on each day of
the plan year such trust benefits at least the lesser of--
``(i) 50 employees of the employer, or
``(ii) the greater of--
``(I) 40 percent of all employees of the employer, or
``(II) 2 employees (or if there is only 1 employee, such
employee).''
(b) Separate Line of Business Test.--Section 401(a)(26)(G)
(relating to separate line of business) is amended by
striking ``paragraph (7)'' and inserting ``paragraph (2)(A)
or (7)''.
(c) Effective Date.--The amendment made by this section
shall apply to years beginning after December 31, 1993.
SEC. 223. NONDISCRIMINATION RULES FOR QUALIFIED CASH OR
DEFERRED ARRANGEMENTS AND MATCHING
CONTRIBUTIONS.
(a) Alternative Methods of Satisfying Section 401(k)
Nondiscrimination Tests.--Section 401(k) (relating to cash or
deferred arrangements) is amended by adding at the end
thereof the following new paragraph:
``(11) Alternative methods of meeting nondiscrimination
requirements.--
``(A) In general.--A cash or deferred arrangement shall be
treated as meeting the requirements of paragraph (3)(A)(ii)
if such arrangement--
``(i) meets the contribution requirements of subparagraph
(B) or (C), and
``(ii) meets the notice requirements of subparagraph (D).
``(B) Matching contributions.--
``(i) In general.--The requirements of this subparagraph
are met if, under the arrangement, the employer makes
matching contributions on behalf of each employee who is not
a highly compensated employee in an amount equal to--
``(I) 100 percent of the elective contributions of the
employee to the extent such elective contributions do not
exceed 3 percent of the employee's compensation, and
``(II) 50 percent of the elective contributions of the
employee to the extent that such elective contributions
exceed 3 percent but do not exceed 5 percent of the
employee's compensation.
``(ii) Rate for highly compensated employees.--The
requirements of this subparagraph are not met if, under the
arrangement, the matching contribution with respect to any
elective contribution of a highly compensated employee at any
level of compensation is greater than that with respect to an
employee who is not a highly compensated employee.
``(iii) Alternative plan designs.--If the matching
contribution with respect to any elective contribution at any
specific level of compensation is not equal to the percentage
required under clause (i), an arrangement shall not be
treated as failing to meet the requirements of clause (i)
if--
``(I) the level of an employer's matching contribution does
not increase as an employee's elective contributions
increase, and
``(II) the aggregate amount of matching contributions with
respect to elective contributions not in excess of such level
of compensation is at least equal to the amount of matching
contributions which would be made if matching contributions
were made on the basis of the percentages described in clause
(i).
``(C) Nonelective contributions.--The requirements of this
subparagraph are met if, under the arrangement, the employer
is required, without regard to whether the employee makes an
elective contribution or employee contribution, to make a
contribution to a defined contribution plan on behalf of each
employee who is not a highly compensated employee and who is
eligible to participate in the arrangement in an amount equal
to at least 3 percent of the employee's compensation.
``(D) Notice requirement.--An arrangement meets the
requirements of this paragraph if, under the arrangement,
each employee eligible to participate is, within a reasonable
period before any year, given written notice of the
employee's rights and obligations under the arrangement
which--
``(i) is sufficiently accurate and comprehensive to
appraise the employee of such rights and obligations, and
``(ii) is written in a manner calculated to be understood
by the average employee eligible to participate.
``(E) Other requirements.--
``(i) Withdrawal and vesting restrictions.--An arrangement
shall not be treated as meeting the requirements of
subparagraph (B) or (C) unless the requirements of
subparagraphs (B) and (C) of paragraph (2) are met with
respect to all employer contributions (including matching
contributions).
``(ii) Social security and similar contributions not taken
into account.--An arrangement shall not be treated as meeting
the requirements of subparagraph (B) or (C) unless such
requirements are met without regard to subsection (l), and,
for purposes of subsection (l), employer contributions under
subparagraph (B) or (C) shall not be taken into account.
``(F) Other plans.--An arrangement shall be treated as
meeting the requirements under subparagraph (A)(i) if any
other plan maintained by the employer meets such requirements
with respect to employees eligible under the arrangement.''
(b) Alternative Methods of Satisfying Section 401(m)
Nondiscrimination Tests.--Section 401(m) (relating to
nondiscrimination test for matching contributions and
employee contributions) is amended by redesignating paragraph
(10) as paragraph (11) and by adding after paragraph (9) the
following new paragraph:
``(10) Alternative method of satisfying tests.--
``(A) In general.--A defined contribution plan shall be
treated as meeting the requirements of paragraph (2) with
respect to matching contributions if the plan--
``(i) meets the contribution requirements of subparagraph
(B) or (C) of subsection (k)(11),
``(ii) meets the notice requirements of subsection
(k)(11)(D), and
``(iii) meets the requirements of subparagraph (B).
``(B) Limitation on matching contributions.--The
requirements of this subparagraph are met if--
``(i) matching contributions on behalf of any employee may
not be made with respect to an employee's contributions or
elective deferrals in excess of 6 percent of the employee's
compensation,
``(ii) the level of an employer's matching contribution
does not increase as an employee's contributions or elective
deferrals increase, and
``(iii) the matching contribution with respect to any
highly compensated employee at a specific level of
compensation is not greater than that with respect to an
employee who is not a highly compensated employee.''
(c) Year for Computing Nonhighly Compensated Employee
Percentage.--
(1) Cash or deferred arrangements.--Clause (ii) of section
401(k)(3)(A) is amended--
(A) by striking ``such year'' and inserting ``the plan
year'', and
(B) by striking ``for such plan year'' and inserting ``the
preceding plan year''.
(2) Matching and employee contributions.--Section
401(m)(2)(A) is amended--
(A) by inserting ``for such plan year'' after ``highly
compensated employees'', and
(B) by inserting ``for the preceding plan year'' after
``eligible employees'' each place it appears in clause (i)
and clause (ii).
(d) Special Rule for Determining Average Deferral
Percentage for First Plan Year, Etc.--
(1) Paragraph (3) of section 401(k) is amended by adding at
the end thereof the following new subparagraph:
``(E) For purposes of this paragraph, in the case of the
first plan year of any plan, the amount taken into account as
the actual deferral percentage of nonhighly compensated
employees for the preceding plan year shall be--
``(i) 3 percent, or
``(ii) if the employer makes an election under this
subclause, the actual deferral percentage of nonhighly
compensated employees determined for such first plan year.''
(2) Paragraph (3) of section 401(m) is amended by adding at
the end thereof the following: ``Rules similar to the rules
of subsection (k)(3)(E) shall apply for purposes of this
subsection.''
(e) Distribution of Excess Contributions.--
(1) Subparagraph (C) of section 401(k)(8) (relating to
arrangement not disqualified if excess contributions
distributed) is amended by striking ``on the basis of the
respective portions of the excess contributions attributable
to each of such employees'' and inserting ``on the basis of
the amount of contributions by, or on behalf of, each of such
employees''.
(2) Subparagraph (C) of section 401(m)(6) (relating to
method of distributing excess aggregate contributions) is
amended by striking ``on the basis of the respective portions
of such amounts attributable to each of such employees'' and
inserting ``on the basis of the amount of contributions on
behalf of, or by, each such employee''.
(f) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 1993.
Subtitle D--Miscellaneous Simplification
SEC. 231. TREATMENT OF LEASED EMPLOYEES.
(a) General Rule.--Subparagraph (C) of section 414(n)(2)
(defining leased employee) is amended to read as follows:
``(C) such services are performed under significant
direction or control by the recipient.''
(b) Effective Date.--The amendment made by subsection (a)
shall apply to years beginning after December 31, 1993, but
shall not apply to any relationship determined under an
Internal Revenue Service ruling issued before the date of the
enactment of this Act pursuant to section 414(n)(2)(C) of the
Internal Revenue Code of 1986 (as in effect on the day before
such date) not to involve a leased employee.
SEC. 232. MODIFICATIONS OF COST-OF-LIVING ADJUSTMENTS.
(a) In General.--Section 415(d) (relating to cost-of-living
adjustments) is amended to read as follows:
``(d) Cost-Of-Living Adjustments.--
``(1) In general.--The Secretary shall adjust annually--
``(A) the $90,000 amount in subsection (b)(1)(A), and
``(B) in the case of a participant who separated from
service, the amount taken into account under subsection
(b)(1)(B),
for increases in the cost-of-living in accordance with
regulations prescribed by the Secretary.
``(2) Method.--
``(A) In general.--The regulations prescribed under
paragraph (1) shall provide for adjustment procedures which
are similar to the procedures used to adjust benefit amounts
under section 215(i)(2)(A) of the Social Security Act.
``(B) Periods for adjustment of dollar amount.--For
purposes of paragraph (1)(A)--
``(i) In general.--The adjustment with respect to any
calendar year shall be based on the increase in the
applicable index as of the close of the calendar quarter
ending September 30 of the preceding calendar year over such
index as of the close of the base period.
``(ii) Base period.--For purposes of clause (i), the base
period is the calendar quarter beginning October 1, 1986.
``(C) Base period for separations.--For purposes of
paragraph (1)(B), the base period is the last calendar
quarter of the calendar year preceding the calendar year in
which the participant separated from service.
``(3) Rounding.--Any amount determined under paragraph (1)
(or by reference to this subsection) shall be rounded to the
nearest $1,000, except that the amounts under sections
402(g)(1), 408(k)(2)(C), and 457(e)(14) shall be rounded to
the nearest $100 and the amount under section 401(a)(17)
shall be rounded, to the next lowest multiple of $10,000.''
(b) Effective Date.--The amendments made by this section
apply to adjustments with respect to calendar years beginning
after December 31, 1993.
SEC. 233. PLANS COVERING SELF-EMPLOYED INDIVIDUALS.
(a) Aggregation Rules.--Section 401(d) (relating to
additional requirements for qualification of trusts and plans
benefiting owner-employees) is amended to read as follows:
``(d) Contribution Limit on Owner-Employees.--A trust
forming part of a pension or profit-sharing plan which
provides contributions or benefits for employees some or all
of whom are owner-employees shall constitute a qualified
trust under this section only if, in addition to meeting the
requirements of subsection (a), the plan provides that
contributions on behalf of any owner-employee may be made
only with respect to the earned income of such owner-employee
which is derived from the trade or business with respect to
which such plan is established.''
(b) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 1993.
SEC. 234. ELIMINATION OF SPECIAL VESTING RULE FOR
MULTIEMPLOYER PLANS.
(a) In General.--Paragraph (2) of section 411(a) (relating
to minimum vesting standards) is amended--
(1) by striking ``subparagraph (A), (B), or (C)'' and
inserting ``subparagraph (A) or (B)''; and
(2) by striking subparagraph (C).
(b) Effective Date.--The amendments made by this section
shall apply to plan years beginning on or after the earlier
of--
(1) the later of--
(A) January 1, 1994, or
(B) the date on which the last of the collective bargaining
agreements pursuant to which the plan is maintained
terminates (determined without regard to any extension
thereof after the date of the enactment of this Act), or
(2) January 1, 1996.
Such amendments shall not apply to any individual who does
not have more than 1 hour of service under the plan on or
after the 1st day of the 1st plan year to which such
amendments apply.
SEC. 235. FULL-FUNDING LIMITATION OF MULTIEMPLOYER PLANS.
(a) Full-Funding Limitation.--Section 412(c)(7)(C)
(relating to full-funding limitation) is amended--
(1) by inserting ``or in the case of a multiemployer
plan,'' after ``paragraph (6)(B),'', and
(2) by inserting ``and multiemployer plans'' after
``paragraph (6)(b)'' in the heading thereof.
(b) Valuation.--Section 412(c)(9) is amended--
(1) by inserting ``(3 years in the case of a multiemployer
plan)'' after ``year'', and
(2) by striking ``Annual valuation'' in the heading and
inserting ``Valuation''.
(c) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 1993.
SEC. 236. ALTERNATIVE FULL-FUNDING LIMITATION.
(a) In General.--Subsection (c) of section 412 (relating to
minimum funding standards) is amended by redesignating
paragraphs (8) through (11) as paragraphs (9) through (12),
respectively, and by adding after paragraph (7) the following
new paragraph:
``(8) Alternative full-funding limitation.--
``(A) General rule.--An employer may elect the full-funding
limitation under this paragraph with respect to any defined
benefit plan of the employer in lieu of the full-funding
limitation determined under paragraph (7) if the requirements
of subparagraphs (C) and (D) are met.
``(B) Alternative full-funding limitation.--The full-
funding limitation under this paragraph is the full-funding
limitation determined under paragraph (7) without regard to
subparagraph (A)(i)(I) thereof.
``(C) Requirements relating to plan eligibility.--
``(i) In general.--The requirements of this subparagraph
are met with respect to a defined benefit plan if--
``(I) as of the 1st day of the election period, the average
accrued liability of participants accruing benefits under the
plan for the 5 immediately preceding plan years is at least
80 percent of the plan's total accrued liability,
``(II) the plan is not a top-heavy plan (as defined in
section 416(g)) for the 1st plan year of the election period
or either of the 2 preceding plan years, and
``(III) each defined benefit plan of the employer (and each
defined benefit plan of each employer who is a member of any
controlled group which includes such employer) meets the
requirements of subclauses (I) and (II).
``(ii) Failure to continue to meet requirements.--
``(I) If any plan fails to meet the requirement of clause
(i)(I) for any plan year during an election period, the
benefits of the election under this paragraph shall be phased
out under regulations prescribed by the Secretary.
``(II) If any plan fails to meet the requirement of clause
(i)(II) for any plan year during an election period, such
plan shall be treated as not meeting the requirements of
clause (i) for the remainder of the election period.
If there is a failure described in subclause (I) or (II) with
respect to any plan, such plan (and each plan described in
clause (i)(III) with respect to such plan) shall be treated
as not meeting the requirements of clause (i) for any of the
10 plan years beginning after the election period.
``(D) Requirements relating to election.--
``(i) In general.--The requirements of this subparagraph
are met with respect to an election if--
``(I) Filing date.--Notice of such election is filed with
the Secretary (in such form and manner and containing such
information as the Secretary may provide) by January 1 of any
calendar year, and is effective as of the 1st day of the
election period beginning on or after January 1 of the
following calendar year.
``(II) Consistent election.--Such an election is made for
all defined benefit plans maintained by the employer or by
any member of a controlled group which includes the employer.
``(ii) Transition period.--In the case of any election
period beginning on or after July 1, 1994, and before January
1, 1995, the requirements of clause (i) shall not apply and
the requirements of this subparagraph are met with respect to
such election period if--
``(I) Filing date.--Notice of election is filed with the
Secretary by October 1, 1994.
``(II) Information.--The notice sets forth the name and tax
identification number of the plan sponsor, the names and tax
identification numbers of the plans to which the election
applies, the limitation under paragraph (7) (determined with
and without regard to this paragraph), and a signed
certification by an officer of the employer stating that the
requirements of this paragraph have been met.
``(iii) Revenue offset procedures.--The Secretary shall, by
January 1, 1995, notify defined benefit plans that have not
made an election under this paragraph for the transition
period described in clause (ii) of the adjustment required by
subparagraph (H). The revenue offset for the transition
period shall apply to plan years beginning on or after July
1, 1994, and before January 1, 1995.
``(iv) Excess contributions made by non-electing plans.--To
the extent a defined benefit plan sponsor makes a
contribution to a defined benefit plan with respect to the
transition period described in clause (ii) which exceeds the
limitation of paragraph (7), as adjusted by the Secretary for
the transition period, the sponsor shall offset the excess
contribution against allowable contributions to the plan in
subsequent quarters in the taxable year of the sponsor. If no
subsequent contributions may be made for the taxable year,
the trustee of the defined benefit plan shall return the
excess contribution to the sponsor in that taxable year or
the following taxable year. Notwithstanding any other
provision of this title, no deduction shall be allowed for
any contribution made in excess of the limitation of
paragraph (7), as adjusted by the Secretary for the
transition period, and no penalty shall apply with respect to
contributions made in excess of such limitation to the extent
such excess contributions are either used to offset
subsequent contributions, or returned to the plan sponsor, as
provided in this clause.
``(E) Term of election.--Any election made under this
paragraph shall apply for the election period.
``(F) Other consequences of election.--
``(i) No funding waivers.--In the case of a plan with
respect to which an election is made under this paragraph, no
waiver may be granted under subsection (d) for any plan year
beginning after the date the election was made and ending at
the close of the election period with respect thereto.
``(ii) Failure to make successive elections.--If an
election is made under this paragraph with respect to any
plan and such an election does not apply for each successive
plan year of such plan, such plan shall be treated as not
meeting the requirements of subparagraph (C) for the period
of 10 plan years beginning after the close of the last
election period for such plan.
``(G) Definitions.--For purposes of this paragraph--
``(i) Election period.--The term `election period' means
the period of 5 consecutive plan years beginning with the 1st
plan year for which the election is made.
``(ii) Controlled group.--The term `controlled group' means
all persons who are treated as a single employer under
subsection (b), (c), (m), or (o) of section 414.
``(H) Procedures if alternative funding limitation reduces
net federal revenues.--
``(i) In general.--At least once with respect to each
fiscal year, the Secretary shall estimate whether the
application of this paragraph will result in a net reduction
in Federal revenues for such fiscal year.
``(ii) Adjustment of full-funding limitation if revenue
shortfall.--If the Secretary estimates that the application
of this paragraph will result in a more than insubstantial
net reduction in Federal revenues for any fiscal year, the
Secretary--
``(I) shall make the adjustment described in clause (iii),
and
``(II) to the extent such adjustment is not sufficient to
reduce such reduction to an insubstantial amount, shall make
the adjustment described in clause (iv).
Such adjustments shall apply only to defined benefit plans
with respect to which an election under this paragraph is not
in effect.
``(iii) Reduction in limitation based on 150 percent of
current liability.--The adjustment described in this clause
is an adjustment which substitutes a percentage (not lower
than 140 percent) for the percentage described in paragraph
(7)(A)(i)(I) determined by reducing the percentage of current
liability taken into account with respect to participants who
are not accruing benefits under the plan.
``(iv) Reduction in limitation based on accrued
liability.--The adjustment described in this clause is an
adjustment which reduces the percentage of accrued liability
taken into account under paragraph (7)(A)(i)(II). In no event
may the amount of accrued liability taken into account under
such paragraph after the adjustment be less than 140 percent
of current liability.''
(b) Alteration of Discretionary Regulatory Authority.--
Subparagraph (D) of section 412(c)(7) is amended by striking
``provide--'' and all that follows through ``(iii) for'' and
inserting ``provide for''.
(c) Effective Date.--The amendments made by this section
shall take effect on January 1, 1995, except that, in the
case of an election under subparagraph (D)(ii) of paragraph
(8) of section 412(c) of the Internal Revenue Code of 1986,
as added by this section, such amendments shall take effect
on July 1, 1994.
SEC. 237. DISTRIBUTIONS UNDER RURAL COOPERATIVE PLANS.
(a) Distributions After Certain Age.--Section 401(k)(7) is
amended by adding at the end thereof the following new
subparagraph:
``(C) Special rule for certain distributions.--A rural
cooperative plan which includes a qualified cash or deferred
arrangement shall not be treated as violating the
requirements of section 401(a) merely by reason of a
distribution to a participant after attainment of age 59\1/
2\.''
(b) Effective Date.--The amendments made by this section
shall apply to distributions after the date of the enactment
of this Act.
SEC. 238. TREATMENT OF GOVERNMENTAL PLANS UNDER SECTION 415.
(a) Definition of Compensation.--Subsection (k) of section
415 (regarding limitations on benefits and contributions
under qualified plans) is amended by adding immediately after
paragraph (2) thereof the following new paragraph:
``(3) Definition of compensation for governmental plans.--
For purposes of this section, in the case of a governmental
plan (as defined in section 414(d)), the term `compensation'
includes, in addition to the amounts described in subsection
(c)(3)--
``(A) any elective deferral (as defined in section
402(g)(3)), and
``(B) any amount which is contributed by the employer at
the election of the employee and which is not includible in
the gross income of an employee under section 125 or 457.''
(b) Compensation Limit.--Subsection (b) of section 415 is
amended by adding immediately after paragraph (10) the
following new paragraph:
``(11) Special limitation rule for governmental plans.--In
the case of a governmental plan (as defined in section
414(d)), subparagraph (B) of paragraph (1) shall not apply.''
(c) Treatment of Certain Excess Benefit Plans.--
(1) In general.--Section 415 is amended by adding at the
end thereof the following new subsection:
``(m) Treatment of Qualified Governmental Excess Benefit
Arrangements.--
``(1) Governmental plan not affected.--In determining
whether a governmental plan (as defined in section 414(d))
meets the requirements of this section, benefits provided
under a qualified governmental excess benefit arrangement
shall not be taken into account. Income accruing to a
governmental plan (or to a trust that is maintained solely
for the purpose of providing benefits under a qualified
governmental excess benefit arrangement) in respect of a
qualified governmental excess benefit arrangement shall
constitute income derived from the exercise of an essential
governmental function upon which such governmental plan (or
trust) shall be exempt from tax under section 115.
``(2) Taxation of participant.--For purposes of this
chapter--
``(A) the taxable year or years for which amounts in
respect of a qualified governmental excess benefit
arrangement are includible in gross income by a participant,
and
``(B) the treatment of such amounts when so includible by
the participant,
shall be determined as if such qualified governmental excess
benefit arrangement were treated as a plan for the deferral
of compensation which is maintained by a corporation not
exempt from tax under this chapter and which does not meet
the requirements for qualification under section 401.
``(3) Qualified governmental excess benefit arrangement.--
For purposes of this subsection, the term `qualified
governmental excess benefit arrangement' means a portion of a
governmental plan if--
``(A) such portion is maintained solely for the purpose of
providing to participants in the plan that part of the
participant's annual benefit otherwise payable under the
terms of the plan that exceeds the limitations on benefits
imposed by this section,
``(B) under such portion no election is provided at any
time to the participant (directly or indirectly) to defer
compensation, and
``(C) benefits described in subparagraph (A) are not paid
from a trust forming a part of such governmental plan unless
such trust is maintained solely for the purpose of providing
such benefits.''
(2) Coordination with section 457.--Subsection (e) of
section 457 is amended by adding at the end thereof the
following new paragraph:
``(15) Treatment of qualified governmental excess benefit
arrangements.--Subsections (b)(2) and (c)(1) shall not apply
to any qualified governmental excess benefit arrangement (as
defined in section 415(m)(3)), and benefits provided under
such an arrangement shall not be taken into account in
determining whether any other plan is an eligible deferred
compensation plan.''
(3) Conforming amendment.--Paragraph (2) of section 457(f)
is amended by striking the word ``and'' at the end of
subparagraph (C), by striking the period after subparagraph
(D) and inserting the words ``, and'', and by inserting
immediately thereafter the following new subparagraph:
``(E) a qualified governmental excess benefit arrangement
described in section 415(m).''
(d) Exemption for Survivor and Disability Benefits.--
Paragraph (2) of section 415(b) is amended by adding at the
end thereof the following new subparagraph:
``(I) Exemption for survivor and disability benefits
provided under governmental plans.--Subparagraph (B) of
paragraph (1), subparagraph (C) of this paragraph, and
paragraph (5) shall not apply to--
``(i) income received from a governmental plan (as defined
in section 414(d)) as a pension, annuity, or similar
allowance as the result of the recipient becoming disabled by
reason of personal injuries or sickness, or
``(ii) amounts received from a governmental plan by the
beneficiaries, survivors, or the estate of an employee as the
result of the death of the employee.''
(e) Revocation of Grandfather Election.--Subparagraph (C)
of section 415(b)(10) is amended by adding at the end thereof
the following new sentence: ``An election made pursuant to
the preceding sentence to have the provisions of this
paragraph applied to the plan may be revoked not later than
the last day of the 3rd plan year beginning after the date of
enactment with respect to all plan years as to which such
election has been applicable and all subsequent plan years;
provided that any amount paid by the plan in a taxable year
ending after revocation of such election in respect of
benefits attributable to a taxable year during which such
election was in effect shall be includible in income by the
recipient in accordance with the rules of this chapter in the
taxable year in which such amount is received (except that
such amount shall be treated as received for purposes of the
limitations imposed by this section in the earlier taxable
year or years to which such amount is attributable).''
(f) Effective Date.--
(1) In general.--The amendments made by subsections (a),
(b), (c), and (d) shall apply to taxable years beginning on
or after the date of the enactment of this Act. The
amendments made by subsection (e) shall apply with respect to
election revocations adopted after the date of the enactment
of this Act.
(2) Treatment for years beginning before date of
enactment.--In the case of a governmental plan (as defined in
section 414(d) of the Internal Revenue Code of 1986), such
plan shall be treated as satisfying the requirements of
section 415 of such Code for all taxable years beginning
before the date of the enactment of this Act.
SEC. 239. UNIFORM RETIREMENT AGE.
(a) Discrimination Testing.--Paragraph (5) of section
401(a) (relating to special rules relating to
nondiscrimination requirements) is amended by adding at the
end thereof the following new subparagraph:
``(F) Social security retirement age.--For purposes of
testing for discrimination under paragraph (4)--
``(i) the social security retirement age (as defined in
section 415(b)(8)) shall be treated as a uniform retirement
age, and
``(ii) subsidized early retirement benefits and joint and
survivor annuities shall not be treated as being unavailable
to employees on the same terms merely because such benefits
or annuities are based in whole or in part on an employee's
social security retirement age (as so defined).''
(b) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 1993.
SEC. 240. UNIFORM PENALTY PROVISIONS TO APPLY TO CERTAIN
PENSION REPORTING REQUIREMENTS.
(a) In General.--
(1) Paragraph (1) of section 6724(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
new subparagraph:
``(C) any statement of the amount of payments to another
person required to be made to the Secretary under--
``(i) section 408(i) (relating to reports with respect to
individual retirement accounts or annuities), or
``(ii) section 6047(d) (relating to reports by employers,
plan administrators, etc.).''
(2) Paragraph (2) of section 6724(d) is amended by striking
``or'' at the end of subparagraph (S), by striking the period
at the end of subparagraph (T) and inserting a comma, and by
inserting after subparagraph (T) the following new
subparagraphs:
``(U) section 408(i) (relating to reports with respect to
individual retirement plans) to any person other than the
Secretary with respect to the amount of payments made to such
person, or
``(V) section 6047(d) (relating to reports by plan
administrators) to any person other than the Secretary with
respect to the amount of payments made to such person.''
(b) Modification of Reportable Designated Distributions.--
(1) Section 408.--Subsection (i) of section 408 (relating
to individual retirement account reports) is amended by
inserting ``aggregating $10 or more in any calendar year''
after ``distributions''.
(2) Section 6047.--Paragraph (1) of section 6047(d)
(relating to reports by employers, plan administrators, etc.)
is amended by adding at the end thereof the following new
sentence: ``No return or report may be required under the
preceding sentence with respect to distributions to any
person during any year unless such distributions aggregate
$10 or more.''
(c) Qualifying Rollover Distributions.--Section 6652(i) is
amended--
(1) by striking ``the $10'' and inserting ``$100'', and
(2) by striking ``$5,000'' and inserting ``$50,000''.
(d) Conforming Amendments.--
(1) Paragraph (1) of section 6047(f) is amended to read as
follows:
``(1) For provisions relating to penalties for failures to file
returns and reports required under this section, see sections 6652(e),
6721, and 6722.''
(2) Subsection (e) of section 6652 is amended by adding at
the end thereof the following new sentence: ``This subsection
shall not apply to any return or statement which is an
information return described in section 6724(d)(1)(C)(ii) or
a payee statement described in section 6724(d)(2)(U).''
(3) Subsection (a) of section 6693 is amended by adding at
the end thereof the following new sentence: ``This subsection
shall not apply to any report which is an information return
described in section 6724(d)(1)(C)(i) or a payee statement
described in section 6724(d)(2)(T).''
(e) Effective Date.--The amendments made by this section
shall apply to returns, reports, and other statements the due
date for which (determined without regard to extensions) is
after December 31, 1993.
SEC. 241. CONTRIBUTIONS ON BEHALF OF DISABLED EMPLOYEES.
(a) All Disabled Participants Receiving Contributions.--
Section 415(c)(3)(C) is amended by adding at the end thereof
the following: ``If a defined contribution plan provides for
the continuation of contributions on behalf of all
participants described in clause (i) for a fixed or
determinable period, this subparagraph shall be applied
without regard to clauses (ii) and (iii).''
(b) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 1993.
SEC. 242. SPECIAL RULES FOR PLANS COVERING PILOTS.
(a) General Rule.--
(1) Subparagraph (B) of section 410(b)(3) is amended to
read as follows:
``(B) in the case of a plan established or maintained by
one or more employers to provide contributions or benefits
for air pilots employed by one or more common carriers
engaged in interstate or foreign commerce or air pilots
employed by carriers transporting mail for or under contract
with the United States Government, all employees who are not
air pilots.''
(2) Paragraph (3) of section 410(b) is amended by striking
the last sentence and inserting the following new sentence:
``Subparagraph (B) shall not apply in the case of a plan
which provides contributions or benefits for employees who
are not air pilots or for air pilots whose principal duties
are not customarily performed aboard aircraft in flight.''
(b) Effective Date.--The amendments made by subsection (a)
shall apply to years beginning after December 31, 1993.
SEC. 243. TREATMENT OF DEFERRED COMPENSATION PLANS OF STATE
AND LOCAL GOVERNMENTS AND TAX-EXEMPT
ORGANIZATIONS.
(a) Special Rules for Plan Distributions.--Paragraph (9) of
section 457(e) (relating to other definitions and special
rules) is amended to read as follows:
``(9) Benefits not treated as made available by reason of
certain elections, etc.--
``(A) Total amount payable is $3,500 or less.--The total
amount payable to a participant under the plan shall not be
treated as made available merely because the participant may
elect to receive such amount (or the plan may distribute such
amount without the participant's consent) if--
``(i) such amount does not exceed $3,500, and
``(ii) such amount may be distributed only if--
``(I) no amount has been deferred under the plan with
respect to such participant during the 2-year period ending
on the date of the distribution, and
``(II) there has been no prior distribution under the plan
to such participant to which this subparagraph applied.
A plan shall not be treated as failing to meet the
distribution requirements of subsection (d) by reason of a
distribution to which this subparagraph applies.
``(B) Election to defer commencement of distributions.--The
total amount payable to a participant under the plan shall
not be treated as made available merely because the
participant may elect to defer commencement of distributions
under the plan if--
``(i) such election is made after amounts may be available
under the plan in accordance with subsection (d)(1)(A) and
before commencement of such distributions, and
``(ii) the participant may make only 1 such election.''
(b) Cost-of-Living Adjustment of Maximum Deferral Amount.--
Subsection (e) of section 457 is amended by adding at the end
thereof the following new paragraph:
``(14) Cost-of-living adjustment of maximum deferral
amount.--The Secretary shall adjust the $7,500 amount
specified in subsections (b)(2) and (c)(1) at the same time
and in the same manner as under section 415(d), except that
the base year in applying such section for purposes of this
paragraph shall be 1993.''
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
SEC. 244. TREATMENT OF EMPLOYER REVERSIONS REQUIRED BY
CONTRACT TO BE PAID TO THE UNITED STATES.
(a) In General.--Subparagraph (B) of section 4980(c)(2)
(defining employer reversion) is amended by striking ``or''
at the end of clause (i), by striking the period at the end
of clause (ii) and inserting ``, or'', and by adding at the
end thereof the following new clause:
``(iii) any distribution to the employer to the extent that
the distribution is paid within a reasonable period to the
United States in satisfaction of a Federal claim for an
equitable share of the plan's surplus assets, as determined
pursuant to Federal contracting regulations.''
(b) Effective Date.--The amendment made by subsection (a)
shall apply to reversions on or after the date of the
enactment of this Act.
SEC. 245. CONTINUATION HEALTH COVERAGE FOR EMPLOYEES OF
FAILED FINANCIAL INSTITUTIONS.
(a) Enforcement of Continuation of Health Plan Requirements
of Acquirers of Failed Depository Institutions.--Subsection
(f) of section 4980B (relating to continuation of coverage
requirements of group health plans) is amended by adding at
the end thereof the following new paragraph:
``(9) Special rules for acquirers of failed depository
institutions.--
``(A) In general.--Except as provided in subparagraph (B),
any acquirer of a failed depository institution--
``(i) shall have the same obligation to provide a group
health plan meeting the requirements of this subsection with
respect to qualified individuals of such institution as the
failed depository institution would have had but for its
failure, and
``(ii) shall be treated as the employer of such qualified
individuals for purposes of this section.
``(B) Tax not to apply if fdic or rtc provide continuation
coverage.--No person shall be subject to any liability under
this section by reason of being an acquirer of a failed
depository institution if the Federal Deposit Insurance
Corporation or the Resolution Trust Corporation elects to
relieve such acquirer from its obligations under subparagraph
(A). In any such case, the requirements of subparagraph (A)
shall apply to the Federal Deposit Insurance Corporation or
the Resolution Trust Corporation, as the case may be.
``(C) Acquirer.--For purposes of this paragraph, an entity
is an acquirer of a failed depository institution during any
period if--
``(i) such entity holds substantially all of the assets or
liabilities of such institution, and
``(ii)(I) such entity is a bridge bank, or
``(II) such entity acquired such assets or liabilities from
the Federal Deposit Insurance Corporation, the Resolution
Trust Corporation, or a bridge bank.
``(D) Failed depository institution.--For purposes of this
section, the term `failed depository institution' means any
depository institution (as defined in section 3(c) of the
Federal Deposit Insurance Act) for which a receiver or
conservator has been appointed.
``(E) Qualified individual.--For purposes of this section,
the term `qualified individual' means--
``(i) any individual who was, on the day before the date of
the appointment of the receiver or conservator, provided
coverage under a group health plan of the failed depository
institution by reason of the performance of services for such
institution, and
``(ii) any individual who was, on such day, a beneficiary
under such plan as the spouse or dependent child of the
individual described in clause (i).''
(b) Treatment of Depository Institution Failures as
Qualifying Events for Retirees of Such Institutions.--
(1) In general.--Subparagraph (B) of section 4980B(f)(3) is
amended--
(A) by striking ``The termination'' and inserting ``(i) The
termination'',
(B) by striking the period at the end and inserting ``,
or'', and
(C) by inserting after clause (i) the following new clause:
``(ii) the appointment of a receiver or conservator for a
failed depository institution from whose employment the
covered employee retired at any time.''
(2) Conforming amendment.--Subclause (I) of section
4980B(f)(2)(B)(i) is amended by striking ``and reduced
hours'' and inserting ``, reduced hours, and failures of
depository institutions''.
(c) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply as if included in
section 451 of the Federal Deposit Insurance Corporation
Improvement Act of 1991 as of the date of the enactment of
such Act.
(2) Liability of fdic.--In the case of the Federal Deposit
Insurance Corporation or any acquirer from such Corporation,
the amendments made by this section shall apply only to
failed depository institutions for which the receiver or
conservator is appointed after the date of the enactment of
this Act.
(3) Special rule for coverage under fdic plan.--Effective
as of the date of the enactment of the Federal Deposit
Insurance Corporation Improvement Act of 1991, coverage under
the health care continuation plan maintained by the Federal
Deposit Insurance Corporation on June 25, 1992, and any other
substantially similar plan maintained by such Corporation,
shall be deemed to satisfy the obligations of the Federal
Deposit Insurance Corporation (and any acquirer from such
Corporation) under section 4980B(f) of the Internal Revenue
Code of 1986 and section 451 of the Federal Deposit Insurance
Corporation Improvement Act of 1991 with respect to qualified
individuals of failed depository institutions.
SEC. 246. DATE FOR ADOPTION OF PLAN AMENDMENTS.
If any amendment made by this title requires an amendment
to any plan, such plan amendment shall not be required to be
made before the first day of the first plan year beginning on
or after January 1, 1995, if--
(1) during the period after such amendment takes effect and
before such first plan year, the plan is operated in
accordance with the requirements of such amendment, and
(2) such plan amendment applies retroactively to such
period.
TITLE III--TREATMENT OF LARGE PARTNERSHIPS
Subtitle A--General Provisions
SEC. 301. SIMPLIFIED FLOW-THROUGH FOR LARGE PARTNERSHIPS.
(a) General Rule.--Subchapter K (relating to partners and
partnerships) is amended by adding at the end thereof the
following new part:
``PART IV--SPECIAL RULES FOR LARGE PARTNERSHIPS
``Sec. 771. Application of subchapter to large partnerships.
``Sec. 772. Simplified flow-through.
``Sec. 773. Computations at partnership level.
``Sec. 774. Other modifications.
``Sec. 775. Large partnership defined.
``Sec. 776. Special rules for partnerships holding oil and gas
properties.
``Sec. 777. Regulations.
``SEC. 771. APPLICATION OF SUBCHAPTER TO LARGE PARTNERSHIPS.
``The preceding provisions of this subchapter to the extent
inconsistent with the provisions of this part shall not apply
to a large partnership and its partners.
``SEC. 772. SIMPLIFIED FLOW-THROUGH.
``(a) General Rule.--In determining the income tax of a
partner of a large partnership, such partner shall take into
account separately such partner's distributive share of the
partnership's--
``(1) taxable income or loss from passive loss limitation
activities,
``(2) taxable income or loss from other activities,
``(3) net capital gain (or net capital loss)--
``(A) to the extent allocable to passive loss limitation
activities, and
``(B) to the extent allocable to other activities,
``(4) tax-exempt interest,
``(5) applicable net AMT adjustment separately computed
for--
``(A) passive loss limitation activities, and
``(B) other activities,
``(6) general credits,
``(7) low-income housing credit determined under section
42,
``(8) rehabilitation credit determined under section 47,
``(9) foreign income taxes,
``(10) the credit allowable under section 29, and
``(11) other items to the extent that the Secretary
determines that the separate treatment of such items is
appropriate.
``(b) Separate Computations.--In determining the amounts
required under subsection (a) to be separately taken into
account by any partner, this section and section 773 shall be
applied separately with respect to such partner by taking
into account such partner's distributive share of the items
of income, gain, loss, deduction, or credit of the
partnership.
``(c) Treatment at Partner Level.--
``(1) In general.--Except as provided in this subsection,
rules similar to the rules of section 702(b) shall apply to
any partner's distributive share of the amounts referred to
in subsection (a).
``(2) Income or loss from passive loss limitation
activities.--For purposes of this chapter, any partner's
distributive share of any income or loss described in
subsection (a)(1) shall be treated as an item of income or
loss (as the case may be) from the conduct of a trade or
business which is a single passive activity (as defined in
section 469). A similar rule shall apply to a partner's
distributive share of amounts referred to in paragraphs
(3)(A) and (5)(A) of subsection (a).
``(3) Income or loss from other activities.--
``(A) In general.--For purposes of this chapter, any
partner's distributive share of any income or loss described
in subsection (a)(2) shall be treated as an item of income or
expense (as the case may be) with respect to property held
for investment.
``(B) Deductions for loss not subject to section 67.--The
deduction under section 212 for any loss described in
subparagraph (A) shall not be treated as a miscellaneous
itemized deduction for purposes of section 67.
``(4) Treatment of net capital gain or loss.--For purposes
of this chapter, any partner's distributive share of any gain
or loss described in subsection (a)(3) shall be treated as a
long-term capital gain or loss, as the case may be.
``(5) Minimum tax treatment.--In determining the
alternative minimum taxable income of any partner, such
partner's distributive share of any applicable net AMT
adjustment shall be taken into account in lieu of making the
separate adjustments provided in sections 56, 57, and 58 with
respect to the items of the partnership. Except as provided
in regulations, the applicable net AMT adjustment shall be
treated, for purposes of section 53, as an adjustment or item
of tax preference not specified in section 53(d)(1)(B)(ii).
``(6) General credits.--A partner's distributive share of
the amount referred to in paragraph (6) of subsection (a)
shall be taken into account as a current year business
credit.
``(d) Operating Rules.--For purposes of this section--
``(1) Passive loss limitation activity.--The term `passive
loss limitation activity' means--
``(A) any activity which involves the conduct of a trade or
business, and
``(B) any rental activity.
For purposes of the preceding sentence, the term `trade or
business' includes any activity treated as a trade or
business under paragraph (5) or (6) of section 469(c).
``(2) Tax-exempt interest.--The term `tax-exempt interest'
means interest excludable from gross income under section
103.
``(3) Applicable net amt adjustment.--
``(A) In general.--The applicable net AMT adjustment is--
``(i) with respect to taxpayers other than corporations,
the net adjustment determined by using the adjustments
applicable to individuals, and
``(ii) with respect to corporations, the net adjustment
determined by using the adjustments applicable to
corporations.
``(B) Net adjustment.--The term `net adjustment' means the
net adjustment in the items attributable to passive loss
activities or other activities (as the case may be) which
would result if such items were determined with the
adjustments of sections 56, 57, and 58.
``(4) Treatment of certain separately stated items.--
``(A) Exclusion for certain purposes.--In determining the
amounts referred to in paragraphs (1) and (2) of subsection
(a), any net capital gain or net capital loss (as the case
may be), and any item referred to in subsection (a)(11),
shall be excluded.
``(B) Allocation rules.--The net capital gain shall be
treated--
``(i) as allocable to passive loss limitation activities to
the extent the net capital gain does not exceed the net
capital gain determined by only taking into account gains and
losses from sales and exchanges of property used in
connection with such activities, and
``(ii) as allocable to other activities to the extent such
gain exceeds the amount allocated under clause (i).
A similar rule shall apply for purposes of allocating any net
capital loss.
``(C) Net capital loss.--The term `net capital loss' means
the excess of the losses from sales or exchanges of capital
assets over the gains from sales or exchange of capital
assets.
``(5) General credits.--The term `general credits' means
any credit other than the low-income housing credit, the
rehabilitation credit, the foreign tax credit, and the credit
allowable under section 29.
``(6) Foreign income taxes.--The term `foreign income
taxes' means taxes described in section 901 which are paid or
accrued to foreign countries and to possessions of the United
States.
``(e) Special Rule for Unrelated Business Tax.--In the case
of a partner which is an organization subject to tax under
section 511, such partner's distributive share of any items
shall be taken into account separately to the extent
necessary to comply with the provisions of section 512(c)(1).
``(f) Special Rules for Applying Passive Loss
Limitations.--If any person holds an interest in a large
partnership other than as a limited partner--
``(1) paragraph (2) of subsection (c) shall not apply to
such partner, and
``(2) such partner's distributive share of the partnership
items allocable to passive loss limitation activities shall
be taken into account separately to the extent necessary to
comply with the provisions of section 469.
The preceding sentence shall not apply to any items allocable
to an interest held as a limited partner.
``SEC. 773. COMPUTATIONS AT PARTNERSHIP LEVEL.
``(a) General Rule.--
``(1) Taxable income.--The taxable income of a large
partnership shall be computed in the same manner as in the
case of an individual except that--
``(A) the items described in section 772(a) shall be
separately stated, and
``(B) the modifications of subsection (b) shall apply.
``(2) Elections.--All elections affecting the computation
of the taxable income of a large partnership or the
computation of any credit of a large partnership shall be
made by the partnership; except that the election under
section 901, and any election under section 108, shall be
made by each partner separately.
``(3) Limitations, etc.--
``(A) In general.--Except as provided in subparagraph (B),
all limitations and other provisions affecting the
computation of the taxable income of a large partnership or
the computation of any credit of a large partnership shall be
applied at the partnership level (and not at the partner
level).
``(B) Certain limitations applied at partner level.--The
following provisions shall be applied at the partner level
(and not at the partnership level):
``(i) Section 68 (relating to overall limitation on
itemized deductions).
``(ii) Sections 49 and 465 (relating to at risk
limitations).
``(iii) Section 469 (relating to limitation on passive
activity losses and credits).
``(iv) Any other provision specified in regulations.
``(4) Coordination with other provisions.--Paragraphs (2)
and (3) shall apply notwithstanding any other provision of
this chapter other than this part.
``(b) Modifications to Determination of Taxable Income.--In
determining the taxable income of a large partnership--
``(1) Certain deductions not allowed.--The following
deductions shall not be allowed:
``(A) The deduction for personal exemptions provided in
section 151.
``(B) The net operating loss deduction provided in section
172.
``(C) The additional itemized deductions for individuals
provided in part VII of subchapter B (other than section 212
thereof).
``(2) Charitable deductions.--In determining the amount
allowable under section 170, the limitation of section
170(b)(2) shall apply.
``(3) Coordination with section 67.--In lieu of applying
section 67, 70 percent of the amount of the miscellaneous
itemized deductions shall be disallowed.
``(c) Special Rules for Income From Discharge of
Indebtedness.--If a large partnership has income from the
discharge of any indebtedness--
``(1) such income shall be excluded in determining the
amounts referred to in section 772(a), and
``(2) in determining the income tax of any partner of such
partnership--
``(A) such income shall be treated as an item required to
be separately taken into account under section 772(a), and
``(B) the provisions of section 108 shall be applied
without regard to this part.
``SEC. 774. OTHER MODIFICATIONS.
``(a) Treatment of Certain Optional Adjustments, Etc.--In
the case of a large partnership--
``(1) computations under section 773 shall be made without
regard to any adjustment under section 743(b) or 108(b), but
``(2) a partner's distributive share of any amount referred
to in section 772(a) shall be appropriately adjusted to take
into account any adjustment under section 743(b) or 108(b)
with respect to such partner.
``(b) Credit Recapture Determined at Partnership Level.--
``(1) In general.--In the case of a large partnership--
``(A) any credit recapture shall be taken into account by
the partnership, and
``(B) the amount of such recapture shall be determined as
if the credit with respect to which the recapture is made had
been fully utilized to reduce tax.
``(2) Method of taking recapture into account.--A large
partnership shall take into account a credit recapture by
reducing the amount of the appropriate current year credit to
the extent thereof, and if such recapture exceeds the amount
of such current year credit, the partnership shall be liable
to pay such excess.
``(3) Dispositions not to trigger recapture.--No credit
recapture shall be required by reason of any transfer of an
interest in a large partnership.
``(4) Credit recapture.--For purposes of this subsection,
the term `credit recapture' means any increase in tax under
section 42(j) or 50(a).
``(c) Partnership Not Terminated by Reason of Change in
Ownership.--Subparagraph (B) of section 708(b)(1) shall not
apply to a large partnership.
``(d) Partnership Entitled to Certain Credits.--The
following shall be allowed to a large partnership and shall
not be taken into account by the partners of such
partnership:
``(1) The credit provided by section 34.
``(2) Any credit or refund under section 852(b)(3)(D).
``(e) Treatment of REMIC Residuals.--For purposes of
applying section 860E(e)(6) to any large partnership--
``(1) all interests in such partnership shall be treated as
held by disqualified organizations,
``(2) in lieu of applying subparagraph (C) of section
860E(e)(6), the amount subject to tax under section
860E(e)(6) shall be excluded from the gross income of such
partnership, and
``(3) subparagraph (D) of section 860E(e)(6) shall not
apply.
``(f) Special Rules for Applying Certain Installment Sale
Rules.--In the case of a large partnership--
``(1) the provisions of sections 453(l)(3) and 453A shall
be applied at the partnership level, and
``(2) in determining the amount of interest payable under
such sections, such partnership shall be treated as subject
to tax under this chapter at the highest rate of tax in
effect under section 1 or 11.
``SEC. 775. LARGE PARTNERSHIP.
``(a) General Rule.--For purposes of this part--
``(1) In general.--Except as otherwise provided in this
section or section 776, the term `large partnership' means,
with respect to any partnership taxable year, any partnership
if the number of persons who were partners in such
partnership in such taxable year or any preceding partnership
taxable year ending on or after December 31, 1994, equaled or
exceeded 250. To the extent provided in regulations, a
partnership shall cease to be treated as a large partnership
for any partnership taxable year if in such taxable year
fewer than 100 persons were partners in such partnership.
``(2) Election for partnerships with at least 100
partners.--If a partnership makes an election under this
paragraph, paragraph (1) shall be applied by substituting
`100' for `250'. Such an election shall apply to the taxable
year for which made and all subsequent taxable years unless
revoked with the consent of the Secretary.
``(b) Special Rules for Certain Service Partnerships.--
``(1) Certain partners not counted.--For purposes of this
section, the term `partner' does not include any individual
performing substantial services in connection with the
activities of the partnership and holding an interest in such
partnership, or an individual who formerly performed
substantial services in connection with such activities and
who held an interest in such partnership at the time the
individual performed such services.
``(2) Exclusion.--For purposes of this part, the term
`large partnership' does not include any partnership if
substantially all the partners of such partnership--
``(A) are individuals performing substantial services in
connection with the activities of such partnership or are
personal service corporations (as defined in section 269A(b))
the owner-employees (as defined in section 269A(b)) of which
perform such substantial services,
``(B) are retired partners who had performed such
substantial services, or
``(C) are spouses of partners who are performing (or had
previously performed) such substantial services.
``(3) Special rule for lower tier partnerships.--For
purposes of this subsection, the activities of a partnership
shall include the activities of any other partnership in
which the partnership owns directly an interest in the
capital and profits of at least 80 percent.
``(c) Exclusion of Commodity Pools.--For purposes of this
part, the term `large partnership' does not include any
partnership the principal activity of which is the buying and
selling of commodities (not described in section 1221(1)), or
options, futures, or forwards with respect to such
commodities.
``(d) Secretary May Rely on Treatment on Return.--If, on
the partnership return of any partnership, such partnership
is treated as a large partnership, such treatment shall be
binding on such partnership and all partners of such
partnership but not on the Secretary.
``SEC. 776. SPECIAL RULES FOR PARTNERSHIPS HOLDING OIL AND
GAS PROPERTIES.
``(a) Exception for Partnerships Holding Significant Oil
and Gas Properties.--
``(1) In general.--For purposes of this part, the term
`large partnership' shall not include any partnership if the
average percentage of assets (by value) held by such
partnership during the taxable year which are oil or gas
properties is at least 25 percent. For purposes of the
preceding sentence, any interest held by a partnership in
another partnership shall be disregarded, except that the
partnership shall be treated as holding its proportionate
share of the assets of such other partnership.
``(2) Election to waive exception.--Any partnership may
elect to have paragraph (1) not apply. Such an election shall
apply to the partnership taxable year for which made and all
subsequent partnership taxable years unless revoked with the
consent of the Secretary.
``(b) Special Rules Where Part Applies.--
``(1) Computation of percentage depletion.--In the case of
a large partnership, except as provided in paragraph (2)--
``(A) the allowance for depletion under section 611 with
respect to any partnership oil or gas property shall be
computed at the partnership level without regard to any
provision of section 613A requiring such allowance to be
computed separately by each partner,
``(B) such allowance shall be determined without regard to
the provisions of section 613A(c) limiting the amount of
production for which percentage depletion is allowable and
without regard to paragraph (1) of section 613A(d), and
``(C) paragraph (3) of section 705(a) shall not apply.
``(2) Treatment of certain partners.--
``(A) In general.--In the case of a disqualified person,
the treatment under this chapter of such person's
distributive share of any item of income, gain, loss,
deduction, or credit attributable to any partnership oil or
gas property shall be determined without regard to this part.
Such person's distributive share of any such items shall be
excluded for purposes of making determinations under sections
772 and 773.
``(B) Disqualified person.--For purposes of subparagraph
(A), the term `disqualified person' means, with respect to
any partnership taxable year--
``(i) any person referred to in paragraph (2) or (4) of
section 613A(d) for such person's taxable year in which such
partnership taxable year ends, and
``(ii) any other person if such person's average daily
production of domestic crude oil and natural gas for such
person's taxable year in which such partnership taxable year
ends exceeds 500 barrels.
``(C) Average daily production.--For purposes of
subparagraph (B), a person's average daily production of
domestic crude oil and natural gas for any taxable year shall
be computed as provided in section 613A(c)(2)--
``(i) by taking into account all production of domestic
crude oil and natural gas (including such person's
proportionate share of any production of a partnership),
``(ii) by treating 6,000 cubic feet of natural gas as a
barrel of crude oil, and
``(iii) by treating as 1 person all persons treated as 1
taxpayer under section 613A(c)(8) or among whom allocations
are required under such section.
``SEC. 777. REGULATIONS.
``The Secretary shall prescribe such regulations as may be
appropriate to carry out the purposes of this part.''
(b) Clerical Amendment.--The table of parts for subchapter
K of chapter 1 is amended by adding at the end thereof the
following new item:
``Part IV. Special rules for large partnerships.''
SEC. 302. SIMPLIFIED AUDIT PROCEDURES FOR LARGE PARTNERSHIPS.
(a) General Rule.--Chapter 63 is amended by adding at the
end thereof the following new subchapter:
``Subchapter D--Treatment of Large Partnerships
``Part I. Treatment of partnership items and adjustments.
``Part II. Partnership level adjustments.
``Part III. Definitions and special rules.
``PART I--TREATMENT OF PARTNERSHIP ITEMS AND ADJUSTMENTS
``Sec. 6240. Application of subchapter.
``Sec. 6241. Partner's return must be consistent with partnership
return.
``Sec. 6242. Procedures for taking partnership adjustments into
account.
``SEC. 6240. APPLICATION OF SUBCHAPTER.
``(a) General Rule.--This subchapter shall only apply to
large partnerships and partners in such partnerships.
``(b) Coordination With Other Partnership Audit
Procedures.--
``(1) In general.--Subchapter C of this chapter shall not
apply to any large partnership other than in its capacity as
a partner in another partnership which is not a large
partnership.
``(2) Treatment where partner in other partnership.--If a
large partnership is a partner in another partnership which
is not a large partnership--
``(A) subchapter C of this chapter shall apply to items of
such large partnership which are partnership items with
respect to such other partnership, but
``(B) any adjustment under such subchapter C shall be taken
into account in the manner provided by section 6242.
``SEC. 6241. PARTNER'S RETURN MUST BE CONSISTENT WITH
PARTNERSHIP RETURN.
``(a) General Rule.--A partner of any large partnership
shall, on the partner's return, treat each partnership item
attributable to such partnership in a manner which is
consistent with the treatment of such partnership item on the
partnership return.
``(b) Underpayment Due to Inconsistent Treatment Assessed
as Math Error.--Any underpayment of tax by a partner by
reason of failing to comply with the requirements of
subsection (a) shall be assessed and collected in the same
manner as if such underpayment were on account of a
mathematical or clerical error appearing on the partner's
return. Paragraph (2) of section 6213(b) shall not apply to
any assessment of an underpayment referred to in the
preceding sentence.
``(c) Adjustments Not To Affect Prior Year of Partners.--
``(1) In general.--Except as provided in paragraph (2),
subsections (a) and (b) shall apply without regard to any
adjustment to the partnership item under part II.
``(2) Certain changes in distributive share taken into
account by partner.--
``(A) In general.--To the extent that any adjustment under
part II involves a change under section 704 in a partner's
distributive share of the amount of any partnership item
shown on the partnership return, such adjustment shall be
taken into account in applying this title to such partner for
the partner's taxable year for which such item was required
to be taken into account.
``(B) Coordination with deficiency procedures.--
``(i) In general.--Subchapter B shall not apply to the
assessment or collection of any underpayment of tax
attributable to an adjustment referred to in subparagraph
(A).
``(ii) Adjustment not precluded.--Notwithstanding any other
law or rule of law, nothing in subchapter B (or in any
proceeding under subchapter B) shall preclude the assessment
or collection of any underpayment of tax (or the allowance of
any credit or refund of any overpayment of tax) attributable
to an adjustment referred to in subparagraph (A) and such
assessment or collection or allowance (or any notice thereof)
shall not preclude any notice, proceeding, or determination
under subchapter B.
``(C) Period of limitations.--The period for--
``(i) assessing any underpayment of tax, or
``(ii) filing a claim for credit or refund of any
overpayment of tax,
attributable to an adjustment referred to in subparagraph (A)
shall not expire before the close of the period prescribed by
section 6248 for making adjustments with respect to the
partnership taxable year involved.
``(D) Tiered structures.--If the partner referred to in
subparagraph (A) is another partnership or an S corporation,
the rules of this paragraph shall also apply to persons
holding interests in such partnership or S corporation (as
the case may be); except that, if such partner is a large
partnership, the adjustment referred to in subparagraph (A)
shall be taken into account in the manner provided by section
6242.
``(d) Addition to Tax for Failure to Comply With Section.--
``For addition to tax in case of partner's disregard of requirements
of this section, see part II of subchapter A of chapter 68.
``SEC. 6242. PROCEDURES FOR TAKING PARTNERSHIP ADJUSTMENTS
INTO ACCOUNT.
``(a) Adjustments Flow Through To Partners for Year in
Which Adjustment Takes Effect.--
``(1) In general.--If any partnership adjustment with
respect to any partnership item takes effect (within the
meaning of subsection (d)(2)) during any partnership taxable
year and if an election under paragraph (2) does not apply to
such adjustment, such adjustment shall be taken into account
in determining the amount of such item for the partnership
taxable year in which such adjustment takes effect. In
applying this title to any person who is (directly or
indirectly) a partner in such partnership during such
partnership taxable year, such adjustment shall be treated as
an item actually arising during such taxable year.
``(2) Partnership liable in certain cases.--If--
``(A) a partnership elects under this paragraph to not take
an adjustment into account under paragraph (1),
``(B) a partnership does not make such an election but in
filing its return for any partnership taxable year fails to
take fully into account any partnership adjustment as
required under paragraph (1), or
``(C) any partnership adjustment involves a reduction in a
credit which exceeds the amount of such credit determined for
the partnership taxable year in which the adjustment takes
effect,
the partnership shall pay to the Secretary an amount
determined by applying the rules of subsection (b)(4) to the
adjustments not so taken into account and any excess referred
to in subparagraph (C).
``(3) Offsetting adjustments taken into account.--If a
partnership adjustment requires another adjustment in a
taxable year after the adjusted year and before the
partnership taxable year in which such partnership adjustment
takes effect, such other adjustment shall be taken into
account under this subsection for the partnership taxable
year in which such partnership adjustment takes effect.
``(4) Coordination with part ii.--Amounts taken into
account under this subsection for any partnership taxable
year shall continue to be treated as adjustments for the
adjusted year for purposes of determining whether such
amounts may be readjusted under part II.
``(b) Partnership Liable for Interest and Penalties.--
``(1) In general.--If a partnership adjustment takes effect
during any partnership taxable year and such adjustment
results in an imputed underpayment for the adjusted year, the
partnership--
``(A) shall pay to the Secretary interest computed under
paragraph (2), and
``(B) shall be liable for any penalty, addition to tax, or
additional amount as provided in paragraph (3).
``(2) Determination of amount of interest.--The interest
computed under this paragraph with respect to any partnership
adjustment is the interest which would be determined under
chapter 67--
``(A) on the imputed underpayment determined under
paragraph (4) with respect to such adjustment,
``(B) for the period beginning on the day after the return
due date for the adjusted year and ending on the return due
date for the partnership taxable year in which such
adjustment takes effect (or, if earlier, in the case of any
adjustment to which subsection (a)(2) applies, the date on
which the payment under subsection (a)(2) is made).
Proper adjustments in the amount determined under the
preceding sentence shall be made for adjustments required for
partnership taxable years after the adjusted year and before
the year in which the partnership adjustment takes effect by
reason of such partnership adjustment.
``(3) Penalties.--A partnership shall be liable for any
penalty, addition to tax, or additional amount for which it
would have been liable if such partnership had been an
individual subject to tax under chapter 1 for the adjusted
year and the imputed underpayment determined under paragraph
(4) were an actual underpayment (or understatement) for such
year.
``(4) Imputed underpayment.--For purposes of this
subsection, the imputed underpayment determined under this
paragraph with respect to any partnership adjustment is the
underpayment (if any) which would result--
``(A) by netting all adjustments to items of income, gain,
loss, or deduction and by treating any net increase in income
as an underpayment equal to the amount of such net increase
multiplied by the highest rate of tax in effect under section
1 or 11 for the adjusted year, and
``(B) by taking adjustments to credits into account as
increases or decreases (whichever is appropriate) in the
amount of tax.
For purposes of the preceding sentence, any net decrease in a
loss shall be treated as an increase in income and a similar
rule shall apply to a net increase in a loss.
``(c) Administrative Provisions.--
``(1) In general.--Any payment required by subsection
(a)(2) or (b)(1)(A)--
``(A) shall be assessed and collected in the same manner as
if it were a tax imposed by subtitle C, and
``(B) shall be paid on or before the return due date for
the partnership taxable year in which the partnership
adjustment takes effect.
``(2) Interest.--For purposes of determining interest, any
payment required by subsection (a)(2) or (b)(1)(A) shall be
treated as an underpayment of tax.
``(3) Penalties.--
``(A) In general.--In the case of any failure by any
partnership to pay on the date prescribed therefor any amount
required by subsection (a)(2) or (b)(1)(A), there is hereby
imposed on such partnership a penalty of 10 percent of the
underpayment. For purposes of the preceding sentence, the
term `underpayment' means the excess of any payment required
under this section over the amount (if any) paid on or before
the date prescribed therefor.
``(B) Accuracy-related and fraud penalties made
applicable.--For purposes of part II of subchapter A of
chapter 68, any payment required by subsection (a)(2) shall
be treated as an underpayment of tax.
``(d) Definitions and Special Rules.--For purposes of this
section--
``(1) Partnership adjustment.--The term `partnership
adjustment' means any adjustment in the amount of any
partnership item of a large partnership.
``(2) When adjustment takes effect.--A partnership
adjustment takes effect--
``(A) in the case of an adjustment pursuant to the decision
of a court in a proceeding brought under part II, when such
decision becomes final,
``(B) in the case of an adjustment pursuant to any
administrative adjustment request under section 6251, when
such adjustment is allowed by the Secretary, or
``(C) in any other case, when such adjustment is made.
``(3) Adjusted year.--The term `adjusted year' means the
partnership taxable year to which the item being adjusted
relates.
``(4) Return due date.--The term `return due date' means,
with respect to any taxable year, the date prescribed for
filing the partnership return for such taxable year
(determined without regard to extensions).
``(5) Adjustments involving changes in character.--Under
regulations, appropriate adjustments in the application of
this section shall be made for purposes of taking into
account partnership adjustments which involve a change in the
character of any item of income, gain, loss, or deduction.
``(e) Payments Nondeductible.--No deduction shall be
allowed under subtitle A for any payment required to be made
by a large partnership under this section.
``PART II--PARTNERSHIP LEVEL ADJUSTMENTS
``Subpart A. Adjustments by Secretary.
``Subpart B. Claims for adjustments by partnership.
``Subpart A--Adjustments by Secretary
``Sec. 6245. Secretarial authority.
``Sec. 6246. Restrictions on partnership adjustments.
``Sec. 6247. Judicial review of partnership adjustment.
``Sec. 6248. Period of limitations for making adjustments.
``SEC. 6245. SECRETARIAL AUTHORITY.
``(a) General Rule.--The Secretary is authorized and
directed to make adjustments at the partnership level in any
partnership item to the extent necessary to have such item be
treated in the manner required.
``(b) Notice of Partnership Adjustment.--
``(1) In general.--If the Secretary determines that a
partnership adjustment is required, the Secretary is
authorized to send notice of such adjustment to the
partnership by certified mail or registered mail. Such notice
shall be sufficient if mailed to the partnership at its last
known address even if the partnership has terminated its
existence.
``(2) Further notices restricted.--If the Secretary mails a
notice of a partnership adjustment to any partnership for any
partnership taxable year and the partnership files a petition
under section 6247 with respect to such notice, in the
absence of a showing of fraud, malfeasance, or
misrepresentation of a material fact, the Secretary shall not
mail another such notice to such partnership with respect to
such taxable year.
``(3) Authority to rescind notice with partnership
consent.--The Secretary may, with the consent of the
partnership, rescind any notice of a partnership adjustment
mailed to such partnership. Any notice so rescinded shall not
be treated as a notice of a partnership adjustment, for
purposes of this section, section 6246, and section 6247, and
the taxpayer shall have no right to bring a proceeding under
section 6247 with respect to such notice. Nothing in this
subsection shall affect any suspension of the running of any
period of limitations during any period during which the
rescinded notice was outstanding.
``SEC. 6246. RESTRICTIONS ON PARTNERSHIP ADJUSTMENTS.
``(a) General Rule.--Except as otherwise provided in this
chapter, no adjustment to any partnership item may be made
(and no levy or proceeding in any court for the collection of
any amount resulting from such adjustment may be made, begun
or prosecuted) before--
``(1) the close of the 90th day after the day on which a
notice of a partnership adjustment was mailed to the
partnership, and
``(2) if a petition is filed under section 6247 with
respect to such notice, the decision of the court has become
final.
``(b) Premature Action May Be Enjoined.--Notwithstanding
section 7421(a), any action which violates subsection (a) may
be enjoined in the proper court, including the Tax Court. The
Tax Court shall have no jurisdiction to enjoin any action
under this subsection unless a timely petition has been filed
under section 6247 and then only in respect of the
adjustments that are the subject of such petition.
``(c) Exceptions to Restrictions on Adjustments.--
``(1) Adjustments arising out of math or clerical errors.--
``(A) In general.--If the partnership is notified that, on
account of a mathematical or clerical error appearing on the
partnership return, an adjustment to a partnership item is
required, rules similar to the rules of paragraphs (1) and
(2) of section 6213(b) shall apply to such adjustment.
``(B) Special rule.--If a large partnership is a partner in
another large partnership, any adjustment on account of such
partnership's failure to comply with the requirements of
section 6241(a) with respect to its interest in such other
partnership shall be treated as an adjustment referred to in
subparagraph (A), except that paragraph (2) of section
6213(b) shall not apply to such adjustment.
``(2) Partnership may waive restrictions.--The partnership
shall at any time (whether or not a notice of partnership
adjustment has been issued) have the right, by a signed
notice in writing filed with the Secretary, to waive the
restrictions provided in subsection (a) on the making of any
partnership adjustment.
``(d) Limit Where No Proceeding Begun.--If no proceeding
under section 6247 is begun with respect to any notice of a
partnership adjustment during the 90-day period described in
subsection (a), the amount for which the partnership is
liable under section 6242 (and any increase in any partner's
liability for tax under chapter 1 by reason of any adjustment
under section 6242(a)) shall not exceed the amount determined
in accordance with such notice.
``SEC. 6247. JUDICIAL REVIEW OF PARTNERSHIP ADJUSTMENT.
``(a) General Rule.--Within 90 days after the date on which
a notice of a partnership adjustment is mailed to the
partnership with respect to any partnership taxable year, the
partnership may file a petition for a readjustment of the
partnership items for such taxable year with--
``(1) the Tax Court,
``(2) the district court of the United States for the
district in which the partnership's principal place of
business is located, or
``(3) the Claims Court.
``(b) Jurisdictional Requirement for Bringing Action in
District Court or Claims Court.--
``(1) In general.--A readjustment petition under this
section may be filed in a district court of the United States
or the Claims Court only if the partnership filing the
petition deposits with the Secretary, on or before the date
the petition is filed, the amount for which the partnership
would be liable under section 6242(b) (as of the date of the
filing of the petition) if the partnership items were
adjusted as provided by the notice of partnership adjustment.
The court may by order provide that the jurisdictional
requirements of this paragraph are satisfied where there has
been a good faith attempt to satisfy such requirement and any
shortfall of the amount required to be deposited is timely
corrected.
``(2) Interest payable.--Any amount deposited under
paragraph (1), while deposited, shall not be treated as a
payment of tax for purposes of this title (other than chapter
67).
``(c) Scope of Judicial Review.--A court with which a
petition is filed in accordance with this section shall have
jurisdiction to determine all partnership items of the
partnership for the partnership taxable year to which the
notice of partnership adjustment relates and the proper
allocation of such items among the partners (and the
applicability of any penalty, addition to tax, or additional
amount for which the partnership may be liable under section
6242(b)).
``(d) Determination of Court Reviewable.--Any determination
by a court under this section shall have the force and effect
of a decision of the Tax Court or a final judgment or decree
of the district court or the Claims Court, as the case may
be, and shall be reviewable as such. The date of any such
determination shall be treated as being the date of the
court's order entering the decision.
``(e) Effect of Decision Dismissing Action.--If an action
brought under this section is dismissed other than by reason
of a rescission under section 6245(b)(3), the decision of the
court dismissing the action shall be considered as its
decision that the notice of partnership adjustment is
correct, and an appropriate order shall be entered in the
records of the court.
``SEC. 6248. PERIOD OF LIMITATIONS FOR MAKING ADJUSTMENTS.
``(a) General Rule.--Except as otherwise provided in this
section, no adjustment under this subpart to any partnership
item for any partnership taxable year may be made after the
date which is 3 years after the later of--
``(1) the date on which the partnership return for such
taxable year was filed, or
``(2) the last day for filing such return for such year
(determined without regard to extensions).
``(b) Extension by Agreement.--The period described in
subsection (a) (including an extension period under this
subsection) may be extended by an agreement entered into by
the Secretary and the partnership before the expiration of
such period.
``(c) Special Rule in Case of Fraud, Etc.--
``(1) False return.--In the case of a false or fraudulent
partnership return with intent to evade tax, the adjustment
may be made at any time.
``(2) Substantial omission of income.--If any partnership
omits from gross income an amount properly includible therein
which is in excess of 25 percent of the amount of gross
income stated in its return, subsection (a) shall be applied
by substituting `6 years' for `3 years'.
``(3) No return.--In the case of a failure by a partnership
to file a return for any taxable year, the adjustment may be
made at any time.
``(4) Return filed by secretary.--For purposes of this
section, a return executed by the Secretary under subsection
(b) of section 6020 on behalf of the partnership shall not be
treated as a return of the partnership.
``(d) Suspension When Secretary Mails Notice of
Adjustment.--If notice of a partnership adjustment with
respect to any taxable year is mailed to the partnership, the
running of the period specified in subsection (a) (as
modified by the other provisions of this section) shall be
suspended--
``(1) for the period during which an action may be brought
under section 6247 (and, if a petition is filed under section
6247 with respect to such notice, until the decision of the
court becomes final), and
``(2) for 1 year thereafter.
``Subpart B--Claims for Adjustments by Partnership
``Sec. 6251. Administrative adjustment requests.
``Sec. 6252. Judicial review where administrative adjustment request is
not allowed in full.
``SEC. 6251. ADMINISTRATIVE ADJUSTMENT REQUESTS.
``(a) General Rule.--A partnership may file a request for
an administrative adjustment of partnership items for any
partnership taxable year at any time which is--
``(1) within 3 years after the later of--
``(A) the date on which the partnership return for such
year is filed, or
``(B) the last day for filing the partnership return for
such year (determined without regard to extensions), and
``(2) before the mailing to the partnership of a notice of
a partnership adjustment with respect to such taxable year.
``(b) Secretarial Action.--If a partnership files an
administrative adjustment request under subsection (a), the
Secretary may allow any part of the requested adjustments.
``(c) Special Rule in Case of Extension Under Section
6248.--If the period described in section 6248(a) is extended
pursuant to an agreement under section 6248(b), the period
prescribed by subsection (a)(1) shall not expire before the
date 6 months after the expiration of the extension under
section 6248(b).
``SEC. 6252. JUDICIAL REVIEW WHERE ADMINISTRATIVE ADJUSTMENT
REQUEST IS NOT ALLOWED IN FULL.
``(a) In General.--If any part of an administrative
adjustment request filed under section 6251 is not allowed by
the Secretary, the partnership may file a petition for an
adjustment with respect to the partnership items to which
such part of the request relates with--
``(1) the Tax Court,
``(2) the district court of the United States for the
district in which the principal place of business of the
partnership is located, or
``(3) the Claims Court.
``(b) Period for Filing Petition.--A petition may be filed
under subsection (a) with respect to partnership items for a
partnership taxable year only--
``(1) after the expiration of 6 months from the date of
filing of the request under section 6251, and
``(2) before the date which is 2 years after the date of
such request.
The 2-year period set forth in paragraph (2) shall be
extended for such period as may be agreed upon in writing by
the partnership and the Secretary.
``(c) Coordination With Subpart A.--
``(1) Notice of partnership adjustment before filing of
petition.--No petition may be filed under this section after
the Secretary mails to the partnership a notice of a
partnership adjustment for the partnership taxable year to
which the request under section 6251 relates.
``(2) Notice of partnership adjustment after filing but
before hearing of petition.--If the Secretary mails to the
partnership a notice of a partnership adjustment for the
partnership taxable year to which the request under section
6251 relates after the filing of a petition under this
subsection but before the hearing of such petition, such
petition shall be treated as an action brought under section
6247 with respect to such notice, except that subsection (b)
of section 6247 shall not apply.
``(3) Notice must be before expiration of statute of
limitations.--A notice of a partnership adjustment for the
partnership taxable year shall be taken into account under
paragraphs (1) and (2) only if such notice is mailed before
the expiration of the period prescribed by section 6248 for
making adjustments to partnership items for such taxable
year.
``(d) Scope of Judicial Review.--Except in the case
described in paragraph (2) of subsection (c), a court with
which a petition is filed in accordance with this section
shall have jurisdiction to determine only those partnership
items to which the part of the request under section 6251 not
allowed by the Secretary relates and those items with respect
to which the Secretary asserts adjustments as offsets to the
adjustments requested by the partnership.
``(e) Determination of Court Reviewable.--Any determination
by a court under this subsection shall have the force and
effect of a decision of the Tax Court or a final judgment or
decree of the district court or the Claims Court, as the case
may be, and shall be reviewable as such. The date of any such
determination shall be treated as being the date of the
court's order entering the decision.
``PART III--DEFINITIONS AND SPECIAL RULES
``Sec. 6255. Definitions and special rules.
``SEC. 6255. DEFINITIONS AND SPECIAL RULES.
``(a) Definitions.--For purposes of this subchapter--
``(1) Large partnership.--The term `large partnership' has
the meaning given to such term by section 775 without regard
to section 776(a).
``(2) Partnership item.--The term `partnership item' has
the meaning given to such term by section 6231(a)(3).
``(b) Partners Bound by Actions of Partnership, Etc.--
``(1) Designation of partner.--Each large partnership shall
designate (in the manner prescribed by the Secretary) a
partner (or other person) who shall have the sole authority
to act on behalf of such partnership under this subchapter.
In any case in which such a designation is not in effect, the
Secretary may select any partner as the partner with such
authority.
``(2) Binding effect.--A large partnership and all partners
of such partnership shall be bound--
``(A) by actions taken under this subchapter by the
partnership, and
``(B) by any decision in a proceeding brought under this
subchapter.
``(c) Partnerships Having Principal Place of Business
Outside the United States.--For purposes of sections 6247 and
6252, a principal place of business located outside the
United States shall be treated as located in the District of
Columbia.
``(d) Treatment Where Partnership Ceases To Exist.--If a
partnership ceases to exist before a partnership adjustment
under this subchapter takes effect, such adjustment shall be
taken into account by the former partners of such partnership
under regulations prescribed by the Secretary.
``(e) Date Decision Becomes Final.--For purposes of this
subchapter, the principles of section 7481(a) shall be
applied in determining the date on which a decision of a
district court or the Claims Court becomes final.
``(f) Partnerships in Cases Under Title 11 of the United
States Code.--The running of any period of limitations
provided in this subchapter on making a partnership
adjustment (or provided by section 6501 or 6502 on the
assessment or collection of any amount required to be paid
under section 6242) shall, in a case under title 11 of the
United States Code, be suspended during the period during
which the Secretary is prohibited by reason of such case from
making the adjustment (or assessment or collection) and--
``(1) for adjustment or assessment, 60 days thereafter, and
``(2) for collection, 6 months thereafter.
``(g) Regulations.--The Secretary shall prescribe such
regulations as may be necessary to carry out the provisions
of this subchapter, including regulations--
``(1) to prevent abuse through manipulation of the
provisions of this subchapter, and
``(2) providing that this subchapter shall not apply to any
case described in section 6231(c)(1) (or the regulations
prescribed thereunder) where the application of this
subchapter to such a case would interfere with the effective
and efficient enforcement of this title.
In any case to which this subchapter does not apply by reason
of paragraph (2), rules similar to the rules of sections
6229(f) and 6255(f) shall apply.''
(b) Clerical Amendment.--The table of subchapters for
chapter 63 is amended by adding at the end thereof the
following new item:
``Subchapter D. Treatment of large partnerships.''
SEC. 303. DUE DATE FOR FURNISHING INFORMATION TO PARTNERS OF
LARGE PARTNERSHIPS.
(a) General Rule.--Subsection (b) of section 6031 (relating
to copies to partners) is amended by adding at the end
thereof the following new sentence: ``In the case of a large
partnership (as defined in sections 775 and 776(a)), such
information shall be furnished on or before the first March
15 following the close of such taxable year.''
(b) Treatment as Information Return.--Section 6724 is
amended by adding at the end thereof the following new
subsection:
``(e) Special Rule for Certain Partnership Returns.--If any
partnership return under section 6031(a) is required under
section 6011(e) to be filed on magnetic media or in other
machine-readable form, for purposes of this part, each
schedule required to be included with such return with
respect to each partner shall be treated as a separate
information return.''
SEC. 304. RETURNS MAY BE REQUIRED ON MAGNETIC MEDIA.
Paragraph (2) of section 6011(e) (relating to returns on
magnetic media) is amended by adding at the end thereof the
following new sentence:
``The preceding sentence shall not apply in the case of the
partnership return of a large partnership (as defined in
sections 775 and 776(a)) or any other partnership with 250 or
more partners.''
SEC. 305. TREATMENT OF PARTNERSHIP ITEMS OF INDIVIDUAL
RETIREMENT ACCOUNTS.
Subsection (b) of section 6012 is amended by adding at the
end thereof the following new paragraph:
``(6) IRA share of partnership income.--In the case of a
trust which is exempt from taxation under section 408(e), for
purposes of this section, the trust's distributive share of
items of gross income and gain of any partnership to which
subchapter C or D of chapter 63 applies shall be treated as
equal to the trust's distributive share of the taxable income
of such partnership.''
SEC. 306. EFFECTIVE DATE.
(a) General Rule.--Except as otherwise provided in this
section, the amendments made by this subtitle shall apply to
partnership taxable years ending on or after December 31,
1994.
(b) Special Rule for Section 304.--In the case of a
partnership which is not a large partnership (as defined in
sections 775 and 776(a) of the Internal Revenue Code of 1986,
as added by this subtitle), the amendment made by section 304
shall only apply to partnership taxable years ending on or
after December 31, 1998.
(c) Special Rule for Section 305.--The amendment made by
section 305 shall apply to taxable years beginning after
December 31, 1993.
Subtitle B--Provisions Related to TEFRA Partnership Proceedings
SEC. 311. TREATMENT OF PARTNERSHIP ITEMS IN DEFICIENCY
PROCEEDINGS.
(a) In General.--Subchapter C of chapter 63 is amended by
adding at the end thereof the following new section:
``SEC. 6234. DECLARATORY JUDGMENT RELATING TO TREATMENT OF
ITEMS OTHER THAN PARTNERSHIP ITEMS WITH RESPECT
TO AN OVERSHELTERED RETURN.
``(a) General Rule.--If--
``(1) a taxpayer files an oversheltered return for a
taxable year,
``(2) the Secretary makes a determination with respect to
the treatment of items (other than partnership items) of such
taxpayer for such taxable year, and
``(3) the adjustments resulting from such determination do
not give rise to a deficiency (as defined in section 6211)
but would give rise to a deficiency if there were no net loss
from partnership items,
the Secretary is authorized to send a notice of adjustment
reflecting such determination to the taxpayer by certified or
registered mail.
``(b) Oversheltered Return.--For purposes of this section,
the term `oversheltered return' means an income tax return
which--
``(1) shows no taxable income for the taxable year, and
``(2) shows a net loss from partnership items.
``(c) Judicial Review in the Tax Court.--Within 90 days, or
150 days if the notice is addressed to a person outside the
United States, after the day on which the notice of
adjustment authorized in subsection (a) is mailed to the
taxpayer, the taxpayer may file a petition with the Tax Court
for redetermination of the adjustments. Upon the filing of
such a petition, the Tax Court shall have jurisdiction to
make a declaration with respect to all items (other than
partnership items and affected items which require partner
level determinations as described in section
6230(a)(2)(A)(i)) for the taxable year to which the notice of
adjustment relates, in accordance with the principles of
section 6214(a). Any such declaration shall have the force
and effect of a decision of the Tax Court and shall be
reviewable as such.
``(d) Failure To File Petition.--
``(1) In general.--Except as provided in paragraph (2), if
the taxpayer does not file a petition with the Tax Court
within the time prescribed in subsection (c), the
determination of the Secretary set forth in the notice of
adjustment that was mailed to the taxpayer shall be deemed to
be correct.
``(2) Exception.--Paragraph (1) shall not apply after the
date that the taxpayer--
``(A) files a petition with the Tax Court within the time
prescribed in subsection (c) with respect to a subsequent
notice of adjustment relating to the same taxable year, or
``(B) files a claim for refund of an overpayment of tax
under section 6511 for the taxable year involved.
If a claim for refund is filed by the taxpayer, then solely
for purposes of determining (for the taxable year involved)
the amount of any computational adjustment in connection with
a partnership proceeding under this subchapter (other than
under this section) or the amount of any deficiency
attributable to affected items in a proceeding under section
6230(a)(2), the items that are the subject of the notice of
adjustment shall be presumed to have been correctly reported
on the taxpayer's return during the pendency of the refund
claim (and, if within the time prescribed by section 6532 the
taxpayer commences a civil action for refund under section
7422, until the decision in the refund action becomes final).
``(e) Limitations Period.--
``(1) In general.--Any notice to a taxpayer under
subsection (a) shall be mailed before the expiration of the
period prescribed by section 6501 (relating to the period of
limitations on assessment).
``(2) Suspension when secretary mails notice of
adjustment.--If the Secretary mails a notice of adjustment to
the taxpayer for a taxable year, the period of limitations on
the making of assessments shall be suspended for the period
during which the Secretary is prohibited from making the
assessment (and, in any event, if a proceeding in respect of
the notice of adjustment is placed on the docket of the Tax
Court, until the decision of the Tax Court becomes final),
and for 60 days thereafter.
``(3) Restrictions on assessment.--Except as otherwise
provided in section 6851, 6852, or 6861, no assessment of a
deficiency with respect to any tax imposed by subtitle A
attributable to any item (other than a partnership item or
any item affected by a partnership item) shall be made--
``(A) until the expiration of the applicable 90-day or 150-
day period set forth in subsection (c) for filing a petition
with the Tax Court, or
``(B) if a petition has been filed with the Tax Court,
until the decision of the Tax Court has become final.
``(f) Further Notices of Adjustment Restricted.--If the
Secretary mails a notice of adjustment to the taxpayer for a
taxable year and the taxpayer files a petition with the Tax
Court within the time prescribed in subsection (c), the
Secretary may not mail another such notice to the taxpayer
with respect to the same taxable year in the absence of a
showing of fraud, malfeasance, or misrepresentation of a
material fact.
``(g) Coordination With Other Proceedings Under This
Subchapter.--
``(1) In general.--The treatment of any item that has been
determined pursuant to subsection (c) or (d) shall be taken
into account in determining the amount of any computational
adjustment that is made in connection with a partnership
proceeding under this subchapter (other than under this
section), or the amount of any deficiency attributable to
affected items in a proceeding under section 6230(a)(2), for
the taxable year involved. Notwithstanding any other law or
rule of law pertaining to the period of limitations on the
making of assessments, for purposes of the preceding
sentence, any adjustment made in accordance with this section
shall be taken into account regardless of whether any
assessment has been made with respect to such adjustment.
``(2) Special rule in case of computational adjustment.--In
the case of a computational adjustment that is made in
connection with a partnership proceeding under this
subchapter (other than under this section), the provisions of
paragraph (1) shall apply only if the computational
adjustment is made within the period prescribed by section
6229 for assessing any tax under subtitle A which is
attributable to any partnership item or affected item for the
taxable year involved.
``(3) Conversion to deficiency proceeding.--If--
``(A) after the notice referred to in subsection (a) is
mailed to a taxpayer for a taxable year but before the
expiration of the period for filing a petition with the Tax
Court under subsection (c) (or, if a petition is filed with
the Tax Court, before the Tax Court makes a declaration for
that taxable year), the treatment of any partnership item for
the taxable year is finally determined, or any such item
ceases to be a partnership item pursuant to section 6231(b),
and
``(B) as a result of that final determination or cessation,
a deficiency can be determined with respect to the items that
are the subject of the notice of adjustment,
the notice of adjustment shall be treated as a notice of
deficiency under section 6212 and any petition filed in
respect of the notice shall be treated as an action brought
under section 6213.
``(4) Finally determined.--For purposes of this subsection,
the treatment of partnership items shall be treated as
finally determined if--
``(A) the Secretary enters into a settlement agreement
(within the meaning of section 6224) with the taxpayer
regarding such items,
``(B) a notice of final partnership administrative
adjustment has been issued and--
``(i) no petition has been filed under section 6226 and the
time for doing so has expired, or
``(ii) a petition has been filed under section 6226 and the
decision of the court has become final, or
``(C) the period within which any tax attributable to such
items may be assessed against the taxpayer has expired.
``(h) Special Rules if Secretary Incorrectly Determines
Applicable Procedure.--
``(1) Special rule if secretary erroneously mails notice of
adjustment.--If the Secretary erroneously determines that
subchapter B does not apply to a taxable year of a taxpayer
and consistent with that determination timely mails a notice
of adjustment to the taxpayer pursuant to subsection (a) of
this section, the notice of adjustment shall be treated as a
notice of deficiency under section 6212 and any petition that
is filed in respect of the notice shall be treated as an
action brought under section 6213.
``(2) Special rule if secretary erroneously mails notice of
deficiency.--If the Secretary erroneously determines that
subchapter B applies to a taxable year of a taxpayer and
consistent with that determination timely mails a notice of
deficiency to the taxpayer pursuant to section 6212, the
notice of deficiency shall be treated as a notice of
adjustment under subsection (a) and any petition that is
filed in respect of the notice shall be treated as an action
brought under subsection (c).''
(b) Treatment of Partnership Items in Deficiency
Proceedings.--Section 6211 (defining deficiency) is amended
by adding at the end thereof the following new subsection:
``(c) Coordination With Subchapter C.--In determining the
amount of any deficiency for purposes of this subchapter,
adjustments to partnership items shall be made only as
provided in subchapter C.''
(c) Clerical Amendment.--The table of sections for
subchapter C of chapter 63 is amended by adding at the end
thereof the following new item:
``Sec. 6234. Declaratory judgment relating to treatment of items other
than partnership items with respect to an oversheltered
return.''
(d) Effective Date.--The amendments made by this section
shall apply to partnership taxable years ending after the
date of the enactment of this Act.
SEC. 312. PARTNERSHIP RETURN TO BE DETERMINATIVE OF AUDIT
PROCEDURES TO BE FOLLOWED.
(a) In General.--Section 6231 (relating to definitions and
special rules) is amended by adding at the end thereof the
following new subsection:
``(g) Partnership Return To Be Determinative of Whether
Subchapter Applies.--
``(1) Determination that subchapter applies.--If, on the
basis of a partnership return for a taxable year, the
Secretary reasonably determines that this subchapter applies
to such partnership for such year but such determination is
erroneous, then the provisions of this subchapter are hereby
extended to such partnership (and its items) for such taxable
year and to partners of such partnership.
``(2) Determination that subchapter does not apply.--If, on
the basis of a partnership return for a taxable year, the
Secretary reasonably determines that this subchapter does not
apply to such partnership for such year but such
determination is erroneous, then the provisions of this
subchapter shall not apply to such partnership (and its
items) for such taxable year or to partners of such
partnership.''
(b) Effective Date.--The amendment made by this section
shall apply to partnership taxable years ending after the
date of the enactment of this Act.
SEC. 313. PROVISIONS RELATING TO STATUTE OF LIMITATIONS.
(a) Suspension of Statute Where Untimely Petition Filed.--
Paragraph (1) of section 6229(d) (relating to suspension
where Secretary makes administrative adjustment) is amended
by striking all that follows ``section 6226'' and inserting
the following: ``(and, if a petition is filed under section
6226 with respect to such administrative adjustment, until
the decision of the court becomes final), and''.
(b) Suspension of Statute During Bankruptcy Proceeding.--
Section 6229 is amended by adding at the end thereof the
following new subsection:
``(h) Suspension During Pendency of Bankruptcy
Proceeding.--If a petition is filed naming a partner as a
debtor in a bankruptcy proceeding under title 11 of the
United States Code, the running of the period of limitations
provided in this section with respect to such partner shall
be suspended--
``(1) for the period during which the Secretary is
prohibited by reason of such bankruptcy proceeding from
making an assessment, and
``(2) for 60 days thereafter.''
(c) Tax Matters Partner in Bankruptcy.--Section 6229(b) is
amended by redesignating paragraph (2) as paragraph (3) and
by inserting after paragraph (1) the following new paragraph:
``(2) Special rule with respect to debtors in title 11
cases.--Notwithstanding any other law or rule of law, if an
agreement is entered into under paragraph (1)(B) and the
agreement is signed by a person who would be the tax matters
partner but for the fact that, at the time that the agreement
is executed, the person is a debtor in a bankruptcy
proceeding under title 11 of the United States Code, such
agreement shall be binding on all partners in the partnership
unless the Secretary has been notified of the bankruptcy
proceeding in accordance with regulations prescribed by the
Secretary.''
(d) Effective Dates.--
(1) Subsections (a) and (b).--The amendments made by
subsections (a) and (b) shall apply to partnership taxable
years with respect to which the period under section 6229 of
the Internal Revenue Code of 1986 for assessing tax has not
expired on or before the date of the enactment of this Act.
(2) Subsection (c).--The amendment made by subsection (c)
shall apply to agreements entered into after the date of the
enactment of this Act.
SEC. 314. EXPANSION OF SMALL PARTNERSHIP EXCEPTION.
(a) In General.--Clause (i) of section 6231(a)(1)(B)
(relating to exception for small partnerships) is amended to
read as follows:
``(i) In general.--The term `partnership' shall not include
any partnership having 10 or fewer partners each of whom is
an individual (other than a nonresident alien), a C
corporation, or an estate of a deceased partner. For purposes
of the preceding sentence, a husband and wife (and their
estates) shall be treated as 1 partner.''
(b) Effective Date.--The amendment made by this section
shall apply to partnership taxable years ending after the
date of the enactment of this Act.
SEC. 315. EXCLUSION OF PARTIAL SETTLEMENTS FROM 1 YEAR
LIMITATION ON ASSESSMENT.
(a) In General.--Subsection (f) of section 6229 (relating
to items becoming nonpartnership items) is amended--
(1) by striking ``(f) Items Becoming Nonpartnership
Items.--If'' and inserting the following:
``(f) Special Rules.--
``(1) Items becoming nonpartnership items.--If'',
(2) by moving the text of such subsection 2 ems to the
right, and
(3) by adding at the end thereof the following new
paragraph:
``(2) Special rule for partial settlement agreements.--If a
partner enters into a settlement agreement with the Secretary
with respect to the treatment of some of the partnership
items in dispute for a partnership taxable year but other
partnership items for such year remain in dispute, the period
of limitations for assessing any tax attributable to the
settled items shall be determined as if such agreement had
not been entered into.''
(b) Effective Date.--The amendment made by this section
shall apply to settlements entered into after the date of the
enactment of this Act.
SEC. 316. EXTENSION OF TIME FOR FILING A REQUEST FOR
ADMINISTRATIVE ADJUSTMENT.
(a) In General.--Section 6227 (relating to administrative
adjustment requests) is amended by redesignating subsections
(b) and (c) as subsections (c) and (d), respectively, and by
inserting after subsection (a) the following new subsection:
``(b) Special Rule in Case of Extension of Period of
Limitations Under Section 6229.--The period prescribed by
subsection (a)(1) for filing of a request for an
administrative adjustment shall be extended--
``(1) for the period within which an assessment may be made
pursuant to an agreement (or any extension thereof) under
section 6229(b), and
``(2) for 6 months thereafter.''
(b) Effective Date.--The amendment made by this section
shall take effect as if included in the amendments made by
section 402 of the Tax Equity and Fiscal Responsibility Act
of 1982.
SEC. 317. AVAILABILITY OF INNOCENT SPOUSE RELIEF IN CONTEXT
OF PARTNERSHIP PROCEEDINGS.
(a) In General.--Subsection (a) of section 6230 is amended
by adding at the end thereof the following new paragraph:
``(3) Special rule in case of assertion by partner's spouse
of innocent spouse relief.--
``(A) Notwithstanding section 6404(b), if the spouse of a
partner asserts that section 6013(e) applies with respect to
a liability that is attributable to any adjustment to a
partnership item, then such spouse may file with the
Secretary within 60 days after the notice of computational
adjustment is mailed to the spouse a request for abatement of
the assessment specified in such notice. Upon receipt of such
request, the Secretary shall abate the assessment. Any
reassessment of the tax with respect to which an abatement is
made under this subparagraph shall be subject to the
deficiency procedures prescribed by subchapter B. The period
for making any such reassessment shall not expire before the
expiration of 60 days after the date of such abatement.
``(B) If the spouse files a petition with the Tax Court
pursuant to section 6213 with respect to the request for
abatement described in subparagraph (A), the Tax Court shall
only have jurisdiction pursuant to this section to determine
whether the requirements of section 6013(e) have been
satisfied. For purposes of such determination, the treatment
of partnership items under the settlement, the final
partnership administrative adjustment, or the decision of the
court (whichever is appropriate) that gave rise to the
liability in question shall be conclusive.
``(C) Rules similar to the rules contained in subparagraphs
(B) and (C) of paragraph (2) shall apply for purposes of this
paragraph.''
(b) Claims for Refund.--Subsection (c) of section 6230 is
amended by adding at the end thereof the following new
paragraph:
``(5) Rules for seeking innocent spouse relief.--
``(A) In general.--The spouse of a partner may file a claim
for refund on the ground that the Secretary failed to relieve
the spouse under section 6013(e) from a liability that is
attributable to an adjustment to a partnership item.
``(B) Time for filing claim.--Any claim under subparagraph
(A) shall be filed within 6 months after the day on which the
Secretary mails to the spouse the notice of computational
adjustment referred to in subsection (a)(3)(A).
``(C) Suit if claim not allowed.--If the claim under
subparagraph (B) is not allowed, the spouse may bring suit
with respect to the claim within the period specified in
paragraph (3).
``(D) Prior determinations are binding.--For purposes of
any claim or suit under this paragraph, the treatment of
partnership items under the settlement, the final partnership
administrative adjustment, or the decision of the court
(whichever is appropriate) that gave rise to the liability in
question shall be conclusive.''
(c) Technical Amendments.--
(1) Paragraph (1) of section 6230(a) is amended by striking
``paragraph (2)'' and inserting ``paragraph (2) or (3)''.
(2) Subsection (a) of section 6503 is amended by striking
``section 6230(a)(2)(A)'' and inserting ``paragraph (2)(A) or
(3) of section 6230(a)''.
(d) Effective Date.--The amendments made by this section
shall take effect as if included in the amendments made by
section 402 of the Tax Equity and Fiscal Responsibility Act
of 1982.
SEC. 318. DETERMINATION OF PENALTIES AT PARTNERSHIP LEVEL.
(a) In General.--Section 6221 (relating to tax treatment
determined at partnership level) is amended by striking
``item'' and inserting ``item (and the applicability of any
penalty, addition to tax, or additional amount which relates
to an adjustment to a partnership item)''.
(b) Conforming Amendments.--
(1) Subsection (f) of section 6226 is amended--
(A) by striking ``relates and'' and inserting ``relates,'',
and
(B) by inserting before the period ``, and the
applicability of any penalty, addition to tax, or additional
amount which relates to an adjustment to a partnership
item''.
(2) Clause (i) of section 6230(a)(2)(A) is amended to read
as follows:
``(i) affected items which require partner level
determinations (other than penalties, additions to tax, and
additional amounts that relate to adjustments to partnership
items), or''.
(3)(A) Subparagraph (A) of section 6230(a)(3), as added by
section 317, is amended by inserting ``(including any
liability for any penalty, addition to tax, or additional
amount relating to such adjustment)'' after ``partnership
item''.
(B) Subparagraph (B) of such section is amended by
inserting ``(and the applicability of any penalties,
additions to tax, or additional amounts)'' after
``partnership items''.
(C) Subparagraph (A) of section 6230(c)(5), as added by
section 317, is amended by inserting before the period
``(including any liability for any penalties, additions to
tax, or additional amounts relating to such adjustment)''.
(D) Subparagraph (D) of section 6230(c)(5), as added by
section 317, is amended by inserting ``(and the applicability
of any penalties, additions to tax, or additional amounts)''
after ``partnership items''.
(4) Paragraph (1) of section 6230(c) is amended by striking
``or'' at the end of subparagraph (A), by striking the period
at the end of subparagraph (B) and inserting ``, or'', and by
adding at the end thereof the following new subparagraph:
``(C) the Secretary erroneously imposed any penalty,
addition to tax, or additional amount which relates to an
adjustment to a partnership item.''
(5) So much of subparagraph (A) of section 6230(c)(2) as
precedes ``shall be filed'' is amended to read as follows:
``(A) Under paragraph (1) (a) or (c).--Any claim under
subparagraph (A) or (C) of paragraph (1)''.
(6) Paragraph (4) of section 6230(c) is amended by adding
at the end thereof the following: ``In addition, the
determination under the final partnership administrative
adjustment or under the decision of the court (whichever is
appropriate) concerning the applicability of any penalty,
addition to tax, or additional amount which relates to an
adjustment to a partnership item shall also be conclusive.
Notwithstanding the preceding sentence, the partner shall be
allowed to assert any partner level defenses that may apply
or to challenge the amount of the computational adjustment.''
(c) Effective Date.--The amendments made by this section
shall apply to partnership taxable years ending after the
date of the enactment of this Act.
SEC. 319. PROVISIONS RELATING TO COURT JURISDICTION, ETC.
(a) Tax Court Jurisdiction To Enjoin Premature Assessments
of Deficiencies Attributable to Partnership Items.--
Subsection (b) of section 6225 is amended by striking ``the
proper court.'' and inserting ``the proper court, including
the Tax Court. The Tax Court shall have no jurisdiction to
enjoin any action or proceeding under this subsection unless
a timely petition for a readjustment of the partnership items
for the taxable year has been filed and then only in respect
of the adjustments that are the subject of such petition.''
(b) Jurisdiction To Consider Statute of Limitations With
Respect to Partners.--Paragraph (1) of section 6226(d) is
amended by adding at the end thereof the following new
sentence:
``Notwithstanding subparagraph (B), any person treated under
subsection (c) as a party to an action shall be permitted to
participate in such action (or file a readjustment petition
under subsection (b) or paragraph (2) of this subsection)
solely for the purpose of asserting that the period of
limitations for assessing any tax attributable to partnership
items has expired with respect to such person, and the court
having jurisdiction of such action shall have jurisdiction to
consider such assertion.''
(c) Tax Court Jurisdiction To Determine Overpayments
Attributable to Affected Items.--
(1) Paragraph (6) of section 6230(d) is amended by striking
``(or an affected item)''.
(2) Paragraph (3) of section 6512(b) is amended by adding
at the end thereof the following new sentence:
``In the case of a credit or refund relating to an affected
item (within the meaning of section 6231(a)(5)), the
preceding sentence shall be applied by substituting the
periods under sections 6229 and 6230(d) for the periods under
section 6511(b)(2), (c), and (d).''
(d) Venue on Appeal.--
(1) Paragraph (1) of section 7482(b) is amended by striking
``or'' at the end of subparagraph (D), by striking the period
at the end of subparagraph (E) and inserting ``, or'', and by
inserting after subparagraph (E) the following new
subparagraph:
``(F) in the case of a petition under section 6234(c)--
``(i) the legal residence of the petitioner if the
petitioner is not a corporation, and
``(ii) the place or office applicable under subparagraph
(B) if the petitioner is a corporation.''
(2) The last sentence of section 7482(b)(1) is amended by
striking ``or 6228(a)'' and inserting ``, 6228(a), or
6234(c)''.
(e) Other Provisions.--
(1) Subsection (c) of section 7459 is amended by striking
``or section 6228(a)'' and inserting ``, 6228(a), or
6234(c)''.
(2) Subsection (o) of section 6501 is amended by adding at
the end thereof the following new paragraph:
``(3) For declaratory judgment relating to treatment of
items other than partnership items with respect to an
oversheltered return, see section 6234.''
(f) Effective Date.--The amendments made by this section
shall apply to partnership taxable years ending after the
date of the enactment of this Act.
SEC. 320. TREATMENT OF PREMATURE PETITIONS FILED BY NOTICE
PARTNERS OR 5-PERCENT GROUPS.
(a) In General.--Subsection (b) of section 6226 (relating
to judicial review of final partnership administrative
adjustments) is amended by redesignating paragraph (5) as
paragraph (6) and by inserting after paragraph (4) the
following new paragraph:
``(5) Treatment of premature petitions.--If--
``(A) a petition for a readjustment of partnership items
for the taxable year involved is filed by a notice partner
(or a 5-percent group) during the 90-day period described in
subsection (a), and
``(B) no action is brought under paragraph (1) during the
60-day period described therein with respect to such taxable
year which is not dismissed,
such petition shall be treated for purposes of paragraph (1)
as filed on the last day of such 60-day period.''
(b) Effective Date.--The amendment made by this section
shall apply to petitions filed after the date of the
enactment of this Act.
SEC. 321. BONDS IN CASE OF APPEALS FROM TEFRA PROCEEDING.
(a) In General.--Subsection (b) of section 7485 (relating
to bonds to stay assessment of collection) is amended--
(1) by inserting ``penalties,'' after ``any interest,'',
and
(2) by striking ``aggregate of such deficiencies'' and
inserting ``aggregate liability of the parties to the
action''.
(b) Effective Date.--The amendment made by this section
shall take effect as if included in the amendments made by
section 402 of the Tax Equity and Fiscal Responsibility Act
of 1982.
SEC. 322. SUSPENSION OF INTEREST WHERE DELAY IN COMPUTATIONAL
ADJUSTMENT RESULTING FROM TEFRA SETTLEMENTS.
(a) In General.--Subsection (c) of section 6601 (relating
to interest on underpayment, nonpayment, or extension of time
for payment, of tax) is amended by adding at the end thereof
the following new sentence: ``In the case of a settlement
under section 6224(c) which results in the conversion of
partnership items to nonpartnership items pursuant to section
6231(b)(1)(C), the preceding sentence shall apply to a
computational adjustment resulting from such settlement in
the same manner as if such adjustment were a deficiency and
such settlement were a waiver referred to in the preceding
sentence.''
(b) Effective Date.--The amendment made by this section
shall apply to adjustments with respect to partnership
taxable years beginning after the date of the enactment of
this Act.
SEC. 323. SPECIAL RULES FOR ADMINISTRATIVE ADJUSTMENT
REQUESTS WITH RESPECT TO BAD DEBTS OR WORTHLESS
SECURITIES.
(a) General Rule.--Section 6227 (relating to administrative
adjustment requests) is amended by adding at the end thereof
the following new subsection:
``(d) Requests With Respect to Bad Debts or Worthless
Securities.--In the case of that portion of any request for
an administrative adjustment which relates to the
deductibility by the partnership under section 166 of a debt
as a debt which became worthless, or under section 165(g) of
a loss from worthlessness of a security, the period
prescribed in subsection (a)(1) shall be 7 years from the
last day for filing the partnership return for the year with
respect to which such request is made (determined without
regard to extensions).''
(b) Effective Date.--
(1) In general.--The amendment made by subsection (a) shall
take effect as if included in the amendments made by section
402 of the Tax Equity and Fiscal Responsibility Act of 1982.
(2) Treatment of requests filed before date of enactment.--
In the case of that portion of any request (filed before the
date of the enactment of this Act) for an administrative
adjustment which relates to the deductibility of a debt as a
debt which became worthless or the deductibility of a loss
from the worthlessness of a security--
(A) paragraph (2) of section 6227(a) of the Internal
Revenue Code of 1986 shall not apply,
(B) the period for filing a petition under section 6228 of
the Internal Revenue Code of 1986 with respect to such
request shall not expire before the date 6 months after the
date of the enactment of this Act, and
(C) such a petition may be filed without regard to whether
there was a notice of the beginning of an administrative
proceeding or a final partnership administrative adjustment.
TITLE IV--FOREIGN PROVISIONS
Subtitle A--Simplification of Treatment of Passive Foreign Corporations
SEC. 401. REPEAL OF FOREIGN PERSONAL HOLDING COMPANY RULES
AND FOREIGN INVESTMENT COMPANY RULES.
(a) General Rule.--The following provisions are hereby
repealed:
(1) Part III of subchapter G of chapter 1 (relating to
foreign personal holding companies).
(2) Section 1246 (relating to gain on foreign investment
company stock).
(3) Section 1247 (relating to election by foreign
investment companies to distribute income currently).
(b) Exemption of Foreign Corporations From Accumulated
Earnings Tax and Personal Holding Company Rules.--
(1) Accumulated earnings tax.--Subsection (b) of section
532 (relating to exceptions) is amended--
(A) by striking paragraph (2) and inserting the following:
``(2) a foreign corporation, or'',
(B) by striking ``, or'' at the end of paragraph (3) and
inserting a period, and
(C) by striking paragraph (4).
(2) Personal holding company rules.--Subsection (c) of
section 542 (relating to exceptions) is amended--
(A) by striking paragraph (5) and inserting the following:
``(5) a foreign corporation,'',
(B) by striking paragraphs (7) and (10) and by
redesignating paragraphs (8) and (9) as paragraphs (7) and
(8), respectively,
(C) by inserting ``and'' at the end of paragraph (7) (as so
redesignated), and
(D) by striking ``; and'' at the end of paragraph (8) (as
so redesignated) and inserting a period.
(c) Treatment of Certain Service Contracts Under Subpart
F.--
(1) Paragraph (1) of section 954(c) (defining foreign
personal holding company income) is amended by adding at the
end thereof the following new subparagraph:
``(F) Personal service contracts.--
``(i) Amounts received under a contract under which the
corporation is to furnish personal services, if some person
other than the corporation has the right to designate (by
name or by description) the individual who is to perform the
services, or if the individual who is to perform the services
is designated (by name or by description) in the contract.
``(ii) Amounts received from the sale or other disposition
of such contract.
This subparagraph shall apply with respect to amounts
received for services under a particular contract only if at
some time during the taxable year 25 percent or more in value
of the outstanding stock of the corporation is owned,
directly or indirectly, by or for the individual who has
performed, is to perform, or may be designated (by name or by
description) as the one to perform, such services. For
purposes of the preceding sentence, the attribution rules of
section 544 shall apply, determined as if any reference to
section 543(a)(7) were a reference to this subparagraph.''
(2) Clause (iii) of section 904(d)(2)(A) is amended by
striking ``and'' at the end of subclause (II), by striking
the period at the end of subclause (III) and inserting ``,
and'', and by adding at the end thereof the following new
subclause:
``(IV) any income described in section 954(c)(1)(F)
(relating to personal service contracts).''
SEC. 402. REPLACEMENT FOR PASSIVE FOREIGN INVESTMENT COMPANY
RULES.
(a) General Rule.--Part VI of subchapter P of chapter 1
(relating to treatment of certain passive foreign investment
companies) is amended to read as follows:
``PART VI--TREATMENT OF PASSIVE FOREIGN CORPORATIONS
``Subpart A. Current taxation rules.
``Subpart B. Interest on holdings to which subpart A does not apply.
``Subpart C. General provisions.
``Subpart A--Current Taxation Rules
``Sec. 1291. Stock in certain passive foreign corporations marked to
market.
``Sec. 1292. Inclusion of income of certain passive foreign
corporations.
``SEC. 1291. STOCK IN CERTAIN PASSIVE FOREIGN CORPORATIONS
MARKED TO MARKET.
``(a) General Rule.--In the case of marketable stock in a
passive foreign corporation which is owned (or treated under
subsection (g) as owned) by a United States person at the
close of any taxable year of such person--
``(1) If the fair market value of such stock as of the
close of such taxable year exceeds its adjusted basis, such
United States person shall include in gross income for such
taxable year an amount equal to the amount of such excess.
``(2) If the adjusted basis of such stock exceeds the fair
market value of such stock as of the close of such taxable
year, such United States person shall be allowed a deduction
for such taxable year equal to the lesser of--
``(A) the amount of such excess, or
``(B) the unreversed inclusions with respect to such stock.
``(b) Basis Adjustments.--
``(1) In general.--The adjusted basis of stock in a passive
foreign corporation--
``(A) shall be increased by the amount included in the
gross income of the United States person under subsection
(a)(1) with respect to such stock, and
``(B) shall be decreased by the amount allowed as a
deduction to the United States person under subsection (a)(2)
with respect to such stock.
``(2) Special rule for stock constructively owned.--In the
case of stock in a passive foreign corporation which the
United States person is treated as owning under subsection
(g)--
``(A) the adjustments under paragraph (1) shall apply to
such stock in the hands of the person actually holding such
stock but only for purposes of determining the subsequent
treatment under this chapter of the United States person with
respect to such stock, and
``(B) similar adjustments shall be made to the adjusted
basis of the property by reason of which the United States
person is treated as owning such stock.
``(c) Character and Source Rules.--
``(1) Ordinary treatment.--
``(A) Gain.--Any amount included in gross income under
subsection (a)(1), and any gain on the sale or other
disposition of marketable stock in a passive foreign
corporation, shall be treated as ordinary income.
``(B) Loss.--Any--
``(i) amount allowed as a deduction under subsection
(a)(2), and
``(ii) loss on the sale or other disposition of marketable
stock in a passive foreign corporation to the extent that the
amount of such loss does not exceed the unreversed inclusions
with respect to such stock,
shall be treated as an ordinary loss. The amount so treated
shall be treated as a deduction allowable in computing
adjusted gross income.
``(2) Source.--The source of any amount included in gross
income under subsection (a)(1) (or allowed as a deduction
under subsection (a)(2)) shall be determined in the same
manner as if such amount were gain or loss (as the case may
be) from the sale of stock in the passive foreign
corporation.
``(d) Unreversed Inclusions.--For purposes of this section,
the term `unreversed inclusions' means, with respect to any
stock in a passive foreign corporation, the excess (if any)
of--
``(1) the amount included in gross income of the taxpayer
under subsection (a)(1) with respect to such stock for prior
taxable years, over
``(2) the amount allowed as a deduction under subsection
(a)(2) with respect to such stock for prior taxable years.
The amount referred to in paragraph (1) shall include any
amount which would have been included in gross income under
subsection (a)(1) with respect to such stock for any prior
taxable year but for section 1293.
``(e) Coordination With Section 1292.--This section shall
not apply with respect to any stock in a passive foreign
corporation--
``(1) which is U.S. controlled,
``(2) which is a qualified electing fund with respect to
the United States person for the taxable year, or
``(3) in which the United States person is a 25-percent
shareholder.
``(f) Treatment of Controlled Foreign Corporations Which
are Shareholders in Passive Foreign Corporations.--In the
case of a foreign corporation which is a controlled foreign
corporation (or is treated as a controlled foreign
corporation under section 1292) and which owns (or is treated
under subsection (g) as owning) stock in a passive foreign
corporation--
``(1) this section (other than subsection (c)(2) thereof)
shall apply to such foreign corporation in the same manner as
if such corporation were a United States person, and
``(2) for purposes of subpart F of part III of subchapter
N--
``(A) any amount included in gross income under subsection
(a)(1) shall be treated as foreign personal holding company
income described in section 954(c)(1)(A), and
``(B) any amount allowed as a deduction under subsection
(a)(2) shall be treated as a deduction allocable to foreign
personal holding company income so described.
``(g) Stock Owned Through Certain Foreign Entities.--Except
as provided in regulations--
``(1) In general.--For purposes of this section, stock
owned, directly or indirectly, by or for a foreign
partnership or foreign trust or foreign estate shall be
considered as being owned proportionately by its partners or
beneficiaries. Stock considered to be owned by a person by
reason of the application of the preceding sentence shall,
for purposes of applying such sentence, be treated as
actually owned by such person.
``(2) Treatment of certain dispositions.--In any case in
which a United States person is treated as owning stock in a
passive foreign corporation by reason of paragraph (1)--
``(A) any disposition by the United States person or by any
other person which results in the United States person being
treated as no longer owning such stock, and
``(B) any disposition by the person owning such stock,
shall be treated as a disposition by the United States person
of the stock in the passive foreign corporation.
``(h) Coordination With Section 851(b).--For purposes of
paragraphs (2) and (3) of section 851(b), any amount included
in gross income under subsection (a) shall be treated as a
dividend.
``(i) Transition Rules.--
``(1) Individuals becoming subject to united states tax.--
If any individual becomes a United States person in a taxable
year beginning after December 31, 1993, solely for purposes
of this section, the adjusted basis (before adjustments under
subsection (b)) of any marketable stock in a passive foreign
corporation owned (or treated as owned under subsection (g))
by such individual on the first day of such taxable year
shall be treated as being the greater of its fair market
value on such first day or its adjusted basis on such first
day.
``(2) Marketable stock held before effective date.--
``(A) In general.--If any marketable stock in a passive
foreign corporation is owned (or treated under subsection (g)
as owned) by a United States person on the first day of such
person's first taxable year, beginning after December 31,
1993--
``(i) paragraph (2) of section 1294(a) shall apply to such
stock as if it became marketable during such first taxable
year; except that--
``(I) section 1293 shall not apply to the amount included
in gross income under subsection (a) to the extent such
amount is attributable to increases in fair market value
during such first taxable year, and
``(II) the taxpayer's holding period shall be treated as
having ended on the last day of the preceding taxable year
for purposes of allocating amounts under section
1293(a)(1)(A), and
``(ii) such person may elect to extend the time for the
payment of the applicable section 1293 deferred tax as
provided in subparagraph (B).
``(B) Election to extend time for payment.--
``(i) In general.--At the election of the taxpayer, the
time for the payment of the applicable section 1293 deferred
tax shall be extended to the extent and subject to the
limitations provided in this subparagraph.
``(ii) Termination of extension.--
``(I) Distributions.--If any distribution is received with
respect to any stock to which an extension under clause (i)
relates and such distribution would be an excess distribution
within the meaning of section 1293 if such section applied to
such stock, then the extension under clause (i) for the
appropriate portion (as determined under regulations) of the
applicable section 1293 deferred tax shall expire on the last
day prescribed by law (determined without regard to
extensions) for filing the return of tax for the taxable year
in which the distribution is received.
``(II) Reversal of inclusion.--If an amount is allowable as
a deduction under subsection (a)(2) with respect to any stock
to which an extension under clause (i) relates and the amount
so allowable is allocable to the amount which gave rise to
the applicable section 1293 deferred tax, then the extension
under clause (i) for the appropriate portion (as determined
under regulations) of the applicable section 1293 deferred
tax shall expire on the last day prescribed by law
(determined without regard to extensions) for filing the
return of the tax for the taxable year for which such
deduction is allowed.
``(III) Dispositions, etc.--If stock in a passive foreign
corporation is disposed of during the taxable year, all
extensions under clause (i) for payment of the applicable
section 1293 deferred tax attributable to such stock which
have not expired before the date of such disposition shall
expire on the last date prescribed by law (determined without
regard to extensions) for filing the return of tax for the
taxable year in which such disposition occurs. To the extent
provided in regulations, the preceding sentence shall not
apply in the case of a disposition in a transaction with
respect to which gain or loss is not recognized (in whole or
in part), and the person acquiring such stock in such
transaction shall succeed to the treatment under this section
of the person making such disposition.
``(iii) Other rules.--
``(I) Election.--The election under clause (i) shall be
made not later than the time prescribed by law (including
extensions) for filing the return of tax imposed by this
chapter for the first taxable year referred to in
subparagraph (A).
``(II) Treatment of loans to shareholder.--For purposes of
this subparagraph, any loan by a passive foreign corporation
(directly or indirectly) to a shareholder of such corporation
shall be treated as a distribution to such shareholder.
``(C) Cross reference.--
``For provisions providing for interest for the period of the
extension under this paragraph, see section 6601.
``(D) Applicable section 1293 deferred tax.--For purposes
of this paragraph, the term `applicable section 1293 deferred
tax' means the deferred tax amount determined under section
1293 with respect to the amount which, but for section 1293,
would have been included in gross income for the first
taxable year referred to in subparagraph (A). Such term also
includes the tax imposed by this chapter for such first
taxable year to the extent attributable to the amounts
allocated under section 1293(a)(1)(A) to a period described
in section 1293(a)(1)(B)(ii).
``(3) Special rules for regulated investment companies.--
``(A) In general.--If any marketable stock in a passive
foreign corporation is owned (or treated under subsection (g)
as owned) by a regulated investment company on the first day
of such company's first taxable year beginning after December
31, 1993--
``(i) section 1293 shall not apply to such stock with
respect to any distribution or disposition during, or amount
included in gross income under this section for, such first
taxable year, but
``(ii) such company's tax under this chapter for such first
taxable year shall be increased by the aggregate amount of
interest which would have been determined under section
1293(c)(3) if section 1293 were applied without regard to
this subparagraph.
``(B) Disallowance of deduction.--No deduction shall be
allowed to any regulated investment company for the increase
in tax under subparagraph (A)(ii).
``SEC. 1292. CURRENT INCLUSION OF INCOME OF CERTAIN PASSIVE
FOREIGN CORPORATIONS.
``(a) Passive Foreign Corporations Which Are United States
Controlled.--
``(1) Treatment under subpart f.--
``(A) In general.--If a passive foreign corporation is
United States controlled, then for purposes of subpart F of
part III of subchapter N--
``(i) such corporation, if not otherwise a controlled
foreign corporation, shall be treated as a controlled foreign
corporation,
``(ii) the term `United States shareholder' means, with
respect to such corporation, any United States person who
owns (within the meaning of section 958(a)) any stock in such
corporation,
``(iii) the entire gross income of such corporation shall,
after being reduced under the principles of paragraph (5) of
section 954(b), be treated as foreign base company income,
and
``(iv) sections 970 and 971 shall not apply to such
corporation.
Except as provided in regulations, the preceding sentence
shall also apply for purposes of section 904(d).
``(B) Special rules.--If any taxpayer is treated as being a
United States shareholder in a controlled foreign corporation
solely by reason of this section--
``(i) section 954(b)(4) (relating to exception for certain
income subject to high foreign taxes) shall not apply for
purposes of determining the amount included in the gross
income of such taxpayer under section 951 by reason of being
so treated with respect to such corporation,
``(ii) the amount so included in the gross income of such
taxpayer under section 951 with respect to such corporation
shall be treated as long-term capital gain to the extent
attributable to the net capital gain of such corporation, and
``(iii) sections 956 and 956A shall not apply to such
taxpayer.
``(2) U.S. controlled.--For purposes of this subpart, a
passive foreign corporation is United States controlled if--
``(A) such corporation is a controlled foreign corporation
determined without regard to this subsection, or
``(B) at any time during the taxable year more than 50
percent of--
``(i) the total combined voting power of all classes of
stock of such corporation entitled to vote, or
``(ii) the total value of the stock of such corporation,
is owned directly or indirectly by 5 or fewer United States
persons.
``(3) Constructive ownership rules for purposes of
paragraph (2)(b).--For purposes of paragraph (2)(B), the
attribution rules provided in section 544 shall apply,
determined as if any reference to a personal holding company
were a reference to a corporation described in paragraph
(2)(B) (and any reference to the stock ownership requirement
provided in section 542(a)(2) were a reference to the
requirement of paragraph (2)(B)); except that--
``(A) subsection (a)(4) of such section shall be applied by
substituting `Paragraphs (1), (2), and (3)' for `Paragraphs
(2) and (3)',
``(B) stock owned by a nonresident alien individual shall
not be considered by reason of attribution through family
membership as owned by a citizen or resident alien individual
who is not the spouse of the nonresident alien individual and
who does not otherwise own stock in the foreign corporation
(determined after the application of such attribution rules
other than attribution through family membership), and
``(C) stock of a corporation owned by any foreign person
shall not be considered by reason of attribution through
partners as owned by a citizen or resident of the United
States who does not otherwise own stock in the foreign
corporation (determined after the application of such
attribution rules and subparagraph (A), other than
attribution through partners).
``(b) Taxpayers Electing Current Inclusion and 25-Percent
Shareholders.--
``(1) In general.--If a passive foreign corporation which
is not United States controlled is a qualified electing fund
with respect to any taxpayer or the taxpayer is a 25-percent
shareholder in such corporation, then for purposes of subpart
F of part III of subchapter N--
``(A) such passive foreign corporation shall be treated as
a controlled foreign corporation with respect to such
taxpayer,
``(B) such taxpayer shall be treated as a United States
shareholder in such corporation, and
``(C) the modifications of clauses (iii) and (iv) of
subsection (a)(1)(A) and of subparagraph (B) of subsection
(a)(1) shall apply in determining the amount included under
such subpart F in the gross income of such taxpayer (and the
character of the amount so included).
For purposes of section 904(d), any amount included in the
gross income of the taxpayer under the preceding sentence
shall be treated as a dividend from a foreign corporation
which is not a controlled foreign corporation.
``(2) Qualified electing fund.--For purposes of this
subpart, the term `qualified electing fund' means any passive
foreign corporation if--
``(A) an election by the taxpayer under paragraph (3)
applies to such corporation for the taxable year of the
taxpayer, and
``(B) such corporation complies with such requirements as
the Secretary may prescribe for purposes of carrying out the
purposes of this subpart.
``(3) Election.--
``(A) In general.--A taxpayer may make an election under
this paragraph with respect to any passive foreign
corporation for any taxable year of the taxpayer. Such an
election, once made with respect to any corporation, shall
apply to all subsequent taxable years of the taxpayer with
respect to such corporation unless revoked by the taxpayer
with the consent of the Secretary.
``(B) When made.--An election under this subsection may be
made for any taxable year of the taxpayer at any time on or
before the due date (determined with regard to extensions)
for filing the return of the tax imposed by this chapter for
such taxable year. To the extent provided in regulations,
such an election may be made later than as required in the
preceding sentence where the taxpayer fails to make a timely
election because the taxpayer reasonably believes that the
corporation was not a passive foreign corporation.
``(4) 25-percent shareholder.--For purposes of this
subpart, the term `25-percent shareholder' means, with
respect to any passive foreign corporation, any United States
person who owns (within the meaning of section 958(a)), or is
considered as owning by applying the rules of section 958(b),
25 percent or more (by vote or value) of the stock of such
corporation.
``Subpart B--Interest on Holdings To Which Subpart A Does Not Apply
``Sec. 1293. Interest on tax deferral.
``Sec. 1294. Definitions and special rules.
``SEC. 1293. INTEREST ON TAX DEFERRAL.
``(a) Treatment of Distributions and Stock Dispositions.--
``(1) Distributions.--If a United States person receives an
excess distribution in respect of stock to which this section
applies, then--
``(A) the amount of the excess distribution shall be
allocated ratably to each day in the taxpayer's holding
period for the stock,
``(B) with respect to such excess distribution, the
taxpayer's gross income for the current year shall include
(as ordinary income) only the amounts allocated under
subparagraph (A) to--
``(i) the current year, or
``(ii) any period in the taxpayer's holding period before
the first day of the first taxable year of the corporation
which begins after December 31, 1986, and for which it was a
passive foreign corporation, and
``(C) the tax imposed by this chapter for the current year
shall be increased by the deferred tax amount (determined
under subsection (c)).
``(2) Dispositions.--If the taxpayer disposes of stock to
which this section applies, then the rules of paragraph (1)
shall apply to any gain recognized on such disposition in the
same manner as if such gain were an excess distribution.
``(3) Definitions.--For purposes of this subpart--
``(A) Holding period.--The taxpayer's holding period shall
be determined under section 1223; except that--
``(i) for purposes of applying this section to an excess
distribution, such holding period shall be treated as ending
on the date of such distribution, and
``(ii) if section 1291 applied to such stock with respect
to the taxpayer for any prior taxable year, such holding
period shall be treated as beginning on the first day of the
first taxable year beginning after the last taxable year for
which section 1291 so applied.
``(B) Current year.--The term `current year' means the
taxable year in which the excess distribution or disposition
occurs.
``(b) Excess Distribution.--
``(1) In general.--For purposes of this section, the term
`excess distribution' means any distribution in respect of
stock received during any taxable year to the extent such
distribution does not exceed its ratable portion of the total
excess distribution (if any) for such taxable year.
``(2) Total excess distribution.--For purposes of this
subsection--
``(A) In general.--The term `total excess distribution'
means the excess (if any) of--
``(i) the amount of the distributions in respect of the
stock received by the taxpayer during the taxable year, over
``(ii) 125 percent of the average amount of the
distributions received in respect of such stock by the
taxpayer during the 3 preceding taxable years (or, if
shorter, the portion of the taxpayer's holding period before
the taxable year).
For purposes of clause (ii), any excess distribution received
during such 3-year period shall be taken into account only to
the extent it was included in gross income under subsection
(a)(1)(B).
``(B) No excess for first year.--The total excess
distributions with respect to any stock shall be zero for the
taxable year in which the taxpayer's holding period in such
stock begins.
``(3) Adjustments.--Under regulations prescribed by the
Secretary--
``(A) determinations under this subsection shall be made on
a share-by-share basis, except that shares with the same
holding period may be aggregated,
``(B) proper adjustments shall be made for stock splits and
stock dividends,
``(C) if the taxpayer does not hold the stock during the
entire taxable year, distributions received during such year
shall be annualized,
``(D) if the taxpayer's holding period includes periods
during which the stock was held by another person,
distributions received by such other person shall be taken
into account as if received by the taxpayer,
``(E) if the distributions are received in a foreign
currency, determinations under this subsection shall be made
in such currency and the amount of any excess distribution
determined in such currency shall be translated into dollars,
``(F) proper adjustment shall be made for amounts not
includible in gross income by reason of section 959(a) or for
which a deduction is allowable under section 245(c), and
``(G) if a charitable deduction was allowable under section
642(c) to a trust for any distribution of its income, proper
adjustments shall be made for the deduction so allowable to
the extent allocable to distributions or gain in respect of
stock in a passive foreign corporation.
For purposes of subparagraph (F), any amount not includible
in gross income by reason of section 551(d) (as in effect on
January 1, 1993) or 1293(c) (as so in effect) shall be
treated as an amount not includible in gross income by reason
of section 959(a).
``(c) Deferred Tax Amount.--For purposes of this section--
``(1) In general.--The term `deferred tax amount' means,
with respect to any distribution or disposition to which
subsection (a) applies, an amount equal to the sum of--
``(A) the aggregate increases in taxes described in
paragraph (2), plus
``(B) the aggregate amount of interest (determined in the
manner provided under paragraph (3)) on such increases in
tax.
Any increase in the tax imposed by this chapter for the
current year under subsection (a) to the extent attributable
to the amount referred to in subparagraph (B) shall be
treated as interest paid under section 6601 on the due date
for the current year.
``(2) Aggregate increases in taxes.--For purposes of
paragraph (1)(A), the aggregate increases in taxes shall be
determined by multiplying each amount allocated under
subsection (a)(1)(A) to any taxable year (other than any
taxable year referred to in subsection (a)(1)(B)) by the
highest rate of tax in effect for such taxable year under
section 1 or 11, whichever applies.
``(3) Computation of interest.--
``(A) In general.--The amount of interest referred to in
paragraph (1)(B) on any increase determined under paragraph
(2) for any taxable year shall be determined for the period--
``(i) beginning on the day after the due date for such
taxable year, and
``(ii) ending on the due date for the taxable year with or
within which the distribution or disposition occurs,
by using the rates and method applicable under section 6621
for underpayments of tax for such period.
``(B) Due date.--For purposes of this subsection, the term
`due date' means the date prescribed by law (determined
without regard to extensions) for filing the return of the
tax imposed by this chapter for the taxable year.
``(C) Special rule.--For purposes of determining the amount
of interest referred to in paragraph (1)(B), the amount of
any increase in tax determined under paragraph (2) shall be
determined without regard to any reduction under section
1294(d) for a tax described in paragraph (2)(A)(ii) thereof.
``SEC. 1294. DEFINITIONS AND SPECIAL RULES.
``(a) Stock to Which Section 1293 Applies.--
``(1) In general.--Except as otherwise provided in this
subsection, section 1293 shall apply to any stock in a
passive foreign corporation unless--
``(A) such stock is marketable stock as of the time of the
distribution or disposition involved, or
``(B)(i) with respect to each of such corporation's taxable
years for which such corporation was a passive foreign
corporation and which began after December 31, 1993, and
included any portion of the taxpayer's holding period in such
stock--
``(I) such corporation was United States controlled (within
the meaning of section 1292(a)(2)), or
``(II) such corporation was treated as a controlled foreign
corporation under section 1292(b) with respect to the
taxpayer, and
``(ii) with respect to each of such corporation's taxable
years for which such corporation was a passive foreign
corporation and which begin after December 31, 1986, and
before January 1, 1994, and included any portion of the
taxpayer's holding period in such stock, such corporation was
treated as a qualified electing fund under this part (as in
effect on January 1, 1993) with respect to the taxpayer.
``(2) Treatment where stock becomes marketable.--If any
stock in a passive foreign corporation becomes marketable
stock after the beginning of the taxpayer's holding period in
such stock, and if the requirements of paragraph (1)(B) are
not satisfied, section 1293 shall apply to--
``(A) any distributions with respect to, or disposition of,
such stock in the taxable year of the taxpayer in which it
becomes so marketable, and
``(B) any amount which, but for section 1293, would have
been included in gross income under section 1291(a) with
respect to such stock for such taxable year in the same
manner as if such amount were gain on the disposition of such
stock.
``(3) Election to recognize gain where company becomes
subject to current inclusions.--
``(A) In general.--If--
``(i) a passive foreign corporation first meets the
requirements of clause (i) of paragraph (1)(B) with respect
to the taxpayer for a taxable year of such taxpayer which
begins after December 31, 1993,
``(ii) the taxpayer holds stock in such company on the
first day of such taxable year, and
``(iii) the taxpayer establishes to the satisfaction of the
Secretary the fair market value of such stock on such first
day,
the taxpayer may elect to recognize gain as if he sold such
stock on such first day for such fair market value.
``(B) Additional election for shareholder of controlled
foreign corporations.--
``(i) In general.--If--
``(I) a passive foreign corporation first meets the
requirements of subclause (I) of paragraph (1)(B)(i) with
respect to the taxpayer for a taxable year of such taxpayer
which begins after December 31, 1993,
``(II) the taxpayer holds stock in such corporation on the
first day of such taxable year, and
``(III) such corporation is a controlled foreign
corporation without regard to this part,
the taxpayer may elect to be treated as receiving a dividend
on such first day in an amount equal to the portion of the
post-1986 earnings and profits of such corporation
attributable (under regulations prescribed by the Secretary)
to the stock in such corporation held by the taxpayer on such
first day. The amount treated as a dividend under the
preceding sentence shall be treated as an excess distribution
and shall be allocated under section 1293(a)(1)(A) only to
days during periods taken into account in determining the
post-1986 earnings and profits so attributable.
``(ii) Post-1986 earnings and profits.--For purposes of
clause (i), the term `post-1986 earnings and profits' means
earnings and profits which were accumulated in taxable years
of the corporation beginning after December 31, 1986, and
during the period or periods the stock was held by the
taxpayer while the corporation was a passive foreign
corporation.
``(iii) Coordination with section 959(e).--For purposes of
section 959(e), any amount treated as a dividend under this
subparagraph shall be treated as included in gross income
under section 1248(a).
``(C) Adjustments.--In the case of any stock to which
subparagraph (A) or (B) applies--
``(i) the adjusted basis of such stock shall be increased
by the gain recognized under subparagraph (A) or the amount
treated as a dividend under subparagraph (B), as the case may
be, and
``(ii) the taxpayer's holding period in such stock shall be
treated as beginning on the first day referred to in such
subparagraph.
``(b) Rules Relating to Stock Acquired From a Decedent.--
``(1) Basis.--In the case of stock of a passive foreign
corporation acquired by bequest, devise, or inheritance (or
by the decedent's estate), notwithstanding section 1014, the
basis of such stock in the hands of the person so acquiring
it shall be the adjusted basis of such stock in the hands of
the decedent immediately before his death (or, if lesser, the
basis which would have been determined under section 1014
without regard to this paragraph).
``(2) Deduction for estate tax.--If stock in a passive
foreign corporation is acquired from a decedent, the taxpayer
shall, under regulations prescribed by the Secretary, be
allowed (for the taxable year of the sale or exchange) a
deduction from gross income equal to that portion of the
decedent's estate tax deemed paid which is attributable to
the excess of (A) the value at which such stock was taken
into account for purposes of determining the value of the
decedent's gross estate, over (B) the basis determined under
paragraph (1).
``(3) Exceptions.--This subsection shall not apply to any
stock in a passive foreign corporation if--
``(A) section 1293 would not have applied to a disposition
of such stock by the decedent immediately before his death,
or
``(B) the decedent was a nonresident alien at all times
during his holding period in such stock.
``(c) Recognition of Gain.--Except as otherwise provided in
regulations, in the case of any transfer of stock in a
passive foreign company to which section 1293 applies, where
(but for this subsection) there is not full recognition of
gain, the excess (if any) of--
``(1) the fair market value of such stock, over
``(2) its adjusted basis,
shall be treated as gain from the sale or exchange of such
stock and shall be recognized notwithstanding any provision
of law. Proper adjustment shall be made to the basis of
property for gain recognized under the preceding sentence.
``(d) Coordination With Foreign Tax Credit Rules.--
``(1) In general.--If there are creditable foreign taxes
with respect to any distribution in respect of stock in a
passive foreign corporation--
``(A) the amount of such distribution shall be determined
for purposes of section 1293 with regard to section 78,
``(B) the excess distribution taxes shall be allocated
ratably to each day in the taxpayer's holding period for the
stock, and
``(C) to the extent--
``(i) that such excess distribution taxes are allocated to
a taxable year referred to in section 1293(a)(1)(B), such
taxes shall be taken into account under section 901 for the
current year, and
``(ii) that such excess distribution taxes are allocated to
any other taxable year, such taxes shall reduce (subject to
the principles of section 904 and not below zero) the
increase in tax determined under section 1293(c)(2) for such
taxable year by reason of such distribution (but such taxes
shall not be taken into account under section 901).
``(2) Definitions.--For purposes of this subsection--
``(A) Creditable foreign taxes.--The term `creditable
foreign taxes' means, with respect to any distribution--
``(i) any foreign taxes deemed paid under section 902 with
respect to such distribution, and
``(ii) any withholding tax imposed with respect to such
distribution,
but only if the taxpayer chooses the benefits of section 901
and such taxes are creditable under section 901 (determined
without regard to paragraph (1)(C)(ii)).
``(B) Excess distribution taxes.--The term `excess
distribution taxes' means, with respect to any distribution,
the portion of the creditable foreign taxes with respect to
such distribution which is attributable (on a pro rata basis)
to the portion of such distribution which is an excess
distribution.
``(C) Section 1248 gain.--The rules of this subsection also
shall apply in the case of any gain which but for this
section would be includible in gross income as a dividend
under section 1248.
``(e) Attribution of Ownership.--For purposes of this
subpart--
``(1) Attribution to united states persons.--This
subsection--
``(A) shall apply to the extent that the effect is to treat
stock of a passive foreign corporation as owned by a United
States person, and
``(B) except as provided in paragraph (3) or in
regulations, shall not apply to treat stock owned (or treated
as owned under this subsection) by a United States person as
owned by any other person.
``(2) Corporations.--
``(A) In general.--If 50 percent or more in value of the
stock of a corporation (other than an S corporation) is
owned, directly or indirectly, by or for any person, such
person shall be considered as owning the stock owned directly
or indirectly by or for such corporation in that proportion
which the value of the stock which such person so owns bears
to the value of all stock in the corporation.
``(B) 50-percent limitation not to apply in certain
cases.--For purposes of determining whether a shareholder of
a passive foreign corporation (or whether a United States
shareholder of a controlled foreign corporation which is not
a passive foreign corporation) is treated as owning stock
owned directly or indirectly by or for such corporation,
subparagraph (A) shall be applied without regard to the 50-
percent limitation contained therein.
``(C) Family and partner attribution for 50-percent
limitation.--For purposes of determining whether the 50-
percent limitation of subparagraph (A) is met, the
constructive ownership rules of section 544(a)(2) shall apply
in addition to the other rules of this subsection.
``(3) Partnerships, etc.--Except as provided in
regulations, stock owned, directly or indirectly, by or for a
partnership, S corporation, estate, or trust shall be
considered as being owned proportionately by its partners,
shareholders, or beneficiaries (as the case may be).
``(4) Options.--To the extent provided in regulations, if
any person has an option to acquire stock, such stock shall
be considered as owned by such person. For purposes of this
paragraph, an option to acquire such an option, and each one
of a series of such options, shall be considered as an option
to acquire such stock.
``(5) Successive application.--Stock considered to be owned
by a person by reason of the application of paragraph (2),
(3), or (4) shall, for purposes of applying such paragraphs,
be considered as actually owned by such person.
``(f) Other Special Rules.--For purposes of this subpart--
``(1) Time for determination.--Stock held by a taxpayer
shall be treated as stock in a passive foreign corporation
if, at any time during the holding period of the taxpayer
with respect to such stock, such corporation (or any
predecessor) was a passive foreign corporation. The preceding
sentence shall not apply if the taxpayer elects to recognize
gain (as of the last day of the last taxable year for which
the company was a passive foreign corporation) under rules
similar to the rules of subsection (a)(3)(A).
``(2) Application of subpart where stock held by other
entity.--Under regulations--
``(A) In general.--In any case in which a United States
person is treated as owning stock in a passive foreign
corporation by reason of subsection (e)--
``(i) any transaction which results in the United States
person being treated as no longer owning such stock,
``(ii) any disposition of such stock by the person owning
such stock, and
``(iii) any distribution of property in respect of such
stock to the person holding such stock,
shall be treated as a disposition by, or distribution to, the
United States person with respect to the stock in the passive
foreign corporation.
``(B) Amount treated in same manner as previously taxed
income.--Rules similar to the rules of section 959(b) shall
apply to any amount described in subparagraph (A) in respect
of stock which the taxpayer is treated as owning under
subsection (e).
``(C) Coordination with section 951.--If, but for this
subparagraph, an amount would be taken into account under
section 1293 by reason of subparagraph (A) and such amount
would also be included in the gross income of the taxpayer
under section 951, such amount shall only be taken into
account under section 1293.
``(3) Dispositions.--Except as provided in regulations, if
a taxpayer uses any stock in a passive foreign corporation as
security for a loan, the taxpayer shall be treated as having
disposed of such stock.
``Subpart C--General Provisions
``Sec. 1296. Passive foreign corporation.
``Sec. 1297. Special rules.
``SEC. 1296. PASSIVE FOREIGN CORPORATION.
``(a) In General.--For purposes of this part, except as
otherwise provided in this subpart, the term `passive foreign
corporation' means any foreign corporation if--
``(1) 60 percent or more of the gross income of such
corporation for the taxable year is passive income,
``(2) the average percentage of assets (by value) held by
such corporation during the taxable year which produce
passive income or which are held for the production of
passive income is at least 50 percent, or
``(3) such corporation is registered under the Investment
Company Act of 1940, as amended (15 U.S.C. 80a-1 to 80b-2),
either as a management company or as a unit investment trust.
In the case of a controlled foreign corporation (or any other
foreign corporation if such corporation so elects), the
determination under paragraph (2) shall be based on the
adjusted bases (as determined for purposes of computing
earnings and profits) of its assets in lieu of their value.
Such an election, once made, may be revoked only with the
consent of the Secretary.
``(b) Passive Income.--For purposes of this section--
``(1) In general.--Except as otherwise provided in this
subsection, the term `passive income' means any income which
is of a kind which would be foreign personal holding company
income as defined in section 954(c) without regard to
paragraph (3) thereof.
``(2) Exceptions.--Except as provided in regulations, the
term `passive income' does not include any income--
``(A) derived in the active conduct of a banking business
by an institution licensed to do business as a bank in the
United States (or, to the extent provided in regulations, by
any other corporation),
``(B) derived in the active conduct of an insurance
business by a corporation which is predominantly engaged in
an insurance business and which would be subject to tax under
subchapter L if it were a domestic corporation,
``(C) which is interest, a dividend, or a rent or royalty,
which is received or accrued from a related person (within
the meaning of section 954(d)(3)) to the extent such amount
is properly allocable (under regulations prescribed by the
Secretary) to income of such related person which is not
passive income, or
``(D) any foreign trade income of a FSC.
For purposes of subparagraph (C), the term `related person'
has the meaning given such term by section 954(d)(3)
determined by substituting `foreign corporation' for
`controlled foreign corporation' each place it appears in
section 954(d)(3).
``(3) Treatment of income from certain assets.--To the
extent that any asset is properly treated as not held for the
production of passive income for purposes of subsection
(a)(2), all income from such asset shall be treated as income
which is not passive income.
``(4) Treatment of certain dealers in securities.--
``(A) In general.--In the case of any foreign corporation
which is a controlled foreign corporation (as defined in
section 957(a)), the term `passive income' does not include
any income derived in the active conduct of a securities
business by such corporation if such corporation is
registered as a securities broker or dealer under section
15(a) of the Securities Exchange Act of 1934 or is registered
as a Government securities broker or dealer under section
15C(a) of such Act. To the extent provided in regulations,
such term shall not include any income derived in the active
conduct of a securities business by a controlled foreign
corporation which is not so registered.
``(B) Application of look-through rules.--For purposes of
paragraph (2)(C), rules similar to the rules of subparagraph
(A) of this paragraph shall apply in determining whether any
income of a related person (whether or not a corporation) is
passive income.
``(C) Limitation.--The preceding provisions of this
paragraph shall only apply in the case of persons who are
United States shareholders (as defined in section 951(b)) in
the controlled foreign corporation.
``(c) Look-Through in Case of 25-Percent Owned
Corporation.--If a foreign corporation owns (directly or
indirectly) at least 25 percent (by value) of the stock of
another corporation, for purposes of determining whether such
foreign corporation is a passive foreign corporation, such
foreign corporation shall be treated as if it--
``(1) held its proportionate share of the assets of such
other corporation, and
``(2) received directly its proportionate share of the
income of such other corporation.
``SEC. 1297. SPECIAL RULES.
``(a) United States Person.--For purposes of this part, the
term `United States person' has the meaning given to such
term by section 7701(a)(30).
``(b) Controlled Foreign Corporation.--For purposes of this
part, the term `controlled foreign corporation' has the
meaning given such term by section 957(a).
``(c) Marketable Stock.--For purposes of this part--
``(1) In general.--The term `marketable stock' means--
``(A) any stock which is regularly traded on--
``(i) a national securities exchange which is registered
with the Securities and Exchange Commission or the national
market system established pursuant to section 11A of the
Securities and Exchange Act of 1934, or
``(ii) any exchange or other market which the Secretary
determines has rules adequate to carry out the purposes of
this part, and
``(B) to the extent provided in regulations, stock in any
foreign corporation which is comparable to a regulated
investment company and which offers for sale or has
outstanding any stock of which it is the issuer and which is
redeemable at its net asset value.
``(2) Special rule for regulated investment companies.--In
the case of any regulated investment company which is
offering for sale or has outstanding any stock of which it is
the issuer and which is redeemable at its net asset value,
all stock in a passive foreign corporation which it owns (or
is treated under section 1291(g) as owning) shall be treated
as marketable stock for purposes of this part. Except as
provided in regulations, a similar rule shall apply in the
case of any other regulated investment company.
``(d) Other Special Rules.--For purposes of this part--
``(1) Certain corporations not treated as passive.--A
corporation shall not be treated as a passive foreign
corporation for the 1st taxable year such corporation has
gross income (hereinafter in this paragraph referred to as
the `start-up year') if--
``(A) no predecessor of such corporation was a passive
foreign corporation,
``(B) it is established to the satisfaction of the
Secretary that such corporation will not be a passive foreign
corporation for either of the 1st 2 taxable years following
the start-up year, and
``(C) such corporation is not a passive foreign corporation
for either of the 1st 2 taxable years following the start-up
year.
``(2) Certain corporations changing businesses.--A
corporation shall not be treated as a passive foreign
corporation for any taxable year if--
``(A) neither such corporation (nor any predecessor) was a
passive foreign corporation for any prior taxable year,
``(B) it is established to the satisfaction of the
Secretary that--
``(i) substantially all of the passive income of the
corporation for the taxable year is attributable to proceeds
from the disposition of 1 or more active trades or
businesses, and
``(ii) such corporation will not be a passive foreign
corporation for either of the first 2 taxable years following
the taxable year, and
``(C) such corporation is not a passive foreign corporation
for either of such 2 taxable years.
For purposes of section 1296(c), any passive income referred
to in subparagraph (B)(i) shall be treated as income which is
not passive income and any assets which produce income so
described shall be treated as assets producing income other
than passive income.
``(3) Treatment of certain foreign corporations owning
stock in 25-percent owned domestic corporation.--
``(A) In general.--If a foreign corporation owns at least
25 percent (by value) of the stock of a domestic corporation,
for purposes of determining whether such foreign corporation
is a passive foreign corporation, any qualified stock held by
such domestic corporation shall be treated as an asset which
does not produce passive income (and is not held for the
production of passive income) and any amount included in
gross income with respect to such stock shall not be treated
as passive income.
``(B) Qualified stock.--For purposes of subparagraph (A),
the term `qualified stock' means any stock in a C corporation
which is a domestic corporation and which is not a regulated
investment company or real estate investment trust.
``(4) Treatment of corporation which was a pfic.--A
corporation shall be treated as a passive foreign corporation
for any taxable year beginning before January 1, 1994, if and
only if such corporation was a passive foreign investment
company under this part as in effect for such taxable year.
``(5) Separate interests treated as separate
corporations.--Under regulations prescribed by the Secretary,
where necessary to carry out the purposes of this part,
separate classes of stock (or other interests) in a
corporation shall be treated as interests in separate
corporations.
``(6) Treatment of certain subpart f inclusions.--Any
amount included in gross income under subparagraph (B) or (C)
of section 951(a)(1) shall be treated as a distribution
received with respect to the stock.
``(e) Treatment of Certain Leased Property.--For purposes
of this part--
``(1) In general.--Any tangible personal property with
respect to which a foreign corporation is the lessee under a
lease with a term of at least 12 months shall be treated as
an asset actually held by such corporation.
``(2) Amount taken into account.--
``(A) In general.--The amount taken into account under
section 1296(a)(2) with respect to any asset to which
paragraph (1) applies shall be the unamortized portion (as
determined under regulations prescribed by the Secretary) of
the present value of the payments under the lease for the use
of such property.
``(B) Present value.--For purposes of subparagraph (A), the
present value of payments described in subparagraph (A) shall
be determined in the manner provided in regulations
prescribed by the Secretary--
``(i) as of the beginning of the lease term, and
``(ii) except as provided in such regulations, by using a
discount rate equal to the applicable Federal rate determined
under section 1274(d)--
``(I) by substituting the lease term for the term of the
debt instrument, and
``(II) without regard to paragraph (2) or (3) thereof.
``(3) Exceptions.--This subsection shall not apply in any
case where--
``(A) the lessor is a related person (as defined in section
954(d)(3)) with respect to the foreign corporation, or
``(B) a principal purpose of leasing the property was to
avoid the provisions of this part or section 956A.
``(f) Special Rules for Certain Intangibles.--For purposes
of this part--
``(1) Research expenditures.--The adjusted basis of the
total assets of a controlled foreign corporation shall be
increased by the research or experimental expenditures
(within the meaning of section 174) paid or incurred by such
foreign corporation during the taxable year and the preceding
2 taxable years. Any expenditure otherwise taken into account
under the preceding sentence shall be reduced by the amount
of any reimbursement received by the controlled foreign
corporation with respect to such expenditure.
``(2) Certain licensed intangibles.--
``(A) In general.--In the case of any intangible property
(as defined in section 936(h)(3)(B)) with respect to which a
controlled foreign corporation is a licensee and which is
used by such foreign corporation in the active conduct of a
trade or business, the adjusted basis of the total assets of
such foreign corporation shall be increased by an amount
equal to 300 percent of the payments made during the taxable
year by such foreign corporation for the use of such
intangible property.
``(B) Exceptions.--Subparagraph (A) shall not apply to--
``(i) any payments to a foreign person if such foreign
person is a related person (as defined in section 954(d)(3))
with respect to the controlled foreign corporation, and
``(ii) any payments under a license if a principal purpose
of entering into such license was to avoid the provisions of
this part or section 956A.
``(3) Controlled foreign corporation.--For purposes of this
subsection, the term `controlled foreign corporation' has the
meaning given such term by section 957(a).
``(g) Election by Certain Passive Foreign Corporations To
Be Treated as a Domestic Corporation.--
``(1) In general.--For purposes of this title, if--
``(A) a passive foreign corporation would qualify as a
regulated investment company under part I of subchapter M if
such passive foreign corporation were a domestic corporation,
``(B) such passive foreign corporation meets such
requirements as the Secretary shall prescribe to ensure that
the taxes imposed by this title on such passive foreign
corporation are paid, and
``(C) such passive foreign corporation makes an election to
have this paragraph apply and waives all benefits which are
granted by the United States under any treaty and to which
such corporation would otherwise be entitled by reason of
being a resident of another country,
such corporation shall be treated as a domestic corporation.
``(2) Certain rules made applicable.--Rules similar to the
rules of paragraphs (2), (3), (4)(A), and (5) of section
953(d) shall apply with respect to any corporation making an
election under paragraph (1).
``(h) Special Rules for Certain Taxpayers.--
``(1) Tax-exempt organizations.--In the case of any
organization exempt from tax under section 501--
``(A) this part shall apply to any stock in a passive
foreign corporation owned (or treated as owned under section
1294(e)) by such organization only to the extent that a
dividend on such stock would be taken into account in
determining the unrelated business taxable income of such
organization, and
``(B) to the extent that this part applies to any such
stock, this part shall be applied in the same manner as if
such organization were not exempt from tax under section
501(a).
``(2) Treatment of stock held by pooled income fund.--If
stock in a passive foreign corporation is owned (or treated
as owned under section 1294(e)) by a pooled income fund (as
defined in section 642(c)(5)) and no portion of any gain from
a disposition of such stock may be allocated to income under
the terms of the governing instrument of such fund--
``(A) section 1293 shall not apply to any gain on a
disposition of such stock by such fund if (without regard to
section 1293) a deduction would be allowable with respect to
such gain under section 642(c)(3),
``(B) subpart A shall not apply with respect to such stock,
and
``(C) in determining whether section 1293 applies to any
distribution in respect of such stock, such stock shall be
treated as failing to qualify for the exceptions under
section 1294(a)(1).
``(i) Information From Shareholders.--Every United States
person who owns stock in any passive foreign corporation
shall furnish with respect to such corporation such
information as the Secretary may prescribe.
``(j) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this part, including regulations--
``(1) providing that gross income shall be determined
without regard to section 1293 for such purposes as may be
specified in such regulations, and
``(2) to prevent avoidance of the provisions of this part
through changes in citizenship or residence status.''
(b) Installment Sales Treatment Not Available.--Paragraph
(2) of section 453(k) is amended by striking ``or'' at the
end of subparagraph (A), by inserting ``or'' at the end of
subparagraph (B), and by adding at the end thereof the
following new subparagraph:
``(C) stock in a passive foreign corporation (as defined in
section 1296) if section 1293 applies to such sale,''.
(c) Treatment of Mark-to-Market Gain Under Section 4982.--
(1) Subsection (e) of section 4982 is amended by adding at
the end thereof the following new paragraph:
``(6) Treatment of gain recognized under section 1291.--For
purposes of determining a regulated investment company's
ordinary income--
``(A) notwithstanding paragraph (1)(C), section 1291 shall
be applied as if such company's taxable year ended on October
31, and
``(B) any ordinary gain or loss from an actual disposition
of stock in a passive foreign corporation during the portion
of the calendar year after October 31 shall be taken into
account in determining such company's ordinary income for the
following calendar year.
In the case of a company making an election under paragraph
(4), the preceding sentence shall be applied by substituting
the last day of the company's taxable year for October 31.''
(2) Subsection (b) of section 852 is amended by adding at
the end thereof the following new paragraph:
``(10) Special rule for certain losses on stock in passive
foreign corporations.--To the extent provided in regulations,
the taxable income of a regulated investment company (other
than a company to which an election under section 4982(e)(4)
applies) shall be computed without regard to any net
reduction in the value of any stock of a passive foreign
corporation to which section 1291 applies occurring after
October 31 of the taxable year, and any such reduction shall
be treated as occurring on the first day of the following
taxable year.''
(3) Subsection (c) of section 852 is amended by inserting
after ``October 31 of such year'' the following: ``, without
regard to any net reduction in the value of any stock of a
passive foreign corporation to which section 1291 applies
occurring after October 31 of such year,''.
(d) Treatment of Certain Previously Taxed Amounts.--
Subsection (e) of section 959 is amended--
(1) by adding at the end thereof the following new
sentence: ``A similar rule shall apply in the case of amounts
included in gross income under section 1293 (as in effect on
January 1, 1993).'', and
(2) by striking ``Amounts Previously Taxed Under Section
1248'' in the subsection heading and inserting ``Certain
Previously Taxed Amounts''.
SEC. 403. TECHNICAL AND CONFORMING AMENDMENTS.
(a) General Rule.--
(1) Paragraph (2) of section 171(c) is amended--
(A) by striking ``, or by a foreign personal holding
company, as defined in section 552'', and
(B) by striking ``, or foreign personal holding company''.
(2) Section 312 is amended by striking subsection (j).
(3) Subsection (m) of section 312 is amended by striking
``, a foreign investment company (within the meaning of
section 1246(b)), or a foreign personal holding company
(within the meaning of section 552)'' and inserting ``or a
passive foreign corporation (as defined in section 1296)''.
(4) Subsection (e) of section 443 is amended by striking
paragraph (3) and by redesignating paragraphs (4) and (5) as
paragraphs (3) and (4), respectively.
(5) Clause (ii) of section 465(c)(7)(B) is amended to read
as follows:
``(ii) a passive foreign corporation with respect to which
the stock ownership requirements of section 1292(a)(2)(B) are
met, or''.
(6) Subsection (b) of section 535 is amended by striking
paragraph (9).
(7) Subsection (d) of section 535 is hereby repealed.
(8) Paragraph (1) of section 543(b) is amended by inserting
``and'' at the end of subparagraph (A), by striking ``, and''
at the end of subparagraph (B) and inserting a period, and by
striking subparagraph (C).
(9) Section 545 is amended by striking subsections (b)(7)
and (c).
(10) Paragraph (1) of section 562(b) is amended by striking
``or a foreign personal holding company described in section
552''.
(11) Section 563 is amended--
(A) by striking subsection (c),
(B) by redesignating subsection (d) as subsection (c), and
(C) by striking ``subsection (a), (b), or (c)'' in
subsection (c) (as so redesignated) and inserting
``subsection (a) or (b)''.
(12) Paragraph (2) of section 751(d) is amended by striking
``subsection (a) of section 1246 (relating to gain on foreign
investment company stock)'' and inserting ``section 1291
(relating to stock in certain passive foreign corporations
marked to market)''.
(13) Subsection (b) of section 851 is amended by striking
the sentence following paragraph (4)(B) which contains a
reference to section 1293(a).
(14) Clause (ii) of section 864(b)(2)(A) is amended by
striking ``(other than'' and all that follows down through
``holding company)'' and inserting ``(other than a
corporation which would be a personal holding company but for
section 542(c)(5) and which is not United States controlled
(as defined in section 1292(a)(2))''.
(15) Subsection (d) of section 904 is amended by striking
paragraphs (2)(A)(ii), (2)(E)(iii), and (3)(I).
(16)(A) Subparagraph (A) of section 904(g)(1) is amended to
read as follows:
``(A) Any amount included in gross income under section
951(a) (relating to amounts included in gross income of
United States shareholders).''
(B) The paragraph heading of paragraph (2) of section
904(g) is amended by striking ``and foreign personal holding
or passive foreign investment company''.
(17) Section 951 is amended by striking subsections (c),
(d), and (f), and by redesignating subsection (e) as
subsection (c).
(18) Paragraph (3) of section 956A(c) is amended--
(A) by striking ``1297(d)'' in subparagraph (B) and
inserting ``1297(e)'', and
(B) by striking ``1297(e)'' in subparagraph (C) and
inserting ``1297(f)''.
(19) Paragraph (1) of section 986(c) is amended by striking
``or 1293(c)''.
(20) Paragraph (3) of section 989(b) is amended by striking
``, 551(a), or 1293(a)''.
(21) Paragraph (5) of section 1014(b) is hereby repealed.
(22) Subsection (a) of section 1016 is amended by striking
paragraph (13) and by redesignating the following paragraphs
accordingly.
(23) Paragraph (3) of section 1212(a) is amended--
(A) by striking subparagraph (A),
(B) by redesignating subparagraphs (B) and (C) as
subparagraphs (A) and (B), respectively, and
(C) by amending subparagraph (D) to read as follows:
``(C) for which it is a passive foreign corporation.''
(24) Section 1223 is amended by striking paragraph (10) and
by redesignating the following paragraphs accordingly.
(25) Subsection (d) of section 1248 is amended by striking
paragraphs (5) and (7).
(26)(A) Subsection (a) of section 6035 is amended by
striking ``foreign personal holding company (as defined in
section 552)'' and inserting ``passive foreign corporation
with respect to which the stock ownership requirements of
section 1292(a)(2)(B) are met''.
(B) The section heading for section 6035 is amended by
striking ``FOREIGN PERSONAL HOLDING COMPANIES'' and inserting
``CLOSELY HELD PASSIVE FOREIGN CORPORATIONS''.
(C) The table of sections for subpart A of part III of
subchapter A of chapter 61 is amended by striking ``foreign
personal holding companies'' in the item relating to section
6035 and inserting ``closely-held passive foreign
corporations''.
(27) Subparagraph (D) of section 6103(e)(1) is amended by
striking clause (iv) and redesignating clauses (v) and (vi)
as clauses (iv) and (v), respectively.
(28) Subparagraph (B) of section 6501(e)(1) is amended to
read as follows:
``(B) Constructive dividends.--If the taxpayer omits from
gross income an amount properly includible therein under
section 951(a), the tax may be assessed, or a proceeding in
court for the collection of such tax may be done without
assessing, at any time within 6 years after the return was
filed.''
(29) Section 4947 and section 4948(c)(4) are each amended
by striking ``556(b)(2),'' each place it appears.
(b) Clerical Amendments.--
(1) The table of parts for subchapter G of chapter 1 is
amended by striking the item relating to part III.
(2) The table of sections for part IV of subchapter P of
chapter 1 is amended by striking the items relating to
sections 1246 and 1247.
(3) The table of parts for subchapter P of chapter 1 is
amended by striking the item relating to part VI and
inserting the following:
``Part VI. Treatment of passive foreign corporations.''
SEC. 404. EFFECTIVE DATE.
(a) General Rule.--Except as otherwise provided in this
section, the amendments made by this subtitle shall apply
to--
(1) taxable years of United States persons beginning after
December 31, 1993, and
(2) taxable years of foreign corporations ending with or
within such taxable years of United States persons.
(b) Denial of Installment Sales Treatment.--The amendment
made by section 402(b) shall apply to dispositions after
December 31, 1993.
(c) Basis Rule.--The amendments made by this subtitle shall
not affect the determination of the basis of any stock
acquired from a decedent in a taxable year beginning before
January 1, 1994.
Subtitle B--Treatment of Controlled Foreign Corporations
SEC. 411. GAIN ON CERTAIN STOCK SALES BY CONTROLLED FOREIGN
CORPORATIONS TREATED AS DIVIDENDS.
(a) General Rule.--Section 964 (relating to miscellaneous
provisions) is amended by adding at the end thereof the
following new subsection:
``(e) Gain on Certain Stock Sales by Controlled Foreign
Corporations Treated as Dividends.--
``(1) In general.--If a controlled foreign corporation
sells or exchanges stock in any other foreign corporation,
gain recognized on such sale or exchange shall be included in
the gross income of such controlled foreign corporation as a
dividend to the same extent that it would have been so
included under section 1248(a) if such controlled foreign
corporation were a United States person. For purposes of
determining the amount which would have been so includible,
the determination of whether such other foreign corporation
was a controlled foreign corporation shall be made without
regard to the preceding sentence.
``(2) Same country exception not applicable.--Clause (i) of
section 954(c)(3)(A) shall not apply to any amount treated as
a dividend by reason of paragraph (1).
``(3) Clarification of deemed sales.--For purposes of this
subsection, a controlled foreign corporation shall be treated
as having sold or exchanged any stock if, under any provision
of this subtitle, such controlled foreign corporation is
treated as having gain from the sale or exchange of such
stock.''
(b) Amendment of Section 904(d).--Clause (i) of section
904(d)(2)(E) is amended by striking ``and except as provided
in regulations, the taxpayer was a United States shareholder
in such corporation''.
(c) Effective Dates.--
(1) The amendment made by subsection (a) shall apply to
gain recognized on transactions occurring after the date of
the enactment of this Act.
(2) The amendment made by subsection (b) shall apply to
distributions after the date of the enactment of this Act.
SEC. 412. MISCELLANEOUS MODIFICATIONS TO SUBPART F.
(a) Section 1248 Gain Taken Into Account in Determining Pro
Rata Share.--
(1) In general.--Paragraph (2) of section 951(a) (defining
pro rata share of subpart F income) is amended by adding at
the end thereof the following new sentence: ``For purposes of
subparagraph (B), any gain included in the gross income of
any person as a dividend under section 1248 shall be treated
as a distribution received by such person with respect to the
stock involved.''
(2) Effective date.--The amendment made by paragraph (1)
shall apply to dispositions after the date of the enactment
of this Act.
(b) Basis Adjustments in Stock Held by Foreign
Corporation.--
(1) In general.--Section 961 (relating to adjustments to
basis of stock in controlled foreign corporations and of
other property) is amended by adding at the end thereof the
following new subsection:
``(c) Basis Adjustments in Stock Held by Foreign
Corporation.--Under regulations prescribed by the Secretary,
if a United States shareholder is treated under section
958(a)(2) as owning any stock in a controlled foreign
corporation which is actually owned by another controlled
foreign corporation, adjustments similar to the adjustments
provided by subsections (a) and (b) shall be made to the
basis of such stock in the hands of such other controlled
foreign corporation, but only for the purposes of determining
the amount included under section 951 in the gross income of
such United States shareholder (or any other United States
shareholder who acquires from any person any portion of the
interest of such United States shareholder by reason of which
such shareholder was treated as owning such stock, but only
to the extent of such portion, and subject to such proof of
identity of such interest as the Secretary may prescribe by
regulations).''
(2) Effective date.--The amendment made by paragraph (1)
shall apply for purposes of determining inclusions for
taxable years of United States shareholders beginning after
December 31, 1993.
(c) Determination of Previously Taxed Income in Section 304
Distributions, Etc.--
(1) In general.--Section 959 (relating to exclusion from
gross income of previously taxed earnings and profits) is
amended by adding at the end thereof the following new
subsection:
``(g) Adjustments for Certain Transactions.--If by reason
of--
``(1) a transaction to which section 304 applies,
``(2) the structure of a United States shareholder's
holdings in controlled foreign corporations, or
``(3) other circumstances,
there would be a multiple inclusion of any item in income (or
an inclusion or exclusion without an appropriate basis
adjustment) by reason of this subpart, the Secretary may
prescribe regulations providing such modifications in the
application of this subpart as may be necessary to eliminate
such multiple inclusion or provide such basis adjustment, as
the case may be.''
(2) Effective date.--The amendment made by paragraph (1)
shall take effect on the date of the enactment of this Act.
(d) Clarification of Treatment of Branch Tax Exemptions or
Reductions.--
(1) In general.--Subsection (b) of section 952 is amended
by adding at the end thereof the following new sentence:
``For purposes of this subsection, any exemption (or
reduction) with respect to the tax imposed by section 884
shall not be taken into account.''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to taxable years beginning after December 31,
1986.
SEC. 413. INDIRECT FOREIGN TAX CREDIT ALLOWED FOR CERTAIN
LOWER TIER COMPANIES.
(a) Section 902 Credit.--
(1) In general.--Subsection (b) of section 902 (relating to
deemed taxes increased in case of certain 2nd and 3rd tier
foreign corporations) is amended to read as follows:
``(b) Deemed Taxes Increased in Case of Certain Lower Tier
Corporations.--
``(1) In general.--If--
``(A) any foreign corporation is a member of a qualified
group, and
``(B) such foreign corporation owns 10 percent or more of
the voting stock of another member of such group from which
it receives dividends in any taxable year,
such foreign corporation shall be deemed to have paid the
same proportion of such other member's post-1986 foreign
income taxes as would be determined under subsection (a) if
such foreign corporation were a domestic corporation.
``(2) Qualified group.--For purposes of paragraph (1), the
term `qualified group' means--
``(A) the foreign corporation described in subsection (a),
and
``(B) any other foreign corporation if--
``(i) the domestic corporation owns at least 5 percent of
the voting stock of such other foreign corporation indirectly
through a chain of foreign corporations connected through
stock ownership of at least 10 percent of their voting stock,
``(ii) the foreign corporation described in subsection (a)
is the first tier corporation in such chain, and
``(iii) such other corporation is not below the sixth tier
in such chain,
The term `qualified group' shall not include any foreign
corporation below the third tier in the chain referred to in
clause (i) unless such foreign corporation is a controlled
foreign corporation (as defined in section 957) and the
domestic corporation is a United States shareholder (as
defined in section 951(b)) in such foreign corporation.
Paragraph (1) shall apply to those taxes paid by a member of
the qualified group below the third tier only with respect to
periods during which it was a controlled foreign
corporation.''
(2) Conforming amendments.--
(A) Subparagraph (B) of section 902(c)(3) is amended by
adding ``or'' at the end of clause (i) and by striking
clauses (ii) and (iii) and inserting the following new
clause:
``(ii) the requirements of subsection (b)(2) are met with
respect to such foreign corporation.''
(B) Subparagraph (B) of section 902(c)(4) is amended by
striking ``3rd foreign corporation'' and inserting ``sixth
tier foreign corporation''.
(C) The heading for paragraph (3) of section 902(c) is
amended by striking ``where domestic corporation acquires 10
percent of foreign corporation'' and inserting ``where
foreign corporation first qualifies''.
(D) Paragraph (3) of section 902(c) is amended by striking
``ownership'' each place it appears.
(b) Section 960 Credit.--Paragraph (1) of section 960(a)
(relating to special rules for foreign tax credits) is
amended to read as follows:
``(1) Deemed paid credit.--For purposes of subpart A of
this part, if there is included under section 951(a) in the
gross income of a domestic corporation any amount
attributable to earnings and profits of a foreign corporation
which is a member of a qualified group (as defined in section
902(b)) with respect to the domestic corporation, then,
except to the extent provided in regulations, section 902
shall be applied as if the amount so included were a dividend
paid by such foreign corporation (determined by applying
section 902(c) in accordance with section 904(d)(3)(B)).''
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to taxes of foreign corporations for taxable years of
such corporations beginning after the date of enactment of
this Act.
(2) Special rule.--In the case of any chain of foreign
corporations described in clauses (i) and (ii) of section
902(b)(2)(B) of the Internal Revenue Code of 1986 (as amended
by this section), no liquidation, reorganization, or similar
transaction in a taxable year beginning after the date of the
enactment of this Act shall have the effect of permitting
taxes to be taken into account under section 902 of the
Internal Revenue Code of 1986 which could not have been taken
into account under such section but for such transaction.
Subtitle C--Other Provisions
SEC. 421. EXCHANGE RATE USED IN TRANSLATING FOREIGN TAXES.
(a) Accrued Taxes Translated by Using Average Rate for Year
to Which Taxes Relate.--
(1) In general.--Subsection (a) of section 986 (relating to
translation of foreign taxes) is amended to read as follows:
``(a) Foreign Income Taxes.--
``(1) Translation of accrued taxes.--
``(A) In general.--For purposes of determining the amount
of the foreign tax credit, in the case of a taxpayer who
takes foreign income taxes into account when accrued, the
amount of any foreign income taxes (and any adjustment
thereto) shall be translated into dollars by using the
average exchange rate for the taxable year to which such
taxes relate.
``(B) Exception for taxes not paid within following 2
years.--
``(i) Subparagraph (A) shall not apply to any foreign
income taxes paid after the date 2 years after the close of
the taxable year to which such taxes relate.
``(ii) Subparagraph (A) shall not apply to taxes paid
before the beginning of the taxable year to which such taxes
relate.
``(C) Exception for inflationary currencies.--To the extent
provided in regulations, subparagraph (A) shall not apply to
any foreign income taxes the liability for which is
denominated in any currency determined to be an inflationary
currency under such regulations.
``(D) Cross reference.--
``For adjustments where tax is not paid within 2 years, see section
905(c).
``(2) Translation of taxes to which paragraph (1) does not
apply.--For purposes of determining the amount of the foreign
tax credit, in the case of any foreign income taxes to which
subparagraph (A) of paragraph (1) does not apply--
``(A) such taxes shall be translated into dollars using the
exchange rates as of the time such taxes were paid to the
foreign country or possession of the United States, and
``(B) any adjustment to the amount of such taxes shall be
translated into dollars using--
``(i) except as provided in clause (ii), the exchange rate
as of the time when such adjustment is paid to the foreign
country or possession, or
``(ii) in the case of any refund or credit of foreign
income taxes, using the exchange rate as of the time of the
original payment of such foreign income taxes.
``(3) Foreign income taxes.--For purposes of this
subsection, the term `foreign income taxes' means any income,
war profits, or excess profits taxes paid or accrued to any
foreign country or to any possession of the United States.''
(2) Adjustment when not paid within 2 years after year to
which taxes relate.--Subsection (c) of section 905 is amended
to read as follows:
``(c) Adjustments to Accrued Taxes.--
``(1) In general.--If--
``(A) accrued taxes when paid differ from the amounts
claimed as credits by the taxpayer,
``(B) accrued taxes are not paid before the date 2 years
after the close of the taxable year to which such taxes
relate, or
``(C) any tax paid is refunded in whole or in part,
the taxpayer shall notify the Secretary, who shall
redetermine the amount of the tax for the year or years
affected.
``(2) Special rule for taxes not paid within 2 years.--In
making the redetermination under paragraph (1), no credit
shall be allowed for accrued taxes not paid before the date
referred to in subparagraph (B) of paragraph (1). Any such
taxes if subsequently paid shall be taken into account for
the taxable year in which paid and no redetermination under
this section shall be made on account of such payment.
``(3) Adjustments.--The amount of tax due on any
redetermination under paragraph (1) (if any) shall be paid by
the taxpayer on notice and demand by the Secretary, and the
amount of tax overpaid (if any) shall be credited or refunded
to the taxpayer in accordance with subchapter B of chapter 66
(section 6511 et seq.).
``(4) Bond requirements.--In the case of any tax accrued
but not paid, the Secretary, as a condition precedent to the
allowance of the credit provided in this subpart, may require
the taxpayer to give a bond, with sureties satisfactory to
and approved by the Secretary, in such sum as the Secretary
may require, conditioned on the payment by the taxpayer of
any amount of tax found due on any such redetermination. Any
such bond shall contain such further conditions as the
Secretary may require.
``(5) Other special rules.--In any redetermination under
paragraph (1) by the Secretary of the amount of tax due from
the taxpayer for the year or years affected by a refund, the
amount of the taxes refunded for which credit has been
allowed under this section shall be reduced by the amount of
any tax described in section 901 imposed by the foreign
country or possession of the United States with respect to
such refund; but no credit under this subpart, or deduction
under section 164, shall be allowed for any taxable year with
respect to any such tax imposed on the refund. No interest
shall be assessed or collected on any amount of tax due on
any redetermination by the Secretary, resulting from a refund
to the taxpayer, for any period before the receipt of such
refund, except to the extent interest was paid by the foreign
country or possession of the United States on such refund for
such period.''
(b) Authority to Use Average Rates.--
(1) In general.--Subsection (a) of section 986 (as amended
by subsection (a)) is amended by redesignating paragraph (3)
as paragraph (4) and inserting after paragraph (2) the
following new paragraph:
``(3) Authority to permit use of average rates.--To the
extent prescribed in regulations, the average exchange rate
for the period (specified in such regulations) during which
the taxes or adjustment is paid may be used instead of the
exchange rate as of the time of such payment.''
(2) Determination of average rates.--Subsection (c) of
section 989 is amended by striking ``and'' at the end of
paragraph (4), by striking the period at the end of paragraph
(5) and inserting ``, and'', and by adding at the end thereof
the following new paragraph:
``(6) setting forth procedures for determining the average
exchange rate for any period.''
(3) Conforming amendments.--Subsection (b) of section 989
is amended by striking ``weighted'' each place it appears.
(c) Effective Dates.--
(1) In general.--The amendments made by subsections (a)(1)
and (b) shall apply to taxes paid or accrued in taxable years
beginning after December 31, 1992.
(2) Subsection (a)(2).--The amendment made by subsection
(a)(2) shall apply to taxes which relate to taxable years
beginning after December 31, 1992.
SEC. 422. ELECTION TO USE SIMPLIFIED SECTION 904 LIMITATION
FOR ALTERNATIVE MINIMUM TAX.
(a) General Rule.--Subsection (a) of section 59 (relating
to alternative minimum tax foreign tax credit) is amended by
adding at the end thereof the following new paragraph:
``(3) Election to use simplified section 904 limitation.--
``(A) In general.--In determining the alternative minimum
tax foreign tax credit for any taxable year to which an
election under this paragraph applies--
``(i) subparagraph (B) of paragraph (1) shall not apply,
and
``(ii) the limitation of section 904 shall be based on the
proportion which--
``(I) the taxpayer's taxable income (as determined for
purposes of the regular tax) from sources without the United
States (but not in excess of the taxpayer's entire
alternative minimum taxable income), bears to
``(II) the taxpayer's entire alternative minimum taxable
income for the taxable year.
``(B) Election.--
``(i) In general.--An election under this paragraph may be
made only for the taxpayer's first taxable year which begins
after December 31, 1993, and for which the taxpayer claims an
alternative minimum tax foreign tax credit.
``(ii) Election revocable only with consent.--An election
under this paragraph, once made, shall apply to the taxable
year for which made and all subsequent taxable years unless
revoked with the consent of the Secretary.''
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
1993.
SEC. 423. MODIFICATION OF SECTION 1491.
(a) General Rule.--So much of chapter 5 (relating to tax on
transfers to avoid income tax) as precedes section 1492 is
amended to read as follows:
``CHAPTER 5--TREATMENT OF TRANSFERS TO AVOID INCOME TAX
``Sec. 1491. Recognition of gain.
``Sec. 1492. Exceptions.
``SEC. 1491. RECOGNITION OF GAIN.
``In the case of any transfer of property by a United
States person to a foreign corporation as paid-in surplus or
as a contribution to capital, to a foreign estate or trust,
or to a foreign partnership, for purposes of this subtitle,
such transfer shall be treated as a sale or exchange for an
amount equal to the fair market value of the property
transferred, and the transferor shall recognize as gain the
excess of--
``(1) the fair market value of the property so transferred,
over
``(2) the adjusted basis (for purposes of determining gain)
of such property in the hands of the transferor.''
(b) Conforming Amendments.--
(1) Section 1057 is hereby repealed.
(2) Section 1492 is amended to read as follows:
``SEC. 1492. EXCEPTIONS.
``The provisions of section 1491 shall not apply--
``(1) If the transferee is an organization exempt from
income tax under part I of subchapter F of chapter 1 (other
than an organization described in section 401(a)),
``(2) To a transfer described in section 367, or
``(3) To any other transfer, to the extent provided in
regulations in accordance with principles similar to the
principles of section 367 or otherwise consistent with the
purpose of section 1491.''
(3) Section 1494 is hereby repealed.
(4) The table of sections for part IV of subchapter O of
chapter 1 is amended by striking the item relating to section
1057.
(5) The table of chapters for subtitle A is amended by
striking ``Tax on'' in the item relating to chapter 5 and
inserting ``Treatment of''.
(c) Effective Date.--The amendments made by this section
shall apply to transfers after December 31, 1994.
SEC. 424. MODIFICATION OF SECTION 367(b).
(a) General Rule.--Paragraph (1) of section 367(b) is
amended to read as follows:
``(1) In general.--In the case of any transaction described
in section 332, 351, 354, 355, 356, or 361 in which the
status of a foreign corporation as a corporation is a general
condition for nonrecognition by 1 or more of the parties to
the transaction, income shall be required to be recognized to
the extent provided in regulations prescribed by the
Secretary which are necessary or appropriate to prevent the
avoidance of Federal income taxes. This subsection shall not
apply to a transaction in which the foreign corporation is
not treated as a corporation under subsection (a)(1).''
(b) Effective Date.--The amendment made by subsection (a)
shall apply to transfers after December 31, 1994.
TITLE V--OTHER INCOME TAX PROVISIONS
Subtitle A--Provisions Relating to Subchapter S Corporations
SEC. 501. AUTHORITY TO VALIDATE CERTAIN INVALID ELECTIONS.
(a) General Rule.--Subsection (f) of section 1362 (relating
to inadvertent terminations) is amended to read as follows:
``(f) Inadvertent Invalid Elections or Terminations.--If--
``(1) an election under subsection (a) by any corporation--
``(A) was not effective for the taxable year for which made
(determined without regard to subsection (b)(2)) by reason of
a failure to meet the requirements of section 1361(b) or to
obtain shareholder consents, or
``(B) was terminated under paragraph (2) or (3) of
subsection (d),
``(2) the Secretary determines that the circumstances
resulting in such ineffectiveness or termination were
inadvertent,
``(3) no later than a reasonable period of time after
discovery of the circumstances resulting in such
ineffectiveness or termination, steps were taken--
``(A) so that the corporation is a small business
corporation, or
``(B) to acquire the required shareholder consents, and
``(4) the corporation, and each person who was a
shareholder in the corporation at any time during the period
specified pursuant to this subsection, agrees to make such
adjustments (consistent with the treatment of the corporation
as an S corporation) as may be required by the Secretary with
respect to such period,
then, notwithstanding the circumstances resulting in such
ineffectiveness or termination, such corporation shall be
treated as an S corporation during the period specified by
the Secretary.''
(b) Late Elections.--Subsection (b) of section 1362 is
amended by adding at the end thereof the following new
paragraph:
``(5) Authority to treat late elections as timely.--If--
``(A) an election under subsection (a) is made for any
taxable year (determined without regard to paragraph (3))
after the date prescribed by this subsection for making such
election for such taxable year, and
``(B) the Secretary determines that there was reasonable
cause for the failure to timely make such election,
the Secretary may treat such election as timely made for such
taxable year (and paragraph (3) shall not apply).''
(c) Effective Date.--The amendments made by this section
shall apply with respect to elections for taxable years
beginning after December 31, 1982.
SEC. 502. TREATMENT OF DISTRIBUTIONS DURING LOSS YEARS.
(a) Adjustments for Distributions Taken Into Account Before
Losses.--
(1) Subparagraph (A) of section 1366(d)(1) is amended by
striking ``paragraph (1)'' and inserting ``paragraphs (1) and
(2)(A)''.
(2) Subsection (d) of section 1368 is amended by adding at
the end thereof the following new sentence:
``In the case of any distribution made during any taxable
year, the adjusted basis of the stock shall be determined
with regard to the adjustments provided in paragraph (1) of
section 1367(a) for the taxable year.''
(b) Accumulated Adjustments Account.--Paragraph (1) of
section 1368(e) (relating to accumulated adjustments account)
is amended by adding at the end thereof the following new
subparagraph:
``(C) Net loss for year disregarded.--
``(i) In general.--In applying this section to
distributions made during any taxable year, the amount in the
accumulated adjustments account as of the close of such
taxable year shall be determined without regard to any net
negative adjustment for such taxable year.
``(ii) Net negative adjustment.--For purposes of clause
(i), the term `net negative adjustment' means, with respect
to any taxable year, the excess (if any) of--
``(I) the reductions in the account for the taxable year
(other than for distributions), over
``(II) the increases in such account for such taxable
year.''
(c) Conforming Amendments.--Subparagraph (A) of section
1368(e)(1) is amended--
(1) by striking ``as provided in subparagraph (B)'' and
inserting ``as otherwise provided in this paragraph'', and
(2) by striking ``section 1367(b)(2)(A)'' and inserting
``section 1367(a)(2)''.
(d) Effective Date.--The amendments made by this section
shall apply to distributions in taxable years beginning after
December 31, 1992.
SEC. 503. ELECTING SMALL BUSINESS TRUSTS.
(a) General Rule.--Subparagraph (A) of section 1361(c)(2)
(relating to certain trusts permitted as shareholders) is
amended by inserting after clause (iv) the following new
clause:
``(v) An electing small business trust.''
(b) Current Beneficiaries Treated as Shareholders.--
Subparagraph (B) of section 1361(c)(2) is amended by adding
at the end the following new clause:
``(v) In the case of a trust described in clause (v) of
subparagraph (A), each potential current beneficiary of such
trust shall be treated as a shareholder; except that, if for
any period there is no potential current beneficiary of such
trust, such trust shall be treated as the shareholder during
such period.''
(c) Electing Small Business Trust Defined.--Section 1361
(defining S corporation) is amended by adding at the end the
following new subsection:
``(e) Electing Small Business Trust Defined.--
``(1) Electing small business trust.--For purposes of this
section--
``(A) In general.--Except as provided in subparagraph (B),
the term `electing small business trust' means any trust if--
``(i) such trust does not have as a beneficiary any person
other than (I) an individual, (II) an estate, or (III) an
organization described in paragraph (2), (3), (4), or (5) of
section 170(c) which holds a contingent interest and is not a
potential current beneficiary,
``(ii) no interest in such trust was acquired by purchase,
and
``(iii) an election under this subsection applies to such
trust.
``(B) Certain trusts not eligible.--The term `electing
small business trust' shall not include--
``(i) any qualified subchapter S trust (as defined in
subsection (d)(3)) if an election under subsection (d)(2)
applies to any corporation the stock of which is held by such
trust, and
``(ii) any trust exempt from tax under this subtitle.
``(C) Purchase.--For purposes of subparagraph (A), the term
`purchase' means any acquisition if the basis of the property
acquired is determined under section 1012.
``(2) Potential current beneficiary.--For purposes of this
section, the term `potential current beneficiary' means, with
respect to any period, any person who at any time during such
period is entitled to, or at the discretion of any person may
receive, a distribution from the principal or income of the
trust. If a trust disposes of all of the stock which it holds
in an S corporation, then, with respect to such corporation,
the term `potential current beneficiary' does not include any
person who first met the requirements of the preceding
sentence during the 60-day period ending on the date of such
disposition.
``(3) Election.--An election under this subsection shall be
made by the trustee. Any such election shall apply to the
taxable year of the trust for which made and all subsequent
taxable years of such trust unless revoked with the consent
of the Secretary.
``(4) Cross reference.--
``For special treatment of electing small business trusts, see
section 641(d).''
(d) Taxation of Electing Small Business Trusts.--Section
641 (relating to imposition of tax on trusts) is amended by
adding at the end the following new subsection:
``(d) Special Rules for Taxation of Electing Small Business
Trusts.--
``(1) In general.--For purposes of this chapter--
``(A) the portion of any electing small business trust
which consists of stock in 1 or more S corporations shall be
treated as a separate trust, and
``(B) the amount of the tax imposed by this chapter on such
separate trust shall be determined with the modifications of
paragraph (2).
``(2) Modifications.--For purposes of paragraph (1), the
modifications of this paragraph are the following:
``(A) Except as provided in section 1(h), the amount of the
tax imposed by section 1(e) shall be determined by using the
highest rate of tax set forth in section 1(e).
``(B) The exemption amount under section 55(d) shall be
zero.
``(C) The only items of income, loss, deduction, or credit
to be taken into account are the following:
``(i) The items required to be taken into account under
section 1366.
``(ii) Any gain or loss from the disposition of stock in an
S corporation.
``(iii) To the extent provided in regulations, State or
local income taxes or administrative expenses to the extent
allocable to items described in clauses (i) and (ii).
No deduction or credit shall be allowed for any amount not
described in this paragraph, and no item described in this
paragraph shall be apportioned to any beneficiary.
``(D) No amount shall be allowed under paragraph (1) or (2)
of section 1211(b).
``(3) Treatment of remainder of trust and distributions.--
For purposes of determining--
``(A) the amount of the tax imposed by this chapter on the
portion of any electing small business trust not treated as a
separate trust under paragraph (1), and
``(B) the distributable net income of the entire trust,
the items referred to in paragraph (2)(C) shall be excluded.
Except as provided in the preceding sentence, this subsection
shall not affect the taxation of any distribution from the
trust.
``(4) Treatment of unused deductions where termination of
separate trust.--If a portion of an electing small business
trust ceases to be treated as a separate trust under
paragraph (1), any carryover or excess deduction of the
separate trust which is referred to in section 642(h) shall
be taken into account by the entire trust.
``(5) Electing small business trust.--For purposes of this
subsection, the term `electing small business trust' has the
meaning given such term by section 1361(e)(1).''
(e) Technical Amendment.--Paragraph (1) of section 1366(a)
is amended by inserting ``, or of a trust or estate which
terminates,'' after ``who dies''.
(f) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
SEC. 504. OTHER MODIFICATIONS.
(a) Treatment of S Corporations Under Subchapter C.--
Subsection (a) of section 1371 (relating to application of
subchapter C rules) is amended to read as follows:
``(a) Application of Subchapter C Rules.--Except as
otherwise provided in this title, and except to the extent
inconsistent with this subchapter, subchapter C shall apply
to an S corporation and its shareholders.''
(b) S Corporations Permitted To Hold Subsidiaries.--
(1) In general.--Paragraph (2) of section 1361(b) (defining
ineligible corporation) is amended by striking subparagraph
(A) and by redesignating subparagraphs (B), (C), (D), and (E)
as subparagraphs (A), (B), (C), and (D), respectively.
(2) Conforming amendments.--
(A) Subsection (c) of section 1361 is amended by striking
paragraph (6).
(B) Subsection (b) of section 1504 (defining includible
corporation) is amended by adding at the end thereof the
following new paragraph:
``(8) An S corporation.''
(c) Elimination of Pre-1983 Earnings and Profits.--
(1) In general.--If--
(A) a corporation was an electing small business
corporation under subchapter S of chapter 1 of the Internal
Revenue Code of 1986 for any taxable year beginning before
January 1, 1983, and
(B) such corporation is an S corporation under subchapter S
of chapter 1 of such Code for its first taxable year
beginning after December 31, 1992,
the amount of such corporation's accumulated earnings and
profits (as of the beginning of such first taxable year)
shall be reduced by an amount equal to the portion (if any)
of such accumulated earnings and profits which were
accumulated in any taxable year beginning before January 1,
1983, for which such corporation was an electing small
business corporation under such subchapter S.
(2) Conforming amendments.--
(A) Paragraph (3) of section 1362(d) is amended--
(i) by striking ``Subchapter C'' in the paragraph heading
and inserting ``Accumulated'',
(ii) by striking ``subchapter C'' in subparagraph (A)(i)(I)
and inserting ``accumulated'', and
(iii) by striking subparagraph (B) and redesignating the
following subparagraphs accordingly.
(B)(i) Subsection (a) of section 1375 is amended by
striking ``subchapter C'' in paragraph (1) and inserting
``accumulated''.
(ii) Paragraph (3) of section 1375(b) is amended to read as
follows:
``(3) Passive investment income, etc.--The terms `passive
investment income' and `gross receipts' have the same
respective meanings as when used in paragraph (3) of section
1362(d).''
(iii) The section heading for section 1375 is amended by
striking ``SUBCHAPTER C'' and inserting ``ACCUMULATED''.
(iv) The table of sections for part III of subchapter S of
chapter 1 is amended by striking ``subchapter C'' in the item
relating to section 1375 and inserting ``accumulated''.
(C) Clause (i) of section 1042(c)(4)(A) is amended by
striking ``section 1362(d)(3)(D)'' and inserting ``section
1362(d)(3)(C)''.
(d) Adjustments to Basis of Inherited S Stock To Reflect
Certain Items of Income.--Subsection (b) of section 1367
(relating to adjustments to basis of stock of shareholders,
etc.) is amended by adding at the end thereof the following
new paragraph:
``(4) Adjustments in case of inherited stock.--
``(A) In general.--If any person acquires stock in an S
corporation by reason of the death of a decedent or by
bequest, devise, or inheritance, section 691 shall be applied
with respect to any item of income of the S corporation in
the same manner as if the decedent had held directly his pro
rata share of such item.
``(B) Adjustments to basis.--The basis determined under
section 1014 of any stock in an S corporation shall be
reduced by the portion of the value of the stock which is
attributable to items constituting income in respect of the
decedent.''
(e) Effective Dates.--
(1) Subsections (a) and (b).--The amendments made by
subsections (a) and (b) shall take effect on the date of the
enactment of this Act.
(2) Subsection (c).--The amendments made by subsection (c)
shall apply to taxable years beginning after December 31,
1992.
(3) Subsection (d).--The amendment made by subsection (d)
shall apply in the case of decedents dying after the date of
the enactment of this Act.
Subtitle B--Accounting Provision
SEC. 511. MODIFICATIONS TO LOOK-BACK METHOD FOR LONG-TERM
CONTRACTS.
(a) Look-Back Method Not To Apply in Certain Cases.--
Subsection (b) of section 460 (relating to percentage of
completion method) is amended by adding at the end thereof
the following new paragraph:
``(6) Election to have look-back method not apply in de
minimis cases.--
``(A) Amounts taken into account after completion of
contract.--Paragraph (1)(B) shall not apply with respect to
any taxable year (beginning after the taxable year in which
the contract is completed) if--
``(i) the cumulative taxable income (or loss) under the
contract as of the close of such taxable year, is within
``(ii) 10 percent of the cumulative look-back taxable
income (or loss) under the contract as of the close of the
most recent taxable year to which paragraph (1)(B) applied
(or would have applied but for subparagraph (B)).
``(B) De minimis discrepancies.--Paragraph (1)(B) shall not
apply in any case to which it would otherwise apply if--
``(i) the cumulative taxable income (or loss) under the
contract as of the close of each prior contract year, is
within
``(ii) 10 percent of the cumulative look-back income (or
loss) under the contract as of the close of such prior
contract year.
``(C) Definitions.--For purposes of this paragraph--
``(i) Contract year.--The term `contract year' means any
taxable year for which income is taken into account under the
contract.
``(ii) Look-back income or loss.--The look-back income (or
loss) is the amount which would be the taxable income (or
loss) under the contract if the allocation method set forth
in paragraph (2)(A) were used in determining taxable income.
``(iii) Discounting not applicable.--The amounts taken into
account after the completion of the contract shall be
determined without regard to any discounting under the 2nd
sentence of paragraph (2).
``(D) Contracts to which paragraph applies.--This paragraph
shall only apply if the taxpayer makes an election under this
subparagraph. Unless revoked with the consent of the
Secretary, such an election shall apply to all long-term
contracts completed during the taxable year for which
election is made or during any subsequent taxable year.''
(b) Modification of Interest Rate.--
(1) In general.--Subparagraph (C) of section 460(b)(2) is
amended by striking ``the overpayment rate established by
section 6621'' and inserting ``the adjusted overpayment rate
(as defined in paragraph (7))''.
(2) Adjusted overpayment rate.--Subsection (b) of section
460 is amended by adding at the end thereof the following new
paragraph:
``(7) Adjusted overpayment rate.--
``(A) In general.--The adjusted overpayment rate for any
interest accrual period is the overpayment rate in effect
under section 6621 for the calendar quarter in which such
interest accrual period begins.
``(B) Interest accrual period.--For purposes of
subparagraph (A), the term `interest accrual period' means
the period--
``(i) beginning on the day after the return due date for
any taxable year of the taxpayer, and
``(ii) ending on the return due date for the following
taxable year.
For purposes of the preceding sentence, the term `return due
date' means the date prescribed for filing the return of the
tax imposed by this chapter (determined without regard to
extensions).''
(c) Effective Date.--The amendments made by this section
shall apply to contracts completed in taxable years ending
after the date of the enactment of this Act.
Subtitle C--Provisions Relating To Regulated Investment Companies
SEC. 521. REPEAL OF 30-PERCENT GROSS INCOME LIMITATION.
(a) General Rule.--Subsection (b) of section 851 (relating
to limitations) is amended by striking paragraph (3), by
adding ``and'' at the end of paragraph (2), and by
redesignating paragraph (4) as paragraph (3).
(b) Technical Amendments.--
(1) The material following paragraph (3) of section 851 (as
redesignated by subsection (a)) is amended--
(A) by striking out ``paragraphs (2) and (3)'' and
inserting ``paragraph (2)'', and
(B) by striking out the last sentence thereof.
(2) Subsection (c) of section 851 is amended by striking
``subsection (b)(4)'' each place it appears (including the
heading) and inserting ``subsection (b)(3)''.
(3) Subsection (d) of section 851 is amended by striking
``subsections (b)(4)'' and inserting ``subsections (b)(3)''.
(4) Paragraph (1) of section 851(e) is amended by striking
``subsection (b)(4)'' and inserting ``subsection (b)(3)''.
(5) Paragraph (4) of section 851(e) is amended by striking
``subsections (b)(4)'' and inserting ``subsections (b)(3)''.
(6) Section 851 is amended by striking subsection (g) and
redesignating subsection (h) as subsection (g).
(7) Subsection (g) of section 851 (as redesignated by
paragraph (6)) is amended by striking paragraph (3).
(8) Section 817(h)(2) is amended--
(A) by striking ``851(b)(4)'' in subparagraph (A) and
inserting ``851(b)(3)'', and
(B) by striking ``851(b)(4)(A)(i)'' in subparagraph (B) and
inserting ``851(b)(3)(A)(i)''.
(9) Section 1092(f)(2) is amended by striking ``Except for
purposes of section 851(b)(3), the'' and inserting ``The''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years ending after the date of the
enactment of this Act.
SEC. 522. BASIS RULES FOR SHARES IN OPEN-END REGULATED
INVESTMENT COMPANIES.
(a) Additional Reporting Requirement.--Section 6045
(relating to returns of brokers) is amended by adding at the
end thereof the following new subsection:
``(f) Additional Information Required With Respect to Open-
End Regulated Investment Companies.--
``(1) In general.--If any person is required under
subsection (a) to make a return regarding the gross proceeds
from any disposition of stock in an open-end regulated
investment company, such return shall include--
``(A) the basis of the stock disposed of (determined by
reference to the average basis of all of the stock in the
account from which the disposition was made immediately
before the disposition), and
``(B) the portion of such basis and such gross proceeds
attributable to stock held for more than 1 year and the
portion not so attributable.
Determinations under subparagraph (B) shall be made on a
first-in, first-out, basis and determinations of basis and
holding period shall be made in such manner as the Secretary
may prescribe.
``(2) Open-end regulated investment company.--For purposes
of this subsection, the term `open-end regulated investment
company' means any regulated investment company which is
offering for sale or has outstanding any redeemable security
(as defined in section 2(a)(32) of the Investment Company Act
of 1940) of which it is the issuer.
``(3) Information transfers.--To the extent provided in
regulations, there shall be such exchanges of information
between brokers as such regulations may require for purposes
of enabling brokers to meet the requirements of this
subsection.
``(4) Application of subsection.--This subsection shall not
apply with respect to stock in any account--
``(A) which was established before January 1, 1995, or
``(B) which includes any stock not acquired by purchase.''
(b) Basis for Income Tax Purposes.--Section 1012 of such
Code is amended--
(1) by striking ``The basis'' and inserting ``(a) General
Rule.--The basis'', and
(2) by adding at the end thereof the following new
subsection:
``(b) Special Rules for Stock in Open-End Regulated
Investment Companies.--
``(1) In general.--In the case of any disposition of stock
from a covered account--
``(A) the basis of such stock shall be determined by
reference to the average basis of all of the stock in such
account immediately before such disposition, and
``(B) the determination of which stock in such account is
so disposed of shall be made on a first-in, first-out, basis.
``(2) Covered account.--For purposes of this subsection--
``(A) In general.--The term `covered account' means any
account of stock in an open-end regulated investment company
if section 6045(f) applies to such account.
``(B) Election out.--The term `covered account' shall not
include any account if, on the taxpayer's return for his
first taxable year in which a disposition from such account
occurs, the taxpayer elects to have this subsection not apply
to such account.''
(c) Coordination With Wash Sale Rules.--Section 1091 is
amended by adding at the end thereof the following new
subsection:
``(f) Special Rules for Certain Accounts in Open-End
Regulated Investment Companies.--
``(1) In general.--In applying this section to a
disposition during December of any calendar year of stock
from a covered account, any acquisition of stock after
January 15 of the following calendar year shall be
disregarded if such acquisition is a result of a dividend
reinvestment pursuant to a dividend reinvestment program
established at the time such account was opened or, if later,
at least 6 months before the date of such disposition.
``(2) De minimis exception.--If
``(A) but for this paragraph, losses from dispositions
during December of any calendar year of stock from a covered
account would have been disallowed under this section by
reason of acquisitions during January of the following
calendar year, and
``(B) the amount of such losses which would have been so
disallowed does not exceed $25,
nothing in this section shall disallow such losses.
``(3) Covered account.--For purposes of this subsection,
the term `covered account' means any account of stock in an
open-end regulated investment company if section 6045(f)
applies to such account.''
(d) Modification of Load Basis Deferral Rule for Certain
Acquisitions Occurring After December 31.--
(1) Paragraph (1) of section 852(f) is amended by striking
``subparagraph (C)) shall not'' and all that follows and
inserting ``subparagraph (C)) shall be recaptured as provided
in paragraph (2). To the extent such charge is recaptured
under paragraph (2), such charge shall be treated as incurred
in connection with the acquisition referred to in
subparagraph (C) (including for purposes of reapplying this
paragraph).''
(2) Subsection (f) of section 852 is amended by
redesignating paragraph (2) as paragraph (3) and by inserting
after paragraph (1) the following new paragraph:
``(2) Recapture.--
``(A) In general.--Except as provided in subparagraph (B),
any load charge required by paragraph (1) to be recaptured
shall not be taken into account in determining the amount of
gain or loss on the disposition referred to in paragraph
(1)(B).
``(B) Subsequent acquisitions occurring after december
31.--If--
``(i) the acquisition referred to in paragraph (1)(A)
occurs in a calendar year, and
``(ii) the subsequent acquisition referred to in paragraph
(1)(C) occurs after December 31 of such calendar year,
subparagraph (A) shall not apply and the amount of the load
charge required by paragraph (1) to be recaptured shall be
included in gross income as short-term capital gain for the
taxable year in which the subsequent acquisition referred to
in paragraph (1)(C) occurs.''
(e) Technical Amendment.--Section 6724 of such Code is
amended by adding at the end thereof the following new
subsection:
``(f) Special Rule for Certain Reports With Respect to
Stock in Open End Regulated Investment Companies.--For
purposes of sections 6721(e)(2)(B) and 6722(c)(1)(B), the
amount required to be reported under section 6045 shall be
determined without regard to subsection (f) thereof.''
(f) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to returns and
statements required for calendar year 1995 and subsequent
calendar years.
(2) Subsections (b).--The amendments made by subsections
(b), (c), and (d) shall apply to dispositions after December
31, 1994.
SEC. 523. NONRECOGNITION TREATMENT FOR CERTAIN TRANSFERS BY
COMMON TRUST FUNDS TO REGULATED INVESTMENT
COMPANIES.
(a) General Rule.--Section 584 (relating to common trust
funds) is amended by redesignating subsection (h) as
subsection (i) and by inserting after subsection (g) the
following new subsection:
``(h) Nonrecognition Treatment for Certain Transfers to
Regulated Investment Companies.--
``(1) In general.--If--
``(A) a common trust fund transfers substantially all of
its assets to a regulated investment company in exchange
solely for stock in such company, and
``(B) such stock is distributed by such common trust fund
to participants in such common trust fund in exchange solely
for their interests in such common trust fund,
no gain or loss shall be recognized by such common trust fund
by reason of such transfer or distribution, and no gain or
loss shall be recognized by any participant in such common
trust fund by reason of such exchange.
``(2) Basis rules.--
``(A) Regulated investment company.--The basis of any asset
received by a regulated investment company in a transfer
referred to in paragraph (1)(A) shall be the same as it would
be in the hands of the common trust fund.
``(B) Participants.--The basis of any stock in a regulated
investment company which is received in an exchange referred
to in paragraph (1)(B) shall be the same as that of the
property exchanged.
``(3) Treatment of assumptions of liability.--
``(A) In general.--In determining whether the transfer
referred to in paragraph (1)(A) is in exchange solely for
stock in the regulated investment company, the assumption by
such company of a liability of the common trust fund, and the
fact that any property transferred by the common trust fund
is subject to a liability, shall be disregarded.
``(B) Special rule where assumed liabilities exceed
basis.--
``(i) In general.--If in any transfer referred to in
paragraph (1)(A) the assumed liabilities exceed the aggregate
adjusted bases (in the hands of the common trust fund) of the
assets transferred to the regulated investment company--
``(I) notwithstanding paragraph (1), gain shall be
recognized to the common trust fund on such transfer in an
amount equal to such excess,
``(II) the basis of the assets received by the regulated
investment company in such transfer shall be increased by the
amount so recognized, and
``(III) any adjustment to the basis of a participant's
interest in the common trust fund as a result of the gain so
recognized shall be treated as occurring immediately before
the exchange referred to in paragraph (1)(B).
``(ii) Assumed liabilities.--For purposes of clause (i),
the term `assumed liabilities' means the aggregate of--
``(I) any liability of the common trust fund assumed by the
regulated investment company in connection with the transfer
referred to in paragraph (1)(A), and
``(II) any liability to which property so transferred is
subject.
``(4) Common trust fund must meet diversification rules.--
This subsection shall not apply to any common trust fund
which would not meet the requirements of section
368(a)(2)(F)(ii) if it were a corporation. For purposes of
the preceding sentence, Government securities shall not be
treated as securities of an issuer in applying the 25-percent
and 50-percent test and such securities shall not be excluded
for purposes of determining total assets under clause (iv) of
section 368(a)(2)(F).''
(b) Effective Date.--The amendment made by subsection (a)
shall apply to transfers after the date of the enactment of
this Act.
Subtitle D--Tax-Exempt Bond Provisions
SEC. 531. REPEAL OF $100,000 LIMITATION ON UNSPENT PROCEEDS
UNDER 1-YEAR EXCEPTION FROM REBATE.
Subclause (I) of section 148(f)(4)(B)(ii) (relating to
additional period for certain bonds) is amended by striking
``the lesser of 5 percent of the proceeds of the issue or
$100,000'' and inserting ``5 percent of the proceeds of the
issue''.
SEC. 532. EXCEPTION FROM REBATE FOR EARNINGS ON BONA FIDE
DEBT SERVICE FUND UNDER CONSTRUCTION BOND
RULES.
Subparagraph (C) of section 148(f)(4) is amended by adding
at the end thereof the following new clause:
``(xvii) Treatment of bona fide debt service funds.--If the
spending requirements of clause (ii) are met with respect to
the available construction proceeds of a construction issue,
then paragraph (2) shall not apply to earnings on a bona fide
debt service fund for such issue.''
SEC. 533. REPEAL OF DEBT SERVICE-BASED LIMITATION ON
INVESTMENT IN CERTAIN NONPURPOSE INVESTMENTS.
Subsection (d) of section 148 (relating to special rules
for reasonably required reserve or replacement fund) is
amended by striking paragraph (3).
SEC. 534. REPEAL OF EXPIRED PROVISIONS.
(a) Paragraph (2) of section 148(c) is amended by striking
subparagraph (B) and by redesignating subparagraphs (C), (D),
and (E) as subparagraph (B), (C), and (D), respectively.
(b) Paragraph (4) of section 148(f) is amended by striking
subparagraph (E).
SEC. 535. CLARIFICATION OF INVESTMENT-TYPE PROPERTY.
Subparagraph (D) of section 148(b)(2) is amended to read as
follows:
``(D) any investment-type property, or''.
SEC. 536. EFFECTIVE DATES.
(a) In General.--Except as provided in subsection (b), the
amendments made by this subtitle shall apply to bonds issued
after the date of the enactment of this Act.
(b) Investment-Type Property.--The amendment made by
section 535 shall take effect as if included in the
amendments made by section 1301 of the Tax Reform Act of
1986.
Subtitle E--Insurance Provisions
SEC. 541. TREATMENT OF CERTAIN INSURANCE CONTRACTS ON RETIRED
LIVES.
(a) General Rule.--
(1) Paragraph (2) of section 817(d) (defining variable
contract) is amended by striking ``or'' at the end of
subparagraph (A), by striking ``and'' at the end of
subparagraph (B) and inserting ``or'', and by inserting after
subparagraph (B) the following new subparagraph:
``(C) provides for funding of insurance on retired lives as
described in section 807(c)(6), and''.
(2) Paragraph (3) of section 817(d) is amended by striking
``or'' at the end of subparagraph (A), by striking the period
at the end of subparagraph (B) and inserting ``, or'', and by
inserting after subparagraph (B) the following new
subparagraph:
``(C) in the case of funds held under a contract described
in paragraph (2)(C), the amounts paid in, or the amounts paid
out, reflect the investment return and the market value of
the segregated asset account.''
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
1992.
SEC. 542. TREATMENT OF MODIFIED GUARANTEED CONTRACTS.
(a) General Rule.--Subpart E of part I of subchapter L of
chapter 1 (relating to definitions and special rules) is
amended by inserting after section 817 the following new
section:
``SEC. 817A. SPECIAL RULES FOR MODIFIED GUARANTEED CONTRACTS.
``(a) Computation of Reserves.--In the case of a modified
guaranteed contract, clause (ii) of section 807(e)(1)(A)
shall not apply.
``(b) Segregated Assets Under Modified Guaranteed Contracts
Marked to Market.--
``(1) In general.--In the case of any life insurance
company, for purposes of this subtitle--
``(A) Any gain or loss with respect to a segregated asset
shall be treated as ordinary income or loss, as the case may
be.
``(B) If any segregated asset is held by such company as of
the close of any taxable year--
``(i) such company shall recognize gain or loss as if such
asset were sold for its fair market value on the last
business day of such taxable year, and
``(ii) any such gain or loss shall be taken into account
for such taxable year.
Proper adjustment shall be made in the amount of any gain or
loss subsequently realized for gain or loss taken into
account under the preceding sentence. The Secretary may
provide by regulations for the application of this
subparagraph at times other than the times provided in this
subparagraph.
``(2) Segregated asset.--For purposes of paragraph (1), the
term `segregated asset' means any asset held as part of a
segregated account referred to in subsection (d)(1) under a
modified guaranteed contract.
``(c) Special Rule in Computing Life Insurance Reserves.--
For purposes of applying section 816(b)(1)(A) to any modified
guaranteed contract, an assumed rate of interest shall
include a rate of interest determined, from time to time,
with reference to a market rate of interest.
``(d) Modified Guaranteed Contract Defined.--For purposes
of this section, the term `modified guaranteed contract'
means a contract not described in section 817--
``(1) all or part of the amounts received under which are
allocated to an account which, pursuant to State law or
regulation, is segregated from the general asset accounts of
the company and is valued from time to time with reference to
market values,
``(2) which--
``(A) provides for the payment of annuities,
``(B) is a life insurance contract, or
``(C) is a pension plan contract which is not a life,
accident, or health, property, casualty, or liability
contract,
``(3) for which reserves are valued at market for annual
statement purposes, and
``(4) which provides for a net surrender value or a
policyholder's fund (as defined in section 807(e)(1)).
``(e) Regulations.--The Secretary may prescribe
regulations--
``(1) to provide for the treatment of market value
adjustments under sections 72, 7702, 7702A, and 807(e)(1)(B),
``(2) to determine the interest rates applicable under
sections 807(c)(3), 807(d)(2)(B), and 812 with respect to a
modified guaranteed contract annually, in a manner
appropriate for modified guaranteed contracts and, to the
extent appropriate for such a contract, to modify or waive
the applicability of section 811(d),
``(3) to provide rules to limit ordinary gain or loss
treatment to assets constituting reserves for modified
guaranteed contracts (and not other assets) of the company,
``(4) to provide appropriate treatment of transfers of
assets to and from the segregated account, and
``(5) as may be necessary or appropriate to carry out the
purposes of this section.''
(b) Clerical Amendment.--The table of sections for subpart
E of part I of subchapter L of chapter 1 is amended by
inserting after the item relating to section 817 the
following new item:
``Sec. 817A. Special rules for modified guaranteed contracts.''
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1992.
(2) Treatment of net adjustments.--In the case of any
taxpayer required by the amendments made by this section to
change its calculation of reserves to take into account
market value adjustments and to mark segregated assets to
market for any taxable year--
(A) such changes shall be treated as a change in method of
accounting initiated by the taxpayer,
(B) such changes shall be treated as made with the consent
of the Secretary, and
(C) the adjustments required by reason of section 481 of
the Internal Revenue Code of 1986 shall be taken into account
as ordinary income or loss by the taxpayer for the taxpayer's
first taxable year beginning after December 31, 1992.
Subtitle F--Other Provisions
SEC. 551. CLOSING OF PARTNERSHIP TAXABLE YEAR WITH RESPECT TO
DECEASED PARTNER, ETC.
(a) General Rule.--Subparagraph (A) of section 706(c)(2)
(relating to disposition of entire interest) is amended to
read as follows:
``(A) Disposition of entire interest.--The taxable year of
a partnership shall close with respect to a partner whose
entire interest in the partnership terminates (whether by
reason of death, liquidation, or otherwise).''
(b) Clerical Amendment.--The paragraph heading for
paragraph (2) of section 706(c) is amended to read as
follows:
``(2) Treatment of dispositions.--''.
(c) Effective Date.--The amendments made by this section
shall apply to partnership taxable years beginning after
December 31, 1993.
SEC. 552. MODIFICATION OF CREDIT FOR PRODUCING FUEL FROM A
NONCONVENTIONAL SOURCE.
(a) In General.--Subparagraph (A) of section 29(c)(2)
(relating to gas from geopressured brine, etc.) is amended by
adding at the end the following new sentence: ``If the
Federal Energy Regulatory Commission ceases to make the
determinations described in the preceding sentence, the
Secretary shall make such determinations in accordance with
section 503 of such Act.''
(b) Conforming Amendment.--Section 29(c)(2)(A) is amended
by inserting ``(as in effect before its repeal by the Natural
Gas Wellhead Decontrol Act of 1989)'' after ``Natural Gas
Policy Act of 1978''.
(c) Effective Date.--The amendments made by this section
shall take effect on January 1, 1993.
TITLE VI--ESTATE AND GIFT TAX PROVISIONS
SEC. 601. CLARIFICATION OF WAIVER OF CERTAIN RIGHTS OF
RECOVERY.
(a) Amendment to Section 2207A.--Paragraph (2) of section
2207A(a) (relating to right of recovery in the case of
certain marital deduction property) is amended to read as
follows:
``(2) Decedent may otherwise direct.--Paragraph (1) shall
not apply with respect to any property to the extent that the
decedent in his will (or a revocable trust) specifically
indicates an intent to waive any right of recovery under this
subchapter with respect to such property.''
(b) Amendment to Section 2207B.--Paragraph (2) of section
2207B(a) (relating to right of recovery where decedent
retained interest) is amended to read as follows:
``(2) Decedent may otherwise direct.--Paragraph (1) shall
not apply with respect to any property to the extent that the
decedent in his will (or a revocable trust) specifically
indicates an intent to waive any right of recovery under this
subchapter with respect to such property.''
(c) Effective Date.--The amendments made by this section
shall apply with respect to the estates of decedents dying
after the date of the enactment of this Act.
SEC. 602. ADJUSTMENTS FOR GIFTS WITHIN 3 YEARS OF DECEDENT'S
DEATH.
(a) General Rule.--Section 2035 is amended to read as
follows:
``SEC. 2035. ADJUSTMENTS FOR CERTAIN GIFTS MADE WITHIN 3
YEARS OF DECEDENT'S DEATH.
``(a) Inclusion of Certain Property in Gross Estate.--If--
``(1) the decedent made a transfer (by trust or otherwise)
of an interest in any property, or relinquished a power with
respect to any property, during the 3-year period ending on
the date of the decedent's death, and
``(2) the value of such property (or an interest therein)
would have been included in the decedent's gross estate under
section 2036, 2037, 2038, or 2042 if such transferred
interest or relinquished power had been retained by the
decedent on the date of his death,
the value of the gross estate shall include the value of any
property (or interest therein) which would have been so
included.
``(b) Inclusion of Gift Tax on Gifts Made During 3 Years
Before Decedent's Death.--The amount of the gross estate
(determined without regard to this subsection) shall be
increased by the amount of any tax paid under chapter 12 by
the decedent or his estate on any gift made by the decedent
or his spouse during the 3-year period ending on the date of
the decedent's death.
``(c) Other Rules Relating to Transfers Within 3 Years of
Death.--
``(1) In general.--For purposes of--
``(A) section 303(b) (relating to distributions in
redemption of stock to pay death taxes),
``(B) section 2032A (relating to special valuation of
certain farms, etc., real property), and
``(C) subchapter C of chapter 64 (relating to lien for
taxes),
the value of the gross estate shall include the value of all
property to the extent of any interest therein of which the
decedent has at any time made a transfer, by trust or
otherwise, during the 3-year period ending on the date of the
decedent's death.
``(2) Coordination with section 6166.--An estate shall be
treated as meeting the 35 percent of adjusted gross estate
requirement of section 6166(a)(1) only if the estate meets
such requirement both with and without the application of
paragraph (1).
``(3) Small transfers.--Paragraph (1) shall not apply to
any transfer (other than a transfer with respect to a life
insurance policy) made during a calendar year to any donee if
the decedent was not required by section 6019 (other than by
reason of section 6019(a)(2)) to file any gift tax return for
such year with respect to transfers to such donee.
``(d) Exception.--Subsection (a) shall not apply to any
bona fide sale for an adequate and full consideration in
money or money's worth.
``(e) Treatment of Certain Transfers From Revocable
Trusts.--For purposes of this section and section 2038, any
transfer from any portion of a trust with respect to which
the decedent was the grantor during any period when the
decedent held the power to revest in the decedent title to
such portion shall be treated as a transfer made directly by
the decedent.''
(b) Clerical Amendment.--The table of sections for part III
of subchapter A of chapter 11 is amended by striking
``gifts'' in the item relating to section 2035 and inserting
``certain gifts''.
(c) Effective Date.--The amendments made by this section
shall apply to the estates of decedents dying after the date
of the enactment of this Act.
SEC. 603. CLARIFICATION OF QUALIFIED TERMINABLE INTEREST
RULES.
(a) General Rule.--
(1) Estate tax.--Subparagraph (B) of section 2056(b)(7)
(defining qualified terminable interest property) is amended
by adding at the end thereof the following new clause:
``(vi) Treatment of certain income distributions.--An
income interest shall not fail to qualify as a qualified
income interest for life solely because income for the period
after the last distribution date and on or before the date of
the surviving spouse's death is not required to be
distributed to the surviving spouse or to the estate of the
surviving spouse.''
(2) Gift tax.--Paragraph (3) of section 2523(f) is amended
by striking ``and (iv)'' and inserting ``(iv), and (vi)''.
(b) Clarification of Subsequent Inclusions.--Section 2044
is amended by adding at the end thereof the following new
subsection:
``(d) Clarification of Inclusion of Certain Income.--The
amount included in the gross estate under subsection (a)
shall include the amount of any income from the property to
which this section applies for the period after the last
distribution date and on or before the date of the decedent's
death if such income is not otherwise included in the
decedent's gross estate.''
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply with respect to the estates of decedents dying, and
gifts made, after the date of the enactment of this Act.
(2) Application of section 2044 to transfers before date of
enactment.--In the case of the estate of any decedent dying
after the date of the enactment of this Act, if there was a
transfer of property on or before such date--
(A) such property shall not be included in the gross estate
of the decedent under section 2044 of the Internal Revenue
Code of 1986 if no prior marital deduction was allowed with
respect to such a transfer of such property to the decedent,
but
(B) such property shall be so included if such a deduction
was allowed.
SEC. 604. TRANSITIONAL RULE UNDER SECTION 2056A.
(a) General Rule.--In the case of any trust created under
an instrument executed before the date of the enactment of
the Revenue Reconciliation Act of 1990, such trust shall be
treated as meeting the requirements of paragraph (1) of
section 2056A(a) of the Internal Revenue Code of 1986 if the
trust instrument requires that all trustees of the trust be
individual citizens of the United States or domestic
corporations.
(b) Effective Date.--The provisions of subsection (a) shall
take effect as if included in the provisions of section
11702(g) of the Revenue Reconciliation Act of 1990.
SEC. 605. OPPORTUNITY TO CORRECT CERTAIN FAILURES UNDER
SECTION 2032A.
(a) General Rule.--Paragraph (3) of section 2032A(d)
(relating to modification of election and agreement to be
permitted) is amended to read as follows:
``(3) Modification of election and agreement to be
permitted.--The Secretary shall prescribe procedures which
provide that in any case in which the executor makes an
election under paragraph (1) (and submits the agreement
referred to in paragraph (2)) within the time prescribed
therefor, but--
``(A) the notice of election, as filed, does not contain
all required information, or
``(B) signatures of 1 or more persons required to enter
into the agreement described in paragraph (2) are not
included on the agreement as filed, or the agreement does not
contain all required information,
the executor will have a reasonable period of time (not
exceeding 90 days) after notification of such failures to
provide such information or signatures.''
(b) Effective Date.--The amendment made by subsection (a)
shall apply to the estates of decedents dying after the date
of the enactment of this Act.
TITLE VII--EXCISE TAX SIMPLIFICATION
Subtitle A--Provisions Related to Distilled Spirits, Wines, and Beer
SEC. 701. CREDIT OR REFUND FOR IMPORTED BOTTLED DISTILLED
SPIRITS RETURNED TO DISTILLED SPIRITS PLANT.
(a) In General.--Paragraph (1) of section 5008(c) (relating
to distilled spirits returned to bonded premises) is amended
by striking ``withdrawn from bonded premises on payment or
determination of tax'' and inserting ``on which tax has been
determined or paid''.
(b) Effective Date.--The amendment made by subsection (a)
shall take effect at the beginning of the first calendar
quarter beginning more than 180 days after the date of the
enactment of this Act.
SEC. 702. AUTHORITY TO CANCEL OR CREDIT EXPORT BONDS WITHOUT
SUBMISSION OF RECORDS.
(a) In General.--Subsection (c) of section 5175 (relating
to export bonds) is amended by striking ``on the submission
of'' and all that follows and inserting ``if there is such
proof of exportation as the Secretary may by regulations
require.''
(b) Effective Date.--The amendment made by subsection (a)
shall take effect at the beginning of the first calendar
quarter beginning more than 180 days after the date of the
enactment of this Act.
SEC. 703. REPEAL OF REQUIRED MAINTENANCE OF RECORDS ON
PREMISES OF DISTILLED SPIRITS PLANT.
(a) In General.--Subsection (c) of section 5207 (relating
to records and reports) is amended by striking ``shall be
kept on the premises where the operations covered by the
record are carried on and''.
(b) Effective Date.--The amendment made by subsection (a)
shall take effect at the beginning of the first calendar
quarter beginning more than 180 days after the date of the
enactment of this Act.
SEC. 704. FERMENTED MATERIAL FROM ANY BREWERY MAY BE RECEIVED
AT A DISTILLED SPIRITS PLANT.
(a) In General.--Paragraph (2) of section 5222(b) (relating
to production, receipt, removal, and use of distilling
materials) is amended to read as follows:
``(2) beer conveyed without payment of tax from brewery
premises, beer which has been lawfully removed from brewery
premises upon determination of tax, or''.
(b) Clarification of Authority To Permit Removal of Beer
Without Payment of Tax for Use as Distilling Material.--
Section 5053 (relating to exemptions) is amended by
redesignating subsection (f) as subsection (i) and by
inserting after subsection (e) the following new subsection:
``(f) Removal for Use as Distilling Material.--Subject to
such regulations as the Secretary may prescribe, beer may be
removed from a brewery without payment of tax to any
distilled spirits plant for use as distilling material.''
(c) Clarification of Refund and Credit of Tax.--Section
5056 (relating to refund and credit of tax, or relief from
liability) is amended--
(1) by redesignating subsection (c) as subsection (d) and
by inserting after subsection (b) the following new
subsection:
``(c) Beer Received at a Distilled Spirits Plant.--Any tax
paid by any brewer on beer produced in the United States may
be refunded or credited to the brewer, without interest, or
if the tax has not been paid, the brewer may be relieved of
liability therefor, under regulations as the Secretary may
prescribe, if such beer is received on the bonded premises of
a distilled spirits plant pursuant to the provisions of
section 5222(b)(2), for use in the production of distilled
spirits.'', and
(2) by striking ``or rendering unmerchantable'' in
subsection (d) (as so redesignated) and inserting ``rendering
unmerchantable, or receipt on the bonded premises of a
distilled spirits plant''.
(d) Effective Date.--The amendments made by this section
shall take effect at the beginning of the first calendar
quarter beginning more than 180 days after the date of the
enactment of this Act.
SEC. 705. REPEAL OF REQUIREMENT FOR WHOLESALE DEALERS IN
LIQUORS TO POST SIGN.
(a) In General.--Section 5115 (relating to sign required on
premises) is hereby repealed.
(b) Conforming Amendments.--
(1) Subsection (a) of section 5681 is amended by striking
``, and every wholesale dealer in liquors,'' and by striking
``section 5115(a) or''.
(2) Subsection (c) of section 5681 is amended--
(A) by striking ``or wholesale liquor establishment, on
which no sign required by section 5115(a) or'' and inserting
``on which no sign required by'', and
(B) by striking ``or wholesale liquor establishment, or
who'' and inserting ``or who''.
(3) The table of sections for subpart D of part II of
subchapter A of chapter 51 is amended by striking the item
relating to section 5115.
(c) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act.
SEC. 706. REFUND OF TAX TO WINE RETURNED TO BOND NOT LIMITED
TO UNMERCHANTABLE WINE.
(a) In General.--Subsection (a) of section 5044 (relating
to refund of tax on unmerchantable wine) is amended by
striking ``as unmerchantable''.
(b) Conforming Amendments.--
(1) Section 5361 is amended by striking ``unmerchantable''.
(2) The section heading for section 5044 is amended by
striking ``unmerchantable''.
(3) The item relating to section 5044 in the table of
sections for subpart C of part I of subchapter A of chapter
51 is amended by striking ``unmerchantable''.
(c) Effective Date.--The amendments made by this section
shall take effect at the beginning of the first calendar
quarter beginning more than 180 days after the date of the
enactment of this Act.
SEC. 707. USE OF ADDITIONAL AMELIORATING MATERIAL IN CERTAIN
WINES.
(a) In General.--Subparagraph (D) of section 5384(b)(2)
(relating to ameliorated fruit and berry wines) is amended by
striking ``loganberries, currants, or gooseberries,'' and
inserting ``any fruit or berry with a natural fixed acid of
20 parts per thousand or more (before any correction of such
fruit or berry)''.
(b) Effective Date.--The amendment made by this section
shall take effect at the beginning of the first calendar
quarter beginning more than 180 days after the date of the
enactment of this Act.
SEC. 708. DOMESTICALLY PRODUCED BEER MAY BE WITHDRAWN FREE OF
TAX FOR USE OF FOREIGN EMBASSIES, LEGATIONS,
ETC.
(a) In General.--Section 5053 (relating to exemptions) is
amended by inserting after subsection (f) the following new
subsection:
``(g) Removals for Use of Foreign Embassies, Legations,
Etc.--
``(1) In general.--Subject to such regulations as the
Secretary may prescribe--
``(A) beer may be withdrawn from the brewery without
payment of tax for transfer to any customs bonded warehouse
for entry pending withdrawal therefrom as provided in
subparagraph (B), and
``(B) beer entered into any customs bonded warehouse under
subparagraph (A) may be withdrawn for consumption in the
United States by, and for the official and family use of,
such foreign governments, organizations, and individuals as
are entitled to withdraw imported beer from such warehouses
free of tax.
Beer transferred to any customs bonded warehouse under
subparagraph (A) shall be entered, stored, and accounted for
in such warehouse under such regulations and bonds as the
Secretary may prescribe, and may be withdrawn therefrom by
such governments, organizations, and individuals free of tax
under the same conditions and procedures as imported beer.
``(2) Other rules to apply.--Rules similar to the rules of
paragraphs (2) and (3) of section 5362(e) of such section
shall apply for purposes of this subsection.''
(b) Effective Date.--The amendment made by subsection (a)
shall take effect at the beginning of the first calendar
quarter beginning more than 180 days after the date of the
enactment of this Act.
SEC. 709. BEER MAY BE WITHDRAWN FREE OF TAX FOR DESTRUCTION.
(a) In General.--Section 5053 is amended by inserting after
subsection (g) the following new subsection:
``(h) Removals for Destruction.--Subject to such
regulations as the Secretary may prescribe, beer may be
removed from the brewery without payment of tax for
destruction.''
(b) Effective Date.--The amendment made by subsection (a)
shall take effect at the beginning of the first calendar
quarter beginning more than 180 days after the date of the
enactment of this Act.
SEC. 710. AUTHORITY TO ALLOW DRAWBACK ON EXPORTED BEER
WITHOUT SUBMISSION OF RECORDS.
(a) In General.--The first sentence of section 5055
(relating to drawback of tax on beer) is amended by striking
``found to have been paid'' and all that follows and
inserting ``paid on such beer if there is such proof of
exportation as the Secretary may by regulations require.''
(b) Effective Date.--The amendment made by subsection (a)
shall take effect at the beginning of the first calendar
quarter beginning more than 180 days after the date of the
enactment of this Act.
SEC. 711. TRANSFER TO BREWERY OF BEER IMPORTED IN BULK
WITHOUT PAYMENT OF TAX.
(a) In General.--Part II of subchapter G of chapter 51 is
amended by adding at the end thereof the following new
section:
``SEC. 5418. BEER IMPORTED IN BULK.
``Beer imported or brought into the United States in bulk
containers may, under such regulations as the Secretary may
prescribe, be withdrawn from customs custody and transferred
in such bulk containers to the premises of a brewery without
payment of the internal revenue tax imposed on such beer. The
proprietor of a brewery to which such beer is transferred
shall become liable for the tax on the beer withdrawn from
customs custody under this section upon release of the beer
from customs custody, and the importer, or the person
bringing such beer into the United States, shall thereupon be
relieved of the liability for such tax.''
(b) Clerical Amendment.--The table of sections for such
part II is amended by adding at the end thereof the following
new item:
``Sec. 5418. Beer imported in bulk.''
(c) Effective Date.--The amendments made by this section
shall take effect at the beginning of the first calendar
quarter beginning more than 180 days after the date of the
enactment of this Act.
Subtitle B--Other Excise Tax Provisions
SEC. 721. AUTHORITY TO GRANT EXEMPTIONS FROM REGISTRATION
REQUIREMENTS.
(a) In General.--The first sentence of section 4222
(relating to registration) is amended to read as follows:
``Except as provided in subsection (b), section 4221 shall
not apply with respect to the sale of any article by or to
any person who is required by the Secretary to be registered
under this section and who is not so registered.''
(b) Effective Date.--The amendment made by subsection (a)
shall apply to sales after the 180th day after the date of
the enactment of this Act.
SEC. 722. REPEAL OF EXPIRED PROVISIONS.
(a) Piggy-Back Trailers.--Section 4051 is amended by
striking subsection (d) and by redesignating subsection (e)
as subsection (d).
(b) Deep Seabed Mining.--
(1) Subchapter F of chapter 36 (relating to tax on removal
of hard mineral resources from deep seabed) is hereby
repealed.
(2) The table of subchapters for chapter 36 is amended by
striking the item relating to subchapter F.
TITLE VIII--ADMINISTRATIVE PROVISIONS
Subtitle A--General Provisions
SEC. 801. USE OF REPRODUCTIONS OF RETURNS STORED IN DIGITAL
IMAGE FORMAT.
(a) In General.--Paragraph (2) of section 6103(p) (relating
to procedure and recordkeeping) is amended by adding at the
end thereof the following new subparagraph:
``(D) Reproduction from digital images.--For purposes of
this paragraph, the term `reproduction' includes a
reproduction from digital images.''
(b) Study.--The Comptroller General of the United States
shall conduct a study of available digital image technology
for the purpose of determining the extent to which
reproductions of documents stored using that technology
accurately reflect the data on the original document and the
appropriate period for retaining the original document. Not
later than 1 year after the date of the enactment of this
Act, a report on the results of such study shall be submitted
to the Committee on Ways and Means of the House of
Representatives and the Committee on Finance of the Senate.
SEC. 802. REPEAL OF AUTHORITY TO DISCLOSE WHETHER PROSPECTIVE
JUROR HAS BEEN AUDITED.
(a) In General.--Subsection (h) of section 6103 (relating
to disclosure to certain Federal officers and employees for
purposes of tax administration, etc.) is amended by striking
paragraph (5) and by redesignating paragraph (6) as paragraph
(5).
(b) Conforming Amendment.--Paragraph (4) of section 6103(p)
is amended by striking ``(h)(6)'' each place it appears and
inserting ``(h)(5)''.
(c) Effective Date.--The amendments made by this section
shall apply to judicial proceedings pending on, or commenced
after, the date of the enactment of this Act.
SEC. 803. REPEAL OF SPECIAL AUDIT PROVISIONS FOR SUBCHAPTER S
ITEMS.
(a) General Rule.--Subchapter D of chapter 63 (relating to
tax treatment of subchapter S items) is hereby repealed.
(b) Consistent Treatment Required.--Section 6037 (relating
to return of S corporation) is amended by adding at the end
thereof the following new subsection:
``(c) Shareholder's Return Must Be Consistent With
Corporate Return or Secretary Notified of Inconsistency.--
``(1) In general.--A shareholder of an S corporation shall,
on such shareholder's return, treat a subchapter S item in a
manner which is consistent with the treatment of such item on
the corporate return.
``(2) Notification of inconsistent treatment.--
``(A) In general.--In the case of any subchapter S item,
if--
``(i)(I) the corporation has filed a return but the
shareholder's treatment on his return is (or may be)
inconsistent with the treatment of the item on the corporate
return, or
``(II) the corporation has not filed a return, and
``(ii) the shareholder files with the Secretary a statement
identifying the inconsistency,
paragraph (1) shall not apply to such item.
``(B) Shareholder receiving incorrect information.--A
shareholder shall be treated as having complied with clause
(ii) of subparagraph (A) with respect to a subchapter S item
if the shareholder--
``(i) demonstrates to the satisfaction of the Secretary
that the treatment of the subchapter S item on the
shareholder's return is consistent with the treatment of the
item on the schedule furnished to the shareholder by the
corporation, and
``(ii) elects to have this paragraph apply with respect to
that item.
``(3) Effect of failure to notify.--In any case--
``(A) described in subparagraph (A)(i)(I) of paragraph (2),
and
``(B) in which the shareholder does not comply with
subparagraph (A)(ii) of paragraph (2),
any adjustment required to make the treatment of the items by
such shareholder consistent with the treatment of the items
on the corporate return shall be treated as arising out of
mathematical or clerical errors and assessed according to
section 6213(b)(1). Paragraph (2) of section 6213(b) shall
not apply to any assessment referred to in the preceding
sentence.
``(4) Subchapter s item.--For purposes of this subsection,
the term `subchapter S item' means any item of an S
corporation to the extent that regulations prescribed by the
Secretary provide that, for purposes of this subtitle, such
item is more appropriately determined at the corporation
level than at the shareholder level.
``(5) Addition to tax for failure to comply with section.--
``For addition to tax in the case of a shareholder's negligence in
connection with, or disregard of, the requirements of this section, see
part II of subchapter A of chapter 68.''
(c) Conforming Amendments.--
(1) Section 1366 is amended by striking subsection (g).
(2) Subsection (b) of section 6233 is amended to read as
follows:
``(b) Similar Rules in Certain Cases.--If a partnership
return is filed for any taxable year but it is determined
that there is no entity for such taxable year, to the extent
provided in regulations, rules similar to the rules of
subsection (a) shall apply.''
(3) The table of subchapters for chapter 63 is amended by
striking the item relating to subchapter D.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years ending after the date of the
enactment of this Act.
SEC. 804. CLARIFICATION OF STATUTE OF LIMITATIONS.
(a) In General.--Subsection (a) of section 6501 (relating
to limitations on assessment and collection) is amended by
adding at the end thereof the following new sentence: ``For
purposes of this chapter, the term `return' means the return
required to be filed by the taxpayer (and does not include a
return of any person from whom the taxpayer has received an
item of income, gain, loss, deduction, or credit).''
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
SEC. 805. CERTAIN NOTICES DISREGARDED UNDER PROVISION
INCREASING INTEREST RATE ON LARGE CORPORATE
UNDERPAYMENTS.
(a) General Rule.--Subparagraph (B) of section 6621(c)(2)
(defining applicable date) is amended by adding at the end
thereof the following new clause:
``(iii) Exception for letters or notices involving small
amounts.--For purposes of this paragraph, any letter or
notice shall be disregarded if the amount of the deficiency
or proposed deficiency (or the assessment or proposed
assessment) set forth in such letter or notice is not greater
than $100,000 (determined by not taking into account any
interest, penalties, or additions to tax).''
(b) Effective Date.--The amendment made by subsection (a)
shall apply for purposes of determining interest for periods
after December 31, 1993.
Subtitle B--Tax Court Procedures
SEC. 811. OVERPAYMENT DETERMINATIONS OF TAX COURT.
(a) Appeal of Order.--Paragraph (2) of section 6512(b)
(relating to jurisdiction to enforce) is amended by adding at
the end the following new sentence: ``An order of the Tax
Court disposing of a motion under this paragraph shall be
reviewable in the same manner as a decision of the Tax Court,
but only with respect to the matters determined in such
order.''
(b) Denial of Jurisdiction Regarding Certain Credits and
Reductions.--Subsection (b) of section 6512 (relating to
overpayment determined by Tax Court) is amended by adding at
the end the following new paragraph:
``(4) Denial of jurisdiction regarding certain credits and
reductions.--The Tax Court shall have no jurisdiction under
this subsection to restrain or review any credit or reduction
made by the Secretary under section 6402.''
(c) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act.
SEC. 812. AWARDING OF ADMINISTRATIVE COSTS.
(a) Right to Appeal Tax Court Decision.--Subsection (f) of
section 7430 (relating to right of appeal) is amended by
adding at the end the following new paragraph:
``(3) Appeal of tax court decision.--An order of the Tax
Court disposing of a petition under paragraph (2) shall be
reviewable in the same manner as a decision of the Tax Court,
but only with respect to the matters determined in such
order.''
(b) Period for Applying to IRS for Costs.--Subsection (b)
of section 7430 (relating to limitations) is amended by
adding at the end the following new paragraph:
``(5) Period for applying to irs for administrative
costs.--An award may be made under subsection (a) by the
Internal Revenue Service for reasonable administrative costs
only if the prevailing party files an application with the
Internal Revenue Service for such costs before the 91st day
after the date on which the final decision of the Internal
Revenue Service as to the determination of the tax, interest,
or penalty is mailed to such party.''
(c) Period for Petitioning of Tax Court for Review of
Denial of Costs.--Paragraph (2) of section 7430(f) (relating
to right of appeal) is amended--
(1) by striking ``appeal to'' and inserting ``the filing of
a petition for review with'', and
(2) by adding at the end the following new sentence: ``If
the Secretary sends by certified or registered mail a notice
of such decision to the petitioner, no proceeding in the Tax
Court may be initiated under this paragraph unless such
petition is filed before the 91st day after the date of such
mailing.''
(d) Effective Date.--The amendments made by this section
shall apply to civil actions or proceedings commenced after
the date of the enactment of this Act.
SEC. 813. REDETERMINATION OF INTEREST PURSUANT TO MOTION.
(a) In General.--Paragraph (3) of section 7481(c) (relating
to jurisdiction over interest determinations) is amended by
striking ``petition'' and inserting ``motion''.
(b) Effective Date.--The amendment made by this section
shall take effect on the date of the enactment of this Act.
SEC. 814. APPLICATION OF NET WORTH REQUIREMENT FOR AWARDS OF
LITIGATION COSTS.
(a) In General.--Paragraph (4) of section 7430(c) (defining
prevailing party) is amended by adding at the end thereof the
following new subparagraph:
``(C) Special rules for applying net worth requirement.--In
applying the requirements of section 2412(d)(2)(B) of title
28, United States Code, for purposes of subparagraph (A)(iii)
of this paragraph--
``(i) the net worth limitation in clause (i) of such
section shall apply to--
``(I) an estate but shall be determined as of the date of
the decedent's death, and
``(II) a trust but shall be determined as of the last day
of the taxable year involved in the proceeding, and
``(ii) individuals filing a joint return shall be treated
as 1 individual for purposes of clause (i) of such section,
except in the case of a spouse relieved of liability under
section 6013(e).''
(b) Effective Date.--The amendment made by this section
shall apply to proceedings commenced after the date of the
enactment of this Act.
Subtitle C--Authority for Certain Cooperative Agreements
SEC. 821. COOPERATIVE AGREEMENTS WITH STATE TAX AUTHORITIES.
(a) General Rule.--Chapter 77 (relating to miscellaneous
provisions) is amended by adding at the end thereof the
following new section:
``SEC. 7524. COOPERATIVE AGREEMENTS WITH STATE TAX
AUTHORITIES.
``(a) Authorization of Agreements.--The Secretary is hereby
authorized to enter into cooperative agreements with State
tax authorities for purposes of enhancing joint tax
administration. Such agreements may provide for--
``(1) joint filing of Federal and State income tax returns,
``(2) single processing of such returns,
``(3) joint collection of taxes (other than Federal income
taxes), and
``(4) such other provisions as may enhance joint tax
administration.
``(b) Services on Reimbursable Basis.--Any agreement under
subsection (a) may require reimbursement for services
provided by either party to the agreement.
``(c) Availability of Funds.--Any funds appropriated for
purposes of the administration of this title shall be
available for purposes of carrying out the Secretary's
responsibility under an agreement entered into under
subsection (a). Any reimbursement received pursuant to such
an agreement shall be credited to the amount so appropriated.
``(d) State Tax Authority.--For purposes of this section,
the term `State tax authority' means agency, body, or
commission referred to in section 6103(d)(1).''
(b) Clerical Amendment.--The table of sections for chapter
77 is amended by adding at the end thereof the following new
item:
``Sec. 7524. Cooperative agreements with State tax authorities.''
Subtitle D--Administrative Practice and Procedural Simplification
SEC. 831. NOTIFICATION OF REASONS FOR TERMINATION OR DENIAL
OF INSTALLMENT AGREEMENTS.
(a) Terminations.--Subsection (b) of section 6159 (relating
to extent to which agreements remain in effect) is amended by
adding at the end thereof the following new paragraph:
``(5) Notice requirements.--The Secretary may not take any
action under paragraph (2), (3), or (4) unless--
``(A) a notice of such action is provided to the taxpayer
not later than the day 30 days before the date of such
action, and
``(B) such notice includes an explanation why the Secretary
intends to take such action.
The preceding sentence shall not apply in any case in which
the Secretary believes that collection of any tax to which an
agreement under this section relates is in jeopardy.''
(b) Denials.--Section 6159 (relating to agreements for
payment of tax liability in installments) is amended by
adding at the end thereof the following new subsection:
``(c) Notice Requirements for Denials.--The Secretary may
not deny any request for an installment agreement under this
section unless--
``(1) a notice of the proposed denial is provided to the
taxpayer not later than the day 30 days before the date of
such denial, and
``(2) such notice includes an explanation why the Secretary
intends to deny such request.
The preceding sentence shall not apply in any case in which
the Secretary believes that collection of any tax to which a
request for an agreement under this section relates is in
jeopardy.''
(c) Conforming Amendment.--Paragraph (3) of section 6159(b)
is amended to read as follows:
``(3) Subsequent change in financial conditions.--If the
Secretary makes a determination that the financial condition
of a taxpayer with whom the Secretary has entered into an
agreement under subsection (a) has significantly changed, the
Secretary may alter, modify, or terminate such agreement.''
(d) Effective Date.--The amendments made by this section
shall take effect on the date 6 months after the date of the
enactment of this Act.
SEC. 832. JOINT RETURN MAY BE MADE AFTER SEPARATE RETURNS
WITHOUT FULL PAYMENT OF TAX.
(a) General Rule.--Paragraph (2) of section 6013(b)
(relating to limitations on filing of joint return after
filing separate returns) is amended by striking subparagraph
(A) and redesignating the following subparagraphs
accordingly.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to taxable years beginning after the date of the
enactment of this Act.
SEC. 833. OFFERS-IN-COMPROMISE.
(a) General Rule.--Subsection (a) of section 7122 (relating
to compromises) is amended by adding at the end thereof the
following new sentence: ``The Secretary may make such a
compromise in any case where the Secretary determines that
such compromise would be in the best interests of the United
States.''.
(b) Review Requirements.--Subsection (b) of section 7122
(relating to records) is amended by striking ``$500.'' and
inserting ``$50,000. However, such compromise shall be
subject to continuing quality review by the Secretary.''.
(c) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act.
SEC. 834. PRELIMINARY NOTICE REQUIREMENT.
(a) In General.--Section 6672 (relating to failure to
collect and pay over tax, or attempt to evade or defeat tax)
is amended by redesignating subsection (b) as subsection (c)
and by inserting after subsection (a) the following new
subsection:
``(b) Preliminary Notice Requirement.--
``(1) In general.--No penalty shall be imposed under
subsection (a) unless the Secretary notifies the taxpayer in
writing by mail to an address as determined under section
6212(b) that the taxpayer shall be subject to an assessment
of such penalty.
``(2) Timing of notice.--The mailing of the notice
described in paragraph (1) shall precede any notice and
demand of any penalty under subsection (a) by at least 60
days.
``(3) Statute of limitations.--If a notice described in
paragraph (1) with respect to any penalty is mailed before
the expiration of the period provided by section 6501 for the
assessment of such penalty (determined without regard to this
paragraph), the period provided by such section for the
assessment of such penalty shall not expire before the date
90 days after the date on which such notice was mailed.
``(4) Exception for jeopardy.--This subsection shall not
apply if the Secretary finds that the collection of the
penalty is in jeopardy.''
(b) Effective Date.--The amendment made by subsection (a)
shall apply to assessments made after June 30, 1995.
SEC. 835. PENALTIES UNDER SECTION 6672.
(a) Public Information Requirements.--The Secretary of the
Treasury or the Secretary's delegate (hereafter in this
section referred to as the ``Secretary'') shall take such
actions as may be appropriate to ensure that employees are
aware of their responsibilities under the Federal tax
depository system, the circumstances under which employees
may be liable for the penalty imposed by section 6672 of the
Internal Revenue Code of 1986, and the responsibility to
promptly report to the Internal Revenue Service any failure
referred to in subsection (a) of such section 6672. Such
actions shall include--
(1) printing of a warning on deposit coupon booklets and
the appropriate tax returns that certain employees may be
liable for the penalty imposed by such section 6672, and
(2) the development of a special information packet.
(b) Board Members of Tax-Exempt Organizations.--
(1) Voluntary board members.--
(A) In general.--The penalty under section 6672 of the
Internal Revenue Code of 1986 shall not be imposed on unpaid,
volunteer members of any board of trustees or directors of an
organization referred to in section 501 of such Code to the
extent such members are solely serving in an honorary
capacity, do not participate in the day-to-day or financial
operations of the organization, and do not have actual
knowledge of the failure on which such penalty is imposed.
(B) Application of paragraph.--This paragraph shall not
apply if it results in no person being held liable for the
penalty described in section 6672(a) of the Internal Revenue
Code of 1986.
(2) Development of explanatory materials.--The Secretary
shall develop materials explaining the circumstances under
which board members of tax-exempt organizations (including
voluntary and honorary members) may be subject to penalty
under section 6672 of such Code. Such materials shall be made
available to tax-exempt organizations.
(3) IRS instructions.--The Secretary shall clarify the
instructions to Internal Revenue Service employees on the
application of the penalty under section 6672 of such Code
with regard to voluntary members of boards of trustees or
directors of tax-exempt organizations.
(c) Prompt Notification.--To the maximum extent
practicable, the Secretary shall notify all persons who have
failed to make timely and complete deposit of any taxes
described in section 6672 of the Internal Revenue Code of
1986 of such failure within 30 days after the return was
filed reflecting such failure or after the date on which the
Secretary is first aware of such failure. If the person
failing to make the deposit is not an individual, the
Secretary shall notify the entity subject to such deposit
requirement and that entity shall notify, within 15 days of
the notification by the Secretary, all officers, general
partners, trustees, or other managers of the failure.
SEC. 836. REQUIRED CONTENT OF CERTAIN NOTICES.
(a) General Rule.--Subsection (a) of section 7522 (relating
to content of tax due, deficiency, and other notices) is
amended by striking ``shall describe the basis for, and
identify'' and inserting ``shall set forth the adjustments
which are the basis for, and shall identify''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to notices sent after the date 6 months after the
date of the enactment of this Act.
SEC. 837. REQUIRED NOTICE OF CERTAIN PAYMENTS.
If any payment is received by the Secretary of the Treasury
or the Secretary's delegate (hereafter in the section
referred to as the ``Secretary'') from any taxpayer and the
Secretary cannot associate such payment with any outstanding
tax liability of such taxpayer, the Secretary shall make
reasonable efforts to notify the taxpayer of such inability
within 60 days after the receipt of such payment.
SEC. 838. IMPROVED PROCEDURES FOR NOTIFYING SERVICE OF CHANGE
OF ADDRESS OR NAME.
The Secretary of the Treasury shall provide improved
procedures for taxpayers to notify the Secretary of changes
in names and addresses. Not later than December 31, 1994, the
Secretary shall institute procedures for timely updating all
Internal Revenue Service records with change-of-address
information provided to the Secretary by taxpayers.
SEC. 839. RIGHTS AND RESPONSIBILITIES OF DIVORCED
INDIVIDUALS.
The Secretary of the Treasury shall include in the Internal
Revenue Service publication entitled ``Your Rights As A
Taxpayer'' a section on the rights and responsibilities of
divorced individuals.
TITLE IX--FINANCING PROVISIONS
SEC. 901. CERTAIN AMOUNTS DERIVED FROM FOREIGN CORPORATIONS
TREATED AS UNRELATED BUSINESS TAXABLE INCOME.
(a) General Rule.--Subsection (b) of section 512 (relating
to modifications) is amended by adding at the end thereof the
following new paragraph:
``(17) Treatment of certain amounts derived from foreign
corporations.--
``(A) In general.--Notwithstanding paragraph (1), any
disqualified amount derived by an organization from a foreign
corporation in which such organization is a 10-percent
shareholder shall be included as an item of gross income
derived from an unrelated trade or business. There shall be
allowed all deductions directly connected with amounts
included in gross income under the preceding sentence.
``(B) Disqualified amount.--For purposes of subparagraph
(A), the term `disqualified amount' means any of the
following:
``(i) Subpart f inclusion.--Any amount included in gross
income under section 951(a)(1)(A) to the extent the amount so
included is attributable to income which, if derived directly
by the organization, would be treated as gross income from an
unrelated trade or business.
``(ii) Dividends.--Any dividend paid out of the earnings
and profits of any foreign corporation in proportion to the
ratio of--
``(I) the portion of the earnings and profits attributable
to income which, if derived directly by the organization,
would be treated as gross income from an unrelated trade or
business, to
``(II) the total amount of earnings and profits.
For purposes of the preceding sentence, earnings and profits
accumulated in taxable years beginning before January 1,
1994, shall not be taken into account.
``(C) 10-percent shareholder.--The term `10-percent
shareholder' means any organization who owns (within the
meaning of section 958(a)), or is considered as owning by
applying the rules of section 958(b), 10 percent or more of
the combined voting power of all class of stock entitled to
vote of the foreign corporation.
``(D) Treatment of certain amounts as dividends.--The rules
of section 904(d)(3)(G) shall apply for purposes of this
paragraph.
``(E) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this paragraph, including regulations for the
application of this paragraph in the case of income paid
through 1 or more entities or between 2 or more chains of
entities.''
(b) Effective Date.--The amendments made by this section
shall apply to--
(1) dividends paid out of earnings and profits of foreign
corporations for taxable years beginning after December 31,
1993, and
(2) amounts included in gross income under section
951(a)(1)(A) of the Internal Revenue Code of 1986 in respect
of any such taxable year.
SEC. 902. SPECIAL RULES FOR RENTAL USE OF DWELLING FOR LESS
THAN 15 DAYS PER YEAR.
(a) In General.--Section 280A is amended by striking
subsection (g) and inserting:
``(g) Special Rule for Certain Rental Use.--Notwithstanding
any other provision of this section or section 183, if the
principal residence of the taxpayer is actually rented for
less than 15 days during the taxable year for the purpose of
providing accommodations to visitors to an event for which
commercial rental accommodations in the community holding the
event are not sufficient to reasonably provide more than one-
half of the accommodations necessary (and the rental income
received by the taxpayer for any visitor is not greater than
a reasonable rental rate charged per individual guest by
commercial rental accommodations), then--
``(1) no deduction otherwise allowable under this chapter
because of the rental use of such dwelling unit shall be
allowed, and
``(2) the income derived from such use for the taxable year
shall not be included in the gross income of such taxpayer
under section 61.
``(h) Regulations.--The Secretary shall prescribe such
regulations as may be appropriate to carry out the purposes
of this section, including regulations providing such de
minimis rules as the Secretary may deem appropriate.''
(b) Effective Date.--The amendment made by subsection (a)
shall apply to taxable years beginning after December 31,
1993.
SEC. 903. LOSS CARRYOVERS AND CARRYBACKS NOT EXCLUDED IN
APPLYING TAXABLE INCOME LIMITATION ON CERTAIN
RESERVE DEDUCTIONS.
(a) General Rule.--Subparagraph (D) of section 593(b)(2)
(relating to computation of taxable income) is amended by
adding at the end thereof the following new sentence:
``Except as providing in the preceding sentence, for purposes
of this paragraph, taxable income shall be computed as
provided in this chapter, including the application of any
carryover or carryback.''
(b) Effective Date.--The amendment made by subsection (a)
shall apply to losses incurred in taxable years ending after
December 31, 1993.
SEC. 904. EXTENSION OF WITHHOLDING TO CERTAIN GAMBLING
WINNINGS.
(a) Repeal of Exemption for Bingo and Keno.--Paragraph (5)
of section 3402(q) is amended to read as follows:
``(5) Exemption for slot machines.--The tax imposed by
paragraph (1) shall not apply to winnings from a slot
machine.''
(b) Threshold Amount.--Paragraph (3) of section 3402(q) is
amended--
(1) by striking ``(B) and (C)'' in subparagraph (A) and
inserting ``(B), (C), and (D)'', and
(2) by adding at the end thereof the following new
subparagraph:
``(D) Bingo and keno.--Proceeds of more than $10,000 from a
wager placed in a bingo or keno game.''
(c) Effective Date.--The amendments made by this section
shall take effect on January 1, 1994.
TITLE X--TECHNICAL CORRECTIONS
Subtitle A--Revenue Provisions
SEC. 1001. AMENDMENTS RELATED TO REVENUE RECONCILIATION ACT
OF 1990.
(a) Amendments Related to Subtitle A.--
(1) Subparagraph (B) of section 59(j)(3) is amended by
striking ``section 1(i)(3)(B)'' and inserting ``section
1(g)(3)(B)''.
(2) Clause (i) of section 151(d)(3)(C) is amended by
striking ``joint of a return'' and inserting ``joint
return''.
(3) Subsection (b) of section 1 (as in effect on the day
before the date of the enactment of the Revenue
Reconciliation Act of 1993) is amended by striking
``$26,500'' in the table contained therein and inserting
``$26,050''.
(b) Amendments Related to Subtitle B.--
(1) Paragraph (1) of section 11212(e) of the Revenue
Reconciliation Act of 1990 is amended by striking ``Paragraph
(1) of section 6724(d)'' and inserting ``Subparagraph (B) of
section 6724(d)(1)''.
(2)(A) Subparagraph (B) of section 4093(c)(2), as in effect
before the amendments made by the Revenue Reconciliation Act
of 1993, is amended by inserting before the period ``unless
such fuel is sold for exclusive use by a State or any
political subdivision thereof''.
(B) Paragraph (4) of section 6427(l), as in effect before
the amendments made by the Revenue Reconciliation Act of
1993, is amended by inserting before the period ``unless such
fuel was used by a State or any political subdivision
thereof''.
(3) Paragraph (1) of section 6416(b) is amended by striking
``chapter 32 or by section 4051'' and inserting ``chapter 31
or 32''.
(4) Section 7012 is amended--
(A) by striking ``production or importation of gasoline''
in paragraph (3) and inserting ``taxes on gasoline and diesel
fuel'', and
(B) by striking paragraph (4) and redesignating paragraphs
(5) and (6) as paragraphs (4) and (5), respectively.
(5) Subsection (c) of section 5041 is amended by striking
paragraph (6) and by inserting the following new paragraphs:
``(6) Credit for transferee in bond.--If--
``(A) wine produced by any person would be eligible for any
credit under paragraph (1) if removed by such person during
the calendar year,
``(B) wine produced by such person is removed during such
calendar year by any other person (hereafter in this
paragraph referred to as the `transferee') to whom such wine
was transferred in bond and who is liable for the tax imposed
by this section with respect to such wine, and
``(C) such producer holds title to such wine at the time of
its removal and provides to the transferee such information
as is necessary to properly determine the transferee's credit
under this paragraph,
then, the transferee (and not the producer) shall be allowed
the credit under paragraph (1) which would be allowed to the
producer if the wine removed by the transferee had been
removed by the producer on that date.
``(7) Regulations.--The Secretary may prescribe such
regulations as may be necessary to carry out the purposes of
this subsection, including regulations--
``(A) to prevent the credit provided in this subsection
from benefiting any person who produces more than 250,000
wine gallons during a calendar year, and
``(B) to assure proper reduction of such credit for persons
producing more than 150,000 wine gallons of wine during a
calendar year.''
(6) Paragraph (3) of section 5061(b) is amended to read as
follows:
``(3) section 5041(f),''.
(7) Section 5354 is amended by inserting ``(taking into
account the appropriate amount of credit with respect to such
wine under section 5041(c))'' after ``any one time''.
(8) Effective on the date of the enactment of this Act,
paragraph (7) of section 11202(i) of the Revenue
Reconciliation Act of 1990 is amended by adding at the end
thereof the following: ``The Secretary may treat any person
who bore the ultimate burden of the tax imposed by this
subsection as the person to whom a credit or refund under
such provisions may be allowed or made.''.
(c) Amendments Related to Subtitle C.--
(1) Paragraph (4) of section 56(g) is amended by
redesignating subparagraphs (I) and (J) as subparagraphs (H)
and (I), respectively.
(2) Subparagraph (B) of section 6724(d)(1) is amended--
(A) by striking ``or'' at the end of clause (xii), and
(B) by striking the period at the end of clause (xiii) and
inserting ``, or''.
(3) Subsection (g) of section 6302 is amended by inserting
``, 22,'' after ``chapters 21''.
(4) The earnings and profits of any insurance company to
which section 11305(c)(3) of the Revenue Reconciliation Act
of 1990 applies shall be determined without regard to any
deduction allowed under such section; except that, for
purposes of applying sections 56 and 902, and subpart F of
part III of subchapter N of chapter 1 of the Internal Revenue
Code of 1986, such deduction shall be taken into account.
(5) Subparagraph (D) of section 6038A(e)(4) is amended--
(A) by striking ``any transaction to which the summons
relates'' and inserting ``any affected taxable year'', and
(B) by adding at the end thereof the following new
sentence: ``For purposes of this subparagraph, the term
`affected taxable year' means any taxable year if the
determination of the amount of tax imposed for such taxable
year is affected by the treatment of the transaction to which
the summons relates.''.
(6) Subparagraph (A) of section 6621(c)(2) is amended by
adding at the end thereof the following new sentence: ``The
preceding sentence shall be applied without regard to any
such letter or notice which is withdrawn by the Secretary.''.
(7) Clause (i) of section 6621(c)(2)(B) is amended by
striking ``this subtitle'' and inserting ``this title''.
(d) Amendments Related to Subtitle D.--
(1) Notwithstanding section 11402(c) of the Revenue
Reconciliation Act of 1990, the amendment made by section
11402(b)(1) of such Act shall apply to taxable years ending
after December 31, 1989.
(2) Clause (ii) of section 143(m)(4)(C) is amended--
(A) by striking ``any month of the 10-year period'' and
inserting ``any year of the 4-year period'',
(B) by striking ``succeeding months'' and inserting
``succeeding years'', and
(C) by striking ``over the remainder of such period (or, if
lesser, 5 years)'' and inserting ``to zero over the
succeeding 5 years''.
(e) Amendments Related to Subtitle E.--
(1)(A) Clause (ii) of section 56(d)(1)(B) is amended to
read as follows:
``(ii) appropriate adjustments in the application of
section 172(b)(2) shall be made to take into account the
limitation of subparagraph (A).''
(B) For purposes of applying sections 56(g)(1) and 56(g)(3)
of the Internal Revenue Code of 1986 with respect to taxable
years beginning in 1991 and 1992, the reference in such
sections to the alternative tax net operating loss deduction
shall be treated as including a reference to the deduction
under section 56(h) of such Code as in effect before the
amendments made by section 1915 of the Energy Policy Act of
1992.
(2) Clause (i) of section 613A(c)(3)(A) is amended by
striking ``the table contained in''.
(3) Section 6501 is amended--
(A) by striking subsection (m) (relating to deficiency
attributable to election under section 44B) and by
redesignating subsections (n) and (o) as subsections (m) and
(n), respectively, and
(B) by striking ``section 40(f) or 51(j)'' in subsection
(m) (as redesignated by subparagraph (A)) and inserting
``section 40(f), 43, or 51(j)''.
(4) Subparagraph (C) of section 38(c)(2) (as in effect on
the day before the date of the enactment of the Revenue
Reconciliation Act of 1990) is amended by inserting before
the period at the end of the first sentence the following:
``and without regard to the deduction under section 56(h)''.
(5) The amendment made by section 1913(b)(2)(C)(i) of the
Energy Policy Act of 1992 shall apply to taxable years
beginning after December 31, 1990.
(f) Amendments Related to Subtitle F.--
(1)(A) Section 2701(a)(3) is amended by adding at the end
thereof the following new subparagraph:
``(C) Valuation of qualified payments where no liquidation,
etc. rights.--In the case of an applicable retained interest
which is described in subparagraph (B)(i) but not
subparagraph (B)(ii), the value of the distribution right
shall be determined without regard to this section.''
(B) Section 2701(a)(3)(B) is amended by inserting
``certain'' before ``qualified'' in the heading thereof.
(C) Sections 2701 (d)(1) and (d)(4) are each amended by
striking ``subsection (a)(3)(B)'' and inserting ``subsection
(a)(3) (B) or (C)''.
(2) Clause (i) of section 2701(a)(4)(B) is amended by
inserting ``(or, to the extent provided in regulations, the
rights as to either income or capital)'' after ``income and
capital''.
(3)(A) Section 2701(b)(2) is amended by adding at the end
thereof the following new subparagraph:
``(C) Applicable family member.--For purposes of this
subsection, the term `applicable family member' includes any
lineal descendant of any parent of the transferor or the
transferor's spouse.''
(B) Section 2701(e)(3) is amended--
(i) by striking subparagraph (B), and
(ii) by striking so much of paragraph (3) as precedes
``shall be treated as holding'' and inserting:
``(3) Attribution of indirect holdings and transfers.--An
individual''.
(C) Section 2704(c)(3) is amended by striking ``section
2701(e)(3)(A)'' and inserting ``section 2701(e)(3)''.
(4) Clause (i) of section 2701(c)(1)(B) is amended to read
as follows:
``(i) a right to distributions with respect to any interest
which is junior to the rights of the transferred interest,''.
(5)(A) Clause (i) of section 2701(c)(3)(C) is amended to
read as follows:
``(i) In general.--Payments under any interest held by a
transferor which (without regard to this subparagraph) are
qualified payments shall be treated as qualified payments
unless the transferor elects not to treat such payments as
qualified payments. Payments described in the preceding
sentence which are held by an applicable family member shall
be treated as qualified payments only if such member elects
to treat such payments as qualified payments.''
(B) The first sentence of section 2701(c)(3)(C)(ii) is
amended to read as follows: ``A transferor or applicable
family member holding any distribution right which (without
regard to this subparagraph) is not a qualified payment may
elect to treat such right as a qualified payment, to be paid
in the amounts and at the times specified in such
election.''.
(C) The time for making an election under the second
sentence of section 2701(c)(3)(C)(i) of the Internal Revenue
Code of 1986 (as amended by subparagraph (A)) shall not
expire before the due date (including extensions) for filing
the transferor's return of the tax imposed by section 2501 of
such Code for the first calendar year ending after the date
of enactment.
(6) Section 2701(d)(3)(A)(iii) is amended by striking ``the
period ending on the date of''.
(7) Subclause (I) of section 2701(d)(3)(B)(ii) is amended
by inserting ``or the exclusion under section 2503(b),''
after ``section 2523,''.
(8) Section 2701(e)(5) is amended--
(A) by striking ``such contribution to capital or such
redemption, recapitalization, or other change'' in
subparagraph (A) and inserting ``such transaction'', and
(B) by striking ``the transfer'' in subparagraph (B) and
inserting ``such transaction''.
(9) Section 2701(d)(4) is amended by adding at the end
thereof the following new subparagraph:
``(C) Transfer to transferors.--In the case of a taxable
event described in paragraph (3)(A)(ii) involving a transfer
of an applicable retained interest from an applicable family
member to a transferor, this subsection shall continue to
apply to the transferor during any period the transferor
holds such interest.''
(10) Section 2701(e)(6) is amended by inserting ``or to
reflect the application of subsection (d)'' before the period
at the end thereof.
(11)(A) Section 2702(a)(3)(A) is amended--
(i) by striking ``to the extent'' and inserting ``if'' in
clause (i),
(ii) by striking ``or'' at the end of clause (i),
(iii) by striking the period at the end of clause (ii) and
inserting ``, or'', and
(iv) by adding at the end thereof the following new clause:
``(iii) to the extent that regulations provide that such
transfer is not inconsistent with the purposes of this
section.''
(B)(i) Section 2702(a)(3) is amended by striking
``incomplete transfer'' each place it appears and inserting
``incomplete gift''.
(ii) The heading for section 2702(a)(3)(B) is amended by
striking ``Incomplete transfer'' and inserting ``Incomplete
gift''.
(g) Amendments Related to Subtitle G.--
(1)(A) Subsection (a) of section 1248 is amended--
(i) by striking ``, or if a United States person receives a
distribution from a foreign corporation which, under section
302 or 331, is treated as an exchange of stock'' in paragraph
(1), and
(ii) by adding at the end thereof the following new
sentence: ``For purposes of this section, a United States
person shall be treated as having sold or exchanged any stock
if, under any provision of this subtitle, such person is
treated as realizing gain from the sale or exchange of such
stock.''.
(B) Paragraph (1) of section 1248(e) is amended by striking
``, or receives a distribution from a domestic corporation
which, under section 302 or 331, is treated as an exchange of
stock''.
(C) Subparagraph (B) of section 1248(f)(1) is amended by
striking ``or 361(c)(1)'' and inserting ``355(c)(1), or
361(c)(1)''.
(D) Paragraph (1) of section 1248(i) is amended to read as
follows:
``(1) In general.--If any shareholder of a 10-percent
corporate shareholder of a foreign corporation exchanges
stock of the 10-percent corporate shareholder for stock of
the foreign corporation, such 10-percent corporate
shareholder shall recognize gain in the same manner as if the
stock of the foreign corporation received in such exchange
had been--
``(A) issued to the 10-percent corporate shareholder, and
``(B) then distributed by the 10-percent corporate
shareholder to such shareholder in redemption or liquidation
(whichever is appropriate).
The amount of gain recognized by such 10-percent corporate
shareholder under the preceding sentence shall not exceed the
amount treated as a dividend under this section.''
(2) Section 897 is amended by striking subsection (f).
(3) Paragraph (13) of section 4975(d) is amended by
striking ``section 408(b)'' and inserting ``section
408(b)(12)''.
(4) Clause (iii) of section 56(g)(4)(D) is amended by
inserting ``, but only with respect to taxable years
beginning after December 31, 1989'' before the period at the
end thereof.
(5)(A) Paragraph (11) of section 11701(a) of the Revenue
Reconciliation Act of 1990 (and the amendment made by such
paragraph) are hereby repealed, and section 7108(r)(2) of the
Revenue Reconciliation Act of 1989 shall be applied as if
such paragraph (and amendment) had never been enacted.
(B) Subparagraph (A) shall not apply to any building if the
owner of such building establishes to the satisfaction of the
Secretary of the Treasury or his delegate that such owner
reasonably relied on the amendment made by such paragraph
(11).
(h) Amendments Related to Subtitle H.--
(1)(A) Clause (vi) of section 168(e)(3)(B) is amended by
striking ``or'' at the end of subclause (I), by striking the
period at the end of subclause (II) and inserting ``, or'',
and by adding at the end thereof the following new subclause:
``(III) is described in section 48(l)(3)(A)(ix) (as in
effect on the day before the date of the enactment of the
Revenue Reconciliation Act of 1990).''
(B) Subparagraph (K) of section 168(g)(4) is amended by
striking ``section 48(a)(3)(A)(iii)'' and inserting ``section
48(l)(3)(A)(ix) (as in effect on the day before the date of
the enactment of the Revenue Reconciliation Act of 1990)''.
(2) Clause (ii) of section 172(b)(1)(E) is amended by
striking ``subsection (m)'' and inserting ``subsection (h)''.
(3) Sections 805(a)(4)(E), 832(b)(5)(C)(ii)(II), and
832(b)(5)(D)(ii)(II) are each amended by striking
``243(b)(5)'' and inserting ``243(b)(2)''.
(4) Subparagraph (A) of section 243(b)(3) is amended by
inserting ``of'' after ``In the case''.
(5) The subsection heading for subsection (a) of section
280F is amended by striking ``Investment Tax Credit and''.
(6) Clause (i) of section 1504(c)(2)(B) is amended by
inserting ``section'' before ``243(b)(2)''.
(7) Paragraph (3) of section 341(f) is amended by striking
``351, 361, 371(a), or 374(a)'' and inserting ``351, or
361''.
(8) Paragraph (2) of section 243(b) is amended to read as
follows:
``(2) Affiliated group.--For purposes of this subsection:
``(A) In general.--The term `affiliated group' has the
meaning given such term by section 1504(b), except that for
such purposes sections 1504(b)(2), 1504(b)(4), and 1504(c)
shall not apply.
``(B) Group must be consistent in foreign tax treatment.--
The requirements of paragraph (1)(A) shall not be treated as
being met with respect to any dividend received by a
corporation if, for any taxable year which includes the day
on which such dividend is received--
``(i) 1 or more members of the affiliated group referred to
in paragraph (1)(A) choose to any extent to take the benefits
of section 901, and
``(ii) 1 or more other members of such group claim to any
extent a deduction for taxes otherwise creditable under
section 901.''
(9) The amendment made by section 11813(b)(17) of the
Revenue Reconciliation Act of 1990 shall be applied as if the
material stricken by such amendment included the closing
parenthesis after ``section 48(a)(5)''.
(10) Paragraph (1) of section 179(d) is amended--
(A) by striking ``in a trade or business'' and inserting
``a trade or business'', and
(B) by adding at the end thereof the following new
sentence: ``Such term shall not include any property
described in section 50(b) and shall not include air
conditioning or heating units and horses''.
(11) Subparagraph (E) of section 50(a)(2) is amended by
striking ``section 48(a)(5)(A)'' and inserting ``section
48(a)(5)''.
(12) The amendment made by section 11801(c)(9)(G)(ii) of
the Revenue Reconciliation Act of 1990 shall be applied as if
it struck ``Section 422A(c)(2)'' and inserted ``Section
422(c)(2)''.
(13) Subparagraph (B) of section 424(c)(3) is amended by
striking ``a qualified stock option, an incentive stock
option, an option granted under an employee stock purchase
plan, or a restricted stock option'' and inserting ``an
incentive stock option or an option granted under an employee
stock purchase plan''.
(14) Subparagraph (E) of section 1367(a)(2) is amended by
striking ``section 613A(c)(13)(B)'' and inserting ``section
613A(c)(11)(B)''.
(15) Subparagraph (B) of section 460(e)(6) is amended by
striking ``section 167(k)'' and inserting ``section
168(e)(2)(A)(ii)''.
(16) Subparagraph (C) of section 172(h)(4) is amended by
striking ``subsection (b)(1)(M)'' and inserting ``subsection
(b)(1)(E)''.
(17) Section 6503 is amended--
(A) by redesignating the subsection relating to extension
in case of certain summonses as subsection (j), and
(B) by redesignating the subsection relating to cross
references as subsection (k).
(18) Paragraph (4) of section 1250(e) is hereby repealed.
(19) Subsection (c) of section 2104 is amended by striking
``subparagraph (A), (C), or (D)'' and inserting
``subparagraph (A)''.
(i) Effective Date.--Except as otherwise expressly
provided--
(1) the amendments made by this section shall be treated as
amendments to the Internal Revenue Code of 1986 as amended by
the Revenue Reconciliation Act of 1993; and
(2) any amendment made by this section shall apply to
periods before the date of the enactment of this section in
the same manner as if it had been included in the provision
of the Revenue Reconciliation Act of 1990 to which such
amendment relates.
SEC. 1002. AMENDMENTS RELATED TO REVENUE RECONCILIATION ACT
OF 1993.
(a) Amendment Related to Section 13114.--Paragraph (2) of
section 1044(c) is amended to read as follows:
``(2) Purchase.--The taxpayer shall be considered to have
purchased any property if, but for subsection (d), the
unadjusted basis of such property would be its cost within
the meaning of section 1012.''
(b) Amendments Related to Section 13142.--
(1) Subparagraph (B) of section 13142(b)(6) of the Revenue
Reconciliation Act of 1993 is amended to read as follows:
``(B) Full-time students, waiver authority, and prohibited
discrimination.--The amendments made by paragraphs (2), (3),
and (4) shall take effect on the date of the enactment of
this Act.''
(2) Subparagraph (C) of section 13142(b)(6) of such Act is
amended by striking ``paragraph (2)'' and inserting
``paragraph (5)''.
(c) Amendment Related to Section 13161.--
(1) In general.--Subsection (e) of section 4001 (relating
to inflation adjustment) is amended to read as follows:
``(e) Inflation Adjustment.--
``(1) In general.--In the case of any calendar year after
1993, the $30,000 amount in subsection (a) and section
4003(a) shall be increased by an amount equal to--
``(A) $30,000, multiplied by
``(B) the cost-of-living adjustment under section 1(f)(3)
for such calendar year, determined by substituting `calendar
year 1990' for `calendar year 1992' in subparagraph (B)
thereof.
``(2) Rounding.--If any amount as adjusted under paragraph
(1) is not a multiple of $2,000, such amount shall be rounded
to the next lowest multiple of $2,000.''
(2) Effective date.--The amendment made by paragraph (1)
shall take effect on January 1, 1994.
(d) Amendment Related to Section 13201.--Clause (ii) of
section 135(b)(2)(B) is amended by inserting before the
period at the end thereof the following: ``, determined by
substituting `calendar year 1989' for `calendar year 1992' in
subparagraph (B) thereof''.
(e) Amendments Related to Section 13203.--Subsection (a) of
section 59 is amended--
(1) by striking ``the amount determined under section
55(b)(1)(A)'' in paragraph (1)(A) and (2)(A)(i) and inserting
``the pre-credit tentative minimum tax'',
(2) by striking ``specified in section 55(b)(1)(A)'' in
paragraph (1)(C) and inserting ``specified in subparagraph
(A)(i) or (B)(i) of section 55(b)(1) (whichever applies)'',
(3) by striking ``which would be determined under section
55(b)(1)(A)'' in paragraph (2)(A)(ii) and inserting ``which
would be the pre-credit tentative minimum tax'', and
(4) by adding at the end thereof the following new
paragraph:
``(4) Pre-credit tentative minimum tax.--For purposes of
this subsection, the term `pre-credit tentative minimum tax'
means--
``(A) in the case of a taxpayer other than a corporation,
the amount determined under the first sentence of section
55(b)(1)(A)(i), or
``(B) in the case of a corporation, the amount determined
under section 55(b)(1)(B)(i).''
(f) Amendment Related to Section 13212.--Subparagraph (B)
of section 401(a)(17) is amended to read as follows:
``(B) Cost-of-living adjustment.--The Secretary shall
adjust annually the $150,000 amount in subparagraph (A) for
increases in the cost-of-living at the same time and in the
same manner as under section 415(d), except that the base
period for purposes of section 415(d)(1)(A) shall be the
calendar quarter beginning October 1, 1993.''
(g) Amendment Related to Section 13221.--Subparagraph (A)
of section 7518(g)(6) is amended by striking ``34 percent''
and inserting ``35 percent''.
(h) Amendments Related to Section 13222.--
(1) Subparagraph (B) of section 6033(e)(1) is amended by
adding at the end thereof the following new clause:
``(iii) Coordination with section 527(f).--This subsection
shall not apply to any amount on which tax is imposed by
reason of section 527(f).''.
(2) Clause (i) of section 6033(e)(1)(B) is amended by
striking ``this subtitle'' and inserting ``section 501''.
(i) Amendment Related to Section 13225.--Paragraph (3) of
section 6655(g) is amended by striking all that follows
```3rd month''' in the sentence following subparagraph (C)
and inserting ``, subsection (e)(2)(A) shall be applied by
substituting `2 months' for `3 months' in clause (i)(I), the
election under clause (i) of subsection (e)(2)(C) may be made
separately for each installment, and clause (ii) of
subsection (e)(2)(C) shall not apply.''.
(j) Amendments Related to Section 13231.--
(1) Paragraph (1) of section 956A(b) is amended to read as
follows:
``(1) the amount (not including a deficit) referred to in
section 316(a)(1) to the extent such amount was accumulated
in prior taxable years beginning after September 30, 1993,
and''.
(2) Subsection (f) of section 956A is amended by inserting
before the period at the end thereof: ``and regulations
coordinating the provisions of subsections (c)(3)(A) and
(d)''.
(3)(A) Subparagraph (A) of section 1297(d)(2) is amended by
striking ``The adjusted basis of any asset'' and inserting
``The amount taken into account under section 1296(a)(2) with
respect to any asset''.
(B) The paragraph heading of paragraph (2) of section
1297(d) is amended to read as follows:
``(2) Amount taken into account.--''.
(4) Subsection (e) of section 1297 is amended by inserting
``For purposes of this part--'' after the subsection heading.
(k) Amendment Related to Section 13241.--Subparagraph (B)
of section 40(e)(1) is amended to read as follows:
``(B) for any period before January 1, 2001, during which
the rates of tax under section 4081(a)(2)(A) are 4.3 cents
per gallon.''
(l) Amendment Related to Section 13261.--Clause (iii) of
section 13261(g)(2)(A) of the Revenue Reconciliation Act of
1993 is amended by striking ``by the taxpayer'' and inserting
``by the taxpayer or a related person''.
(m) Amendment Related to Section 13301.--Subparagraph (B)
of section 1397B(d)(5) is amended by striking ``preceding''.
(n) Clerical Amendments.--
(1) Subsection (d) of section 39 is amended--
(A) by striking ``45'' in the heading of paragraph (5) and
inserting ``45A'', and
(B) by striking ``45'' in the heading of paragraph (6) and
inserting ``45B''.
(2) Subparagraph (A) of section 108(d)(9) is amended by
striking ``paragraph (3)(B)'' and inserting ``paragraph
(3)(C)''.
(3) Subparagraph (C) of section 143(d)(2) is amended by
striking the period at the end thereof and inserting a comma.
(4) Clause (ii) of section 163(j)(6)(E) is amended by
striking ``which is a'' and inserting ``which is''.
(5) Subparagraph (A) of section 1017(b)(4) is amended by
striking ``subsection (b)(2)(D)'' and inserting ``subsection
(b)(2)(E)''.
(6) So much of section 1245(a)(3) as precedes subparagraph
(A) thereof is amended to read as follows:
``(3) Section 1245 property.--For purposes of this section,
the term `section 1245 property' means any property which is
or has been property of a character subject to the allowance
for depreciation provided in section 167 and is either--''.
(7) Paragraph (2) of section 1394(e) is amended--
(A) by striking ``(i)'' and inserting ``(A)'', and
(B) by striking ``(ii)'' and inserting ``(B)''.
(8) Subsection (m) of section 6501 (as redesignated by
section 1001) is amended by striking ``or 51(j)'' and
inserting ``45B, or 51(j)''.
(9)(A) The section 6714 added by section 13242(b)(1) of the
Revenue Reconciliation Act of 1993 is hereby redesignated as
section 6715.
(B) The table of sections for part I of subchapter B of
chapter 68 is amended by striking ``6714'' in the item added
by such section 13242(b)(2) of such Act and inserting
``6715''.
(10) Paragraph (2) of section 9502(b) is amended by
inserting ``and before'' after ``1982,''.
(11) Subsections (a)(2) and (a)(3) of section 13206 of the
Revenue Reconciliation Act of 1993 are each amended by
striking ``this section'' and inserting ``this subsection''.
(12) Paragraph (1) of section 13215(c) of the Revenue
Reconciliation Act of 1993 is amended by striking ``Public
Law 92-21'' and inserting ``Public Law 98-21''.
(13) Paragraph (2) of section 13311(e) of the Revenue
Reconciliation Act of 1993 is amended by striking ``section
1393(a)(3)'' and inserting ``section 1393(a)(2)''.
(14) Subparagraph (B) of section 117(d)(2) is amended by
striking ``section 132(f)'' and inserting ``section 132(h)''.
(o) Effective Date.--Any amendment made by this section
shall take effect as if included in the provision of the
Revenue Reconciliation Act of 1993 to which such amendment
relates.
SEC. 1003. MISCELLANEOUS PROVISIONS.
(a) Application of Amendments Made By Title XII of Omnibus
Budget Reconciliation Act of 1990.--Except as otherwise
expressly provided, whenever in title XII of the Omnibus
Budget Reconciliation Act of 1990 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.
(b) Treatment of Certain Amounts Under Hedge Bond Rules.--
(1) Clause (iii) of section 149(g)(3)(B) is amended to read
as follows:
``(iii) Amounts held pending reinvestment or redemption.--
Amounts held for not more than 30 days pending reinvestment
or bond redemption shall be treated as invested in bonds
described in clause (i).''
(2) The amendment made by paragraph (1) shall take effect
as if included in the amendments made by section 7651 of the
Omnibus Budget Reconciliation Act of 1989.
(c) Treatment of Certain Distributions Under Section
1445.--
(1) In general.--Paragraph (3) of section 1445(e) is
amended by adding at the end thereof the following new
sentence: ``Rules similar to the rules of the preceding
provisions of this paragraph shall apply in the case of any
distribution to which section 301 applies and which is not
made out of the earnings and profits of such a domestic
corporation.''
(2) Effective date.--The amendment made by paragraph (1)
shall apply to distributions after the date of the enactment
of this Act.
(d) Treatment of Certain Credits Under Section 469.--
(1) In general.--Subparagraph (B) of section 469(c)(3) is
amended by adding at the end thereof the following new
sentence: ``If the preceding sentence applies to the net
income from any property for any taxable year, any credits
allowable under subpart B (other than section 27(a)) or D of
part IV of subchapter A for such taxable year which are
attributable to such property shall be treated as credits not
from a passive activity to the extent the amount of such
credits does not exceed the regular tax liability of the
taxpayer for the taxable year which is allocable to such net
income.''
(2) Effective date.--The amendment made by paragraph (1)
shall apply to taxable years beginning after December 31,
1986.
(e) Treatment of Dispositions Under Passive Loss Rules.--
(1) In general.--Subparagraph (A) of section 469(g)(1) is
amended to read as follows:
``(A) In general.--If all gain or loss realized on such
disposition is recognized, the excess of--
``(i) any loss from such activity for such taxable year
(determined after the application of subsection (b)), over
``(ii) any net income or gain for such taxable year from
all other passive activities (determined after the
application of subsection (b)),
shall be treated as a loss which is not from a passive
activity.''
(2) Effective date.--The amendment made by paragraph (1)
shall apply to taxable years beginning after December 31,
1986.
(f) Miscellaneous Amendments to Foreign Provisions.--
(1) Coordination of unified estate tax credit with
treaties.--Subparagraph (A) of section 2102(c)(3) is amended
by adding at the end thereof the following new sentence:
``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.''
(2) Treatment of certain interest paid to related person.--
(A) In general.--Subparagraph (B) of section 163(j)(1) is
amended by inserting before the period at the end thereof the
following: ``(and clause (ii) of paragraph (2)(A) shall not
apply for purposes of applying this subsection to the amount
so treated)''.
(B) Effective date.--The amendment made by subparagraph (A)
shall apply as if included in the amendments made by section
7210(a) of the Revenue Reconciliation Act of 1989.
(3) Treatment of interest allocable to effectively
connected income.--
(A) In general.--
(i) Subparagraph (B) of section 884(f)(1) is amended by
striking ``to the extent'' and all that follows down through
``subparagraph (A)'' and inserting ``to the extent that the
allocable interest exceeds the interest described in
subparagraph (A)''.
(ii) The second sentence of section 884(f)(1) is amended by
striking ``reasonably expected'' and all that follows down
through the period at the end thereof and inserting
``reasonably expected to be allocable interest.''
(iii) Paragraph (2) of section 884(f) is amended to read as
follows:
``(2) Allocable interest.--For purposes of this subsection,
the term `allocable interest' means any interest which is
allocable to income which is effectively connected (or
treated as effectively connected) with the conduct of a trade
or business in the United States.''
(B) Effective date.--The amendments made by subparagraph
(A) shall take effect as if included in the amendments made
by section 1241(a) of the Tax Reform Act of 1986.
(4) Clarification of source rule.--
(A) In general.--Paragraph (2) of section 865(b) is amended
by striking ``863(b)'' and inserting ``863''.
(B) Effective date.--The amendment made by subparagraph (A)
shall take effect as if included in the amendments made by
section 1211 of the Tax Reform Act of 1986.
(5) Repeal of obsolete provisions.--
(A) Paragraph (1) of section 6038(a) is amended by striking
``, and'' at the end of subparagraph (E) and inserting a
period, and by striking subparagraph (F).
(B) Subsection (b) of section 6038A is amended by adding
``and'' at the end of paragraph (2), by striking ``, and'' at
the end of paragraph (3) and inserting a period, and by
striking paragraph (4).
(g) Treatment of Assignment of Interest in Certain Bond-
Financed Facilities.--
(1) In general.--Subparagraph (A) of section 1317(3) of the
Tax Reform Act of 1986 is amended by adding at the end
thereof the following new sentence: ``A facility shall not
fail to be treated as described in this subparagraph by
reason of an assignment (or an agreement to an assignment) by
the governmental unit on whose behalf the bonds are issued of
any part of its interest in the property financed by such
bonds to another governmental unit.''
(2) Effective date.--The amendment made by paragraph (1)
shall take effect as if included in such section 1317 on the
date of the enactment of the Tax Reform Act of 1986.
(h) Clarification of Treatment of Medicare Entitlement
Under COBRA Provisions.--
(1) In general.--
(A) Subclause (V) of section 4980B(f)(2)(B)(i) is amended
to read as follows:
``(V) Medicare entitlement followed by qualifying event.--
In the case of a qualifying event described in paragraph
(3)(B) that occurs less than 18 months after the date the
covered employee became entitled to benefits under title
XVIII of the Social Security Act, the period of coverage for
qualified beneficiaries other than the covered employee shall
not terminate under this clause before the close of the 36-
month period beginning on the date the covered employee
became so entitled.''
(B) Clause (v) of section 602(2)(A) of the Employee
Retirement Income Security Act of 1974 is amended to read as
follows:
``(v) Medicare entitlement followed by qualifying event.--
In the case of a qualifying event described in section 603(2)
that occurs less than 18 months after the date the covered
employee became entitled to benefits under title XVIII of the
Social Security Act, the period of coverage for qualified
beneficiaries other than the covered employee shall not
terminate under this subparagraph before the close of the 36-
month period beginning on the date the covered employee
became so entitled.''
(C) Clause (iv) of section 2202(2)(A) of the Public Health
Service Act is amended to read as follows:
``(iv) Medicare entitlement followed by qualifying event.--
In the case of a qualifying event described in section
2203(2) that occurs less than 18 months after the date the
covered employee became entitled to benefits under title
XVIII of the Social Security Act, the period of coverage for
qualified beneficiaries other than the covered employee shall
not terminate under this subparagraph before the close of the
36-month period beginning on the date the covered employee
became so entitled.''
(2) Effective date.--The amendments made by this subsection
shall apply to plan years beginning after December 31, 1989.
(i) Treatment of Certain REMIC Inclusions.--
(1) In general.--Subsection (a) of section 860E is amended
by adding at the end thereof the following new paragraph:
``(6) Coordination with minimum tax.--For purposes of part
VI of subchapter A of this chapter--
``(A) the reference in section 55(b)(2) to taxable income
shall be treated as a reference to taxable income determined
without regard to this subsection,
``(B) the alternative minimum taxable income of any holder
of a residual interest in a REMIC for any taxable year shall
in no event be less than the excess inclusion for such
taxable year, and
``(C) any excess inclusion shall be disregarded for
purposes of computing the alternative tax net operating loss
deduction.
The preceding sentence shall not apply to any organization to
which section 593 applies, except to the extent provided in
regulations prescribed by the Secretary under paragraph
(2).''
(2) Effective date.--The amendment made by paragraph (1)
shall take effect as if included in the amendments made by
section 671 of the Tax Reform Act of 1986 unless the taxpayer
elects to apply such amendment only to taxable years
beginning after the date of the enactment of this Act.
(j) Exemption From Harbor Maintenance Tax for Certain
Passengers.--
(1) In general.--Subparagraph (D) of section 4462(b)(1)
(relating to special rule for Alaska, Hawaii, and
possessions) is amended by inserting before the period the
following: ``, or passengers transported on United States
flag vessels operating solely within the State waters of
Alaska or Hawaii and adjacent international waters''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect as if included in the amendments made by
section 1402(a) of the Harbor Maintenance Revenue Act of
1986.
(k) Amendments Related to Revenue Provisions of Energy
Policy Act of 1992.--
(1) Effective with respect to taxable years beginning after
December 31, 1990, subclause (II) of section 53(d)(1)(B)(iv)
is amended to read as follows:
``(II) the adjusted net minimum tax for any taxable year is
the amount of the net minimum tax for such year increased in
the manner provided in clause (iii).''
(2) Subsection (g) of section 179A is redesignated as
subsection (f).
(l) Treatment of Qualified Football Coaches Plan.--
(1) In general.--Section 1022 of title II of the Employee
Retirement Income Security Act of 1974 is amended by adding
at the end thereof the following new subsection:
``(i) Qualified Football Coaches Plan.--For purposes of
determining the qualified plan status of a qualified football
coaches plan, section 3(37)(F) shall be treated as part of
this title and a qualified football coaches plan shall be
treated as a multiemployer collectively bargained plan for
purposes of the Internal Revenue Code of 1986.''
(2) Effective date.--The amendment made by paragraph (1)
shall apply to years beginning after the date of the
enactment of Public Law 100-202.
(m) Miscellaneous Clerical Amendments.--
(1) Subclause (II) of section 56(g)(4)(C)(ii) is amended by
striking ``of the subclause'' and inserting ``of subclause''.
(2) Paragraph (2) of section 72(m) is amended by inserting
``and'' at the end of subparagraph (A), by striking
subparagraph (B), and by redesignating subparagraph (C) as
subparagraph (B).
(3) Paragraph (2) of section 86(b) is amended by striking
``adusted'' and inserting ``adjusted''.
(4)(A) The heading for section 112 is amended by striking
``COMBAT PAY'' and inserting ``COMBAT ZONE COMPENSATION''.
(B) The item relating to section 112 in the table of
sections for part III of subchapter B of chapter 1 is amended
by striking ``combat pay'' and inserting ``combat zone
compensation''.
(C) Paragraph (1) of section 3401(a) is amended by striking
``combat pay'' and inserting ``combat zone compensation''.
(5) Clause (i) of section 172(h)(3)(B) is amended by
striking the comma at the end thereof and inserting a period.
(6) Clause (ii) of section 543(a)(2)(B) is amended by
striking ``section 563(c)'' and inserting ``section 563(d)''.
(7) Paragraph (1) of section 958(a) is amended by striking
``sections 955(b)(1)(A) and (B), 955(c)(2)(A)(ii), and
960(a)(1)'' and inserting ``section 960(a)(1)''.
(8) Subsection (g) of section 642 is amended by striking
``under 2621(a)(2)'' and inserting ``under section
2621(a)(2)''.
(9) Section 1463 is amended by striking ``this subsection''
and inserting ``this section''.
(10) Subsection (k) of section 3306 is amended by inserting
a period at the end thereof.
(11) The item relating to section 4472 in the table of
sections for subchapter B of chapter 36 is amended by
striking ``and special rules''.
(12) Paragraph (2) of section 4978(b) is amended by
striking the period at the end of subparagraph (A) and
inserting a comma, and by striking the period and quotation
marks at the end of subparagraph (B) and inserting a comma.
(13) Paragraph (3) of section 5134(c) is amended by
striking ``section 6662(a)'' and inserting ``section
6665(a)''.
(14) Paragraph (2) of section 5206(f) is amended by
striking ``section 5(e)'' and inserting ``section 105(e)''.
(15) Paragraph (1) of section 6050B(c) is amended by
striking ``section 85(c)'' and inserting ``section 85(b)''.
(16) Subsection (k) of section 6166 is amended by striking
paragraph (6).
(17) Subsection (e) of section 6214 is amended to read as
follows:
``(e) Cross Reference.--
``For provision giving Tax Court jurisdiction to order a refund of an
overpayment and to award sanctions, see section 6512(b)(2).''
(18) The section heading for section 6043 is amended by
striking the semicolon and inserting a comma.
(19) The item relating to section 6043 in the table of
sections for subpart B of part III of subchapter A of chapter
61 is amended by striking the semicolon and inserting a
comma.
(20) The table of sections for part I of subchapter A of
chapter 68 is amended by striking the item relating to
section 6662.
(21)(A) Section 7232 is amended--
(i) by striking ``LUBRICATING OIL,'' in the heading, and
(ii) by striking ``lubricating oil,'' in the text.
(B) The table of sections for part II of subchapter A of
chapter 75 is amended by striking ``lubricating oil,'' in the
item relating to section 7232.
(22) Paragraph (1) of section 6701(a) of the Omnibus Budget
Reconciliation Act of 1989 is amended by striking ``subclause
(IV)'' and inserting ``subclause (V)''.
(23) Clause (ii) of section 7304(a)(2)(D) of such Act is
amended by striking ``subsection (c)(2)'' and inserting
``subsection (c)''.
(24) Paragraph (1) of section 7646(b) of such Act is
amended by striking ``section 6050H(b)(1)'' and inserting
``section 6050H(b)(2)''.
(25) Paragraph (10) of section 7721(c) of such Act is
amended by striking ``section 6662(b)(2)(C)(ii)'' and
inserting ``section 6661(b)(2)(C)(ii)''.
(26) Subparagraph (A) of section 7811(i)(3) of such Act is
amended by inserting ``the first place it appears'' before
``in clause (i)''.
(27) Paragraph (10) of section 7841(d) of such Act is
amended by striking ``section 381(a)'' and inserting
``section 381(c)''.
(28) Paragraph (2) of section 7861(c) of such Act is
amended by inserting ``the second place it appears'' before
``and inserting''.
(29) Paragraph (1) of section 460(b) is amended by striking
``the look-back method of paragraph (3)'' and inserting ``the
look-back method of paragraph (2)''.
(30) Subparagraph (C) of section 50(a)(2) is amended by
striking ``subsection (c)(4)'' and inserting ``subsection
(d)(5)''.
(31) Subparagraph (B) of section 172(h)(4) is amended by
striking the material following the heading and preceding
clause (i) and inserting ``For purposes of subsection
(b)(2)--''.
(32) Subparagraph (A) of section 355(d)(7) is amended by
inserting ``section'' before ``267(b)''.
(33) Subparagraph (C) of section 420(e)(1) is amended by
striking ``mean'' and inserting ``means''.
(34) Paragraph (4) of section 537(b) is amended by striking
``section 172(i)'' and inserting ``section 172(f)''.
(35) Subparagraph (B) of section 613(e)(1) is amended by
striking the comma at the end thereof and inserting a period.
(36) Paragraph (4) of section 856(a) is amended by striking
``section 582(c)(5)'' and inserting ``section 582(c)(2)''.
(37) Sections 904(f)(2)(B)(i) and 907(c)(4)(B)(iii) are
each amended by inserting ``(as in effect on the day before
the date of the enactment of the Revenue Reconciliation Act
of 1990)'' after ``section 172(h)''.
(38) Subsection (b) of section 936 is amended by striking
``subparagraphs (D)(ii)(I)'' and inserting ``subparagraphs
(D)(ii)''.
(39) Subsection (c) of section 2104 is amended by striking
``subparagraph (A), (C), or (D) of section 861(a)(1)'' and
inserting ``section 861(a)(1)(A)''.
(40) Paragraph (1) of section 5002(b) is amended by
striking ``section 5041(c)'' and inserting ``section
5041(d)''.
(41) Section 6038 is amended by redesignating the
subsection relating to cross references as subsection (f).
(42) Clause (iv) of section 6103(e)(1)(A) is amended by
striking all that follows ``provisions of'' and inserting
``section 1(g) or 59(j);''.
(43) The subsection (f) of section 6109 of the Internal
Revenue Code of 1986 which was added by section 2201(d) of
Public Law 101-624 is redesignated as subsection (g).
(44) Subsection (b) of section 7454 is amended by striking
``section 4955(e)(2)'' and inserting ``section 4955(f)(2)''.
(45) Subsection (d) of section 11231 of the Revenue
Reconciliation Act of 1990 shall be applied as if ``comma''
appeared instead of ``period'' and as if the paragraph (9)
proposed to be added ended with a comma.
(46) Paragraph (1) of section 11303(b) of the Revenue
Reconciliation Act of 1990 shall be applied as if
``paragraph'' appeared instead of ``subparagraph'' in the
material proposed to be stricken.
(47) Subsection (f) of section 11701 of the Revenue
Reconciliation Act of 1990 is amended by inserting
``(relating to definitions)'' after ``section 6038(e)''.
(48) Subsection (i) of section 11701 of the Revenue
Reconciliation Act of 1990 shall be applied as if
``subsection'' appeared instead of ``section'' in the
material proposed to be stricken.
(49) Subparagraph (B) of section 11801(c)(2) of the Revenue
Reconciliation Act of 1990 shall be applied as if ``section
56(g)'' appeared instead of ``section 59(g)''.
(50) Subparagraph (C) of section 11801(c)(8) of the Revenue
Reconciliation Act of 1990 shall be applied as if
``reorganizations'' appeared instead of ``reorganization'' in
the material proposed to be stricken.
(51) Subparagraph (H) of section 11801(c)(9) of the Revenue
Reconciliation Act of 1990 shall be applied as if ``section
1042(c)(1)(B)'' appeared instead of ``section
1042(c)(2)(B)''.
(52) Subparagraph (F) of section 11801(c)(12) of the
Revenue Reconciliation Act of 1990 shall be applied as if
``and (3)'' appeared instead of ``and (E)''.
(53) Subparagraph (A) of section 11801(c)(22) of the
Revenue Reconciliation Act of 1990 shall be applied as if
``chapters 21'' appeared instead of ``chapter 21'' in the
material proposed to be stricken.
(54) Paragraph (3) of section 11812(b) of the Revenue
Reconciliation Act of 1990 shall be applied by not executing
the amendment therein to the heading of section 42(d)(5)(B).
(55) Clause (i) of section 11813(b)(9)(A) of the Revenue
Reconciliation Act of 1990 shall be applied as if a comma
appeared after ``(3)(A)(ix)'' in the material proposed to be
stricken.
(56) Subparagraph (F) of section 11813(b)(13) of the
Revenue Reconciliation Act of 1990 shall be applied as if
``tax'' appeared after ``investment'' in the material
proposed to be stricken.
(57) Paragraph (19) of section 11813(b) of the Revenue
Reconciliation Act of 1990 shall be applied as if ``Paragraph
(20) of section 1016(a), as redesignated by section 11801,''
appeared instead of ``Paragraph (21) of section 1016(a)''.
(58) Paragraph (5) section 8002(a) of the Surface
Transportation Revenue Act of 1991 shall be applied as if
``4481(e)'' appeared instead of ``4481(c)''.
(59) Section 7872 is amended--
(A) by striking ``foregone'' each place it appears in
subsections (a) and (e)(2) and inserting ``forgone'', and
(B) by striking ``Foregone'' in the heading for subsection
(e) and the heading for paragraph (2) of subsection (e) and
inserting ``Forgone''.
(60) Paragraph (7) of section 7611(h) is amended by
striking ``appropriate'' and inserting ``appropriate''.
(61) The heading of paragraph (3) of section 419A(c) is
amended by striking ``severence'' and inserting
``severance''.
(62) Clause (ii) of section 807(d)(3)(B) is amended by
striking ``Commissioners' '' and inserting ``Commissioners'
''.
(63) Subparagraph (B) of section 1274A(c)(1) is amended by
striking ``instrument'' and inserting ``instrument''.
(64) Subparagraph (B) of section 724(d)(3) by striking
``Subparagraph'' and inserting ``Subparagraph''.
(65) The last sentence of paragraph (2) of section 42(c) is
amended by striking ``of 1988''.
(66) Paragraph (1) of section 9707(d) is amended by
striking ``diligence,'' and inserting ``diligence''.
(67) Subsection (c) of section 4977 is amended by striking
``section 132(g)(2)'' and inserting ``section 132(h)''.
(68) The last sentence of section 401(a)(20) is amended by
striking ``section 211'' and inserting ``section 521''.
(69) Subparagraph (A) of section 402(g)(3) is amended by
striking ``subsection (a)(8)'' and inserting ``subsection
(e)(3)''.
(70) The last sentence of section 403(b)(10) is amended by
striking ``an direct'' and inserting ``a direct''.
(71) Subparagraph (A) of section 4973(b)(1) is amended by
striking ``sections 402(c)'' and inserting ``section
402(c)''.
(72) Paragraph (12) of section 3405(e) is amended by
striking ``(b)(3)'' and inserting ``(b)(2)''.
(73) Paragraph (41) of section 521(b) of the Unemployment
Compensation Amendments of 1992 shall be applied as if
``section'' appeared instead of ``sections'' in the material
proposed to be stricken.
(74) Paragraph (27) of section 521(b) of the Unemployment
Compensation Amendments of 1992 shall be applied as if
``Section 691(c)(5)'' appeared instead of ``Section 691(c)''.
(75) Paragraph (5) of section 860F(a) is amended by
striking ``paragraph (1)'' and inserting ``paragraph (2)''.
Subtitle B--Income Security and Human Resource Amendments
PART I--AMENDMENTS RELATING TO OLD-AGE, SURVIVORS, AND DISABILITY
INSURANCE PROGRAM
SEC. 1011. TECHNICAL CORRECTIONS RELATED TO OASDI IN THE
OMNIBUS BUDGET RECONCILIATION ACT OF 1990.
(a) Amendments Related to Provisions in Section 5103(b)
Relating to Disabled Widows.--Section 223(f)(2) of the Social
Security Act (42 U.S.C. 423(f)(2)) is amended--
(1) in subparagraph (A), by striking ``(in a case to which
clause (ii)(II) does not apply)''; and
(2) by striking subparagraph (B)(ii) and inserting the
following:
``(ii) the individual is now able to engage in substantial
gainful activity; or''.
(b) Amendments Related to Provisions in Section 5105(d)
Relating to Representative Payees.--Section 5105(d)(1)(A) of
the Omnibus Budget Reconciliation Act of 1990 (Public Law
101-508) is amended--
(1) by striking ``Section 205(j)(5)'' and inserting
``Section 205(j)(6)''; and
(2) by redesignating the paragraph (5) as amended thereby
as paragraph (6).
(c) Amendments Related to Provisions in Section 5106
Relating to Coordination of Rules Under Titles II and XVI
Governing Fees for Representatives of Claimants With
Entitlements Under Both Titles.--
(1) Calculation of fee of claimant's representative based
on amount of past-due supplemental security income benefits
after application of windfall offset provision.--Section
1631(d)(2)(A)(i) of the Social Security Act (as amended by
section 5106(a)(2) of the Omnibus Budget Reconciliation Act
of 1990) (42 U.S.C. 1383(d)(2)(A)(i)) is amended to read as
follows:
``(i) by substituting, in subparagraphs (A)(ii)(I) and
(C)(i), the phrase `(as determined before any applicable
reduction under section 1631(g), and reduced by the amount of
any reduction in benefits under this title or title II made
pursuant to section 1127(a))' for the parenthetical phrase
contained therein; and''.
(2) Calculation of past-due benefits for purposes of
determining attorney fees in judicial proceedings.--
(A) In general.--Section 206(b)(1) of such Act (42 U.S.C.
406(b)(1)) is amended--
(i) by inserting ``(A)'' after ``(b)(1)''; and
(ii) by adding at the end the following new subparagraph:
``(B) For purposes of this paragraph--
``(i) the term `past-due benefits' excludes any benefits
with respect to which payment has been continued pursuant to
subsection (g) or (h) of section 223, and
``(ii) amounts of past-due benefits shall be taken into
account to the extent provided under the rules applicable in
cases before the Secretary.''.
(B) Protection from offsetting ssi benefits.--The last
sentence of section 1127(a) of such Act (as added by section
5106(b) of the Omnibus Budget Reconciliation Act of 1990) (42
U.S.C. 1320a-6(a)) is amended by striking ``section
206(a)(4)'' and inserting ``subsection (a)(4) or (b) of
section 206''.
(3) Application of single dollar amount ceiling to
concurrent claims under titles ii and xvi.--
(A) In general.--Section 206(a)(2) of such Act (as amended
by section 5106(a)(1) of the Omnibus Budget Reconciliation
Act of 1990) (42 U.S.C. 406(a)(2)) is amended--
(i) by redesignating subparagraph (C) as subparagraph (D);
and
(ii) by inserting after subparagraph (B) the following new
subparagraph:
``(C) In any case involving--
``(i) an agreement described in subparagraph (A) with any
person relating to both a claim of entitlement to past-due
benefits under this title and a claim of entitlement to past-
due benefits under title XVI, and
``(ii) a favorable determination made by the Secretary with
respect to both such claims,
the Secretary may approve such agreement only if the total
fee or fees specified in such agreement does not exceed, in
the aggregate, the dollar amount in effect under subparagraph
(A)(ii)(II).''.
(B) Conforming amendment.--Section 206(a)(3)(A) of such Act
(as amended by section 5106(a)(1) of the Omnibus Budget
Reconciliation Act of 1990) (42 U.S.C. 406(a)(3)(A)) is
amended by striking ``paragraph (2)(C)'' and inserting
``paragraph (2)(D)''.
(d) Amendment Related to Provisions in Section 5115
Relating to Advance Tax Transfers.--Section 201(a) of the
Social Security Act (42 U.S.C. 401(a)) is amended in the last
sentence by striking ``and'' the second place it appears.
(e) Effective Date.--Each amendment made by this section
shall take effect as if included in the provisions of the
Omnibus Budget Reconciliation Act of 1990 to which such
amendment relates.
SEC. 1012. ELIMINATION OF ROUNDING DISTORTION IN THE
CALCULATION OF THE OLD-AGE, SURVIVORS, AND
DISABILITY INSURANCE CONTRIBUTION AND BENEFIT
BASE AND THE EARNINGS TEST EXEMPT AMOUNTS.
(a) Adjustment of OASDI Contribution and Benefit Base.--
(1) In general.--Section 230(b) of the Social Security Act
(42 U.S.C. 430(b)) is amended by striking paragraphs (1) and
(2) and inserting the following:
``(1) $60,600, and
``(2) the ratio of (A) the deemed average total wages (as
defined in section 209(k)(1)) for the calendar year before
the calendar year in which the determination under subsection
(a) is made to (B) the deemed average total wages (as so
defined) for 1992,''.
(2) Conforming amendment relating to applicable prior
law.--Section 230(d) of such Act (42 U.S.C. 430(d)) is
amended by striking ``(except that'' and all that follows
through the end and inserting ``(except that, for purposes of
subsection (b) of such section 230 as so in effect, the
reference to the contribution and benefit base in paragraph
(1) of such subsection (b) shall be deemed a reference to an
amount equal to $45,000, each reference in paragraph (2) of
such subsection (b) to the average of the wages of all
employees as reported to the Secretary of the Treasury shall
be deemed a reference to the deemed average total wages (as
defined in section 209(k)(1)), the reference to a preceding
calendar year in paragraph (2)(A) of such subsection (b)
shall be deemed a reference to the calendar year before the
calendar year in which the determination under subsection (a)
of such section 230 is made, and the reference to a calendar
year in paragraph (2)(B) of such subsection (b) shall be
deemed a reference to 1992).''.
(3) Adjustment of contribution and benefit base applicable
in determining years of coverage for purposes of special
minimum primary insurance amount.--Section 215(a)(1)(C)(ii)
of such Act is amended by striking ``(except that'' and all
that follows through the end and inserting ``(except that,
for purposes of subsection (b) of such section 230 as so in
effect, the reference to the contribution and benefit base in
paragraph (1) of such subsection (b) shall be deemed a
reference to an amount equal to $45,000, each reference in
paragraph (2) of such subsection (b) to the average of the
wages of all employees as reported to the Secretary of the
Treasury shall be deemed a reference to the deemed average
total wages (as defined in section 209(k)(1)), the reference
to a preceding calendar year in paragraph (2)(A) of such
subsection (b) shall be deemed a reference to the calendar
year before the calendar year in which the determination
under subsection (a) of such section 230 is made, and the
reference to a calendar year in paragraph (2)(B) of such
subsection (b) shall be deemed a reference to 1992).''.
(b) Adjustment of Earnings Test Exempt Amount.--Section
203(f)(8)(B)(ii) of the Social Security Act (42 U.S.C.
403(f)(8)(B)(ii)) is amended to read as follows:
``(ii) the product of the corresponding exempt amount which
is in effect with respect to months in the taxable year
ending after 1993 and before 1995, and the ratio of--
``(I) the deemed average total wages (as defined in section
209(k)(1)) for the calendar year before the calendar year in
which the determination under subparagraph (A) is made, to
``(II) the deemed average total wages (as so defined) for
1992,
with such product, if not a multiple of $10, being rounded to
the next higher multiple of $10 where such product is a
multiple of $5 but not of $10 and to the nearest multiple of
$10 in any other case.''.
(c) Effective Dates.--
(1) The amendments made by subsection (a) shall be
effective with respect to the determination of the
contribution and benefit base for years after 1994.
(2) The amendment made by subsection (b) shall be effective
with respect to the determination of the exempt amounts
applicable to any taxable year ending after 1994.
PART II--HUMAN RESOURCES PROVISIONS
SEC. 1016. CORRECTIONS RELATED TO THE INCOME SECURITY AND
HUMAN RESOURCES PROVISIONS OF THE OMNIBUS
BUDGET RECONCILIATION ACT OF 1990.
(a) Amendment Related to Section 5035(a)(2).--Section
5035(a)(2) of the Omnibus Budget Reconciliation Act of 1990
(Public Law 101-508) is amended by striking ``a semicolon''
and inserting `` `; and' ''.
(b) Repeal of Provision Inadvertently Included.--Section
5057 of the Omnibus Budget Reconciliation Act of 1990 (Public
Law 101-508), and the amendment made by such section, are
hereby repealed, and section 1139(d) of the Social Security
Act shall be applied and administered as if such section 5057
had never been enacted.
(c) Amendment Related to Section 5105(d)(1)(B).--Section
5105(d)(1)(B) of the Omnibus Budget Reconciliation Act of
1990 (Public Law 101-508; 104 Stat. 1388-266) is amended to
read as follows:
``(B) Title xvi.--Section 1631(a)(2)(F) (42 U.S.C.
1383(a)(2)(F)), as so redesignated by subsection (c)(2) of
this section, is amended to read as follows:
```(F) The Secretary shall include as a part of the annual
report required under section 704 information with respect to
the implementation of the preceding provisions of this
paragraph, including--
```(i) the number of cases in which the representative
payee was changed;
```(ii) the number of cases discovered where there has been
a misuse of funds;
```(iii) how any such cases were dealt with by the
Secretary;
```(iv) the final disposition of such cases (including any
criminal penalties imposed); and
```(v) such other information as the Secretary determines
to be appropriate.'.''
(d) Amendment Related to Section 5105(a)(1)(B).--The second
paragraph of section 1631(a) of the Social Security Act (42
U.S.C. 1383(a)) is amended by striking ``(A)(i) Payments''
and inserting ``(2)(A)(i) Payments''.
(e) Amendments Related to Section 5105(b).--Section
1631(a)(2)(C) of the Social Security Act (42 U.S.C.
1383(a)(2)(C)) is amended--
(1) by striking clause (ii);
(2) by redesignating clauses (iii), (iv), and (v) as
clauses (ii), (iii), and (iv), respectively; and
(3) in clause (iv) (as so redesignated), by striking
``(iii), and (iv)'' and inserting ``and (iii)''.
(f) Amendments Related to Section 5107(a)(2)(B).--Section
1631(c)(1)(B) of the Social Security Act (42 U.S.C.
1383(c)(1)(B)) is amended by striking ``paragraph (1)'' each
place such term appears and inserting ``subparagraph (A)''.
(g) Amendment Related to Section 5109(a)(2).--Section 1631
of the Social Security Act (42 U.S.C. 1383) is amended by
redesignating the subsection (n) added by section 5109(a)(2)
of the Omnibus Budget Reconciliation Act of 1990, as
subsection (o).
(h) Amendments Related to Section 11115(b)(2).--Section
11115(b)(2) of the Omnibus Budget Reconciliation Act of 1990
(Public Law 101-508) is amended--
(1) in subparagraph (A), by striking ``paragraph (8)'' and
inserting ``paragraph (9)'';
(2) in subparagraph (B), by striking ``paragraph (9)'' and
inserting ``paragraph (10)''; and
(3) in subparagraph (C), by redesignating the new paragraph
added thereby as paragraph (11).
(i) Effective Date.--Each amendment made by this section
shall take effect as if included in the provision of the
Omnibus Budget Reconciliation Act of 1990 to which the
amendment relates at the time such provision became law.
SEC. 1017. TECHNICAL CORRECTIONS RELATED TO THE HUMAN
RESOURCE AND INCOME SECURITY PROVISIONS OF
OMNIBUS BUDGET RECONCILIATION ACT OF 1989.
(a) Amendment Relating to Section 8004(a).--Section
408(m)(2)(A) of the Social Security Act (42 U.S.C.
608(m)(2)(A)) is amended by striking ``a fiscal'' and
inserting ``the fiscal''.
(b) Amendment Relating to Section 8006(a).--Section
473(a)(6)(B) of such Act (42 U.S.C. 673(a)(6)(B)) is amended
by striking ``474(a)(3)(B)'' and inserting ``474(a)(3)(C)''.
(c) Amendment Relating to Section 8007(b)(3).--Subparagraph
(D) of section 475(5) of such Act (42 U.S.C. 675(5)(D)) is
amended by moving such subparagraph 2 ems to the right so
that the left margin of such subparagraph is aligned with the
left margin of subparagraph (C) of such section.
(d) Effective Date.--Each amendment made by this section
shall take effect as if the amendment had been included in
the provision of the Omnibus Budget Reconciliation Act of
1989 to which the amendment relates, at the time the
provision became law.
SEC. 1018. ELIMINATION OF OBSOLETE PROVISIONS RELATING TO
TREATMENT OF THE EARNED INCOME TAX CREDIT.
(a) Treatment of EITC as Earned Income.--Section 1612(a)(1)
of the Social Security Act (42 U.S.C. 1382a(a)(1)) is amended
by striking subparagraph (C) and by redesignating
subparagraphs (D) and (E) as subparagraphs (C) and (D),
respectively.
(b) Adjustment of Benefits Due to Treatment of EITC as
Earned Income.--Section 1631(b) of such Act (42 U.S.C.
1383(b)) is amended by striking paragraph (3) and by
redesignating paragraphs (4) and (5) as paragraphs (3) and
(4), respectively.
SEC. 1019. REDESIGNATION OF CERTAIN PROVISIONS.
Section 1631(e)(6) of the Social Security Act (42 U.S.C.
1383(e)(6)) is amended by redesignating subparagraphs (1) and
(2) as subparagraphs (A) and (B), respectively.
Subtitle C--Tariff and Customs
SEC. 1021. TECHNICAL AMENDMENTS TO THE HARMONIZED TARIFF
SCHEDULE OF THE UNITED STATES.
(a) In General.--The Harmonized Tariff Schedule of the
United States is amended as follows:
(1) Tapestry and upholstery fabrics.--The article
description for subheading 5112.19.20 is amended by striking
``of a weight exceeding 300 g/m2''.
(2) Gloves.--
(A) Chapter 61 is amended by redesignating subheading
6116.10.45 as subheading 6116.10.48.
(B) Chapter 62 is amended by striking the superior text
``Other:'' that appears between subheadings 6216.00.46 and
6216.00.52.
(3) Agglomerate stone floor and wall tiles.--The article
description for subheading 6810.19.12 is amended to read as
follows: ``Of stone agglomerated with binders other than
cement''.
(4) 2,4-Diaminobenzenesulfonic acid.--The article
description for heading 9902.30.43 is amended by striking
``2921.51.50'' and inserting ``2921.59.50''.
(5) Machines used in the manufacture of bicycle parts.--The
article description for heading 9902.84.79 is amended by
striking ``8479.89.90'' and inserting ``8462.49.00,
8479.89.90 or 9031.80.00''.
(6) Copying machines and parts.--The article description
for heading 9902.90.90 is amended by inserting ``or
8473.40.40'' after ``8472.90.80''.
(b) Staged Rate Reductions for Gloves.--Any staged
reduction of a special rate of duty set forth in subheading
6116.10.45 of such Schedule that takes effect on or after
October 1, 1990, by reason of section 10011(a)(2) of the
Omnibus Budget Reconciliation Act of 1990 shall apply to the
corresponding rate of duty in subheading 6116.10.48 (as
redesignated by subsection (a)(2)(A)).
(c) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by subsection (a) shall apply with respect to
goods entered, or withdrawn from warehouse for consumption,
on or after the 15th day after the date of the enactment of
this Act.
(2) Retroactive application for certain liquidations and
reliquidations.--
(A) Notwithstanding section 514 of the Tariff Act of 1930
or any other provision of law, upon proper request filed with
the appropriate customs officer on or before the 90th day
after the date of the enactment of this Act, any entry--
(i) that was made after the applicable date and before the
15th day after such date of enactment; and
(ii) with respect to which there would have been a lesser
or no duty if any amendment made by subsection (a) applied to
such entry;
shall be liquidated or reliquidated as though such amendment
applied to such entry.
(B) For purposes of this subsection, the term ``applicable
date'' means--
(i) if such amendment is made by subsection (a)(3) or
(a)(6), December 31, 1988; and
(ii) if such amendment is made by subsection (a)(1),
(a)(2), (a)(4), (a)(5), September 30, 1990.
SEC. 1022. CLARIFICATION REGARDING THE APPLICATION OF CUSTOMS
USER FEES.
(a) In General.--Subparagraph (D) of section 13031(b)(8) of
the Consolidated Omnibus Budget Reconciliation Act of 1985
(19 U.S.C. 58c(b)(8)(D)) is amended--
(1) by striking ``and'' at the end of clause (iv);
(2) by striking the period at the end of clause (v) and
inserting ``; and''; and
(3) by inserting after clause (v) the following new clause:
``(vi) in the case of merchandise entered from a foreign
trade zone (other than merchandise to which clause (v)
applies), be applied only to the value of the privileged or
nonprivileged foreign status merchandise under section 3 of
the Act of June 18, 1934 (commonly known as the Foreign Trade
Zones Act, 19 U.S.C. 81c).''
(b) Effective Date.--The amendments made by subsection (a)
apply to--
(1) any entry made from a foreign trade zone on or after
the 15th day after the date of the enactment of this Act; and
(2) any entry made from a foreign trade zone after November
30, 1986, and before such 15th day if the entry was not
liquidated before such 15th day.
(c) Application of Fees to Certain Agricultural Products.--
The amendment made by section 111(b)(2)(D)(iv) of the Customs
and Trade Act of 1990 shall apply to--
(1) any entry made from a foreign trade zone on or after
the 15th day after the date of the enactment of this Act; and
(2) any entry made from a foreign trade zone after November
30, 1986, and before such 15th day if the entry was not
liquidated, or if the liquidation has not become final,
before such 15th day.
SEC. 1023. TECHNICAL AMENDMENTS TO THE OMNIBUS TRADE AND
COMPETITIVENESS ACT OF 1988.
(a) In General.--Paragraph (2) of section 1102(a) of the
Omnibus Trade and Competitiveness Act of 1988 (19 U.S.C.
2902(a)(2)) is amended--
(1) in subparagraph (A)--
(A) by striking ``the date of enactment of this Act'' and
inserting ``January 1, 1989''; and
(B) by striking ``such date of enactment'' and inserting
``January 1, 1989''; and
(2) in subparagraph (B), by striking ``such date of
enactment'' and inserting ``January 1, 1989''.
(b) Effective Date.--The amendments made by subsection (a)
shall take effect January 1, 1989.
(c) Construction.--For purposes of applying the amendments
made by subsection (a), the column 1-general rate of duty
established by any amendment to the Harmonized Tariff
Schedule of the United States that was enacted after January
1, 1989, shall, if--
(1) such amendment has, or is statutorily treated as
having, an effective date of January 1, 1989; or
(2) application for liquidation or reliquidation at such
rate with respect to entries made after December 31, 1988,
and before the effective date of the amendment, is provided
for;
be treated as the rate in effect on January 1, 1989.
SEC. 1024. TECHNICAL AMENDMENT TO THE CUSTOMS AND TRADE ACT
OF 1990.
Subsection (b) of section 484H of the Customs and Trade Act
of 1990 (19 U.S.C. 1553 note) is amended by striking ``, or
withdrawn from warehouse for consumption,'' and inserting
``for transportation in bond''.
SEC. 1025. TECHNICAL AMENDMENTS REGARDING CERTAIN BENEFICIARY
COUNTRIES.
(a) Caribbean Basin Economic Recovery Act.--Section
213(h)(1) of the Caribbean Basin Economic Recovery Act (19
U.S.C. 2703(h)(1)) is amended by adding at the end thereof
the following flush sentence:
``The duty reductions provided for under this paragraph shall
not apply to textile and apparel articles which are subject
to textile agreements.''
(b) Andean Trade Preference Act.--Section 204(c)(1) of the
Andean Trade Preference Act (19 U.S.C. 3203(c)(1)) is amended
by adding at the end thereof the following flush sentence:
``The duty reductions provided for under this paragraph shall
not apply to textile and apparel articles which are subject
to textile agreements.''
(c) Effective Date.--The amendments made by this section
apply with respect to--
(1) articles entered, or withdrawn from warehouse for
consumption, on or after the 15th day after the date of the
enactment of this Act, and
(2) articles entered after December 31, 1991, and before
such 15th day, which are not liquidated before such 15th day.
SEC. 1026. CLARIFICATION OF FEES FOR CERTAIN CUSTOMS
SERVICES.
(a) In General.--Section 13031(b)(9)(A) of the Consolidated
Omnibus Budget Reconciliation Act of 1985 (19 U.S.C.
58c(b)(9)(A)) is amended--
(1) by striking ``centralized hub facility or'' in clause
(i); and
(2) in clause (ii)--
(A) by striking ``facility--'' and inserting ``facility or
centralized hub facility--'',
(B) by striking ``customs inspectional'' in subclause (I),
and
(C) by striking ``at the facility'' in subclause (I) and
inserting ``for the facility''.
(b) Definitions.--Section 13031(b)(9)(B)(i) of the
Consolidated Omnibus Budget Reconciliation Act of 1985 (19
U.S.C. 58c(b)(9)(B)(i)) is amended--
(1) by striking ``, as in effect on July 30, 1990'', and
(2) by adding at the end thereof the following new
sentence: ``Nothing in this paragraph shall be construed as
prohibiting the Secretary of the Treasury from processing
merchandise that is informally entered or released at any
centralized hub facility or express consignment carrier
facility during the normal operating hours of the Customs
Service, subject to reimbursement and payment under
subparagraph (A).''.
(c) Citation.--Section 13031(b)(9)(B)(ii) of the
Consolidated Omnibus Budget Reconciliation Act of 1985 (19
U.S.C. 58c(b)(9)(B)(ii)) is amended by striking ``section 236
of the Tariff and Trade Act of 1984'' and inserting ``section
236 of the Trade and Tariff Act of 1984''.
SEC. 1027. CONFORMING AMENDMENT TO SECTION 337 OF THE TARIFF
ACT OF 1930.
(a) In General.--The second sentence of section 337(b)(3)
of the Tariff Act of 1930 is amended by striking ``section
303, 671, or 673'' and inserting ``section 303, 701, or
731''.
(b) Effective Date.--The amendment made by subsection (a)
shall take effect October 28, 1992.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Illinois [Mr. Rostenkowski] will be recognized for 20 minutes, and the
gentleman from Texas [Mr. Archer] will be recognized for 20 minutes.
The Chair recognizes the gentleman from Illinois [Mr. Rostenkowski].
Mr. ROSTENKOWSKI. Mr. Speaker, I yield myself such time as I may
consume.
Mr. Speaker, I rise today in support of H.R. 3419, the Tax
Simplification and Technical Corrections Act of 1993.
This bill is the culmination of over 4 years of legislative work, and
simplifies over 100 different provisions of the tax law, including
provisions relating to a wide variety of individual and corporate tax
matters, pensions, mutual funds, international taxation, partnerships,
and tax-exempt bonds.
In addition, it includes much-needed technical corrections to prior
legislation, including the Budget Reconciliation Acts of 1990 and 1993,
and other recently enacted legislation within the jurisdiction of the
Committee on Ways and Means.
Passage of this bill is long overdue. Virtually all of the
simplification provisions passed the House in the 102d Congress, and
were included in H.R. 4210 and H.R. 11, the two major tax bills that
were vetoed by President Bush. Similarly, most of the technical
corrections have already been approved by this body, and were also
included in H.R. 11.
The simplification provisions are the product of a major initiative
to simplify the tax laws which I announced in February of 1990. I
requested interested members of the public, tax professionals,
government officials, and staff to develop tax simplification proposals
that would make life easier for taxpayers, return preparers, tax
administrators, and the courts, without undoing major policy objectives
or increasing the deficit. In response, I received hundreds of
proposals.
At my direction, these simplification proposals were thoroughly
analyzed by the congressional tax-writing staffs in a bipartisan
process with the cooperation of the Treasury Department and the
Internal Revenue Service. In 1991 and again in 1993, I introduced bills
reflecting their recommendations regarding these proposals.
Subsequently, the Committee on Ways and Means and the Subcommittee on
Select Revenue Measures held public hearings on these various bills.
Mr. Speaker, I want to assure my fellow Members and taxpayers that
this bill is not intended or designed to make substantive changes in
tax policy. Rather, the simplification provisions are intended to make
the law work better, and the technical corrections are designed to
correct drafting errors and inconsistencies with congressional intent.
In sum, H.R. 3419 represents the responsible clean-up work that we are
called upon to do as legislators.
Mr. Speaker, if this bill is approved today, it is my hope that the
Senate will complete work on a similar package so that the technical
corrections and simplification provisions may be enacted before the end
of this Congress. However, I will stringently oppose any efforts to
turn the bill into a Christmas tree decorated with special interest and
Members amendments. Of course, I would not preclude consideration of
amendments that are truly technical in nature, or further provisions
constituting true simplification.
Moreover, if the Senate would like to consider alternative revenue-
raising provisions to the four provisions included in this legislation,
I would certainly consider such provisions in conference, provided they
are reasonable in nature.
Further, because H.R. 3419 was reported by the committee in November
1993, I contemplate that various effective dates will have to be
modified in conference to ensure that these revenue-raising provisions
are prospective and that the bill remains revenue-neutral.
In the past I have stated that I do not expect this bill to be the
final piece of tax simplification legislation.
Rather, this bill is an important first step in what for me is a
continuing commitment to simplify the tax laws. Some have questioned
whether there is any constituency for tax legislation that does not
provide tax relief for specific industries or interest groups. I urge
my colleagues to support this legislation as proof that there is a
constituency for braod-based tax simplification and much-needed
technical corrections.
Mr. Speaker, with respect to the revenue raising provisions in this
legislation, it has come to my attention that certain tax-exempt
organizations, including some pension funds and hospitals, have
questioned aspects of the provision treating certain foreign
corporation dividends and deemed income inclusions as unrelated
business income. Let me reiterate that if the Senate amends the four
revenue-raising provisions contained in H.R. 3419, and does so in a
reasonable manner, then I will be willing to review such amendments in
conference.
Also, Chairman de la Garza of the House Committee on Agriculture, has
brought to my attention that many farm organizations are concerned
about a recent Technical Advice Memorandum [TAM] issued by the Internal
Revenue Service. The TAM holds that dues paid by associate members of
State farm organizations constitute unrelated taxable income to the
farm organization if the associate members receive benefits such as
insurance from membership and do not enjoy voting and office-holding
rights equal to regular farm organization members. I plan to ask the
Secretary of the Treasury for a prompt analysis of the impact of the
TAM on farm organizations, as well as the basis for changing what I
understand to be longstanding IRS practice in this area. In addition, I
would hope that the committee could review this issue at the earliest
appropriate opportunity.
{time} 1320
Mr. Speaker, I reserve the balance of my time.
Mr. ARCHER. Mr. Speaker, I yield myself such time as I may consume.
(Mr. ARCHER asked and was given permission to revise and extend his
remarks.)
Mr. ARCHER. Mr. Speaker, I rise in support of H.R. 3419, the Tax
Simplification and Technical Corrections Act of 1993.
This bill is the product of a bipartisan initiative by members of the
Ways and Means Committee to simplify provisions in the Tax Code. These
simplification measures are fairly modest, and enacting them will not
magically erase the overwhelming complexity in the Tax Code. Still,
these small simplifications will make life around tax time a little
easier for many taxpayers.
Chairman Rostenkowski has already described many of the provisions in
this bill, so I won't go into a lot of detail. But, here are some of
the taxpayers who would be helped by these simplification measures:
investors in large partnerships who get intricate and almost
unfathomable Schedules K-1 on April 15, preventing them from filing
their tax return on time; individuals who would otherwise have to file
complicated tax forms due to a small amount of passive losses or
foreign tax credit; small businesses that operate as an S corporation;
large businesses with international operations; people receiving
pensions or expecting one day to receive one; and many others.
These provisions should result in a little more convenience, a little
less paperwork or recordkeeping, and a little less legal or accounting
fees.
The bill also corrects earlier technical drafting errors in prior
tax, social security, human resources, and trade legislation.
H.R. 3419 contains four explicit financing provisions which raise a
total of approximately $467 million over 5 years, the amount necessary
to offset the tax simplification provisions. None of the offsets have
generated opposition to the bill's passage in the House. To the extent
that opposition develops to any of these financing provisions, I will
do my utmost in conference to modify the controversial provision or to
substitute a noncontroversial alternative.
Since H.R. 3419 was reported out of committee in 1993, many of the
then-prospective effective dates have become retroactive, typically
dating back to January 1, 1994. In his statement, Chairman Rostenkowski
expressed his intent in conference to make all effective dates
prospective, consistent with the bill as reported by the committee.
I want to state my own intent to make sure that the effective dates
in the final legislation--particularly the financing provisions--are
prospective. I will not support any final legislation if it contains
what I considerable to be retroactive tax increases.
Mr. Speaker, this bill should not be reviewed as controversial. It is
revenue-neutral. Most of its provisions have passed Congress twice, and
many of the technical corrections have passed this House three times. I
urge the adoption of H.R. 3419.
Mr. LANTOS. Mr. Speaker, I rise today in support of H.R. 3419, the
Tax Simplification and Technical Corrections Act of 1993, which will
simplify many tax provisions regarding individuals, pensions,
partnerships, international operations of U.S. corporations, tax-exempt
bonds, estates and gift taxes and will clarify tax-related provisions
in the 1990 and 1993 deficit reduction laws. I support this bill with
reservation, however, because it does not include changes to the
foreign sales corporation [FSC] rules.
Mr. Speaker, I think we would all agree that tax simplification
should, among other things, simplify the task of business and create
economic incentives to create jobs. This bill is a good step in that
direction. Unfortunately, this bill does not address the simplification
of the foreign sales corporation [FSC] regulations which have singled
out software for discriminatory treatment. And, as a result, the
software industry, employing more than 65,000 Californians, will not
see the benefits of tax simplification.
Over the past several months more than 100 Members of Congress,
including 35 members of the California congressional delegation, have
written Treasury Secretary Lloyd Bentsen expressing concern with the
Treasury Department's temporary and proposed foreign sales corporation
[FSC] regulations that deny exports of software accompanied by a right
to reproduce the software from qualifying for the same tax benefits
available to other U.S. exports. I would like to submit for the record
a copy of the correspondence with Secretary Bentsen on this issue.
Congress enacted the FSC rules to assist U.S. exporters in competing
with products made in other countries that have more favorable rules
for taxing imports. However, due to a narrow IRS interpretation of the
FSC rules, the export of computer software which is accompanied by the
right to reproduce the software is barred from receiving this export
incentive. The ability to license software, accompanied by the right to
reproduce, is essential to the way the software industry does business.
Denying FSC benefits to software sold through these and other
distribution networks poses an impediment to the competitiveness of
U.S. manufactured software.
Mr. Speaker, I was disappointed to learn last week that the Treasury
Department decided not to change its regulation, although they have the
statutory authority to do so. While it was not possible under House
rules to include these changes in the House version of the tax
simplification bill, it is my hope that when the Senate takes up its
version that they will decide to add this measure and that the House
will accept this addition in conference. In the meantime, I have
written to Secretary Bentsen to urge him to reconsider his decision not
to revise the temporary and proposed FSC regulations to eliminate their
discriminatory treatment of software. It is my fervent hope that the
Treasury Department will still amend these regulations to include
software rather than forcing us to legislate this matter.
House of Representatives,
Washington, DC, March 4, 1994.
Hon. Lloyd Bentsen,
Secretary, U.S. Department of the Treasury, Washington, DC.
Dear Mr. Secretary: As Members of the California
Congressional Delegation, we urge you to reexamine and revise
the temporary and proposed Foreign Sales Corporation (FSC)
Treasury regulations which unfairly restrict export benefits
for the software industry.
California's economic climate has seen better days. We are
very interested in improving these conditions by encouraging
business expansion through private sector contributions to
revitalize our state's economy. As you may be aware, the
software industry represents a growing and dynamic economic
force throughout California and our nation. American software
products are highly sought after throughout the world and we
want to continue American primacy in this major export.
The United States is currently the world leader in software
development, employing approximately 400,000 people in highly
skilled software development and servicing jobs. Currently,
the largest percentage of independent software companies are
headquartered in California, employing more than 65,000
Californians in software development. Future expansion of the
industry and additional California jobs will arise as a
direct result of the growth in software exports.
The software industry needs FSC benefits to remain
competitive. Furthermore, FSC benefits encourage small and
medium-sized software companies to enter the export market.
If their exports are not given FSC benefits, we are concerned
that high-paying software development jobs will leave
California and begin moving to other countries. With
California mired in a recession, we urge the Treasury
Department to amend its regulation to help the California
software industry grow, rather than retaining the current
regulations that could lead to a contraction of the industry.
We request your prompt review of these provisions and a
timely determination of whether FSC benefits can be applied
to the software industry. Supporting the Delegation's views
are many Members of the House Ways and Means Committee,
including Chairman Rostenkowski, who have requested your
review, finding merit in the positions expressed by software
manufacturers, many of whom are headquartered in California.
Congress enacted the FSC rules to assist U.S. exporters in
competing with products made in other countries that have
more favorable rules for taxing imports. However, due to a
narrow IRS interpretation of the FSC rules, the export of
computer software which is accompanied by the right to
reproduce the software is barred from receiving this export
incentive. The ability to license software, accompanied by
the right to reproduce, is essential to the way the software
industry does business. Examples include: the ability to sell
products to foreign equipment manufacturers who load the
software into their computers and market the combined product
for sale in the local country; and the ability to translate
the software into the local language and then reproduce it
for sale in that country.
Denying FSC benefits to software sold through these and
other distribution networks poses an impediment to the
competitiveness of U.S. manufactured software. And Congress
intended to remove this impediment from U.S. manufactured
goods through the enactment of FSC provisions.
The Treasury Department's temporary and proposed
regulations have been pending since 1987. Although we believe
that the problem created for software exports can be most
easily cured by amending the regulations, we are concerned
that the Treasury Department has taken no action to finalize
the regulation for over six years. We are therefore,
requesting the Treasury Department to promptly review the
temporary and proposed regulations that deny FSC benefits to
exports of software and to issue new regulations which ensure
that all software exports are eligible for this benefit.
Thank you for your consideration of this matter.
Sincerely,
Senator Dianne Feinstein, Congressman Tom Lantos,
Congressman Don Edwards, Congressman Robert Matsui,
Congressman Howard Berman, Congressman George Miller,
Congressman Ron Packard, Congressman Vic Fazio,
Congresswoman Nancy Pelosi, Congressman Al McCandless,
Congressman Walter Tucker, Congressman John Doolittle,
Congresswoman Anna Eshoo, Congressman Richard Lehman,
Congressman Stephen Horn, Congresswoman Jane Harman,
Congressman Ken Calvert, Congressman Carlos Moorhead,
Senator Barbara Boxer, Congressman Wally Herger,
Congressman Jerry Lewis, Congressman Julian Dixon,
Congressman George Brown, Congressman Matthew Martinez,
Congressman Ronald Dellums, Congressman David Dreier,
Congressman Esteban Torres, Congressman Norman Mineta,
Congressman Randy ``Duke'' Cunningham, Congressman Bill
Baker, Congressman Richard Pombo, Congressman Sam Farr,
Congresswoman Lynn Schenk, Congressman Robert Dornan,
Congressman Elton Gallegly, Congressman Dan Hamburg.
____
Department of the Treasury,
Washington, DC, May 6, 1994.
Hon. Tom Lantos,
U.S. House of Representatives,
Washington, DC.
Dear Tom: Thank you for your letter concerning the tax
treatment of software licensing income earned by Foreign
Sales Corporations (FSCs). Many members of the House and
Senate have written to request that the Treasury revise its
1987 regulations to administratively extend FSC benefits to
the license of software with the right of reproduction.
We have carefully considered the arguments made in support
of this request and have concluded not to alter the
regulations when they are finalized to extend FSC benefits to
software licenses. There is no evidence that the Congress
intended to provide FSC benefits to software licensed abroad.
Indeed, what guidance exists in the legislative history of
the enactment of the FSC rules in 1984 suggests that the FSC
rules should parallel the DISC regulations they replaced.
Accordingly, the 1987 temporary regulations with respect to
software duplicated the interpretation in the DISC
regulations.
Moreover, an administrative extension of the FSC benefits
to software licensed with a right to reproduction would seem
to run counter to the apparent purpose of the FSC rules,
which limit tax benefits to the export of products
``manufactured, produced, grown, or extracted in the United
States.'' If FSC benefits were so extended, then some part of
the processing of software products for sale in foreign
markets that is now performed in the United States can be
expected to be performed abroad. While a similar point might
be made about licenses of films, records, and tapes, the
decision to make an exception for those licenses was a
legislative one. It would seem appropriate that a decision to
expand the scope of the FSC rules to a new category as
significant as software licenses (whether or not further
processing is conducted by a related party) similarly should
be a legislative decision.
The Treasury does not oppose a legislative proposal to
extend FSC benefits to software licensed with a right of
reproduction, assuming appropriate offsetting revenue
measures can be identified. The differences between the
license of films, tapes and records and the license of
software are not great, and as the technology develops, the
demarcation grows increasingly less distinct.
Thank you for your interest.
Sincerely,
Lloyd Bentsen,
Secretary of the Treasury.
____
House of Representatives,
Washington, DC, May 16, 1994.
Hon. Lloyd Bentsen,
Secretary, U.S. Department of the Treasury, Washington, DC.
Dear Mr. Secretary: I am writing in response to your May 6
letter regarding the application of the Foreign Sales
Corporation (FSC) rules to software. I would like to
specifically address some of the points raised in your letter
and to once again urge you to reconsider your decision not to
revise the temporary and proposed FSC regulations to
eliminate their discriminatory treatment of software.
First, your letter states that the 1987 temoprary
regulations with respect to software duplicated the
interpretation in the DISC regulations, which they replaced.
It is my understanding that the DISC regulations were silent
as to software.
Second, your letter states that the decision to provide FSC
benefits to the license of films, records, and tapes was a
legislative one, and hence, the decision to expand it to the
software industry should also be a legislative decision. But
the statute provides FSC benefits to licenses of ``films,
records, tapes, and other similar property.'' Since there is
little or no difference between the license of films, tapes
and records and the license of software, I do not understand
the decision not to change the temporary and proposed
regulations, especially since your letter states that ``the
differences between the license of films, tapes and records
and the license of software are not great and as the
technology develops, the demarcation grows increasingly less
distinct.'' Clearly, the legislative intent was not to limit
the benefits to certain subject matter. I'm sure that you are
aware that there are other cases in which the Treasury
Department has specifically expanded the application of its
regulations to industries that were not specifically
mentioned in the statute.
Third, and most importantly, your letter states that if FSC
benefits are extended to software licenses with a right of
reproduction then ``some part of the processing of software
products for sale in foreign markets that is now performed in
the United States can be expected to be performed abroad.''
As a member of Congress representing a congressional district
that relies on software industry jobs, I can assure you that
I would not be seeking a change in the FSC regulation if I
believed it would result in a net job loss. Many software
companies are already seriously considering or have started
to move jobs overseas and I am fighting to keep those jobs in
the US and in my district. The FSC benefits I seek for
software would in fact provide incentive for software
companies that currently develop their products overseas to
move software development back to the United States.
I respectfully request that you review your decision not to
eliminate the discrimination against software companies
contained in the 1987 temporary and proposed regulation. I
believe the 1987 regulations demonstrated a lack of
understanding of the development and manufacturing of
software. I am certain that this Administration is more
enlightened, not only about software technology, but also
about job creation. The issue of where software is developed
in the future is very real for me and many of my colleagues
from California.
Thank you for your consideration of this important issue.
Cordially,
Tom Lantos,
Member of Congress.
Mr. RUSH. Mr. Speaker, I rise today to support H.R. 3419, the Tax
Simplification and Technical Corrections Act. I salute Chairman
Rostenkowski for this legislation, as it is yet another in the long
line of bills which demonstrate the chairman's dedication to improving
and simplifying our Nation's Tax Code. During his tenure with the House
Ways and Means Committee, the chairman has worked tirelessly to improve
and refine the code on behalf of the American people. I appreciate his
willingness to work with me on a particular aspect of this bill, and I
look forward to like cooperative efforts for many years to come.
This is an important simplification bill, and one of the reasons that
this is true is that it contains a piece of legislation that I
introduced last year, the Public Pension Simplification Act. This bill,
which was my first legislative effort as a Member of Congress, has 24
House cosponsors of both political parties. The intention of this
provision is to secure the promised pension benefits of many loyal
hard-working public employees across the country as well as in the
State of Illinois, and in particular the city of Chicago, including the
police officers, firefighters, and teachers of that great city.
The Public Pension Simplification Act contains several provisions
that will enable all participants and their spouses or beneficiaries to
receive the pension benefits they have been promised by their
governmental employers in exchange for many years of dedicated, self-
sacrificing service. Many of my colleagues and I know some of
these individuals personally, through the police services that are
delivered to our neighborhoods, the firefighters who respond with great
speed and efficiency, the teachers who produce undeniable results so
visible in the education of our sons, daughters, and grandchildren, and
the many other services provided to us and our communities daily.
Our close contact with many of these individuals gives us firsthand
knowledge of the stressful conditions under which many of them are
required to work, as well as the level of excellence and scrutiny to
which they are continuously held by the general public. Yet day after
day, year after year, many of these employees continue to deliver to
their communities, and to your families, their dedicated services. Mr.
Speaker, providing a more secure retirement for these selfless workers
is the goal of the legislation I am supporting today.
The provision will provide the following benefits for all State and
local government pension plans:
First, exempt the benefits accrued or paid under the plans from the
100 percent of compensation limitation in section 415 of the Internal
Revenue Code;
Second, permit the use of the definition of compensation, for
purposes of the section 415 limitations, which include certain amounts
employees elect to contribute under other benefits plans;
Third, exempt survivor and disability benefits from the section 415
limitation; and
Fourth, permit the use of excess benefit plans as allowed in the
private sector.
Mr. Speaker, I believe that these simplification proposals are
essential to the smooth management of qualified pension plans offered
by State and local governments to their employees. As many of my
colleagues are aware, many State and local government plans are subject
to two sets of rules, which at times can produce conflicting and harsh
results for both the plan sponsors and the participants in the plans.
At the Federal level, all State and local plans must meet certain
qualifying requirements to receive and maintain qualified status. At
the State level, many State and local government employers are
constitutionally prohibited from making any reduction in the
participants' promised benefits, as could be required under the Federal
qualifying requirements. These two conflicting sets of rules sometimes
result in the sponsors of these plans being placed in the very
difficult situation of making an unrealistic choice of either:
First, reducing the promised benefit as required by the qualifying
requirement and becoming exposed to possible legal suits by the plan
participants; or
Second, complying with the State constitutional limitation and being
exposed to plan disqualification by the IRS. Such actions might result
in detrimental financial consequences to every employee who
participates in the plan.
This provision is intended to enable State and local governments to
provide pension benefits to their employees within both the Federal and
State rules without encountering unintended conflict.
Mr. Speaker, this provision could provide added security for the
pension benefits of approximately 17,000 firefighters, spouses, and
beneficiaries, and approximately 32,000 police officers, spouses, and
beneficiaries from the city of Chicago and surrounding areas. In
addition, the promised pension benefits of approximately 486,000 public
employees of the State of Illinois will be given an extra measure of
security not currently present.
I am proud of this provision and I remain committed to providing an
added element of certainty regarding the retirement benefits of so many
of our State and local employees, their spouses, and beneficiaries. I
would respectfully ask for my colleagues' support of H.R. 3419.
Mrs. KENNELLY. Mr. Speaker, I rise in strong support of H.R. 3419,
the Tax Simplification and Technical Corrections Act. I am pleased that
we finally have this bill before us today.
Despite our best efforts, we do make mistakes in drafting
legislation. This bill corrects errors we have made in the past , as
well as conforms various provisions in recently enacted tax and other
legislation within the jurisdiction of the Committee on Ways and Means.
These errors can have unintended consequences, and it is important that
we show the American people that Congress can fix problems of this
nature without getting bogged down in the politics.
This bill also contains a number of simplification provisions. I
would like to focus on one in particular--the elimination of the
special vesting rule for multi-employer pension plans. In 1986, I
worked with Chairman Rostenkowski and we were able to reduce the
vesting period--the minimum period an employee must work before
becoming eligible for a pension--from 10 years to 5 years for most
workers in America. However, multi-employer plans retained 10 year
vesting.
This is something I have been working to change since 1986. It simply
doesn't make sense that an employee enrolled in a multi-employer plan
has to work twice as long in order to be entitled to a pension. It is
about time we leveled the playing field. This provision has passed the
House on several occasions only to die as larger tax vehicles were
vetoed.
I urge my colleagues to support this important provision and the
bill.
Mr. ARCHER. Mr. Speaker, I have no requests for time, and I yield
back the balance of my time.
Mr. ROSTENKOWSKI. Mr. Speaker, I, too, have no requests for time, and
I yield back the balance of my time.
The SPEAKER pro tempore (Mr. Mazzoli). The question is on the motion
offered by the gentleman from Illinois [Mr. Rostenkowski] that the
House suspend the rules and pass the bill, H.R. 3419, as amended.
The question was taken; and (two-thirds having voted in favor
thereof) the rules were suspended, and the bill, as amended, was
passed.
A motion to reconsider was laid on the table.
____________________