[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.

                          ____________________