[Congressional Record Volume 142, Number 73 (Wednesday, May 22, 1996)]
[House]
[Pages H5445-H5478]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
SMALL BUSINESS JOB PROTECTION ACT OF 1996
Mr. ARCHER. Mr. Speaker, pursuant to House Resolution 440, I call up
the bill (H.R. 3448) to provide tax relief for small businesses, to
protect jobs, to create opportunities, to increase the take home pay of
workers, and for other purposes, and ask for its immediate
consideration in the House.
The Clerk read the title of the bill.
The SPEAKER pro tempore (Mr. Walker). Pursuant to House Resolution
440, the Committee amendment in the nature of a substitute printed in
the bill is considered read.
The text of the committee amendment in the nature of a substitute is
as follows:
H.R. 3448
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Small
Business Job Protection Act of 1996''.
(b) Table of Contents.--
TITLE I--SMALL BUSINESS AND OTHER TAX PROVISIONS
Sec. 1101. Amendment of 1986 Code.
Sec. 1102. Underpayments of estimated tax.
Subtitle A--Expensing; Etc.
Sec. 1111. Increase in expense treatment for small businesses.
Sec. 1112. Treatment of employee tips.
Sec. 1113. Treatment of storage of product samples.
Sec. 1114. Treatment of certain charitable risk pools.
Sec. 1115. Treatment of dues paid to agricultural or horticultural
organizations.
Sec. 1116. Clarification of employment tax status of certain fishermen;
information reporting.
Subtitle B--Extension of Certain Expiring Provisions
Sec. 1201. Work opportunity tax credit.
Sec. 1202. Employer-provided educational assistance programs.
Sec. 1203. FUTA exemption for alien agricultural workers.
Subtitle C--Provisions Relating to S Corporations
Sec. 1301. S corporations permitted to have 75 shareholders.
Sec. 1302. Electing small business trusts.
Sec. 1303. Expansion of post-death qualification for certain trusts.
Sec. 1304. Financial institutions permitted to hold safe harbor debt.
Sec. 1305. Rules relating to inadvertent terminations and invalid
elections.
Sec. 1306. Agreement to terminate year.
Sec. 1307. Expansion of post-termination transition period.
Sec. 1308. S corporations permitted to hold subsidiaries.
Sec. 1309. Treatment of distributions during loss years.
Sec. 1310. Treatment of S corporations under subchapter C.
Sec. 1311. Elimination of certain earnings and profits.
Sec. 1312. Carryover of disallowed losses and deductions under at-risk
rules allowed.
Sec. 1313. Adjustments to basis of inherited S stock to reflect certain
items of income.
[[Page H5446]]
Sec. 1314. S corporations eligible for rules applicable to real
property subdivided for sale by noncorporate taxpayers.
Sec. 1315. Effective date.
Subtitle D--Pension Simplification
Chapter 1--Simplified Distribution Rules
Sec. 1401. Repeal of 5-year income averaging for lump-sum
distributions.
Sec. 1402. Repeal of $5,000 exclusion of employees' death benefits.
Sec. 1403. Simplified method for taxing annuity distributions under
certain employer plans.
Sec. 1404. Required distributions.
Chapter 2--Increased Access to Pension Plans
SUBCHAPTER A--SIMPLE SAVINGS PLANS
Sec. 1421. Establishment of savings incentive match plans for employees
of small employers.
Sec. 1422. Extension of simple plan to 401(k) arrangements.
SUBCHAPTER B--OTHER PROVISIONS
Sec. 1426. Tax-exempt organizations eligible under section 401(k).
Chapter 3--Nondiscrimination Provisions
Sec. 1431. Definition of highly compensated employees; repeal of family
aggregation.
Sec. 1432. Modification of additional participation requirements.
Sec. 1433. Nondiscrimination rules for qualified cash or deferred
arrangements and matching contributions.
Sec. 1434. Definition of compensation for section 415 purposes.
Chapter 4--Miscellaneous Provisions
Sec. 1441. Plans covering self-employed individuals.
Sec. 1442. Elimination of special vesting rule for multiemployer plans.
Sec. 1443. Distributions under rural cooperative plans.
Sec. 1444. Treatment of governmental plans under section 415.
Sec. 1445. Uniform retirement age.
Sec. 1446. Contributions on behalf of disabled employees.
Sec. 1447. Treatment of deferred compensation plans of State and local
governments and tax-exempt organizations.
Sec. 1448. Trust requirement for deferred compensation plans of State
and local governments.
Sec. 1449. Transition rule for computing maximum benefits under section
415 limitations.
Sec. 1450. Modifications of section 403(b).
Sec. 1451. Waiver of minimum period for joint and survivor annuity
explanation before annuity starting date.
Sec. 1452. Repeal of limitation in case of defined benefit plan and
defined contribution plan for same employee; excess
distributions.
Sec. 1453. Tax on prohibited transactions.
Sec. 1454. Treatment of leased employees.
Sec. 1455. Uniform penalty provisions to apply to certain pension
reporting requirements.
Sec. 1456. Retirement benefits of ministers not subject to tax on net
earnings from self-employment.
Sec. 1457. Date for adoption of plan amendments.
Subtitle E--Foreign Simplification
Sec. 1501. Repeal of inclusion of certain earnings invested in excess
passive assets.
Subtitle F--Revenue Offsets
Sec. 1601. Termination of Puerto Rico and possession tax credit.
Sec. 1602. Repeal of exclusion for interest on loans used to acquire
employer securities.
Sec. 1603. Certain amounts derived from foreign corporations treated as
unrelated business taxable income.
Sec. 1604. Depreciation under income forecast method.
Sec. 1605. Repeal of exclusion for punitive damages and for damages not
attributable to physical injuries or sickness.
Sec. 1606. Repeal of diesel fuel tax rebate to purchasers of diesel-
powered automobiles and light trucks.
Subtitle G--Technical Corrections
Sec. 1701. Coordination with other subtitles.
Sec. 1702. Amendments related to Revenue Reconciliation Act of 1990.
Sec. 1703. Amendments related to Revenue Reconciliation Act of 1993.
Sec. 1704. Miscellaneous provisions.
TITLE I--SMALL BUSINESS AND OTHER TAX PROVISIONS
SEC. 1101. AMENDMENT OF 1986 CODE.
Except as otherwise expressly provided, whenever in this
title 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.
SEC. 1102. UNDERPAYMENTS OF ESTIMATED TAX.
No addition to the tax shall be made under section 6654 or
6655 of the Internal Revenue Code of 1986 (relating to
failure to pay estimated tax) with respect to any
underpayment of an installment required to be paid before the
date of the enactment of this Act to the extent such
underpayment was created or increased by any provision of
this title.
Subtitle A--Expensing; Etc.
SEC. 1111. INCREASE IN EXPENSE TREATMENT FOR SMALL
BUSINESSES.
(a) General Rule.--Paragraph (1) of section 179(b)
(relating to dollar limitation) is amended to read as
follows:
``(1) Dollar limitation.--The aggregate cost which may be
taken into account under subsection (a) for any taxable year
shall not exceed the following applicable amount:
``If thThe applicable
amount is:
1996.....................................................$18,500
1997..................................................... 19,000
1998..................................................... 20,000
1999..................................................... 21,000
2000..................................................... 22,000
2001..................................................... 23,000
2002..................................................... 23,500
2003 or thereafter..................................... 25,000.''
(b) Effective Date.--The amendment made by subsection (a)
shall apply to taxable years beginning after December 31,
1995.
SEC. 1112. TREATMENT OF EMPLOYEE TIPS.
(a) Employee Cash Tips.--
(1) Reporting requirement not considered.--Subparagraph (A)
of section 45B(b)(1) (relating to excess employer social
security tax) is amended by inserting ``(without regard to
whether such tips are reported under section 6053)'' after
``section 3121(q)''.
(2) Taxes paid.--Subsection (d) of section 13443 of the
Revenue Reconciliation Act of 1993 is amended by inserting
``, with respect to services performed before, on, or after
such date'' after ``1993''.
(3) Effective date.--The amendments made by this subsection
shall take effect as if included in the amendments made by,
and the provisions of, section 13443 of the Revenue
Reconciliation Act of 1993.
(b) Tips for Employees Delivering Food or Beverages.--
(1) In general.--Paragraph (2) of section 45B(b) is amended
to read as follows:
``(2) Only tips received for food or beverages taken into
account.--In applying paragraph (1), there shall be taken
into account only tips received from customers in connection
with the delivering or serving of food or beverages for
consumption if the tipping of employees delivering or serving
food or beverages by customers is customary.''
(2) Effective date.--The amendment made by paragraph (1)
shall apply to tips received for services performed after
December 31, 1996.
SEC. 1113. TREATMENT OF STORAGE OF PRODUCT SAMPLES.
(a) In General.--Paragraph (2) of section 280A(c) is
amended by striking ``inventory'' and inserting ``inventory
or product samples''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to taxable years beginning after December 31,
1995.
SEC. 1114. TREATMENT OF CERTAIN CHARITABLE RISK POOLS.
(a) General Rule.--Section 501 (relating to exemption from
tax on corporations, certain trusts, etc.) is amended by
redesignating subsection (n) as subsection (o) and by
inserting after subsection (m) the following new subsection:
``(n) Charitable Risk Pools.--
``(1) In general.--For purposes of this title--
``(A) a qualified charitable risk pool shall be treated as
an organization organized and operated exclusively for
charitable purposes, and
``(B) subsection (m) shall not apply to a qualified
charitable risk pool.
``(2) Qualified charitable risk pool.--For purposes of this
subsection, the term `qualified charitable risk pool' means
any organization--
``(A) which is organized and operated solely to pool
insurable risks of its members (other than risks related to
medical malpractice) and to provide information to its
members with respect to loss control and risk management,
``(B) which is comprised solely of members that are
organizations described in subsection (c)(3) and exempt from
tax under subsection (a), and
``(C) which meets the organizational requirements of
paragraph (3).
``(3) Organizational requirements.--An organization
(hereinafter in this subsection referred to as the `risk
pool') meets the organizational requirements of this
paragraph if--
``(A) such risk pool is organized as a nonprofit
organization under State law provisions authorizing risk
pooling arrangements for charitable organizations,
``(B) such risk pool is exempt from any income tax imposed
by the State (or will be so exempt after such pool qualifies
as an organization exempt from tax under this title),
``(C) such risk pool has obtained at least $1,000,000 in
startup capital from nonmember charitable organizations,
``(D) such risk pool is controlled by a board of directors
elected by its members, and
``(E) the organizational documents of such risk pool
require that--
``(i) each member of such pool shall at all times be an
organization described in subsection (c)(3) and exempt from
tax under subsection (a),
``(ii) any member which receives a final determination that
it no longer qualifies as an organization described in
subsection (c)(3) shall immediately notify the pool of such
determination and the effective date of such determination,
and
``(iii) each policy of insurance issued by the risk pool
shall provide that such policy will not cover the insured
with respect to events occurring after the date such final
determination was issued to the insured.
An organization shall not cease to qualify as a qualified
charitable risk pool solely by reason of the failure of any
of its members to continue to be an organization described in
subsection (c)(3) if, within a reasonable period of time
after such pool is notified as required under subparagraph
[[Page H5447]]
(C)(ii), such pool takes such action as may be reasonably
necessary to remove such member from such pool.
``(4) Other definitions.--For purposes of this subsection--
``(A) Startup capital.--The term `startup capital' means
any capital contributed to, and any program-related
investments (within the meaning of section 4944(c)) made in,
the risk pool before such pool commences operations.
``(B) Nonmember charitable organization.--The term
`nonmember charitable organization' means any organization
which is described in subsection (c)(3) and exempt from tax
under subsection (a) and which is not a member of the risk
pool and does not benefit (directly or indirectly) from the
insurance coverage provided by the pool to its members.''
(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. 1115. TREATMENT OF DUES PAID TO AGRICULTURAL OR
HORTICULTURAL ORGANIZATIONS.
(a) General Rule.--Section 512 (defining unrelated business
taxable income) is amended by adding at the end thereof the
following new subsection:
``(d) Treatment of Dues of Agricultural or Horticultural
Organizations.--
``(1) In general.--If--
``(A) an agricultural or horticultural organization
described in section 501(c)(5) requires annual dues to be
paid in order to be a member of such organization, and
``(B) the amount of such required annual dues does not
exceed $100,
in no event shall any portion of such dues be treated as
derived by such organization from an unrelated trade or
business by reason of any benefits or privileges to which
members of such organization are entitled.
``(2) Indexation of $100 amount.--In the case of any
taxable year beginning in a calendar year after 1995, the
$100 amount in paragraph (1) shall be increased by an amount
equal to--
``(A) $100, multiplied by
``(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, by substituting `calendar year 1994' for
`calendar year 1992' in subparagraph (B) thereof.
``(3) Dues.--For purposes of this subsection, the term
`dues' includes any payment required to be made in order to
be recognized by the organization as a member of the
organization.''
(b) Effective Date.--The amendment made by subsection (a)
shall apply to taxable years beginning after December 31,
1994.
SEC. 1116. CLARIFICATION OF EMPLOYMENT TAX STATUS OF CERTAIN
FISHERMEN; INFORMATION REPORTING.
(a) Clarification of Employment Tax Status.--
(1) Amendments of internal revenue code of 1986.--
(A) Determination of size of crew.--Subsection (b) of
section 3121 (defining employment) is amended by adding at
the end thereof the following new sentence:
``For purposes of paragraph (20), the operating crew of a
boat shall be treated as normally made up of fewer than 10
individuals if the average size of the operating crew on
trips made during the preceding 4 calendar quarters consisted
of fewer than 10 individuals.''
(B) Certain cash remuneration permitted.--Subparagraph (A)
of section 3121(b)(20) is amended to read as follows:
``(A) such individual does not receive any cash
remuneration other than as provided in subparagraph (B) and
other than cash remuneration--
``(i) which does not exceed $100 per trip;
``(ii) which is contingent on a minimum catch; and
``(iii) which is paid solely for additional duties (such as
mate, engineer, or cook) for which additional cash
remuneration is traditional in the industry,''.
(C) Conforming amendment.--Section 6050A(a) is amended by
striking ``and'' at the end of paragraph (3), by striking the
period at the end of paragraph (4) and inserting ``; and'',
and by adding at the end thereof the following new paragraph:
``(5) any cash remuneration described in section
3121(b)(20)(A).''
(2) Amendment of social security act.--
(A) Determination of size of crew.--Subsection (a) of
section 210 of the Social Security Act is amended by adding
at the end thereof the following new sentence:
``For purposes of paragraph (20), the operating crew of a
boat shall be treated as normally made up of fewer than 10
individuals if the average size of the operating crew on
trips made during the preceding 4 calendar quarters consisted
of fewer than 10 individuals.''
(B) Certain cash remuneration permitted.--Subparagraph (A)
of section 210(a)(20) of such Act is amended to read as
follows:
``(A) such individual does not receive any additional
compensation other than as provided in subparagraph (B) and
other than cash remuneration--
``(i) which does not exceed $100 per trip;
``(ii) which is contingent on a minimum catch; and
``(iii) which is paid solely for additional duties (such as
mate, engineer, or cook) for which additional cash
remuneration is traditional in the industry,''.
(3) Effective date.--
(A) In general.--The amendments made by this subsection
shall apply to remuneration paid after December 31, 1996.
(B) Special rule.--The amendments made by this subsection
(other than paragraph (1)(C)) shall also apply to
remuneration paid after December 31, 1984, and before January
1, 1997, unless the payor treated such remuneration (when
paid) as being subject to tax under chapter 21 of the
Internal Revenue Code of 1986.
(b) Information Reporting.--
(1) In general.--Subpart B of part III of subchapter A of
chapter 68 (relating to information concerning transactions
with other persons) is amended by adding at the end the
following new section:
``SEC. 6050Q. RETURNS RELATING TO CERTAIN PURCHASES OF FISH.
``(a) Requirement of Reporting.--Every person--
``(1) who is engaged in the trade or business of purchasing
fish for resale from any person engaged in the trade or
business of catching fish; and
``(2) who makes payments in cash in the course of such
trade or business to such a person of $600 or more during any
calendar year for the purchase of fish,
shall make a return (at such times as the Secretary may
prescribe) described in subsection (b) with respect to each
person to whom such a payment was made during such calendar
year.
``(b) Return.--A return is described in this subsection if
such return--
``(1) is in such form as the Secretary may prescribe, and
``(2) contains--
``(A) the name, address, and TIN of each person to whom a
payment described in subsection (a)(2) was made during the
calendar year;
``(B) the aggregate amount of such payments made to such
person during such calendar year and the date and amount of
each such payment, and
``(C) such other information as the Secretary may require.
``(c) Statement To Be Furnished With Respect to Whom
Information is Required.--Every person required to make a
return under subsection (a) shall furnish to each person
whose name is required to be set forth in such return a
written statement showing--
``(1) the name and address of the person required to make
such a return, and
``(2) the aggregate amount of payments to the person
required to be shown on the return.
The written statement required under the preceding sentence
shall be furnished to the person on or before January 31 of
the year following the calendar year for which the return
under subsection (a) is required to be made.
``(d) Definitions.--For purposes of this section:
``(1) Cash.--The term `cash' has the meaning given such
term by section 6050I(d).
``(2) Fish.--The term `fish' includes other forms of
aquatic life.''.
(2) Technical amendments.--
(A) Subparagraph (A) of section 6724(d)(1) is amended by
striking ``or'' at the end of clause (vi), by striking
``and'' at the end of clause (vii) and inserting ``or'', and
by adding at the end the following new clause:
``(viii) section 6050Q (relating to returns relating to
certain purchases of fish), and''.
(B) Paragraph (2) of section 6724(d) is amended by
redesignating subparagraphs (Q) through (T) as subparagraphs
(R) through (U), respectively, and by inserting after
subparagraph (P) the following new subparagraph:
``(Q) section 6050Q(c) (relating to returns relating to
certain purchases of fish),''.
(C) The table of sections for subpart B of part III of
subchapter A of chapter 68 is amended by adding at the end
the following new item:
``Sec. 6050Q. Returns relating to certain purchases of fish.''.
(3) Effective date.--The amendments made by this subsection
shall apply to payments made after December 31, 1996.
Subtitle B--Extension of Certain Expiring Provisions
SEC. 1201. WORK OPPORTUNITY TAX CREDIT.
(a) Amount of Credit.--Subsection (a) of section 51
(relating to amount of credit) is amended by striking ``40
percent'' and inserting ``35 percent''.
(b) Members of Targeted Groups.--Subsection (d) of section
51 is amended to read as follows:
``(d) Members of Targeted Groups.--For purposes of this
subpart--
``(1) In general.--An individual is a member of a targeted
group if such individual is--
``(A) a qualified IV-A recipient,
``(B) a qualified veteran,
``(C) a qualified ex-felon,
``(D) a high-risk youth,
``(E) a vocational rehabilitation referral, or
``(F) a qualified summer youth employee.
``(2) Qualified iv-a recipient.--
``(A) In general.--The term `qualified IV-A recipient'
means any individual who is certified by the designated local
agency as being a member of a family receiving assistance
under a IV-A program for at least a 9-month period ending
during the 9-month period ending on the hiring date.
``(B) IV-A program.--For purposes of this paragraph, the
term `IV-A program' means any program providing assistance
under a State plan approved under part A of title IV of the
Social Security Act (relating to assistance for needy
families with minor children) and any successor of such
program.
``(3) Qualified veteran.--
``(A) In general.--The term `qualified veteran' means any
veteran who is certified by the designated local agency as
being--
``(i) a member of a family receiving assistance under a IV-
A program (as defined in paragraph (2)(B)) for at least a 9-
month period ending during the 12-month period ending on the
hiring date, or
``(ii) a member of a family receiving assistance under a
food stamp program under the Food
[[Page H5448]]
Stamp Act of 1977 for at least a 3-month period ending during
the 12-month period ending on the hiring date.
``(B) Veteran.--For purposes of subparagraph (A), the term
`veteran' means any individual who is certified by the
designated local agency as--
``(i)(I) having served on active duty (other than active
duty for training) in the Armed Forces of the United States
for a period of more than 180 days, or
``(II) having been discharged or released from active duty
in the Armed Forces of the United States for a service-
connected disability, and
``(ii) not having any day during the 60-day period ending
on the hiring date which was a day of extended active duty in
the Armed Forces of the United States.
For purposes of clause (ii), the term `extended active duty'
means a period of more than 90 days during which the
individual was on active duty (other than active duty for
training).
``(4) Qualified ex-felon.--The term `qualified ex-felon'
means any individual who is certified by the designated local
agency--
``(A) as having been convicted of a felony under any
statute of the United States or any State,
``(B) as having a hiring date which is not more than 1 year
after the last date on which such individual was so convicted
or was released from prison, and
``(C) as being a member of a family which had an income
during the 6 months immediately preceding the earlier of the
month in which such income determination occurs or the month
in which the hiring date occurs, which, on an annual basis,
would be 70 percent or less of the Bureau of Labor Statistics
lower living standard.
Any determination under subparagraph (C) shall be valid for
the 45-day period beginning on the date such determination is
made.
``(5) High-risk youth.--
``(A) In general.--The term `high-risk youth' means any
individual who is certified by the designated local agency--
``(i) as having attained age 18 but not age 25 on the
hiring date, and
``(ii) as having his principal place of abode within an
empowerment zone or enterprise community.
``(B) Youth must continue to reside in zone.--In the case
of a high-risk youth, the term `qualified wages' shall not
include wages paid or incurred for services performed while
such youth's principal place of abode is outside an
empowerment zone or enterprise community.
``(6) Vocational rehabilitation referral.--The term
`vocational rehabilitation referral' means any individual who
is certified by the designated local agency as--
``(A) having a physical or mental disability which, for
such individual, constitutes or results in a substantial
handicap to employment, and
``(B) having been referred to the employer upon completion
of (or while receiving) rehabilitative services pursuant to--
``(i) an individualized written rehabilitation plan under a
State plan for vocational rehabilitation services approved
under the Rehabilitation Act of 1973, or
``(ii) a program of vocational rehabilitation carried out
under chapter 31 of title 38, United States Code.
``(7) Qualified summer youth employee.--
``(A) In general.--The term `qualified summer youth
employee' means any individual--
``(i) who performs services for the employer between May 1
and September 15,
``(ii) who is certified by the designated local agency as
having attained age 16 but not 18 on the hiring date (or if
later, on May 1 of the calendar year involved),
``(iii) who has not been an employee of the employer during
any period prior to the 90-day period described in
subparagraph (B)(i), and
``(iv) who is certified by the designated local agency as
having his principal place of abode within an empowerment
zone or enterprise community.
``(B) Special rules for determining amount of credit.--For
purposes of applying this subpart to wages paid or incurred
to any qualified summer youth employee--
``(i) subsection (b)(2) shall be applied by substituting
`any 90-day period between May 1 and September 15' for `the
1-year period beginning with the day the individual begins
work for the employer', and
``(ii) subsection (b)(3) shall be applied by substituting
`$3,000' for `$6,000'.
The preceding sentence shall not apply to an individual who,
with respect to the same employer, is certified as a member
of another targeted group after such individual has been a
qualified summer youth employee.
``(C) Youth must continue to reside in zone.--Paragraph
(5)(B) shall apply for purposes of this paragraph.
``(8) Hiring date.--The term `hiring date' means the day
the individual is hired by the employer.
``(9) Designated local agency.--The term `designated local
agency' means a State employment security agency established
in accordance with the Act of June 6, 1933, as amended (29
U.S.C. 49-49n).
``(10) Special rules for certifications.--
``(A) In general.--An individual shall not be treated as a
member of a targeted group unless--
``(i) on or before the day on which such individual begins
work for the employer, the employer has received a
certification from a designated local agency that such
individual is a member of a targeted group, or
``(ii)(I) on or before the day the individual is offered
employment with the employer, a pre-screening notice is
completed by the employer with respect to such individual,
and
``(II) not later than the 14th day after the individual
begins work for the employer, the employer submits such
notice, signed by the employer and the individual under
penalties of perjury, to the designated local agency as part
of a written request for such a certification from such
agency.
For purposes of this paragraph, the term `pre-screening
notice' means a document (in such form as the Secretary shall
prescribe) which contains information provided by the
individual on the basis of which the employer believes that
the individual is a member of a targeted group.
``(B) Incorrect certifications.--If--
``(i) an individual has been certified by a designated
local agency as a member of a targeted group, and
``(ii) such certification is incorrect because it was based
on false information provided by such individual,
the certification shall be revoked and wages paid by the
employer after the date on which notice of revocation is
received by the employer shall not be treated as qualified
wages.
``(C) Explanation of denial of request.--If a designated
local agency denies a request for certification of membership
in a targeted group, such agency shall provide to the person
making such request a written explanation of the reasons for
such denial.''
(c) Minimum Employment Period.--Paragraph (3) of section
51(i) (relating to certain individuals ineligible) is amended
to read as follows:
``(3) Individuals not meeting minimum employment period.--
No wages shall be taken into account under subsection (a)
with respect to any individual unless such individual
either--
``(A) is employed by the employer at least 180 days (20
days in the case of a qualified summer youth employee), or
``(B) has completed at least 500 hours (120 hours in the
case of a qualified summer youth employee) of services
performed for the employer.''
(d) Termination.--Paragraph (4) of section 51(c) (relating
to wages defined) is amended to read as follows:
``(4) Termination.--The term `wages' shall not include any
amount paid or incurred to an individual who begins work for
the employer--
``(A) after December 31, 1994, and before July 1, 1996, or
``(B) after June 30, 1997.''
(e) Redesignation of Credit.--
(1) Sections 38(b)(2) and 51(a) are each amended by
striking ``targeted jobs credit'' and inserting ``work
opportunity credit''.
(2) The subpart heading for subpart F of part IV of
subchapter A of chapter 1 is amended by striking ``Targeted
Jobs Credit'' and inserting ``Work Opportunity Credit''.
(3) The table of subparts for such part IV is amended by
striking ``targeted jobs credit'' and inserting ``work
opportunity credit''.
(4) The heading for paragraph (3) of section 1396(c) is
amended by striking ``targeted jobs credit'' and inserting
``work opportunity credit''.
(f) Technical Amendment.--Paragraph (1) of section 51(c) is
amended by striking ``, subsection (d)(8)(D),''.
(g) Effective Date.--The amendments made by this section
shall apply to individuals who begin work for the employer
after June 30, 1996.
SEC. 1202. EMPLOYER-PROVIDED EDUCATIONAL ASSISTANCE PROGRAMS.
(a) Extension.--Subsection (d) of section 127 (relating to
educational assistance programs) is amended by striking
``December 31, 1994'' and inserting ``December 31, 1996''.
(b) Limitation to Education Below Graduate Level.--The last
sentence of section 127(c)(1) is amended by inserting before
the period ``or at the graduate level''.
(c) Effective Dates.--
(1) Extension.--The amendment made by subsection (a) shall
apply to taxable years beginning after December 31, 1994.
(2) Limitation.--The amendment made by subsection (b) shall
apply to taxable years beginning after December 31, 1995.
(3) Expedited procedures.--The Secretary of the Treasury
shall establish expedited procedures for the refund of any
overpayment of taxes imposed by chapter 24 of the Internal
Revenue Code of 1986 which is attributable to amounts
excluded from gross income during 1995 or 1996 under section
127 of such Code, including procedures waiving the
requirement that an employer obtain an employee's signature
where the employer demonstrates to the satisfaction of the
Secretary that any refund collected by the employer on behalf
of the employee will be paid to the employee.
SEC. 1203. FUTA EXEMPTION FOR ALIEN AGRICULTURAL WORKERS.
(a) In General.--Subparagraph (B) of section 3306(c)(1)
(defining employment) is amended by striking ``before January
1, 1995,''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to services performed after December 31, 1994.
Subtitle C--Provisions Relating to S Corporations
SEC. 1301. S CORPORATIONS PERMITTED TO HAVE 75 SHAREHOLDERS.
Subparagraph (A) of section 1361(b)(1) (defining small
business corporation) is amended by striking ``35
shareholders'' and inserting ``75 shareholders''.
SEC. 1302. 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:
[[Page H5449]]
``(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''.
SEC. 1303. EXPANSION OF POST-DEATH QUALIFICATION FOR CERTAIN
TRUSTS.
Subparagraph (A) of section 1361(c)(2) (relating to certain
trusts permitted as shareholders) is amended--
(1) by striking ``60-day period'' each place it appears in
clauses (ii) and (iii) and inserting ``2-year period'', and
(2) by striking the last sentence in clause (ii).
SEC. 1304. FINANCIAL INSTITUTIONS PERMITTED TO HOLD SAFE
HARBOR DEBT.
Clause (iii) of section 1361(c)(5)(B) (defining straight
debt) is amended by striking ``or a trust described in
paragraph (2)'' and inserting ``a trust described in
paragraph (2), or a person which is actively and regularly
engaged in the business of lending money''.
SEC. 1305. RULES RELATING TO INADVERTENT TERMINATIONS AND
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, Etc.--Subsection (b) of section 1362 is
amended by adding at the end the following new paragraph:
``(5) Authority to treat late elections, etc., 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 or no such election is made
for any 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 an election as timely made for
such taxable year (and paragraph (3) shall not apply).''
(c) Effective Date.--The amendments made by subsection (a)
and (b) shall apply with respect to elections for taxable
years beginning after December 31, 1982.
SEC. 1306. AGREEMENT TO TERMINATE YEAR.
Paragraph (2) of section 1377(a) (relating to pro rata
share) is amended to read as follows:
``(2) Election to terminate year.--
``(A) In general.--Under regulations prescribed by the
Secretary, if any shareholder terminates the shareholder's
interest in the corporation during the taxable year and all
affected shareholders and the corporation agree to the
application of this paragraph, paragraph (1) shall be applied
to the affected shareholders as if the taxable year consisted
of 2 taxable years the first of which ends on the date of the
termination.
``(B) Affected shareholders.--For purposes of subparagraph
(A), the term `affected shareholders' means the shareholder
whose interest is terminated and all shareholders to whom
such shareholder has transferred shares during the taxable
year. If such shareholder has transferred shares to the
corporation, the term `affected shareholders' shall include
all persons who are shareholders during the taxable year.''
SEC. 1307. EXPANSION OF POST-TERMINATION TRANSITION PERIOD.
(a) In General.--Paragraph (1) of section 1377(b) (relating
to post-termination transition period) is amended by striking
``and'' at the end of subparagraph (A), by redesignating
subparagraph (B) as subparagraph (C), and by inserting after
subparagraph (A) the following new subparagraph:
``(B) the 120-day period beginning on the date of any
determination pursuant to an audit of the taxpayer which
follows the termination of the corporation's election and
which adjusts a subchapter S item of income, loss, or
deduction of the corporation arising during the S period (as
defined in section 1368(e)(2)), and''.
(b) Determination Defined.--Paragraph (2) of section
1377(b) is amended by striking subparagraphs (A) and (B), by
redesignating subparagraph (C) as subparagraph (B), and by
inserting before subparagraph (B) (as so redesignated) the
following new subparagraph:
``(A) a determination as defined in section 1313(a), or''.
(c) Repeal of Special Audit Provisions for Subchapter S
Items.--
(1) General rule.--Subchapter D of chapter 63 (relating to
tax treatment of subchapter S items) is hereby repealed.
(2) Consistent treatment required.--Section 6037 (relating
to return of S corporation) is
[[Page H5450]]
amended by adding at the end 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.''
(3) Conforming amendments.--
(A) Section 1366 is amended by striking subsection (g).
(B) 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.''
(C) The table of subchapters for chapter 63 is amended by
striking the item relating to subchapter D.
SEC. 1308. S CORPORATIONS PERMITTED TO HOLD SUBSIDIARIES.
(a) 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.
(b) Treatment of Certain Wholly Owned S Corporation
Subsidiaries.--Section 1361(b) (defining small business
corporation) is amended by adding at the end the following
new paragraph:
``(3) Treatment of certain wholly owned subsidiaries.--
``(A) In general.--For purposes of this title--
``(i) a corporation which is a qualified subchapter S
subsidiary shall not be treated as a separate corporation,
and
``(ii) all assets, liabilities, and items of income,
deduction, and credit of a qualified subchapter S subsidiary
shall be treated as assets, liabilities, and such items (as
the case may be) of the S corporation.
``(B) Qualified subchapter s subsidiary.--For purposes of
this paragraph, the term `qualified subchapter S subsidiary'
means any domestic corporation which is not an ineligible
corporation (as defined in paragraph (2)), if--
``(i) 100 percent of the stock of such corporation is held
by the S corporation, and
``(ii) the S corporation elects to treat such corporation
as a qualified subchapter S subsidiary.
``(C) Treatment of terminations of qualified subchapter s
subsidiary status.--For purposes of this title, if any
corporation which was a qualified subchapter S subsidiary
ceases to meet the requirements of subparagraph (B), such
corporation shall be treated as a new corporation acquiring
all of its assets (and assuming all of its liabilities)
immediately before such cessation from the S corporation in
exchange for its stock.''
(c) Certain Dividends Not Treated as Passive Investment
Income.--Paragraph (3) of section 1362(d) is amended by
adding at the end the following new subparagraph:
``(F) Treatment of certain dividends.--If an S corporation
holds stock in a C corporation meeting the requirements of
section 1504(a)(2), the term `passive investment income'
shall not include dividends from such C corporation to the
extent such dividends are attributable to the earnings and
profits of such C corporation derived from the active conduct
of a trade or business.''
(d) Conforming Amendments.--
(1) Subsection (c) of section 1361 is amended by striking
paragraph (6).
(2) Subsection (b) of section 1504 (defining includible
corporation) is amended by adding at the end the following
new paragraph:
``(8) An S corporation.''
SEC. 1309. TREATMENT OF DISTRIBUTIONS DURING LOSS YEARS.
(a) Adjustments for Distributions Taken Into Account Before
Losses.--
(1) Subparagraph (A) of section 1366(d)(1) (relating to
losses and deductions cannot exceed shareholder's basis in
stock and debt) is amended by striking ``paragraph (1)'' and
inserting ``paragraphs (1) and (2)(A)''.
(2) Subsection (d) of section 1368 (relating to certain
adjustments taken into account) is amended by adding at the
end 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 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)''.
SEC. 1310. 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.''
SEC. 1311. ELIMINATION OF CERTAIN EARNINGS AND PROFITS.
(a) In General.--If--
(1) 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
(2) such corporation is an S corporation under subchapter S
of chapter 1 of such Code for its first taxable year
beginning after December 31, 1996,
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.
(b) Conforming Amendments.--
(1) Paragraph (3) of section 1362(d), as amended by section
1308, is amended--
(A) by striking ``subchapter c'' in the paragraph heading
and inserting ``accumulated'',
(B) by striking ``subchapter C'' in subparagraph (A)(i)(I)
and inserting ``accumulated'', and
(C) by striking subparagraph (B) and redesignating the
following subparagraphs accordingly.
(2)(A) Subsection (a) of section 1375 is amended by
striking ``subchapter C'' in paragraph (1) and inserting
``accumulated''.
(B) 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).''
(C) The section heading for section 1375 is amended by
striking ``subchapter c'' and inserting ``accumulated''.
(D) 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''.
(3) Clause (i) of section 1042(c)(4)(A) is amended by
striking ``section 1362(d)(3)(D)'' and inserting ``section
1362(d)(3)(C)''.
SEC. 1312. CARRYOVER OF DISALLOWED LOSSES AND DEDUCTIONS
UNDER AT-RISK RULES ALLOWED.
Paragraph (3) of section 1366(d) (relating to carryover of
disallowed losses and deductions to post-termination
transition period) is amended by adding at the end the
following new subparagraph:
``(D) At-risk limitations.--To the extent that any increase
in adjusted basis described in subparagraph (B) would have
increased the shareholder's amount at risk under section 465
if such increase had occurred on the day preceding the
commencement of the post-termination transition period, rules
similar to the rules described in subparagraphs (A) through
(C) shall
[[Page H5451]]
apply to any losses disallowed by reason of section 465(a).''
SEC. 1313. ADJUSTMENTS TO BASIS OF INHERITED S STOCK TO
REFLECT CERTAIN ITEMS OF INCOME.
(a) In General.--Subsection (b) of section 1367 (relating
to adjustments to basis of stock of shareholders, etc.) is
amended by adding at the end 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.''
(b) Effective Date.--The amendment made by subsection (a)
shall apply in the case of decedents dying after the date of
the enactment of this Act.
SEC. 1314. S CORPORATIONS ELIGIBLE FOR RULES APPLICABLE TO
REAL PROPERTY SUBDIVIDED FOR SALE BY
NONCORPORATE TAXPAYERS.
(a) In General.--Subsection (a) of section 1237 (relating
to real property subdivided for sale) is amended by striking
``other than a corporation'' in the material preceding
paragraph (1) and inserting ``other than a C corporation''.
(b) Conforming Amendment.--Subparagraph (A) of section
1237(a)(2) is amended by inserting ``an S corporation which
included the taxpayer as a shareholder,'' after ``controlled
by the taxpayer,''.
SEC. 1315. EFFECTIVE DATE.
(a) In General.--Except as otherwise provided in this
subtitle, the amendments made by this subtitle shall apply to
taxable years beginning after December 31, 1996.
(b) Treatment of Certain Elections Under Prior Law.--For
purposes of section 1362(g) of the Internal Revenue Code of
1986 (relating to election after termination), any
termination under section 1362(d) of such Code in a taxable
year beginning before January 1, 1997, shall not be taken
into account.
Subtitle D--Pension Simplification
CHAPTER 1--SIMPLIFIED DISTRIBUTION RULES
SEC. 1401. 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' has the
meaning given such term by section 402(e)(4)(D) (without
regard to subclauses (I), (II), (III), and (IV) of clause (i)
thereof).''
(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, 1998.
(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. 1402. REPEAL OF $5,000 EXCLUSION OF EMPLOYEES' DEATH
BENEFITS.
(a) In General.--Subsection (b) of section 101 is hereby
repealed.
(b) Conforming Amendments.--
(1) Subsection (c) of section 101 is amended by striking
``subsection (a) or (b)'' and inserting ``subsection (a)''.
(2) Sections 406(e) and 407(e) are each amended by striking
paragraph (2) and by redesignating paragraph (3) as paragraph
(2).
(3) Section 7701(a)(20) is amended by striking ``, for the
purpose of applying the provisions of section 101(b) with
respect to employees' death benefits''.
(c) Effective Date.--The amendments made by this section
shall apply with respect to decedents dying after the date of
the enactment of this Act.
SEC. 1403. 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.
[[Page H5452]]
``(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 annuiThe number of anticipated payments is:
Not more than 55.............................................360 ....
More than 55 but not more than 60............................310 ....
More than 60 but not more than 65............................260 ....
More than 65 but not more than 70............................210 ....
More than 70.................................................160.....
``(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 this section
shall apply in cases where the annuity starting date is after
the 90th day after the date of the enactment of this Act.
SEC. 1404. 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, 1996.
CHAPTER 2--INCREASED ACCESS TO PENSION PLANS
Subchapter A--Simple Savings Plans
SEC. 1421. ESTABLISHMENT OF SAVINGS INCENTIVE MATCH PLANS FOR
EMPLOYEES OF SMALL EMPLOYERS.
(a) In General.--Section 408 (relating to individual
retirement accounts) is amended by redesignating subsection
(p) as subsection (q) and by inserting after subsection (o)
the following new subsection:
``(p) Simple Retirement Accounts.--
``(1) In general.--For purposes of this title, the term
`simple retirement account' means an individual retirement
plan (as defined in section 7701(a)(37))--
``(A) with respect to which the requirements of paragraphs
(3), (4), and (5) are met; and
``(B) with respect to which the only contributions allowed
are contributions under a qualified salary reduction
arrangement.
``(2) Qualified salary reduction arrangement.--
``(A) In general.--For purposes of this subsection, the
term `qualified salary reduction arrangement' means a written
arrangement of an eligible employer under which--
``(i) an employee eligible to participate in the
arrangement may elect to have the employer make payments--
``(I) as elective employer contributions to a simple
retirement account on behalf of the employee, or
``(II) to the employee directly in cash,
``(ii) the amount which an employee may elect under clause
(i) for any year is required to be expressed as a percentage
of compensation and may not exceed a total of $6,000 for any
year,
``(iii) the employer is required to make a matching
contribution to the simple retirement account for any year in
an amount equal to so much of the amount the employee elects
under clause (i)(I) as does not exceed the applicable
percentage of compensation for the year, and
``(iv) no contributions may be made other than
contributions described in clause (i) or (iii).
``(B) Employer may elect 2-percent nonelective
contribution.--An employer shall be treated as meeting the
requirements of subparagraph (A)(iii) for any year if, in
lieu of the contributions described in such clause, the
employer elects to make nonelective contributions of 2
percent of compensation for each employee who is eligible to
participate in the arrangement and who has at least $5,000 of
compensation from the employer for the year. If an employer
makes an election under this subparagraph for any year, the
employer shall notify employees of such election within a
reasonable period of time before the 30-day period for such
year under paragraph (5)(C).
``(C) Definitions.--For purposes of this subsection--
``(i) Eligible employer.--The term `eligible employer'
means an employer who employs 100 or fewer employees on any
day during the year.
``(ii) Applicable percentage.--
``(I) In general.--The term `applicable percentage' means 3
percent.
``(II) Election of lower percentage.--An employer may elect
to apply a lower percentage (not less than 1 percent) for any
year for all employees eligible to participate in the plan
for such year if the employer notifies the employees of such
lower percentage within a reasonable period of time before
the 30-day election period for such year under paragraph
(5)(C). An employer may not elect a lower percentage under
this subclause for any year if that election would result in
the applicable percentage being lower than 3 percent in more
than 2 of the years in the 5-year period ending with such
year.
``(III) Special rule for years arrangement not in effect.--
If any year in the 5-year period described in subclause (II)
is a year prior to the first year for which any qualified
salary reduction arrangement is in effect with respect to the
employer (or any predecessor), the employer shall be treated
as if the level of the employer matching contribution was at
3 percent of compensation for such prior year.
``(D) Arrangement may be only plan of employer.--
``(i) In general.--An arrangement shall not be treated as a
qualified salary reduction arrangement for any year if the
employer (or any predecessor employer) maintained a qualified
plan with respect to which contributions were made, or
benefits were accrued, for service in any year in the period
beginning with the year such arrangement became effective and
ending with the year for which the determination is being
made.
``(ii) Qualified plan.--For purposes of this subparagraph,
the term `qualified plan' means a plan, contract, pension, or
trust described in subparagraph (A) or (B) of section
219(g)(5).
``(E) Cost-of-living adjustment.--The Secretary shall
adjust the $6,000 amount under subparagraph (A)(ii) at the
same time and in the same manner as under section 415(d),
except that the base period taken into account shall be the
calendar quarter ending September 30, 1995, and any increase
under this subparagraph which is not a multiple of $500 shall
be rounded to the next lower multiple of $500.
``(3) Vesting requirements.--The requirements of this
paragraph are met with respect to a simple retirement account
if the employee's rights to any contribution to the simple
retirement account are nonforfeitable. For purposes of this
paragraph, rules similar to the rules of subsection (k)(4)
shall apply.
``(4) Participation requirements.--
``(A) In general.--The requirements of this paragraph are
met with respect to any simple retirement account for a year
only if, under the qualified salary reduction arrangement,
all employees of the employer who--
``(i) received at least $5,000 in compensation from the
employer during any 2 preceding years, and
``(ii) are reasonably expected to receive at least $5,000
in compensation during the year,
are eligible to make the election under paragraph (2)(A)(i)
or receive the nonelective contribution described in
paragraph (2)(B).
``(B) Excludable employees.--An employer may elect to
exclude from the requirement under subparagraph (A) employees
described in section 410(b)(3).
[[Page H5453]]
``(5) Administrative requirements.--The requirements of
this paragraph are met with respect to any simplified
retirement account if, under the qualified salary reduction
arrangement--
``(A) an employer must--
``(i) make the elective employer contributions under
paragraph (2)(A)(i) not later than the close of the 30-day
period following the last day of the month with respect to
which the contributions are to be made, and
``(ii) make the matching contributions under paragraph
(2)(A)(iii) or the nonelective contributions under paragraph
(2)(B) not later than the date described in section
404(m)(2)(B),
``(B) an employee may elect to terminate participation in
such arrangement at any time during the year, except that if
an employee so terminates, the arrangement may provide that
the employee may not elect to resume participation until the
beginning of the next year, and
``(C) each employee eligible to participate may elect,
during the 30-day period before the beginning of any year
(and the 30-day period before the first day such employee is
eligible to participate), to participate in the arrangement,
or to modify the amounts subject to such arrangement, for
such year.
``(6) Definitions.--For purposes of this subsection--
``(A) Compensation.--
``(i) In general.--The term `compensation' means amounts
described in paragraphs (3) and (8) of section 6051(a).
``(ii) Self-employed.--In the case of an employee described
in subparagraph (B), the term `compensation' means net
earnings from self-employment determined under section
1402(a) without regard to any contribution under this
subsection.
``(B) Employee.--The term `employee' includes an employee
as defined in section 401(c)(1).
``(C) Year.--The term `year' means the calendar year.''
(b) Tax Treatment of Simple Retirement Accounts.--
(1) Deductibility of contributions by employees.--
(A) Section 219(b) (relating to maximum amount of
deduction) is amended by adding at the end the following new
paragraph:
``(4) Special rule for simple retirement accounts.--This
section shall not apply with respect to any amount
contributed to a simple retirement account established under
section 408(p).''
(B) Section 219(g)(5)(A) (defining active participant) is
amended by striking ``or'' at the end of clause (iv) and by
adding at the end the following new clause:
``(vi) any simple retirement account (within the meaning of
section 408(p)), or''.
(2) Deductibility of employer contributions.--Section 404
(relating to deductions for contributions of an employer to
pension, etc. plans) is amended by adding at the end the
following new subsection:
``(m) Special Rules for Simple Retirement Accounts.--
``(1) In general.--Employer contributions to a simple
retirement account shall be treated as if they are made to a
plan subject to the requirements of this section.
``(2) Timing.--
``(A) Deduction.--Contributions described in paragraph (1)
shall be deductible in the taxable year of the employer with
or within which the calendar year for which the contributions
were made ends.
``(B) Contributions after end of year.--For purposes of
this subsection, contributions shall be treated as made for a
taxable year if they are made on account of the taxable year
and are made not later than the time prescribed by law for
filing the return for the taxable year (including extensions
thereof).''
(3) Contributions and distributions.--
(A) Section 402 (relating to taxability of beneficiary of
employees' trust) is amended by adding at the end the
following new subsection:
``(k) Treatment of Simple Retirement Accounts.--Rules
similar to the rules of paragraphs (1) and (3) of subsection
(h) shall apply to contributions and distributions with
respect to a simple retirement account under section
408(p).''
(B) Section 408(d)(3) is amended by adding at the end the
following new subparagraph:
``(G) Simple retirement accounts.--This paragraph shall not
apply to any amount paid or distributed out of a simple
retirement account (as defined in section 408(p)) unless--
``(i) it is paid into another simple retirement account, or
``(ii) in the case of any payment or distribution to which
section 72(t)(8) does not apply, it is paid into an
individual retirement plan.''
(C) Clause (i) of section 457(c)(2)(B) is amended by
striking ``section 402(h)(1)(B)'' and inserting ``section
402(h)(1)(B) or (k)''.
(4) Penalties.--
(A) Early withdrawals.--Section 72(t) (relating to
additional tax in early distributions), as amended by this
Act, is amended by adding at the end the following new
paragraph:
``(6) Special rules for simple retirement accounts.--In the
case of any amount received from a simple retirement account
(within the meaning of section 408(p)) during the 2-year
period beginning on the date such individual first
participated in any qualified salary reduction arrangement
maintained by the individual's employer under section
408(p)(2), paragraph (1) shall be applied by substituting `25
percent' for `10 percent'.''
(B) Failure to report.--Section 6693 is amended by
redesignating subsection (c) as subsection (d) and by
inserting after subsection (b) the following new subsection:
``(c) Penalties Relating to Simple Retirement Accounts.--
``(1) Employer penalties.--An employer who fails to provide
1 or more notices required by section 408(l)(2)(C) shall pay
a penalty of $50 for each day on which such failures
continue.
``(2) Trustee penalties.--A trustee who fails--
``(A) to provide 1 or more statements required by the last
sentence of section 408(i) shall pay a penalty of $50 for
each day on which such failures continue, or
``(B) to provide 1 or more summary descriptions required by
section 408(l)(2)(B) shall pay a penalty of $50 for each day
on which such failures continue.
``(3) Reasonable cause exception.--No penalty shall be
imposed under this subsection with respect to any failure
which the taxpayer shows was due to reasonable cause.''
(5) Reporting requirements.--
(A) Section 408(l) is amended by adding at the end the
following new paragraph:
``(2) Simple retirement accounts.--
``(A) No employer reports.--Except as provided in this
paragraph, no report shall be required under this section by
an employer maintaining a qualified salary reduction
arrangement under subsection (p).
``(B) Summary description.--The trustee of any simple
retirement account established pursuant to a qualified salary
reduction arrangement under subsection (p) shall provide to
the employer maintaining the arrangement, each year a
description containing the following information:
``(i) The name and address of the employer and the trustee.
``(ii) The requirements for eligibility for participation.
``(iii) The benefits provided with respect to the
arrangement.
``(iv) The time and method of making elections with respect
to the arrangement.
``(v) The procedures for, and effects of, withdrawals
(including rollovers) from the arrangement.
``(C) Employee notification.--The employer shall notify
each employee immediately before the period for which an
election described in subsection (p)(5)(C) may be made of the
employee's opportunity to make such election. Such notice
shall include a copy of the description described in
subparagraph (B).''
(B) Section 408(l) is amended by striking ``An employer''
and inserting the following:
``(1) In general.--An employer''.
(6) Reporting requirements.--Section 408(i) is amended by
adding at the end the following new flush sentence:
``In the case of a simple retirement account under subsection
(p), only one report under this subsection shall be required
to be submitted each calendar year to the Secretary (at the
time provided under paragraph (2)) but, in addition to the
report under this subsection, there shall be furnished,
within 30 days after each calendar year, to the individual
on whose behalf the account is maintained a statement with
respect to the account balance as of the close of, and the
account activity during, such calendar year.''
(7) Exemption from top-heavy plan rules.--Section 416(g)(4)
(relating to special rules for top-heavy plans) is amended by
adding at the end the following new subparagraph:
``(G) Simple retirement accounts.--The term `top-heavy
plan' shall not include a simple retirement account under
section 408(p).''
(8) Employment taxes.--
(A) Paragraph (5) of section 3121(a) is amended by striking
``or'' at the end of subparagraph (F), by inserting ``or'' at
the end of subparagraph (G), and by adding at the end the
following new subparagraph:
``(H) under an arrangement to which section 408(p) applies,
other than any elective contributions under paragraph
(2)(A)(i) thereof,''.
(B) Section 209(a)(4) of the Social Security Act is amended
by inserting ``, or (J) under an arrangement to which section
408(p) of such Code applies, other than any elective
contributions under paragraph (2)(A)(i) thereof'' before the
semicolon at the end thereof.
(C) Paragraph (5) of section 3306(b) is amended by striking
``or'' at the end of subparagraph (F), by inserting ``or'' at
the end of subparagraph (G), and by adding at the end the
following new subparagraph:
``(H) under an arrangement to which section 408(p) applies,
other than any elective contributions under paragraph
(2)(A)(i) thereof,''.
(D) Paragraph (12) of section 3401(a) is amended by adding
the following new subparagraph:
``(D) under an arrangement to which section 408(p) applies;
or''.
(9) Conforming amendments.--
(A) Section 280G(b)(6) is amended by striking ``or'' at the
end of subparagraph (B), by striking the period at the end of
subparagraph (C) and inserting ``, or'' and by adding after
subparagraph (C) the following new subparagraph:
``(D) a simple retirement account described in section
408(p).''
(B) Section 402(g)(3) is amended by striking ``and'' at the
end of subparagraph (B), by striking the period at the end of
subparagraph (C) and inserting ``, and'', and by adding after
subparagraph (C) the following new subparagraph:
``(D) any elective employer contribution under section
408(p)(2)(A)(i).''
(C) Subsections (b), (c), (m)(4)(B), and (n)(3)(B) of
section 414 are each amended by inserting ``408(p),'' after
``408(k),''.
(D) Section 4972(d)(1)(A) is amended by striking ``and'' at
the end of clause (ii), by striking the period at the end of
clause (iii) and inserting ``, and'', and by adding after
clause (iii) the following new clause:
``(iv) any simple retirement account (within the meaning of
section 408(p)).''
(c) Repeal of Salary Reduction Simplified Employee
Pensions.--Section 408(k)(6) is amended by adding at the end
the following new subparagraph:
[[Page H5454]]
``(H) Termination.--This paragraph shall not apply to years
beginning after December 31, 1996. The preceding sentence
shall not apply to a simplified employee pension if the terms
of such pension, as in effect on December 31, 1996, provide
that an employee may make the election described in
subparagraph (A).''
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
1996.
SEC. 1422. EXTENSION OF SIMPLE PLAN TO 401(k) ARRANGEMENTS.
(a) Alternative Method of Satisfying Section 401(k)
Nondiscrimination Tests.--Section 401(k) (relating to cash or
deferred arrangements) is amended by adding at the end the
following new paragraph:
``(11) Adoption of simple plan to meet nondiscrimination
tests.--
``(A) In general.--A cash or deferred arrangement
maintained by an eligible employer shall be treated as
meeting the requirements of paragraph (3)(A)(ii) if such
arrangement meets--
``(i) the contribution requirements of subparagraph (B),
``(ii) the exclusive benefit requirements of subparagraph
(C), and
``(iii) the vesting requirements of section 408(p)(3).
``(B) Contribution requirements.--
``(i) In general.--The requirements of this subparagraph
are met if, under the arrangement--
``(I) an employee may elect to have the employer make
elective contributions for the year on behalf of the employee
to a trust under the plan in an amount which is expressed as
a percentage of compensation of the employee but which in no
event exceeds $6,000,
``(II) the employer is required to make a matching
contribution to the trust for the year in an amount equal to
so much of the amount the employee elects under subclause (I)
as does not exceed 3 percent of compensation for the year,
and
``(III) no other contributions may be made other than
contributions described in subclause (I) or (II).
``(ii) Employer may elect 2-percent nonelective
contribution.--An employer shall be treated as meeting the
requirements of clause (i)(II) for any year if, in lieu of
the contributions described in such clause, the employer
elects (pursuant to the terms of the arrangement) to make
nonelective contributions of 2 percent of compensation for
each employee who is eligible to participate in the
arrangement and who has at least $5,000 of compensation from
the employer for the year. If an employer makes an election
under this subparagraph for any year, the employer shall
notify employees of such election within a reasonable period
of time before the 30th day before the beginning of such
year.
``(C) Exclusive benefit.--The requirements of this
subparagraph are met for any year to which this paragraph
applies if no contributions were made, or benefits were
accrued, for services during such year under any qualified
plan of the employer on behalf of any employee eligible to
participate in the cash or deferred arrangement, other than
contributions described in subparagraph (B).
``(D) Definitions and special rule.--
``(i) Definitions.--For purposes of this paragraph, any
term used in this paragraph which is also used in section
408(p) shall have the meaning given such term by such
section.
``(ii) Coordination with top-heavy rules.--A plan meeting
the requirements of this paragraph for any year shall not be
treated as a top-heavy plan under section 416 for such
year.''
(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 defined
contribution plan shall be treated as meeting the
requirements of paragraph (2) with respect to matching
contributions if the plan--
``(A) meets the contribution requirements of subparagraph
(B) of subsection (k)(11),
``(B) meets the exclusive benefit requirements of
subsection (k)(11)(C), and
``(C) meets the vesting requirements of section
408(p)(3).''
(c) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 1996.
Subchapter B--Other Provisions
SEC. 1426. TAX-EXEMPT ORGANIZATIONS ELIGIBLE UNDER SECTION
401(k).
(a) In General.--Subparagraph (B) of section 401(k)(4) is
amended to read as follows:
``(B) Eligibility of state and local governments and tax-
exempt organizations.--
``(i) Tax-exempts eligible.--Except as provided in clause
(ii), any organization exempt from tax under this subtitle
may include a qualified cash or deferred arrangement as part
of a plan maintained by it.
``(ii) Governments ineligible.--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 clause shall
not apply to a rural cooperative plan or to a plan of an
employer described in clause (iii).
``(iii) Treatment of indian tribal governments.--An
employer which is an Indian tribal government (as defined in
section 7701(a)(40)), a subdivision of an Indian tribal
government (determined in accordance with section 7871(d)),
an agency or instrumentality of an Indian tribal government
or subdivision thereof, or a corporation chartered under
Federal, State, or tribal law which is owned in whole or in
part by any of the foregoing shall be treated as an
organization exempt from tax under this subtitle for purposes
of clause (i).''
(b) Effective Date.--The amendment made by this section
shall apply to plan years beginning after December 31, 1996,
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.
CHAPTER 3--NONDISCRIMINATION PROVISIONS
SEC. 1431. DEFINITION OF HIGHLY COMPENSATED EMPLOYEES; REPEAL
OF FAMILY AGGREGATION.
(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) for the preceding year--
``(i) had compensation from the employer in excess of
$80,000, and
``(ii) was in the top-paid group of the employer.
The Secretary shall adjust the $80,000 amount under
subparagraph (B) at the same time and in the same manner as
under section 415(d), except that the base period shall be
the calendar quarter ending September 30, 1996.''
(b) Repeal of Family Aggregation Rules.--
(1) In general.--Paragraph (6) of section 414(q) is hereby
repealed.
(2) Compensation limit.--Paragraph (17)(A) of section
401(a) is amended by striking the last sentence.
(3) Deduction.--Subsection (l) of section 404 is amended by
striking the last sentence.
(c) Conforming Amendments.--
(1)(A) Subsection (q) of section 414 is amended by striking
paragraphs (2), (5), (8), and (12) and by redesignating
paragraphs (3), (4), (7), (9), (10), and (11) as paragraphs
(2) through (7), respectively.
(B) Sections 129(d)(8)(B), 401(a)(5)(D)(ii), 408(k)(2)(C),
and 416(i)(1)(D) are each amended by striking ``section
414(q)(7)'' and inserting ``section 414(q)(4)''.
(C) Section 416(i)(1)(A) is amended by striking ``section
414(q)(8)'' and inserting ``section 414(r)(9)''.
(2)(A) Section 414(r) is amended by adding at the end 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) 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 on the
day before the date of the enactment of the Small Business
Job Protection Act of 1996.''.
(d) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to years beginning after December 31, 1996, except that
in determining whether an employee is a highly compensated
employee for years beginning in 1997, such amendments shall
be treated as having been in effect for years beginning in
1996.
(2) Family aggregation.--The amendments made by subsection
(b) shall apply to years beginning after December 31, 1996.
SEC. 1432. 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 amendments made by this section
shall apply to years beginning after December 31, 1996.
SEC. 1433. 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), as amended by section 1422, is
amended
[[Page H5455]]
by adding at the end the following new paragraph:
``(12) 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 rate of matching contribution with respect
to any elective contribution of a highly compensated employee
at any rate of elective contribution is greater than that
with respect to an employee who is not a highly compensated
employee.
``(iii) Alternative plan designs.--If the rate of any
matching contribution with respect to any rate of elective
contribution 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 rate of an employer's matching contribution does
not increase as an employee's rate of elective contributions
increase, and
``(II) the aggregate amount of matching contributions at
such rate of elective contribution is at least equal to the
aggregate 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) of this paragraph unless the
requirements of subparagraphs (B) and (C) of paragraph (2)
are met with respect to all employer contributions (including
matching contributions) taken into account in determining
whether the requirements of subparagraphs (B) and (C) of this
paragraph are met.
``(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), as amended by this Act, is amended
by redesignating paragraph (11) as paragraph (12) and by
adding after paragraph (10) the following new paragraph:
``(11) 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)(12),
``(ii) meets the notice requirements of subsection
(k)(12)(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 rate of an employer's matching contribution does
not increase as the rate of an employee's contributions or
elective deferrals increase, and
``(iii) the matching contribution with respect to any
highly compensated employee at any rate of an employee
contribution or rate of elective deferral 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'',
(B) by striking ``for such plan year'' and inserting ``for
the preceding plan year'', and
(C) by adding at the end the following new sentence: ``An
arrangement may apply this clause by using the plan year
rather than the preceding plan year if the employer so
elects, except that if such an election is made, it may not
be changed except as provided by the Secretary.''
(2) Matching and employee contributions.--Section
401(m)(2)(A) is amended--
(A) by inserting ``for such plan year'' after ``highly
compensated employees'',
(B) by inserting ``for the preceding plan year'' after
``eligible employees'' each place it appears in clause (i)
and clause (ii), and
(C) by adding at the end the following flush sentence:
``This subparagraph may be applied by using the plan year
rather than the preceding plan year if the employer so
elects, except that if such an election is made, it may not
be changed except as provided the Secretary.''
(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 the following new subparagraph:
``(E) For purposes of this paragraph, in the case of the
first plan year of any plan (other than a successor 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 the following: ``Rules similar to the rules of
subsection (k)(3)(E) shall apply for purposes of this
subsection.''
(e) Distribution of Excess Contributions and Excess
Aggregate 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 Dates.--
(1) In general.--The amendments made by this section shall
apply to years beginning after December 31, 1998.
(2) Exceptions.--The amendments made by subsections (c),
(d), and (e) shall apply to years beginning after December
31, 1996.
SEC. 1434. DEFINITION OF COMPENSATION FOR SECTION 415
PURPOSES.
(a) General Rule.--Section 415(c)(3) (defining
participant's compensation) is amended by adding at the end
the following new subparagraph:
``(D) Certain deferrals included.--The term `participant's
compensation' shall include--
``(i) any elective deferral (as defined in section
402(g)(3)), and
``(ii) any amount which is contributed by the employer at
the election of the employee and which is not includible in
the gross income of the employee under section 125 or 457.''
(b) Conforming Amendments.--
(1) Section 414(q)(4), as redesignated by section 1431, is
amended to read as follows:
``(4) Compensation.--For purposes of this subsection, the
term `compensation' has the meaning given such term by
section 415(c)(3).''
(2) Section 414(s)(2) is amended by inserting ``not'' after
``elect'' in the text and heading thereof.
(c) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 1997.
CHAPTER 4--MISCELLANEOUS PROVISIONS
SEC. 1441. 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, 1996.
SEC. 1442. ELIMINATION OF SPECIAL VESTING RULE FOR
MULTIEMPLOYER PLANS.
(a) In General.--Paragraph (2) of section 411(a) (relating
to minimum vesting standards) is amended--
[[Page H5456]]
(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, 1997, 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, 1999.
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. 1443. DISTRIBUTIONS UNDER RURAL COOPERATIVE PLANS.
(a) Distributions for Hardship or After a Certain Age.--
Section 401(k)(7) is amended by adding at the end 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) or of paragraph (2) merely by
reason of a hardship distribution or a distribution to a
participant after attainment of age 59\1/2\. For purposes of
this section, the term `hardship distribution' means a
distribution described in paragraph (2)(B)(i)(IV) (without
regard to the limitation of its application to profit-sharing
or stock bonus plans).''
(b) Public Utility Districts.--Clause (i) of section
401(k)(7)(B) (defining rural cooperative) is amended to read
as follows:
``(i) any organization which--
``(I) is engaged primarily in providing electric service on
a mutual or cooperative basis, or
``(II) is engaged primarily in providing electric service
to the public in its area of service and which is exempt from
tax under this subtitle or which is a State or local
government (or an agency or instrumentality thereof), other
than a municipality (or an agency or instrumentality
thereof),''.
(c) Effective Dates.--
(1) Distributions.--The amendments made by subsection (a)
shall apply to distributions after the date of the enactment
of this Act.
(2) Rural cooperative.--The amendments made by subsection
(b) shall apply to plan years beginning after December 31,
1996.
SEC. 1444. TREATMENT OF GOVERNMENTAL PLANS UNDER SECTION 415.
(a) 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.''
(b) Treatment of Certain Excess Benefit Plans.--
(1) In general.--Section 415 is amended by adding at the
end 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 the following new
paragraph:
``(14) 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 ``and'' at the end of subparagraph
(C), by striking the period at the end of subparagraph (D)
and inserting ``, and'', and by inserting immediately
thereafter the following new subparagraph:
``(E) a qualified governmental excess benefit arrangement
described in section 415(m).''
(c) Exemption for Survivor and Disability Benefits.--
Paragraph (2) of section 415(b) is amended by adding at the
end the following new subparagraph:
``(I) Exemption for survivor and disability benefits
provided under governmental plans.--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.''
(d) Revocation of Grandfather Election.--
(1) In general.--Subparagraph (C) of section 415(b)(10) is
amended by adding at the end the following new clause:
``(ii) Revocation of election.--An election under clause
(i) may be revoked not later than the last day of the third
plan year beginning after the date of the enactment of this
clause. The revocation shall apply to all plan years to which
the election applied and to all subsequent plan years. Any
amount paid by a plan in a taxable year ending after the
revocation shall be includible in income in such taxable year
under the rules of this chapter in effect for such taxable
year, except that, for purposes of applying the limitations
imposed by this section, any portion of such amount which is
attributable to any taxable year during which the election
was in effect shall be treated as received in such taxable
year.''
(2) Conforming amendment.--Subparagraph (C) of section
415(b)(10) is amended by striking ``This'' and inserting:
``(i) In general.--This''.
(e) Effective Date.--
(1) In general.--The amendments made by subsections (a),
(b), and (c) shall apply to years beginning after December
31, 1994. The amendments made by subsection (d) shall apply
with respect to revocations adopted after the date of the
enactment of this Act.
(2) Treatment for years beginning before january 1, 1995.--
Nothing in the amendments made by this section shall be
construed to infer that a governmental plan (as defined in
section 414(d) of the Internal Revenue Code of 1986) fails to
satisfy the requirements of section 415 of such Code for any
taxable year beginning before January 1, 1995.
SEC. 1445. 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 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 amendment made by this section
shall apply to years beginning after December 31, 1996.
SEC. 1446. CONTRIBUTIONS ON BEHALF OF DISABLED EMPLOYEES.
(a) All Disabled Participants Receiving Contributions.--
Section 415(c)(3)(C) is amended by adding at the end 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 amendment made by this section
shall apply to years beginning after December 31, 1996.
SEC. 1447. 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
[[Page H5457]]
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, as amended by section
1444(b)(2) (relating to governmental plans), is amended by
adding at the end the following new paragraph:
``(15) 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 period shall be the calendar quarter ending
September 30, 1994, and any increase under this paragraph
which is not a multiple of $500 shall be rounded to the next
lowest multiple of $500.''
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
1996.
SEC. 1448. TRUST REQUIREMENT FOR DEFERRED COMPENSATION PLANS
OF STATE AND LOCAL GOVERNMENTS.
(a) In General.--Section 457 is amended by adding at the
end the following new subsection:
``(g) Governmental Plans Must Maintain Set-Asides for
Exclusive Benefit of Participants.--
``(1) In general.--A plan maintained by an eligible
employer described in subsection (e)(1)(A) shall not be
treated as an eligible deferred compensation plan unless all
assets and income of the plan described in subsection (b)(6)
are held in trust for the exclusive benefit of participants
and their beneficiaries.
``(2) Taxability of trusts and participants.--For purposes
of this title--
``(A) a trust described in paragraph (1) shall be treated
as an organization exempt from taxation under section 501(a),
and
``(B) notwithstanding any other provision of this title,
amounts in the trust shall be includible in the gross income
of participants and beneficiaries only to the extent, and at
the time, provided in this section.
``(3) Custodial accounts and contracts.--For purposes of
this subsection, custodial accounts and contracts described
in section 401(f) shall be treated as trusts under rules
similar to the rules under section 401(f).''
(b) Conforming Amendment.--Paragraph (6) of section 457(b)
is amended by inserting ``except as provided in subsection
(g),'' before ``which provides that''.
(c) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to assets and
income described in section 457(b)(6) of the Internal Revenue
Code of 1986 held by a plan on and after the date of the
enactment of this Act.
(2) Transition rule.--In the case of assets and income
described in paragraph (1) held by a plan on the date of the
enactment of this Act, a trust need not be established by
reason of the amendments made by this section before
January 1, 1999.
SEC. 1449. TRANSITION RULE FOR COMPUTING MAXIMUM BENEFITS
UNDER SECTION 415 LIMITATIONS.
(a) In General.--Subparagraph (A) of section 767(d)(3) of
the Uruguay Round Agreements Act is amended to read as
follows:
``(A) Exception.--A plan that was adopted and in effect
before December 8, 1994, shall not be required to apply the
amendments made by subsection (b) with respect to benefits
accrued before the earlier of--
``(i) the later of the date a plan amendment applying such
amendment is adopted or made effective, or
``(ii) the first day of the first limitation year beginning
after December 31, 1999.
Determinations under section 415(b)(2)(E) of the Internal
Revenue Code of 1986 before such earlier date shall be made
with respect to such benefits on the basis of such section as
in effect on December 7, 1994 (except that the modification
made by section 1449(b) of the Small Business Job Protection
Act of 1996 shall be taken into account), and the provisions
of the plan as in effect on December 7, 1994, but only if
such provisions of the plan meet the requirements of such
section (as so in effect).''
(b) Modification of Certain Assumptions for Adjusting
Benefits of Defined Benefit Plans for Early Retirees.--
Subparagraph (E) of section 415(b)(2) (relating to limitation
on certain assumptions) is amended--
(1) by striking ``Except as provided in clause (ii), for
purposes of adjusting any benefit or limitation under
subparagraph (B) or (C),'' in clause (i) and inserting ``For
purposes of adjusting any limitation under subparagraph (C)
and, except as provided in clause (ii), for purposes of
adjusting any benefit under subparagraph (B),'', and
(2) by striking ``For purposes of adjusting the benefit or
limitation of any form of benefit subject to section
417(e)(3),'' in clause (ii) and inserting ``For purposes of
adjusting any benefit under subparagraph (B) for any form of
benefit subject to section 417(e)(3),''.
(c) Effective Date.--The amendments made by this section
shall take effect as if included in the provisions of section
767 of the Uruguay Round Agreements Act.
(d) Transitional Rule.--In the case of a plan that was
adopted and in effect before December 8, 1994, if--
(1) a plan amendment was adopted or made effective on or
before the date of the enactment of this Act applying the
amendments made by section 767 of the Uruguay Round
Agreements Act, and
(2) within 1 year after the date of the enactment of this
Act, a plan amendment is adopted which repeals the amendment
referred to in paragraph (1),
the amendment referred to in paragraph (1) shall not be taken
into account in applying section 767(d)(3)(A) of the Uruguay
Round Agreements Act, as amended by subsection (a).
SEC. 1450. MODIFICATIONS OF SECTION 403(b).
(a) Multiple Salary Reduction Agreements Permitted.--
(1) General rule.--For purposes of section 403(b) of the
Internal Revenue Code of 1986, the frequency that an employee
is permitted to enter into a salary reduction agreement, the
salary to which such an agreement may apply, and the ability
to revoke such an agreement shall be determined under the
rules applicable to cash or deferred elections under section
401(k) of such Code.
(2) Effective date.--This subsection shall apply to taxable
years beginning after December 31, 1995.
(b) Treatment of Indian Tribal Governments.--
(1) In general.--In the case of any contract purchased in a
plan year beginning before January 1, 1995, section 403(b) of
the Internal Revenue Code of 1986 shall be applied as if any
reference to an employer described in section 501(c)(3) of
the Internal Revenue Code of 1986 which is exempt from tax
under section 501 of such Code included a reference to an
employer which is an Indian tribal government (as defined by
section 7701(a)(40) of such Code), a subdivision of an Indian
tribal government (determined in accordance with section
7871(d) of such Code), an agency or instrumentality of an
Indian tribal government or subdivision thereof, or a
corporation chartered under Federal, State, or tribal law
which is owned in whole or in part by any of the foregoing.
(2) Rollovers.--Solely for purposes of applying section
403(b)(8) of such Code to a contract to which paragraph (1)
applies, a qualified cash or deferred arrangement under
section 401(k) of such Code shall be treated as if it were a
plan or contract described in clause (ii) of section
403(b)(8)(A) of such Code.
(c) Elective Deferrals.--
(1) In general.--Subparagraph (E) of section 403(b)(1) is
amended to read as follows:
``(E) in the case of a contract purchased under a salary
reduction agreement, the contract meets the requirements of
section 401(a)(30),''.
(2) Effective date.--The amendment made by this subsection
shall apply to years beginning after December 31, 1995,
except a contract shall not be required to meet any change in
any requirement by reason of such amendment before the 90th
day after the date of the enactment of this Act.
SEC. 1451. WAIVER OF MINIMUM PERIOD FOR JOINT AND SURVIVOR
ANNUITY EXPLANATION BEFORE ANNUITY STARTING
DATE.
(a) General Rule.--For purposes of section 417(a)(3)(A) of
the Internal Revenue Code of 1986 (relating to plan to
provide written explanations), the minimum period prescribed
by the Secretary of the Treasury between the date that the
explanation referred to in such section is provided and the
annuity starting date shall not apply if waived by the
participant and, if applicable, the participant's spouse.
(b) Effective Date.--Subsection (a) shall apply to plan
years beginning after December 31, 1996.
SEC. 1452. REPEAL OF LIMITATION IN CASE OF DEFINED BENEFIT
PLAN AND DEFINED CONTRIBUTION PLAN FOR SAME
EMPLOYEE; EXCESS DISTRIBUTIONS.
(a) In General.--Section 415(e) is repealed.
(b) Excess Distributions.--Section 4980A is amended by
adding at the end the following new subsection:
``(g) Limitation on Application.--This section shall not
apply to distributions during years beginning after December
31, 1995, and before January 1, 1999, and such distributions
shall be treated as made first from amounts not described in
subsection (f).''
(c) Conforming Amendments.--
(1) Paragraph (1) of section 415(a) is amended--
(A) by adding ``or'' at the end of subparagraph (A),
(B) by striking ``, or'' at the end of subparagraph (B) and
inserting a period, and
(C) by striking subparagraph (C).
(2) Subparagraph (B) of section 415(b)(5) is amended by
striking ``and subsection (e)''.
(3) Paragraph (1) of section 415(f) is amended by striking
``subsections (b), (c), and (e)'' and inserting ``subsections
(b) and (c)''.
(4) Subsection (g) of section 415 is amended by striking
``subsections (e) and (f)'' in the last sentence and
inserting ``subsection (f)''.
(5) Clause (i) of section 415(k)(2)(A) is amended to read
as follows:
``(i) any contribution made directly by an employee under
such an arrangement shall not be treated as an annual
addition for purposes of subsection (c), and''.
(6) Clause (ii) of section 415(k)(2)(A) is amended by
striking ``subsections (c) and (e)'' and inserting
``subsection (c)''.
(7) Section 416 is amended by striking subsection (h).
(d) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to limitation
years beginning after December 31, 1998.
[[Page H5458]]
(2) Excess distributions.--The amendment made by subsection
(b) shall apply to years beginning after December 31, 1995.
SEC. 1453. TAX ON PROHIBITED TRANSACTIONS.
(a) In General.--Section 4975(a) is amended by striking ``5
percent'' and inserting ``10 percent''.
(b) Effective Date.--The amendment made by this section
shall apply to prohibited transactions occurring after the
date of the enactment of this Act.
SEC. 1454. 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 primary direction
or control by the recipient.''
(b) Effective Date.--The amendment made by subsection (a)
shall apply to years beginning after December 31, 1996, 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. 1455. UNIFORM PENALTY PROVISIONS TO APPLY TO CERTAIN
PENSION REPORTING REQUIREMENTS.
(a) Penalties.--
(1) Statements.--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) Reports.--Paragraph (2) of section 6724(d), as amended
by section 1116, is amended by striking ``or'' at the end of
subparagraph (T), by striking the period at the end of
subparagraph (U) and inserting a comma, and by inserting
after subparagraph (U) the following new subparagraphs:
``(V) 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
``(W) 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 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 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)(W).''
(3) Subsection (a) of section 6693 is amended by adding at
the end 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)(V).''
(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, 1996.
SEC. 1456. RETIREMENT BENEFITS OF MINISTERS NOT SUBJECT TO
TAX ON NET EARNINGS FROM SELF-EMPLOYMENT.
(a) In General.--Section 1402(a)(8) (defining net earning
from self-employment) is amended by inserting ``, but shall
not include in such net earnings from self-employment the
rental value of any parsonage (whether or not excludable
under section 107) provided after the individual retires, or
any other retirement benefit received by such individual from
a church plan (as defined in section 414(e)) after the
individual retires'' before the semicolon at the end.
(b) Effective Date.--The amendments made by this section
shall apply to years beginning before, on, or after December
31, 1994.
SEC. 1457. DATE FOR ADOPTION OF PLAN AMENDMENTS.
If any amendment made by this subtitle requires an
amendment to any plan or annuity contract, such amendment
shall not be required to be made before the first day of the
first plan year beginning on or after January 1, 1997, if--
(1) during the period after such amendment takes effect and
before such first plan year, the plan or contract is operated
in accordance with the requirements of such amendment, and
(2) such amendment applies retroactively to such period.
In the case of a governmental plan (as defined in section
414(d) of the Internal Revenue Code of 1986), this section
shall be applied by substituting ``1999'' for ``1997''.
Subtitle E--Foreign Simplification
SEC. 1501. REPEAL OF INCLUSION OF CERTAIN EARNINGS INVESTED
IN EXCESS PASSIVE ASSETS.
(a) In General.--
(1) Repeal of inclusion.--Paragraph (1) of section 951(a)
(relating to amounts included in gross income of United
States shareholders) is amended by striking subparagraph (C),
by striking ``; and'' at the end of subparagraph (B) and
inserting a period, and by adding ``and'' at the end of
subparagraph (A).
(2) Repeal of inclusion amount.--Section 956A (relating to
earnings invested in excess passive assets) is repealed.
(b) Conforming Amendments.--
(1) Paragraph (1) of section 956(b) is amended to read as
follows:
``(1) Applicable earnings.--For purposes of this section,
the term `applicable earnings' means, with respect to any
controlled foreign corporation, the sum of--
``(A) the amount (not including a deficit) referred to in
section 316(a)(1), and
``(B) the amount referred to in section 316(a)(2),
but reduced by distributions made during the taxable year.''
(2) Paragraph (3) of section 956(b) is amended to read as
follows:
``(3) Special rule where corporation ceases to be
controlled foreign corporation.--If any foreign corporation
ceases to be a controlled foreign corporation during any
taxable year--
``(A) the determination of any United States shareholder's
pro rata share shall be made on the basis of stock owned
(within the meaning of section 958(a)) by such shareholder on
the last day during the taxable year on which the foreign
corporation is a controlled foreign corporation,
``(B) the average referred to in subsection (a)(1)(A) for
such taxable year shall be determined by only taking into
account quarters ending on or before such last day, and
``(C) in determining applicable earnings, the amount taken
into account by reason of being described in paragraph (2) of
section 316(a) shall be the portion of the amount so
described which is allocable (on a pro rata basis) to the
part of such year during which the corporation is a
controlled foreign corporation.''
(3) Subsection (a) of section 959 (relating to exclusion
from gross income of previously taxed earnings and profits)
is amended by adding ``or'' at the end of paragraph (1), by
striking ``or'' at the end of paragraph (2), and by striking
paragraph (3).
(4) Subsection (a) of section 959 is amended by striking
``paragraphs (2) and (3)'' in the last sentence and inserting
``paragraph (2)''.
(5) Subsection (c) of section 959 is amended by adding at
the end the following flush sentence:
``References in this subsection to section 951(a)(1)(C) and
subsection (a)(3) shall be treated as references to such
provisions as in effect on the day before the date of the
enactment of the Small Business Job Protection Act of 1996.''
(6) Paragraph (1) of section 959(f) is amended to read as
follows:
``(1) In general.--For purposes of this section, amounts
that would be included under subparagraph (B) of section
951(a)(1) (determined without regard to this section) shall
be treated as attributable first to earnings described in
subsection (c)(2), and then to earnings described in
subsection (c)(3).''
(7) Paragraph (2) of section 959(f) is amended by striking
``subparagraphs (B) and (C) of section 951(a)(1)'' and
inserting ``section 951(a)(1)(B)''.
(8) Subsection (b) of section 989 is amended by striking
``subparagraph (B) or (C) of section 951(a)(1)'' and
inserting ``section 951(a)(1)(B)''.
(9) Paragraph (9) of section 1297(b) is amended by striking
``subparagraph (B) or (C) of section 951(a)(1)'' and
inserting ``section 951(a)(1)(B)''.
(10) Subsections (d)(3)(B) and (e)(2)(B)(ii) of section
1297 are each amended by striking ``or section 956A''.
(c) Clerical Amendment.--The table of sections for subpart
F of part III of subchapter N of chapter 1 is amended by
striking the item relating to section 956A.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years of foreign corporations
beginning after December 31, 1996, and to taxable years of
United States shareholders within which or with which such
taxable years of foreign corporations end.
Subtitle F--Revenue Offsets
SEC. 1601. TERMINATION OF PUERTO RICO AND POSSESSION TAX
CREDIT.
(a) In General.--Section 936 is amended by adding at the
end the following new subsection:
``(j) Termination.--
``(1) In general.--Except as otherwise provided in this
subsection, this section shall not apply to any taxable year
beginning after December 31, 1995.
``(2) Transition rules for active business income credit.--
Except as provided in paragraph (3)--
``(A) Economic activity credit.--In the case of an existing
credit claimant--
``(i) with respect to a possession other than Puerto Rico,
and
``(ii) to which subsection (a)(4)(B) does not apply,
the credit determined under subsection (a)(1)(A) shall be
allowed for taxable years beginning after December 31, 1995,
and before January 1, 2002.
[[Page H5459]]
``(B) Special rule for reduced credit.--
``(i) In general.--In the case of an existing credit
claimant to which subsection (a)(4)(B) applies, the credit
determined under subsection (a)(1)(A) shall be allowed for
taxable years beginning after December 31, 1995, and before
January 1, 1998.
``(ii) Election irrevocable after 1997.--An election under
subsection (a)(4)(B)(iii) which is in effect for the
taxpayer's last taxable year beginning before 1997 may not be
revoked unless it is revoked for the taxpayer's first taxable
year beginning in 1997 and all subsequent taxable years.
``(C) Economic activity credit for puerto rico.--
``For economic activity credit for Puerto Rico, see section 30A.
``(3) Additional restricted credit.--
``(A) In general.--In the case of an existing credit
claimant--
``(i) the credit under subsection (a)(1)(A) shall be
allowed for the period beginning with the first taxable year
after the last taxable year to which subparagraph (A) or (B)
of paragraph (2), whichever is appropriate, applied and
ending with the last taxable year beginning before January 1,
2006, except that
``(ii) the aggregate amount of taxable income taken into
account under subsection (a)(1)(A) for any such taxable year
shall not exceed the adjusted base period income of such
claimant.
``(B) Coordination with subsection (a)(4).--The amount of
income described in subsection (a)(1)(A) which is taken into
account in applying subsection (a)(4) shall be such income as
reduced under this paragraph.
``(4) Adjusted base period income.--For purposes of
paragraph (3)--
``(A) In general.--The term `adjusted base period income'
means the average of the inflation-adjusted possession
incomes of the corporation for each base period year.
``(B) Inflation-adjusted possession income.--For purposes
of subparagraph (A), the inflation-adjusted possession income
of any corporation for any base period year shall be an
amount equal to the sum of--
``(i) the possession income of such corporation for such
base period year, plus
``(ii) such possession income multiplied by the inflation
adjustment percentage for such base period year.
``(C) Inflation adjustment percentage.--For purposes of
subparagraph (B), the inflation adjustment percentage for any
base period year means the percentage (if any) by which--
``(i) the CPI for 1995, exceeds
``(ii) the CPI for the calendar year in which the base
period year for which the determination is being made ends.
For purposes of the preceding sentence, the CPI for any
calendar year is the CPI (as defined in section 1(f)(5)) for
such year under section 1(f)(4).
``(D) Increase in inflation adjustment percentage for
growth during base years.--The inflation adjustment
percentage (determined under subparagraph (C) without regard
to this subparagraph) for each of the 5 taxable years
referred to in paragraph (5)(A) shall be increased by--
``(i) 5 percentage points in the case of a taxable year
ending during the 1-year period ending on October 13, 1995;
``(ii) 10.25 percentage points in the case of a taxable
year ending during the 1-year period ending on October 13,
1994;
``(iii) 15.76 percentage points in the case of a taxable
year ending during the 1-year period ending on October 13,
1993;
``(iv) 21.55 percentage points in the case of a taxable
year ending during the 1-year period ending on October 13,
1992; and
``(v) 27.63 percentage points in the case of a taxable year
ending during the 1-year period ending on October 13, 1991.
``(5) Base period year.--For purposes of this subsection--
``(A) In general.--The term `base period year' means each
of 3 taxable years which are among the 5 most recent taxable
years of the corporation ending before October 14, 1995,
determined by disregarding--
``(i) one taxable year for which the corporation had the
largest inflation-adjusted possession income, and
``(ii) one taxable year for which the corporation had the
smallest inflation-adjusted possession income.
``(B) Corporations not having significant possession income
throughout 5-year period.--
``(i) In general.--If a corporation does not have
significant possession income for each of the most recent 5
taxable years ending before October 14, 1995, then, in lieu
of applying subparagraph (A), the term `base period year'
means only those taxable years (of such 5 taxable years) for
which the corporation has significant possession income;
except that, if such corporation has significant possession
income for 4 of such 5 taxable years, the rule of
subparagraph (A)(ii) shall apply.
``(ii) Special rule.--If there is no year (of such 5
taxable years) for which a corporation has significant
possession income--
``(I) the term `base period year' means the first taxable
year ending on or after October 14, 1995, but
``(II) the amount of possession income for such year which
is taken into account under paragraph (4) shall be the amount
which would be determined if such year were a short taxable
year ending on September 30, 1995.
``(iii) Significant possession income.--For purposes of
this subparagraph, the term `significant possession income'
means possession income which exceeds 2 percent of the
possession income of the taxpayer for the taxable year (of
the period of 6 taxable years ending with the first taxable
year ending on or after October 14, 1995) having the greatest
possession income.
``(C) Election to use one base period year.--
``(i) In general.--At the election of the taxpayer, the
term `base period year' means--
``(I) only the last taxable year of the corporation ending
in calendar year 1992, or
``(II) a deemed taxable year which includes the first ten
months of calendar year 1995.
``(ii) Base period income for 1995.--In determining the
adjusted base period income of the corporation for the deemed
taxable year under clause (i)(II), the possession income
shall be annualized and shall be determined without regard to
any extraordinary item.
``(iii) Election.--An election under this subparagraph by
any possession corporation may be made only for the
corporation's first taxable year beginning after December 31,
1995, for which it is a possession corporation. The rules of
subclauses (II) and (III) of subsection (a)(4)(B)(iii) shall
apply to the election under this subparagraph.
``(D) Acquisitions and dispositions.--Rules similar to the
rules of subparagraphs (A) and (B) of section 41(f)(3) shall
apply for purposes of this subsection.
``(6) Possession income.--For purposes of this subsection,
the term `possession income' means, with respect to any
possession, the income referred to in subsection (a)(1)(A)
determined with respect to that possession. In no event shall
possession income be treated as being less than zero.
``(7) Short years.--If the current year or a base period
year is a short taxable year, the application of this
subsection shall be made with such annualizations as the
Secretary shall prescribe.
``(8) Special rules for certain possessions.--
``(A) In general.--In the case of an existing credit
claimant with respect to an applicable possession, this
section (other than the preceding paragraphs of this
subsection) shall apply to such claimant with respect to such
applicable possession for taxable years beginning after
December 31, 1995, and before January 1, 2006.
``(B) Applicable possession.--For purposes of this
paragraph, the term `applicable possession' means Guam,
American Samoa, and the Commonwealth of the Northern Mariana
Islands.
``(9) Existing credit claimant.--For purposes of this
subsection--
``(A) In general.--The term `existing credit claimant'
means a corporation--
``(i) which was actively conducting a trade or business in
a possession on October 13, 1995, and
``(ii) with respect to which an election under this section
is in effect for the corporation's taxable year which
includes October 13, 1995.
``(B) New lines of business prohibited.--If, after October
13, 1995, a corporation which would (but for this
subparagraph) be an existing credit claimant adds a
substantial new line of business, such corporation shall
cease to be treated as an existing credit claimant as of the
close of the taxable year ending before the date of such
addition.
``(C) Binding contract exception.--If, on October 13, 1995,
and at all times thereafter, there is in effect with respect
to a corporation a binding contract for the acquisition of
assets to be used in, or for the sale of assets to be
produced from, a trade or business, the corporation shall be
treated for purposes of this paragraph as actively conducting
such trade or business on October 13, 1995. The preceding
sentence shall not apply if such trade or business is not
actively conducted before January 1, 1996.
``(10) Separate application to each possession.--For
purposes of determining--
``(A) whether a taxpayer is an existing credit claimant,
and
``(B) the amount of the credit allowed under this section,
this subsection (and so much of this section as relates to
this subsection) shall be applied separately with respect to
each possession.''
(b) Economic Activity Credit for Puerto Rico.--
(1) In general.--Subpart B of part IV of subchapter A of
chapter 1 is amended by adding at the end the following new
section:
``SEC. 30A. PUERTO RICAN ECONOMIC ACTIVITY CREDIT.
``(a) Allowance of Credit.--
``(1) In general.--Except as otherwise provided in this
section, if the conditions of both paragraph (1) and
paragraph (2) of subsection (b) are satisfied with respect to
a qualified domestic corporation, there shall be allowed as a
credit against the tax imposed by this chapter an amount
equal to the portion of the tax which is attributable to the
taxable income, from sources without the United States,
from--
``(A) the active conduct of a trade or business within
Puerto Rico, or
``(B) the sale or exchange of substantially all of the
assets used by the taxpayer in the active conduct of such
trade or business.
In the case of any taxable year beginning after December 31,
2001, the aggregate amount of taxable income taken into
account under the preceding sentence (and in applying
subsection (d)) shall not exceed the adjusted base period
income of such corporation, as determined in the same manner
as under section 936(j).
``(2) Qualified domestic corporation.--For purposes of
paragraph (1), the term `qualified domestic corporation'
means a domestic corporation--
``(A) which is an existing credit claimant with respect to
Puerto Rico, and
``(B) with respect to which section 936(a)(4)(B) does not
apply for the taxable year.
``(3) Separate application.--For purposes of determining--
``(A) whether a taxpayer is an existing credit claimant
with respect to Puerto Rico, and
[[Page H5460]]
``(B) the amount of the credit allowed under this section,
this section (and so much of section 936 as relates to this
section) shall be applied separately with respect to Puerto
Rico.
``(b) Conditions Which Must Be Satisfied.--The conditions
referred to in subsection (a) are--
``(1) 3-year period.--If 80 percent or more of the gross
income of the qualified domestic corporation for the 3-year
period immediately preceding the close of the taxable year
(or for such part of such period immediately preceding the
close of such taxable year as may be applicable) was derived
from sources within a possession (determined without regard
to section 904(f)).
``(2) Trade or business.--If 75 percent or more of the
gross income of the qualified domestic corporation for such
period or such part thereof was derived from the active
conduct of a trade or business within a possession.
``(c) Credit Not Allowed Against Certain Taxes.--The credit
provided by subsection (a) shall not be allowed against the
tax imposed by--
``(1) section 59A (relating to environmental tax),
``(2) section 531 (relating to the tax on accumulated
earnings),
``(3) section 541 (relating to personal holding company
tax), or
``(4) section 1351 (relating to recoveries of foreign
expropriation losses).
``(d) Limitations on Credit for Active Business Income.--
The amount of the credit determined under subsection (a) for
any taxable year shall not exceed the sum of the following
amounts:
``(1) 60 percent of the sum of--
``(A) the aggregate amount of the qualified domestic
corporation's qualified possession wages for such taxable
year, plus
``(B) the allocable employee fringe benefit expenses of the
qualified domestic corporation for such taxable year.
``(2) The sum of--
``(A) 15 percent of the deprecation allowances for the
taxable year with respect to short-life qualified tangible
property,
``(B) 40 percent of the depreciation allowances for the
taxable year with respect to medium-life qualified tangible
property, and
``(C) 65 percent of the depreciation allowances for the
taxable year with respect to long-life qualified tangible
property.
``(3) If the qualified domestic corporation does not have
an election to use the method described in section
936(h)(5)(C)(ii) (relating to profit split) in effect for the
taxable year, the amount of the qualified possession income
taxes for the taxable year allocable to nonsheltered income.
``(e) Administrative Provisions.--For purposes of this
title--
``(1) the provisions of section 936 (including any
applicable election thereunder) shall apply in the same
manner as if the credit under this section were a credit
under section 936(a)(1)(A) for a domestic corporation to
which section 936(a)(4)(A) applies,
``(2) the credit under this section shall be treated in the
same manner as the credit under section 936, and
``(3) a corporation to which this section applies shall be
treated in the same manner as if it were a corporation
electing the application of section 936.
``(f) Definitions.--For purposes of this section, any term
used in this section which is also used in section 936 shall
have the same meaning given such term by section 936.
``(g) Application of Section.--This section shall apply to
taxable years beginning after December 31, 1995, and before
January 1, 2006.''
(2) Conforming amendments.--
(A) Paragraph (1) of section 55(c) is amended by striking
``and the section 936 credit allowable under section 27(b)''
and inserting ``, the section 936 credit allowable under
section 27(b), and the Puerto Rican economic activity credit
under section 30A''.
(B) Subclause (I) of section 56(g)(4)(C)(ii) is amended--
(i) by inserting ``30A,'' before ``936'', and
(ii) by striking ``and (i)'' and inserting ``, (i), and
(j)''.
(C) Clause (iii) of section 56(g)(4)(C) is amended by
adding at the end the following new subclause:
``(VI) Application to section 30a corporations.--References
in this clause to section 936 shall be treated as including
references to section 30A.''
(D) Subsection (b) of section 59 is amended by striking
``section 936,'' and all that follows and inserting ``section
30A or 936, alternative minimum taxable income shall not
include any income with respect to which a credit is
determined under section 30A or 936.''.
(E) The table of sections for subpart B of part IV of
subchapter A of chapter 1 is amended by adding at the end the
following new item:
``Sec. 30A. Puerto Rican economic activity credit.''
(F)(i) The heading for subpart B of part IV of subchapter A
of chapter 1 is amended to read as follows:
``Subpart B--Other Credits''.
(ii) The table of subparts for part IV of subchapter A of
chapter 1 is amended by striking the item relating to subpart
B and inserting the following new item:
``Subpart B. Other credits.''
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
1995.
SEC. 1602. REPEAL OF EXCLUSION FOR INTEREST ON LOANS USED TO
ACQUIRE EMPLOYER SECURITIES.
(a) In General.--Section 133 (relating to interest on
certain loans used to acquire employer securities) is hereby
repealed.
(b) Conforming Amendments.--
(1) Subparagraph (B) of section 291(e)(1) is amended by
striking clause (iv) and by redesignating clause (v) as
clause (iv).
(2) Section 812 is amended by striking subsection (g).
(3) Paragraph (5) of section 852(b) is amended by striking
subparagraph (C).
(4) Paragraph (2) of section 4978(b) is amended by striking
subparagraph (A) and all that follows and inserting the
following:
``(A) first from qualified securities to which section 1042
applied acquired during the 3-year period ending on the date
of the disposition, beginning with the securities first so
acquired, and
``(B) then from any other employer securities.
If subsection (d) applies to a disposition, the disposition
shall be treated as made from employer securities in the
opposite order of the preceding sentence.''.
(5)(A) Section 4978B (relating to tax on disposition of
employer securities to which section 133 applied) is hereby
repealed.
(B) The table of sections for chapter 43 is amended by
striking the item relating to section 4978B.
(6) Subsection (e) of section 6047 is amended by striking
paragraphs (1), (2), and (3) and inserting the following new
paragraphs:
``(1) any employer maintaining, or the plan administrator
(within the meaning of section 414(g)) of, an employee stock
ownership plan which holds stock with respect to which
section 404(k) applies to dividends paid on such stock, or
``(2) both such employer or plan administrator,''.
(7) Subsection (f) of section 7872 is amended by striking
paragraph (12).
(8) The table of sections for part III of subchapter B of
chapter 1 is amended by striking the item relating to section
133.
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to loans made after October 13, 1995.
(2) Refinancings.--The amendments made by this section
shall not apply to loans made after October 13, 1995, to
refinance securities acquisition loans (determined without
regard to section 133(b)(1)(B) of the Internal Revenue Code
of 1986, as in effect on the day before the date of the
enactment of this Act) made on or before such date or to
refinance loans described in this paragraph if--
(A) the refinancing loans meet the requirements of section
133 of such Code (as so in effect),
(B) immediately after the refinancing the principal amount
of the loan resulting from the refinancing does not exceed
the principal amount of the refinanced loan (immediately
before the refinancing), and
(C) the term of such refinancing loan does not extend
beyond the last day of the term of the original securities
acquisition loan.
For purposes of this paragraph, the term ``securities
acquisition loan'' includes a loan from a corporation to an
employee stock ownership plan described in section 133(b)(3)
of such Code (as so in effect).
(3) Exception.--Any loan made pursuant to a binding written
contract in effect on October 13, 1995, and at all times
thereafter before such loan is made, shall be treated for
purposes of paragraphs (1) and (2) as a loan made before such
date.
SEC. 1603. 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 the
following new paragraph:
``(17) Treatment of certain amounts derived from foreign
corporations.--
``(A) In general.--Notwithstanding paragraph (1), any
amount included in gross income under section 951(a)(1)(A)
shall be included as an item of gross income derived from an
unrelated trade or business to the extent the amount so
included is attributable to insurance income (as defined in
section 953) which, if derived directly by the organization,
would be treated as gross income 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) Exception.--Subparagraph (A) shall not apply to
income attributable to a policy of insurance or reinsurance
with respect to which the person (directly or indirectly)
insured is--
``(i) such organization,
``(ii) an affiliate of such organization which is exempt
from tax under section 501(a), or
``(iii) a director or officer of, or an individual who
(directly or indirectly) performs services for, such
organization or affiliate but only if the insurance covers
primarily risks associated with the performance of services
in connection with such organization or affiliate.
For purposes of this subparagraph, the determination as to
whether an entity is an affiliate of an organization shall be
made under rules similar to the rules of section
168(h)(4)(B).
``(C) 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 amendment made by this section
shall apply to amounts included in gross income in any
taxable year beginning after December 31, 1995.
SEC. 1604. DEPRECIATION UNDER INCOME FORECAST METHOD.
(a) General Rule.--Section 167 (relating to depreciation)
is amended by redesignating subsection (g) as subsection (h)
and by inserting
[[Page H5461]]
after subsection (f) the following new subsection:
``(g) Depreciation Under Income Forecast Method.--
``(1) In general.--If the depreciation deduction allowable
under this section to any taxpayer with respect to any
property is determined under the income forecast method or
any similar method--
``(A) the income from the property to be taken into account
in determining the depreciation deduction under such method
shall be equal to the amount of income earned in connection
with the property before the close of the 10th taxable year
following the taxable year in which the property was placed
in service,
``(B) the adjusted basis of the property shall only include
amounts with respect to which the requirements of section
461(h) are satisfied,
``(C) the depreciation deduction under such method for the
10th taxable year beginning after the taxable year in which
the property was placed in service shall be equal to the
adjusted basis of such property as of the beginning of such
10th taxable year, and
``(D) such taxpayer shall pay (or be entitled to receive)
interest computed under the look-back method of paragraph (2)
for any recomputation year.
``(2) Look-back method.--The interest computed under the
look-back method of this paragraph for any recomputation year
shall be determined by--
``(A) first determining the depreciation deductions under
this section with respect to such property which would have
been allowable for prior taxable years if the determination
of the amounts so allowable had been made on the basis of the
sum of the following (instead of the estimated income from
such property)--
``(i) the actual income earned in connection with such
property for periods before the close of the recomputation
year, and
``(ii) an estimate of the future income to be earned in
connection with such property for periods after the
recomputation year and before the close of the 10th taxable
year following the taxable year in which the property was
placed in service,
``(B) second, determining (solely for purposes of computing
such interest) the overpayment or underpayment of tax for
each such prior taxable year which would result solely from
the application of subparagraph (A), and
``(C) then using the adjusted overpayment rate (as defined
in section 460(b)(7)), compounded daily, on the overpayment
or underpayment determined under subparagraph (B).
For purposes of the preceding sentence, any cost incurred
after the property is placed in service (which is not treated
as a separate property under paragraph (5)) shall be taken
into account by discounting (using the Federal mid-term rate
determined under section 1274(d) as of the time such cost is
incurred) such cost to its value as of the date the property
is placed in service. The taxpayer may elect with respect to
any property to have the preceding sentence not apply to such
property.
``(3) Exception from look-back method.--Paragraph (1)(D)
shall not apply with respect to any property which, when
placed in service by the taxpayer, had a basis of $100,000 or
less.
``(4) Recomputation year.--For purposes of this subsection,
except as provided in regulations, the term `recomputation
year' means, with respect to any property, the 3d and the
10th taxable years beginning after the taxable year in which
the property was placed in service, unless the actual income
earned in connection with the property for the period before
the close of such 3d or 10th taxable year is within 10
percent of the income earned in connection with the property
for such period which was taken into account under paragraph
(1)(A).
``(5) Special rules.--
``(A) Certain costs treated as separate property.--For
purposes of this subsection, the following costs shall be
treated as separate properties:
``(i) Any costs incurred with respect to any property after
the 10th taxable year beginning after the taxable year in
which the property was placed in service.
``(ii) Any costs incurred after the property is placed in
service and before the close of such 10th taxable year if
such costs are significant and give rise to a significant
increase in the income from the property which was not
included in the estimated income from the property.
``(B) Syndication income from television series.--In the
case of property which is an episode in a television series,
income from syndicating such series shall not be required to
be taken into account under this subsection before the
earlier of--
``(i) the 4th taxable year beginning after the date the
first episode in such series is placed in service, or
``(ii) the earliest taxable year in which the taxpayer has
an arrangement relating to the future syndication of such
series.
``(C) Special rules for financial exploitation of
characters, etc.--For purposes of this subsection, in the
case of television and motion picture films, the income from
the property shall include income from the exploitation of
characters, designs, scripts, scores, and other incidental
income associated with such films, but only to the extent
that such income is earned in connection with the ultimate
use of such items by, or the ultimate sale of merchandise to,
persons who are not related persons (within the meaning of
section 267(b)) to the taxpayer.
``(D) Collection of interest.--For purposes of subtitle F
(other than sections 6654 and 6655), any interest required to
be paid by the taxpayer under paragraph (1) for any
recomputation year shall be treated as an increase in the tax
imposed by this chapter for such year.
``(E) Determinations.--For purposes of paragraph (2),
determinations of the amount of income earned in connection
with any property shall be made in the same manner as for
purposes of applying the income forecast method; except that
any income from the disposition of such property shall be
taken into account.
``(F) Treatment of pass-thru entities.--Rules similar to
the rules of section 460(b)(4) shall apply for purposes of
this subsection.''
(b) Effective Date.--
(1) In general.--The amendment made by subsection (a) shall
apply to property placed in service after September 13, 1995.
(2) Binding contracts.--The amendment made by subsection
(a) shall not apply to any property produced or acquired by
the taxpayer pursuant to a written contract which was binding
on September 13, 1995, and at all times thereafter before
such production or acquisition.
SEC. 1605. REPEAL OF EXCLUSION FOR PUNITIVE DAMAGES AND FOR
DAMAGES NOT ATTRIBUTABLE TO PHYSICAL INJURIES
OR SICKNESS.
(a) In General.--Paragraph (2) of section 104(a) (relating
to compensation for injuries or sickness) is amended to read
as follows:
``(2) the amount of any damages (other than punitive
damages) received (whether by suit or agreement and whether
as lump sums or as periodic payments) on account of personal
physical injuries or physical sickness;''.
(b) Emotional Distress as Such Treated as Not Physical
Injury or Physical Sickness.--Section 104(a) is amended by
striking the last sentence and inserting the following new
sentence: ``For purposes of paragraph (2), emotional distress
shall not be treated as a physical injury or physical
sickness. The preceding sentence shall not apply to an amount
of damages not in excess of the amount paid for medical care
(described in subparagraph (A) or (B) of section 213(d)(1))
attributable to emotional distress.''.
(c) Application of Prior Law for States in Which Only
Punitive Damages May Be Awarded in Wrongful Death Actions.--
Section 104 is amended by redesignating subsection (c) as
subsection (d) and by inserting after subsection (b) the
following new subsection:
``(c) Application of Prior Law in Certain Cases.--The
phrase `(other than punitive damages)' shall not apply to
punitive damages awarded in a civil action--
``(1) which is a wrongful death action, and
``(2) with respect to which applicable State law (as in
effect on September 13, 1995 and without regard to any
modification after such date) provides, or has been construed
to provide by a court of competent jurisdiction pursuant to a
decision issued on or before September 13, 1995, that only
punitive damages may be awarded in such an action.
This subsection shall cease to apply to any civil action
filed on or after the first date on which the applicable
State law ceases to provide (or is no longer construed to
provide) the treatment described in paragraph (2).''
(d) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to amounts
received after June 30, 1996, in taxable years ending after
such date.
(2) Exception.--The amendments made by this section shall
not apply to any amount received under a written binding
agreement, court decree, or mediation award in effect on (or
issued on or before) September 13, 1995.
SEC. 1606. REPEAL OF DIESEL FUEL TAX REBATE TO PURCHASERS OF
DIESEL-POWERED AUTOMOBILES AND LIGHT TRUCKS.
(a) In General.--Section 6427 (relating to fuels not used
for taxable purposes) is amended by striking subsection (g).
(b) Conforming Amendments.--
(1) Paragraph (3) of section 34(a) is amended to read as
follows:
``(3) under section 6427 with respect to fuels used for
nontaxable purposes or resold during the taxable year
(determined without regard to section 6427(k)).''.
(2) Paragraphs (1) and (2)(A) of section 6427(i) are each
amended--
(A) by striking ``(g),'', and
(B) by striking ``(or a qualified diesel powered highway
vehicle purchased)'' each place it appears.
(c) Effective Date.--The amendments made by this section
shall apply to vehicles purchased after the date of the
enactment of this Act.
Subtitle G--Technical Corrections
SEC. 1701. COORDINATION WITH OTHER SUBTITLES.
For purposes of applying the amendments made by any
subtitle of this title other than this subtitle, the
provisions of this subtitle shall be treated as having been
enacted immediately before the provisions of such other
subtitles.
SEC. 1702. 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''.
(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
[[Page H5462]]
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''.
(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 flush 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''.
[[Page H5463]]
(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 (B) of section 168(e)(3) (relating to 5-
year property) is amended by adding at the end the following
flush sentence:
``Nothing in any provision of law shall be construed to treat
property as not being described in clause (vi)(I) (or the
corresponding provisions of prior law) by reason of being
public utility property (within the meaning of section
48(a)(3)).''
(C) 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(a), 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 by striking
``in a trade or business'' and inserting ``a trade or
business''.
(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.
(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. 1703. 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.--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 the calendar year in which the vehicle is sold,
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 the date of the enactment of this Act.
(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:
``(3) 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 13221.--Sections 1201(a)
and 1561(a) are each amended by striking ``last sentence''
each place it appears and inserting ``last 2 sentences''.
(g) 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''.
[[Page H5464]]
(h) 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.''.
(i) Amendments Related to Section 13231.--
(1) Subparagraph (G) of section 904(d)(3) is amended by
striking ``section 951(a)(1)(B)'' and inserting
``subparagraph (B) or (C) of section 951(a)(1)''.
(2) 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''.
(3) 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)''.
(4) Subsection (b) of section 958 is amended by striking
``956(b)(2)'' each place it appears and inserting
``956(c)(2)''.
(5)(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.--''.
(6) Subsection (e) of section 1297 is amended by inserting
``For purposes of this part--'' after the subsection heading.
(j) 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.''
(k) 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''.
(l) Amendment Related to Section 13301.--Subparagraph (B)
of section 1397B(d)(5) is amended by striking ``preceding''.
(m) 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 1602) 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) Subsection (a)(3) of section 13206 of the Revenue
Reconciliation Act of 1993 is 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)''.
(n) 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. 1704. 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) 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) Subsection (j) of section 163 is amended by
redesignating paragraph (7) as paragraph (8) and by inserting
after paragraph (6) the following new paragraph:
``(7) Coordination with passive loss rules, etc.--This
subsection shall be applied before sections 465 and 469.''
(C) The amendments made by this paragraph 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.--
[[Page H5465]]
(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).
(3) Subparagraph (E) of section 6724(d)(3) is amended by
striking ``section 6109(f)'' and inserting ``section
6109(h)''.
(4)(A) Subsection (d) of section 30 is amended--
(i) by inserting ``(determined without regard to subsection
(b)(3))'' before the period at the end of paragraph (1)
thereof, and
(ii) by adding at the end thereof the following new
paragraph:
``(4) Election to not take credit.--No credit shall be
allowed under subsection (a) for any vehicle if the taxpayer
elects to not have this section apply to such vehicle.''
(B) Subsection (m) of section 6501 (as redesignated by
section 1602) is amended by striking ``section 40(f)'' and
inserting ``section 30(d)(4), 40(f)''.
(5) Subclause (III) of section 501(c)(21)(D)(ii) is amended
by striking ``section 101(6)'' and inserting ``section
101(7)'' and by striking ``1752(6)'' and inserting
``1752(7)''.
(6) Paragraph (1) of section 1917(b) of the Energy Policy
Act of 1992 shall be applied as if ``at a rate'' appeared
instead of ``at the rate'' in the material proposed to be
stricken.
(7) Paragraph (2) of section 1921(b) of the Energy Policy
Act of 1992 shall be applied as if a comma appeared after
``(2)'' in the material proposed to be stricken.
(8) Subsection (a) of section 1937 of the Energy Policy Act
of 1992 shall be applied as if ``Subpart B'' appeared instead
of ``Subpart C''.
(l) Treatment of Qualified Football Coaches Plan.--
(1) In general.--Subparagraph (F) of section 3(37) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1002(37)(F)) is amended by redesignating clause (ii) as
clause (iii) and by inserting after clause (i) the following
new clause:
``(ii) For purposes of the Internal Revenue Code of 1986--
``(I) clause (i) shall apply, and
``(II) a qualified football coaches plan shall be treated
as a multiemployer collectively bargained plan.''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to years beginning after December 22, 1987.
(m) Determination of Unrecovered Investment in Annuity
Contract.--
(1) In general.--Subparagraph (A) of section 72(b)(4) is
amended by inserting ``(determined without regard to
subsection (c)(2))'' after ``contract''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect as if included in the amendments made by
section 1122(c) of the Tax Reform Act of 1986.
(n) Modifications to Election To Include Child's Income on
Parent's Return.--
(1) 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,''.
(2) Computation of tax.--Subparagraph (B) of section
1(g)(7) (relating to income included on parent's return) is
amended--
(A) by striking ``$1,000'' in clause (i) and inserting
``twice the amount described in paragraph (4)(A)(ii)(I)'',
and
(B) 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''.
(3) 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)''.
(4) Effective date.--The amendments made by this subsection
shall apply to taxable years beginning after December 31,
1995.
(o) Treatment of Certain Veterans' Reemployment Rights.--
(1) In general.--Section 414 is amended by adding at the
end the following new subsection:
``(u) Special Rules Relating to Veterans' Reemployment
Rights Under USERRA.--
``(1) Treatment of certain contributions made pursuant to
veterans' reemployment rights.--If any contribution is made
by an employer or an employee under an individual account
plan with respect to an employee, or by an employee to a
defined benefit plan that provides for employee
contributions, and such contribution is required by reason of
such employee's rights under chapter 43 of title 38, United
States Code, resulting from qualified military service,
then--
``(A) such contribution shall not be subject to any
otherwise applicable limitation contained in section 402(g),
402(h), 403(b), 404(a), 404(h), 408, 415, or 457, and shall
not be taken into account in applying such limitations to
other contributions or benefits under such plan or any other
plan, with respect to the year in which the contribution is
made,
``(B) such contribution shall be subject to the limitations
referred to in subparagraph (A) with respect to the year to
which the contribution relates (in accordance with rules
prescribed by the Secretary), and
``(C) such plan shall not be treated as failing to meet the
requirements of section 401(a)(4), 401(a)(26), 401(k)(3),
401(k)(11), 401(k)(12), 401(m), 403(b)(12), 408(k)(3),
408(k)(6), 408(p), 410(b), or 416 by reason of the making of
(or the right to make) such contribution.
For purposes of the preceding sentence, any elective deferral
or employee contribution made under paragraph (2) shall be
treated as required by reason of the employee's rights under
such chapter 43.
``(2) Reemployment rights under userra with respect to
elective deferrals.--
``(A) In general.--For purposes of this subchapter and
section 457, if an employee is entitled to the benefits of
chapter 43 of title 38, United States Code, with respect to
any plan which provides for elective deferrals, the employer
sponsoring the plan shall be treated as meeting the
requirements of such chapter 43 with respect to such elective
deferrals only if such employer--
``(i) permits such employee to make additional elective
deferrals under such plan (in the amount determined under
subparagraph (B) or such lesser amount as is elected by the
employee) during the period which begins on the
[[Page H5466]]
date of the reemployment of such employee with such
employer and has the same length as the lesser of--
``(I) the product of 3 and the period of qualified military
service which resulted in such rights, and
``(II) 5 years, and
``(ii) makes a matching contribution with respect to any
additional elective deferral made pursuant to clause (i)
which would have been required had such deferral actually
been made during the period of such qualified military
service.
``(B) Amount of makeup required.--The amount determined
under this subparagraph with respect to any plan is the
maximum amount of the elective deferrals that the individual
would have been permitted to make under the plan in
accordance with the limitations referred to in paragraph
(1)(A) during the period of qualified military service if the
individual had continued to be employed by the employer
during such period and received compensation as determined
under paragraph (7). Proper adjustment shall be made to the
amount determined under the preceding sentence for any
elective deferrals actually made during the period of such
qualified military service.
``(C) Elective deferral.--For purposes of this paragraph,
the term `elective deferral' has the meaning given such term
by section 402(g)(3); except that such term shall include any
deferral of compensation under an eligible deferred
compensation plan (as defined in section 457(b)).
``(D) After-tax employee contributions.--References in
subparagraphs (A) and (B) to elective deferrals shall be
treated as including references to employee contributions.
``(3) Certain retroactive adjustments not required.--For
purposes of this subchapter and subchapter E, no provision of
chapter 43 of title 38, United States Code, shall be
construed as requiring--
``(A) any crediting of earnings to an employee with respect
to any contribution before such contribution is actually
made, or
``(B) any allocation of any forfeiture with respect to the
period of qualified military service.
``(4) Loan repayment suspensions permitted.--If any plan
suspends the obligation to repay any loan made to an employee
from such plan for any part of any period during which such
employee is performing service in the uniformed services (as
defined in chapter 43 of title 38, United States Code),
whether or not qualified military service, such suspension
shall not be taken into account for purposes of section
72(p), 401(a), or 4975(d)(1).
``(5) Qualified military service.--For purposes of this
subsection, the term `qualified military service' means any
service in the uniformed services (as defined in chapter 43
of title 38, United States Code) by any individual if such
individual is entitled to reemployment rights under such
chapter with respect to such service.
``(6) Individual account plan.--For purposes of this
subsection, the term `individual account plan' means any
defined contribution plan (including any tax-sheltered
annuity plan under section 403(b), any simplified employee
pension under section 408(k), any qualified salary reduction
arrangement under section 408(p), and any eligible deferred
compensation plan (as defined in section 457(b)).
``(7) Compensation.--For purposes of sections 403(b)(3),
415(c)(3), and 457(e)(5), an employee who is in qualified
military service shall be treated as receiving compensation
from the employer during such period of qualified military
service equal to--
``(A) the compensation the employee would have received
during such period if the employee were not in qualified
military service, determined based on the rate of pay the
employee would have received from the employer but for
absence during the period of qualified military service, or
``(B) if the compensation the employee would have received
during such period was not reasonably certain, the employee's
average compensation from the employer during the 12-month
period immediately preceding the qualified military service
(or, if shorter, the period of employment immediately
preceding the qualified military service).
``(8) USERRA requirements for qualified retirement plans.--
For purposes of this subchapter and section 457, an employer
sponsoring a retirement plan shall be treated as meeting the
requirements of chapter 43 of title 38, United States Code,
only if each of the following requirements is met:
``(A) An individual reemployed under such chapter is
treated with respect to such plan as not having incurred a
break in service with the employer maintaining the plan by
reason of such individual's period of qualified military
service.
``(B) Each period of qualified military service served by
an individual is, upon reemployment under such chapter,
deemed with respect to such plan to constitute service with
the employer maintaining the plan for the purpose of
determining the nonforfeitability of the individual's accrued
benefits under such plan and for the purpose of determining
the accrual of benefits under such plan.
``(C) An individual reemployed under such chapter is
entitled to accrued benefits that are contingent on the
making of, or derived from, employee contributions or
elective deferrals only to the extent the individual makes
payment to the plan with respect to such contributions or
deferrals. No such payment may exceed the amount the
individual would have been permitted or required to
contribute had the individual remained continuously employed
by the employer throughout the period of qualified military
service. Any payment to such plan shall be made during the
period beginning with the date of reemployment and whose
duration is 3 times the period of the qualified military
service (but not greater than 5 years).
``(9) Plans not subject to title 38.--This subsection shall
not apply to any retirement plan to which chapter 43 of title
38, United States Code, does not apply.
``(10) References.--For purposes of this section, any
reference to chapter 43 of title 38, United States Code,
shall be treated as a reference to such chapter as in effect
on December 12, 1994 (without regard to any subsequent
amendment).''
(2) Effective date.--The amendment made by this subsection
shall be effective as of December 12, 1994.
(p) Reporting of Real Estate Transactions.--
(1) In general.--Paragraph (3) of section 6045(e) (relating
to prohibition of separate charge for filing return) is
amended by adding at the end the following new sentence:
``Nothing in this paragraph shall be construed to prohibit
the real estate reporting person from taking into account its
cost of complying with such requirement in establishing its
charge (other than a separate charge for complying with such
requirement) to any customer for performing services in the
case of a real estate transaction.''
(2) Effective date.--The amendment made by paragraph (1)
shall take effect as if included in section 1015(e)(2)(A) of
the Technical and Miscellaneous Revenue Act of 1988.
(q) Clarification of Denial of Deduction for Stock
Redemption Expenses.
(1) In general.--Paragraph (1) of section 162(k) is amended
by striking ``the redemption of its stock'' and inserting
``the reacquisition of its stock or of the stock of any
related person (as defined in section 465(b)(3)(C))''.
(2) Certain deductions permitted.--Subparagraph (A) of
section 162(k)(2) is amended by striking ``or'' at the end of
clause (i), by redesignating clause (ii) as clause (iii), and
by inserting after clause (i) the following new clause:
``(ii) deduction for amounts which are properly allocable
to indebtedness and amortized over the term of such
indebtedness, or''.
(3) Clerical amendment.--The subsection heading for
subsection (k) of section 162 is amended by striking
``Redemption'' and inserting ``Reacquisition''.
(4) Effective date.--
(A) In general.--Except as provided in subparagraph (B),
the amendments made by this subsection shall apply to amounts
paid or incurred after September 13, 1995, in taxable years
ending after such date.
(B) Paragraph (2).--The amendment made by paragraph (2)
shall take effect as if included in the amendment made by
section 613 of the Tax Reform Act of 1986.
(r) Clerical Amendment to Section 404.--
(1) In general.--Paragraph (1) of section 404(j) is amended
by striking ``(10)'' and inserting ``(9)''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect as if included in the amendments made by
section 713(d)(4)(A) of the Deficit Reduction Act of 1984.
(s) Passive Income Not To Include FSC Income, Etc.--
(1) In general.--Paragraph (2) of section 1296(b) is
amended by striking ``or'' at the end of subparagraph (B), by
striking the period at the end of subparagraph (C) and
inserting ``, or'', and by inserting after subparagraph (C)
the following new subparagraph:
``(D) which is foreign trade income of a FSC or export
trade income of an export trade corporation (as defined in
section 971).''
(2) Effective date.--The amendment made by paragraph (1)
shall take effect as if included in the amendments made by
section 1235 of the Tax Reform Act of 1986.
(t) 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 (3) of section 5134(c) is amended by
striking ``section 6662(a)'' and inserting ``section
6665(a)''.
(13) Paragraph (2) of section 5206(f) is amended by
striking ``section 5(e)'' and inserting ``section 105(e)''.
(14) Paragraph (1) of section 6050B(c) is amended by
striking ``section 85(c)'' and inserting ``section 85(b)''.
[[Page H5467]]
(15) Subsection (k) of section 6166 is amended by striking
paragraph (6).
(16) 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).''
(17) The section heading for section 6043 is amended by
striking the semicolon and inserting a comma.
(18) 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.
(19) The table of sections for part I of subchapter A of
chapter 68 is amended by striking the item relating to
section 6662.
(20)(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.
(21) Paragraph (1) of section 6701(a) of the Omnibus Budget
Reconciliation Act of 1989 is amended by striking ``subclause
(IV)'' and inserting ``subclause (V)''.
(22) Clause (ii) of section 7304(a)(2)(D) of such Act is
amended by striking ``subsection (c)(2)'' and inserting
``subsection (c)''.
(23) Paragraph (1) of section 7646(b) of such Act is
amended by striking ``section 6050H(b)(1)'' and inserting
``section 6050H(b)(2)''.
(24) 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)''.
(25) Subparagraph (A) of section 7811(i)(3) of such Act is
amended by inserting ``the first place it appears'' before
``in clause (i)''.
(26) Paragraph (10) of section 7841(d) of such Act is
amended by striking ``section 381(a)'' and inserting
``section 381(c)''.
(27) Paragraph (2) of section 7861(c) of such Act is
amended by inserting ``the second place it appears'' before
``and inserting''.
(28) 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)''.
(29) Subparagraph (C) of section 50(a)(2) is amended by
striking ``subsection (c)(4)'' and inserting ``subsection
(d)(5)''.
(30) 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)--''.
(31) Subparagraph (A) of section 355(d)(7) is amended by
inserting ``section'' before ``267(b)''.
(32) Subparagraph (C) of section 420(e)(1) is amended by
striking ``mean'' and inserting ``means''.
(33) Paragraph (4) of section 537(b) is amended by striking
``section 172(i)'' and inserting ``section 172(f)''.
(34) Subparagraph (B) of section 613(e)(1) is amended by
striking the comma at the end thereof and inserting a period.
(35) Paragraph (4) of section 856(a) is amended by striking
``section 582(c)(5)'' and inserting ``section 582(c)(2)''.
(36) 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)''.
(37) Subsection (b) of section 936 is amended by striking
``subparagraphs (D)(ii)(I)'' and inserting ``subparagraphs
(D)(ii)''.
(38) 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)''.
(39) Subparagraph (A) of section 280A(c)(1) is amended to
read as follows:
``(A) as the principal place of business for any trade or
business of the taxpayer,''.
(40) Section 6038 is amended by redesignating the
subsection relating to cross references as subsection (f).
(41) 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);''.
(42) 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).
(43) Subsection (b) of section 7454 is amended by striking
``section 4955(e)(2)'' and inserting ``section 4955(f)(2)''.
(44) 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.
(45) 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.
(46) Subsection (f) of section 11701 of the Revenue
Reconciliation Act of 1990 is amended by inserting
``(relating to definitions)'' after ``section 6038(e)''.
(47) 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.
(48) 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)''.
(49) 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.
(50) 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)''.
(51) 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)''.
(52) 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.
(53) 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).
(54) 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.
(55) 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.
(56) 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)''.
(57) 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)''.
(58) 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''.
(59) Paragraph (7) of section 7611(h) is amended by
striking ``approporiate'' and inserting ``appropriate''.
(60) The heading of paragraph (3) of section 419A(c) is
amended by striking ``severence'' and inserting
``severance''.
(61) Clause (ii) of section 807(d)(3)(B) is amended by
striking ``Commissoners' '' and inserting ``Commissioners'
''.
(62) Subparagraph (B) of section 1274A(c)(1) is amended by
striking ``instument'' and inserting ``instrument''.
(63) Subparagraph (B) of section 724(d)(3) by striking
``Subparagaph'' and inserting ``Subparagraph''.
(64) The last sentence of paragraph (2) of section 42(c) is
amended by striking ``of 1988''.
(65) Paragraph (1) of section 9707(d) is amended by
striking ``diligence,'' and inserting ``diligence''.
(66) Subsection (c) of section 4977 is amended by striking
``section 132(i)(2)'' and inserting ``section 132(h)''.
(67) The last sentence of section 401(a)(20) is amended by
striking ``section 211'' and inserting ``section 521''.
(68) Subparagraph (A) of section 402(g)(3) is amended by
striking ``subsection (a)(8)'' and inserting ``subsection
(e)(3)''.
(69) The last sentence of section 403(b)(10) is amended by
striking ``an direct'' and inserting ``a direct''.
(70) Subparagraph (A) of section 4973(b)(1) is amended by
striking ``sections 402(c)'' and inserting ``section
402(c)''.
(71) Paragraph (12) of section 3405(e) is amended by
striking ``(b)(3)'' and inserting ``(b)(2)''.
(72) 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.
(73) 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)''.
(74) Paragraph (5) of section 860F(a) is amended by
striking ``paragraph (1)'' and inserting ``paragraph (2)''.
(75) Paragraph (1) of section 415(k) is amended by adding
``or'' at the end of subparagraph (C), by striking
subparagraphs (D) and (E), and by redesignating subparagraph
(F) as subparagraph (D).
(76) Paragraph (2) of section 404(a) is amended by striking
``(18),''.
(77) Clause (ii) of section 72(p)(4)(A) is amended to read
as follows:
``(ii) Special rule.--The term `qualified employer plan'
shall not include any plan which was (or was determined to
be) a qualified employer plan or a government plan.''
(78) Sections 461(i)(3)(C) and 1274(b)(3)(B)(i) are each
amended by striking ``section 6662(d)(2)(C)(ii)'' and
inserting ``section 6662(d)(2)(C)(iii)''.
(79) Subsection (a) of section 164 is amended by striking
the paragraphs relating to the generation-skipping tax and
the environmental tax imposed by section 59A and by inserting
after paragraph (3) the following new paragraphs:
``(4) The GST tax imposed on income distributions.
``(5) The environmental tax imposed by section 59A.''
(u) Certain Property Not Treated as Section 179 Property.--
(1) In general.--Paragraph (1) of section 179(d) is amended
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.''
(2) Effective date.--The amendment made by paragraph (1)
shall apply to property placed in service after May 14, 1996.
The SPEAKER pro tempore. Under the rule, the gentleman from Texas
[Mr. Archer] and the gentleman from Florida [Mr. Gibbons] each will
control 30 minutes.
The Chair recognizes the gentleman from Texas [Mr. Archer].
[[Page H5468]]
{time} 1845
general leave
Mr. ARCHER. Mr. Speaker, I ask unanimous consent that all Members may
have 5 legislative days within which to revise and extend their remarks
and include extraneous material on H.R. 3448.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Texas?
There was no objection.
Mr. ARCHER. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, millions of Americans worry about their ability to
retire with security and comfort.
Some worry because their employer is unable to provide them with a
benefit and pensions. Others worry about whether their existing
pensions will be there for them when they retire.
The bill that we pass in the House today will come as a blessing for
all of these Americans. This bill will make it easier for people to get
pensions and it will protect the pensions of those who already have
them.
These Republican pension reforms should provide relief and comfort
for countless middle-income Americans struggling to make ends meet.
Republicans recognize that the middle-class crunch is real and these
reforms are designed to help people make more and save more.
Our bill contains more than two dozen specific pension reforms.
Thirty-six million Americans work for small businesses that can't
afford to provide pensions to their employees. These 36 million people
will benefit from our simple plan. This plan allows small businesses
tax favored treatment when they establish pension plans for their
workers.
Two million Americans who work for tax-exempt organizations will, for
the first time, be eligible to sign up for 401(k) savings plans.
And in what is called the Orange County provision, 16 million people
who work for State and local governments will no longer have to fear
losing their pensions in the event of a bankruptcy. Our section 457
trust reforms protect their retirement savings from creditors.
In addition to pension reforms, the bill we pass today includes seven
other items that will help small businesses and their workers. They
include creation of the work opportunity tax credit designed to
encourage the hiring of hard-to-place works, and an increase in
expensing for small businesses to help the Nation's job creators grow
and create more jobs. I note that this item was part of our Contract
With America.
We change S corporation laws to make it easier for families to
maintain their enterprises and we extend a popular tax provision that
allows employers to provide their workers with educational assistance
on a tax favored basis.
All these changes will give small businesses and their workers a
helping hand as they wrestle with the middle-class crunch. Although
President Clinton vetoed them once before, I am confident he will now
sign these Republican reforms.
One final note. This isn't all we've done on pension reforms and we
are about to do even more. Last year, we passed expanded individual
retirement accounts; IRA's for homemakers; we created a new American
dream savings account that can be used for education, first-time home
purchases, and extraordinary medical expenses.
President Clinton vetoed all these measures, but we're going to pass
them again and this time we hope he'll support them.
I am delighted these initiatives are passing in the House today and I
look forward to them becoming law.
Mr. Speaker, I reserve the balance of my time.
Mr. GIBBONS. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I am going to yield to the gentleman from Puerto Rico
[Mr. Romero-Barcelo]. The gentleman from Puerto Rico [Mr. Romero-
Barcelo] represents the millions of Americans, the millions of
Americans, who are disenfranchised because they happen to live in
Puerto Rico. He is a distinguished Member of Congress, and he deserves
our rapt attention. He is the former Governor of Puerto Rico, and a
great part of this bill affects the lives of the people of Puerto Rico.
So I hope all Member will pay rapt attention to his words.
Mr. Speaker, I yield 4 minutes to the gentleman from Puerto Rico [Mr.
Romero-Barcelo].
Mr. ROMERO-BARCELO. Mr. Speaker, I thank the gentleman from Florida
for yielding me time.
Mr. Speaker, the differences between democracy and totalitarianism is
that in totalitarianism the end justifies the means. In a democracy the
means are at least as important as the end, if not more important.
This act has a good purpose, to provide businesses, small businesses,
with tax breaks. We are all for that. But how does it go about
providing small businesses with tax breaks?
It collects revenues from Puerto Rico. Tax revenues that up to now
have not been collected, to the tune of $4.8 billion, which is more
than half of the tax cuts that are going to be provided for the small
businesses in eight years.
Now, this funding, this money that is being collected from Puerto
Rico, is not being turned back to Puerto Rico at all. Puerto Rico,
which is the poorest jurisdiction in the Nation, Puerto Rico has the
lowest per capita income than the State with the lowest per capital
income, which is Mississippi, we have less than half the per capita
income, we have more than double the unemployment of the Nation, and
the tax cuts that were being given to Puerto Rico and the
other territories is for the purpose of promoting jobs.
Now, is it fair for the poorest jurisdiction in the Nation to
subsidize the tax cuts for small businesses in 50 States of the Nation?
I submit, Mr. Speaker, that that is grossly unfair. That is something
that should not be allowed.
But I have no vote. I represent 3.8 million U.S. citizens, six times
more than the average here in the House, but I am not allowed to vote.
I am disenfranchised. We are all disenfranchised. But we are not merely
resident aliens, we are U.S. citizens, and have been since 1917.
Mr. Speaker, what do we say to the children of men who have given
their lives in defense of the Nation? That here, when we need to have
tax cuts for small businesses, we cannot find it anywhere else, but we
go to Puerto Rico and grab $4.8 billion in 8 years to subsidize these
tax cuts? And I have not been given an opportunity even to submit an
amendment here on the floor?
I was not given an opportunity to really participate in anything, any
of the discussions in the Committee on Ways and Means. Mr. Speaker, I
have been probably the most critical person of the tax breaks based on
income, the tax credit based on income, the so-called section 936. But
we are proposing a substitute, that we have tax credits based on
salaries, on wages. And this has been supported by some of the speakers
here today when they were discussing the rule, by some of the
Republicans when they were discussing the rule. That is what we
proposed as a substitute.
Why try to save the companies or give them a 10-year holiday, the
ones that earn the most money in Puerto Rico, the ones that receive the
most profits, the most benefits, give them a 10-year holiday for now,
but it does not produce a single new job, when we could be taxing them,
but at the same time providing for tax credits based on wages, which
would stimulate further investment to create more jobs, and the
revenues obtained in Puerto Rico; that we listen to what the President
is proposing and what we have proposed, that because the people of
Puerto Rico do not have the same safety net that at least in health
care, at least in health care, this money be used to make Puerto Rico
whole in health care.
We get less than 10 percent of what we would get in Medicaid for
health care in Puerto Rico if we were treated as a State. Now, if any
State in the Nation had to pay over 90 percent of their Medicaid costs
now, they would be broke. And here we are not being given anything out
of this revenue for Medicaid.
Mr. Speaker, I submit that this bill should be reviewed and that this
should not be approved today.
Mr. ARCHER. Mr. Speaker, I yield 2 minutes to the gentleman from new
York [Mr. Houghton], a respected member of the Committee on Ways and
Means.
(Mr. HOUGHTON asked and was given permission to revise and extend his
remarks.)
[[Page H5469]]
Mr. HOUGHTON. Mr. Speaker, I thank the gentleman for yielding me
time.
Mr. Speaker, I am here to support not only the minimum wage bill, but
also the work opportunity tax credit. I would first like to say a word
about the gentleman from Buffalo, NY, Mr. Jack Quinn, because he has
been a leading light and real pusher of this thing from way back, and I
also would like to thank the gentleman from Pennsylvania, Mr. Phil
English, for what he has done and the gentleman from Kansas, Mr. Pat
Roberts, for his work on the work opportunity tax credit, and also my
friend the gentleman from New York, Mr. Charlie Rangel, over here.
This is a plain sense bill. It is part of the tax package. I would
like to focus just the few seconds I have on the work opportunity tax
credit.
This is something, really, which makes sense, not only for the people
who are to be hired, but also for the businesses. For the businesses,
what it does is help those businesses that are going to be having an
increase in the minimum wage to absorb the cost. As a matter of fact,
if you hire an individual, the arithmetic works out that you, in terms
of the total 2-year period which you will be hiring this individual and
having him work in your establishment, that the cost will be less than
the minimum wage is now because of the incentive which the Government
gives.
So it is a real incentive for businesses. On the other hand, of
course, what it does is take those needy people, who are working off
welfare or getting off of food stamps or getting off a whole variety of
things, to come into the work force. Now, this is not a perfect bill,
and with any bill like this, it will be changed and adopted over the
years. But it makes a great deal of sense.
So, Mr. Speaker, with the minimum wage, combined with the work
opportunity tax credit, I think we have a winnable combination. I thank
you very much for letting me express myself.
{time} 1900
Mr. GIBBONS. Mr. Speaker, I yield 4 minutes to the gentleman from New
York [Mr. Rangel].
(Mr. RANGEL asked and was given permission to revise and extend his
remarks.)
Mr. RANGEL. Mr. Speaker, I think this is going to be an historic
vote. The Republicans have been forced to bring to the floor a minimum
wage bill so they had to put some sweetness in there, of course, for
small employers, where they get a few tax breaks, and, hopefully, we
would have a good sweetener.
But when we see how they are going to pay for this it is almost like
those old enough to remember when we had to take castor oil. They used
to mix it with the orange juice. Well, we have got the orange juice
with the watered down minimum wage bill, but the castor oil is how do
we pay for it?
I would guess that, following Republican logic, we will pay for it by
going to the poorest people with the weakest political posture and, if
we can find any Americans that cannot vote, then hit them where it
hurts.
We get $4.8 billion over the next couple of years, not in grants for
health care or for housing, but in order to create jobs. And, again, it
gives it to the corporations to encourage them to invest there. Some
people say it is too much for the corporations. Some people say it is
too expensive of a project. Well, they might be right. But if we are
going to take 3.8 million Americans, and every time there is a war we
call upon them to get in a suit and go over to fight for the United
States of America; if we are going to take 3.8 million Americans who
stand up to the United Nations and say we are no colony, the United
States is no imperialistic nation, we are citizens of the United
States, but we decide for sweetness for those on the mainland that we
are going to whack it to them.
Well, listen, if they have the votes, they should do it. I understand
that. But should they not do it with hearings? Have we reached a point
that we are dealing with tax bills that the tax committee does not even
look at it; we just get it? Has it reached the point that we do not
have hearings anymore? Have we fallen so much in common decency that we
do not ask the duly elected representative from the 4 million people
what he thinks?
They have a Governor. I do not know what people think about him, but
he has the responsibility for the health, for the welfare, for the
economy. Do we say to him, ``What would you like to do; do you have a
substitute?'' Or do we just take away $4 billion because we have the
power to do it?
I tell my colleagues one thing, I am not here to defend 936. Whatever
the economists and the people in Puerto Rico think is good to encourage
jobs for them, good. But I notice one thing, especially when the
chairman of the committee says, ``Oh, Charlie, I know you like 936
companies.'' Oh, no, the chairman likes 936 companies, because in this
bill the only people that are protected are not the people of Puerto
Rico but the American companies that are in Puerto Rico. They get 10
years to get their money out. But there is nothing there to encourage
one nickel of investment, as these companies now have 10 years to look
at other parts of the Caribbean or Ireland or any low-wage based
country.
So what we have said now is that we cannot find enough poor on the
mainland to beat up on. We have already hit them when we talked about
the earned income tax credit. If we are talking about housing for the
poor, we put a damper on the low-income housing credit. We have done
everything we could, but somebody said we have some poorer Americans in
Puerto Rico, hit them, and that is exactly what the Republicans have
done.
All I can say is, Mr. President, wherever you are, do not sign this
bill.
Mr. ARCHER. Mr. Speaker, I yield 2 minutes to the gentleman from
Pennsylvania [Mr. English], another valued member of the Committees on
Ways and Means.
Mr. ENGLISH of Pennsylvania. Mr. Speaker, I rise in strong support of
H.R. 3448, the Small Business Job Protection Act, strong legislation to
help small business and to help American workers.
Mr. Speaker, this bipartisan bill would enact several key tax
incentives critical to working students, critical to trainees with
limited skills, and critical to small businesses that are the most
dynamic sector of the American economy.
Mr. Speaker, this bill encourages investment in jobs by cash-starved
small economies, small businesses. H.R. 3448 will increase the limit on
the amount of equipment that a small business can expense from the
current level of $17,500 to $25,000. This will allow small companies to
grow and to create more jobs.
This bill encourages the hiring of low-skilled workers through the
work opportunity tax credit, a critical initiative to bring more people
out of the welfare system and into the work force.
This bill encourages critical investment in worker training through a
tax break for employer-provided undergraduate tuition, that,
unfortunately, the last Congress had allowed to expire.
This legislation increases access to pension benefits for workers
through pension reform and pension simplification.
Mr. Speaker, all of these provisions passed the Committee on Ways and
Means with strong bipartisan support. I invite my colleagues on both
sides of the aisle to support our workers by giving employers the tools
to create and improve jobs by voting ``yes'' on H.R. 3448.
Mr. GIBBONS. Mr. Speaker, I yield 3 minutes to the gentlewoman from
Connecticut [Mrs. Kennelly].
Mrs. KENNELLY. Mr. Speaker, I rise to talk about this bill that is
before us this evening, and I have to say that it has some very
excellent provisions in it. Having said that, I must admit that one of
the reasons that I say that is that it contains one of the things that
I have worked on for years, and I thank Chairman Archer for including
it in the bill.
This reduces the vesting period for multiemployer pension plans from
10 years to 5 years. What that means is that 1 million people will
receive a well-deserved pension when and if the President signs this
bill.
This bill also extends employer-provided educational assistance
through December 31, 1996. This is so important to workers who want to
maintain their
[[Page H5470]]
competitiveness in an ever changing world.
I do wish, and I almost cannot understand why if we put in the
additional continuation of the educational assistance, that we did not
do it for graduate school. If we are really serious about competing in
a world economy, we certainly have to continue our education. As we
know, people have job after job throughout their careers, and I just
wish this could be reconsidered and we would have that deduction for
our graduate education.
But I look at another thing in this bill and I see it has very good
increases on the limitation on expensing to $25,000 in the year 2003.
Many people in this body will remember when in 1993 we increased, when
I say we, I say the Clinton administration and the majority at that
time, took the expensing limit from $10,000 to $17,500. Now we are
going to take it up to an additional amount.
But there are disappointments in this bill and I remain deeply
concerned about one of them, and that is one that the delegate from
Puerto Rico just spoke about, and that is section 936. Section 936 has
played a critical role in the economic development of Puerto Rico and
has certainly provided good jobs in Puerto Rico so people could work
and take care of themselves and their families.
What happens in this bill is that the 936 is phased out. There has
been discussion about that over the years, but having phased it out, it
is not replaced with anything that addresses the economic needs of
Puerto Rico.
I am also disappointed that this legislation does not include other
extenders such as the R&D, the research and development credit in
particular. Once again, how will we compete in an international world
if we do not do what we do best, research?
But the most profound disappointment concerns the fact that even as
we consider this very important legislation to provide assistance to
small businesses, we will have an amendment before us, as this process
continues, of stripping away one of the most important protections
relied on by workers and many of these businesses, and that is the
minimum wage.
The amendment that is going to come before us is an effort to roll
back the minimum wage coverage for as many as 10 million individuals
employed by small businesses. This amendment should not pass.
Mr. ARCHER. Mr. Speaker, I yield 2 minutes to the gentleman from Ohio
[Mr. Portman], another valued member of the Committee on Ways and
Means; a gentleman who, through his efforts, has made a major
contribution to the pension provisions that are in this bill. He has
almost singlehandedly created those provisions, and so I am proud to
yield to him.
Mr. PORTMAN. Mr. Speaker, I thank the chairman for those words, and I
will return the compliment. We would not have the small business
package on the floor if not for his support of it, and I think if we
can make these changes, we will see immediate benefits to small
business America and to the jobs they create. After all, that is what
this is all about.
Mr. Speaker, last year the gentleman from Maryland, Mr. Ben Cardin,
and I introduced legislation to simplify the pension system in this
country. It was in the Balanced Budget Act that was vetoed by the
President. It is a common sense approach. There is strong bipartisan
support for it.
The idea is to make it just a lot easier for companies to offer a
pension plan, particularly smaller businesses. The current system cries
out for reform because of its cost and complexity.
Let me give my colleagues a statistic. Only 20 percent of businesses
with less than 25 employees offer any kind of pension plan today, any
kind of profit sharing plan, 401(k), or any other pension system.
I think there are three main reasons this pension reform is long
overdue.
First, it will help the savings rate, by which economists will tell
us it will help productivity and result in more jobs in this country.
We now have the lowest savings rate of all the industrialized worlds
and it is hurting us. It gives us a competitive disadvantage.
Second, I think we need to do all we can to encourage private savings
in this country for retirement. The reason for that is we need to
backstop our Social Security System. The American people are way ahead
of us on this. They understand that Social Security is at risk and we
need to encourage private savings so it will be there, particularly
when the baby boom generation begins to retire.
Third, and most important, this provision is going to help American
workers, the workers who are caught in the wage and benefits squeeze,
because this makes more generous a very important fringe benefit, and
that is the pension benefit. That is the most important part of this.
It is a win-win situation. It is overdue, something we should have
done already, and I am very pleased it is part of this legislation.
Let us simplify our retirement security system in this country. Let
us do this for our workers. Let us enable more working Americans to
save and let us increase retirement security.
Mr. ARCHER. Mr. Speaker, I yield myself such time as I may consume in
order to expand my compliments to include the gentleman from Maryland,
[Mr. Cardin], who also has made a major contribution to these pension
simplification provisions of this bill.
It has been bipartisan, and I would say to the Speaker that when this
bill passed out of our committee in its entirety, there were only three
negative votes against it. So it is truly a bipartisan bill.
Mr. Speaker, I reserve the balance of my time.
Mr. GIBBONS. Mr. Speaker, I yield 3 minutes to the gentleman from
Maryland, [Mr. Cardin,] who I am proud to say has made mammoth
contributions to this pension plan we are talking about now.
Mr. CARDIN. Mr. Speaker, I thank my friend from Florida for yielding
me this time, and compliment my colleague, the gentleman from Ohio [Mr.
Portman], for the work that he has done in the pension area, and I
thank the chairman of the committee, the gentleman from Texas [Mr.
Archer] for his comments.
It has clearly been a bipartisan effort on the pension
simplification, and the gentleman from Ohio [Mr. Portman] has done a
great job this year in bringing this bill to the floor for the second
time. I hope we are going to be able to get these pension
simplifications enacted.
We have moved many of the provisions in this bill on previous
occasions. We have broad support both in this House, the other body,
the Clinton administration, and the public for many provisions that are
in this bill.
We have seen most of these provisions included in the pension
simplification in 1992 as passed by a Democratic Congress. It was
vetoed by a Republican President for unrelated reasons. The provisions
were passed again in 1995 by a Republican Congress and vetoed by a
Democratic President for unrelated reasons. So I hope the third time is
the charm and we will get this bill passed and signed into law, because
it contains many important provisions for people in this Nation.
We have already heard some of those reasons. We are restoring the
exclusion for employer-provided education assistance. That is long
overdue and good news many hundreds of thousands of Americans.
Thousands more Americans will welcome the newly configured work
opportunity tax credit, which will help businesses hire people and give
them a chance to learn new skills.
{time} 1915
The reform in subchapter S, very important for American small
businesses that will help them accumulate capital and prosper and raise
the necessary funds in order to grow in our economy. And the expensing
of capital from $17,500 to $25,000 for small business is a continuation
of a process that we started in 1993 tax legislation.
But as the gentleman from Ohio [Mr. Portman] has pointed out, the
provision I guess I am the most pleased to see us move forward is the
pension simplification. All too frequently in the last 15 years in the
name of simplification and reform, we made it impossible for many small
businesses to have pension plans. The complicated test that Government
required small businesses to go through prevented many small businesses
financially from being able to offer pension plans.
What this bill will do, by offering new opportunities and safe harbor
provisions, will allow small companies to
[[Page H5471]]
in fact have pension plans to provide for the future of their workers.
I am extremely pleased that those provisions are included in this bill,
and I trust that we will be able to get this to the President's desk in
a form that it can be signed.
Mr. Speaker, let me point out, when we work together, Democrats and
Republicans, to craft legislation, it is in the best interest of the
American people. I hope what we are doing tonight in this legislation
we can do in many more bills throughout the year, work together on
behalf of the American people.
Mr. ARCHER. Mr. Speaker, I yield 2 minutes to the gentleman from
Michigan [Mr. Camp], another valued member of the Committee on Ways and
Means.
Mr. CAMP. Mr. Speaker, I thank the chairman for yielding me the time.
Mr. Speaker, a cornerstone of our Nation is education. A small
investment in education can reap tremendous rewards. The United States
is the world's greatest Nation, and we owe this success in large part
to the commitment we have made to learning.
Today the Congress affirms its commitment to education. The bill
before us today continues favorable tax treatment when employers pay
for employee education. Employers benefit from this education tax
assistance through access to a better educated and more productive work
force.
Employees benefit from this provision by enhancing their education
and expanding their opportunities. By promoting education, we ensure
the United States maintains the most educated and productive work force
in the world.
As an original cosponsor of this proposal, I am pleased it was
included in the bill. It preserves our tradition of excellence and
affirms our commitment to education and to lifelong learning.
I urge my colleagues to support America's students and vote in favor
of this bill.
Mr. GIBBONS. Mr. Speaker, I yield 3 minutes and 30 seconds to the
gentleman from Massachusetts [Mr. Neal].
Mr. NEAL of Massachusetts. Mr. Speaker, this evening we are debating
the Small Business Job Protection Act. The basic provisions of this
bill are good measures which would help small businesses. Most of the
provisions in the bill are bipartisan. The reason we are debating this
bill today is to provide a sweetener to small businesses because of the
minimum wage. I have no problem with passing tax legislation to assist
them, but I think we should have had the opportunity for a clean
minimum wage bill.
During this Congress, we have not passed much tax legislation and
there are many noncontroversial provisions where there is bipartisan
agreement that should have been included in this package. Last night, I
went to the Committee on Rules to testify about an amendment which I
offered during the Ways and Means markup. This amendment would have
allowed a $5,000 deduction for expenses associated with the higher
costs of education. The deduction would be phased out for taxpayers
with modified adjusted gross income [AGI] between $70,000 and $90,000
for single filers and $100,000 and $120,000 for joint returns.
This amendment proposed originally by President Clinton would help
with the high rising costs of education. The costs of a college
education have risen steadily in the past 15 years. However, the
average family's income has not increased at the same rate. I realize
the purpose of this legislation is to assist small businesses. Our
business will be greatly assisted by this type of provision. The need
for higher education is more important than ever. The world economy
mandates the necessity of education and training for workers.
This provision assists 14 million families and this results in 17
million students. We should have used this opportunity today to help
the middle class with the rising costs of tuition. The bill is weak on
education. Under the bill, the provision to provide tax-free employer-
provided educational assistance would be extended from January 1, 1995,
through December 31, 1996. However, educational expenses for graduate
studies would not receive the exclusion after December 31, 1995. As a
former college instructor, I taught many students in continuing
education programs. These students worked hard to increase knowledge
and greatly benefited their employer.
I am pleased the legislation included pension simplification
provisions. Pension security is an extremely important issue. I wish
this bill included additional provisions which would assist with
pension portability. We have to make it easier for workers to keep
their pension when they change jobs. Additional provisions could have
been added to make pension more portable. True pension reform needs to
include the expansion of Individual Retirement Accounts [IRA's].
Expanded IRA's will allow an additional 20 million families to utilize
the tax advantages of IRA's. More individuals would benefit from a tax
incentive to save for their retirement. Expanded IRA's would encourage
individuals to become more personally responsible for their savings.
IRA's would make pensions easier for employers.
This bill contains a provision which affects the economy of Puerto
Rico. I am concerned with the changes to section 936 and I encourage
Congress to continue to work with the Governor of Puerto Rico and the
administration to improve this provision.
I support this bill, but I wish it could have been a better product.
We need to work in a bipartisan manner to enact the proposals that we
can agree on such as education, IRA's, and the R&D tax credit.
Let me close by saying, Mr. Speaker, I want to thank Mr. Archer this
evening for addressing an issue that has been long held for the
community of New Bedford, MA. I want to thank the chairman for the
manner in which he addressed that legislation and helped to secure its
passage. It was long overdue. And while I wish we could have spoken to
education, IRA's, and the R&D tax credit, I am indeed grateful that we
were able to address the needs of the New Bedford fishermen.
Mr. ARCHER. Mr. Speaker, I yield 2 minutes to the gentleman from
Connecticut [Mr. Shays].
Mr. SHAYS. Mr. Speaker, as a member of the Committee on the Budget,
we were looking at getting at some of the what I would call the
corporate loopholes, the corporate write-offs, and I just find it
somewhat disingenuous that when we attempt to do that, then we are
being accused of hurting the poor.
The bottom line is we have a special provision to big businesses in
Puerto Rico who admittedly are there working to employ people, but in
some cases, the write-off is $100,000, $200,000 benefit per job for
some of these very large corporations. These large corporations, some
of them are in my district, they benefit from it. But we are saving
basically $4.9 billion over 10 years. We are phasing it out over 10
years. We are taking that $4.9 billion, and we are truly helping in a
whole host of ways.
Expensing for small business to me makes sense, but I particularly
like the work opportunity tax credit. We are giving a tax credit to
individuals that hire what I would call the least employable, the
people who are on welfare, the people who simply have not had work
experience.
I am proud that my side is dealing with the minimum wage, having an
economic engine along with the minimum wage. We are given a vote to
have a vote up or down on the minimum wage. We have that. We are given
a vote to also provide an economic engine for our companies who employ.
One of the best, to my mind, ways of looking at it, the work
opportunity tax credit. It is going to be funded in part by eliminating
what I call a significant loophole to large businesses who happen to
just have activity in a possession of the United States.
So I applaud what the Committee on Ways and Means has done. I thank
them for eliminating what I think is a loophole that does not benefit
enough people and in the end allow for small businesses to pay the
minimum wage.
Mr. RANGEL. Mr. Speaker, will the gentleman yield?
Mr. SHAYS. I yield to the gentleman from New York.
Mr. RANGEL. Mr. Speaker, the gentleman may be right about this 936,
but we do not have a vote on that. That was not allowed by the rule.
And we never had any hearings as to how we could improve, eliminate or
substitute 936. We have just said the poor people in Puerto Rico have
to take our word for it.
[[Page H5472]]
Mr. GIBBONS. Mr. Speaker, I yield 2 minutes to the gentlewoman from
New York [Ms. Velazquez].
Ms. VELAZQUEZ. Mr. Speaker, I rise today in strong opposition to H.R.
3448. World War I, World War II, Korea, Vietnam, the Persian Gulf, this
country has sent our brave and courageous Americans from the island of
Puerto Rico, such as my uncle, to fight in foreign lands. Now, through
their repeal of section 936, Republicans intend to use the people of
Puerto Rico as human shields to give businesses more tax breaks. This
bill is an insult to the 3.8 million American citizens in Puerto Rico.
What is good for American citizens in the mainland should be good for
the people in Puerto Rico.
If this was not cruel enough, Puerto Rico will get nothing for this
national sacrifice in the name of more tax cuts. In typical Republican
style, you go after the one group of Americans who have no vote in this
Chamber.
Section 936 is not charity. It has been successful for the island and
for the United States. It has created 300,000 jobs through private
capital and tax incentives. Without it, the already high poverty and
unemployment rates on the island will skyrocket. Many companies will
move out of Puerto Rico, but they will not move to the mainland. They
will move to such places like Mexico and Singapore.
Many Puerto Ricans forced out of work will need public assistance to
survive. We will all pay sooner or later, jobs under section 936 or
more public assistance. Be ready to invest in jobs creation, because
there will be thousands of Puerto Rican workers migrating to the
mainland. I thought you were the party of work, not welfare. Your
radical, heartless agenda is clear: Up with tax breaks for business;
down with the middle class, down with Puerto Rico.
I urge my colleagues to vote no on this legislation.
Mr. ARCHER. Mr. Speaker, I reserve the balance of my time.
Mr. GIBBONS. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, the first speaker we had, Mr. Rangel, the last speaker
we had, Ms. Velazquez, and the next speaker we have, the gentleman from
Illinois [Mr. Gutierrez], point out something I think is very
significant here. The first speaker represents Puerto Rico here, 3\1/2\
million people, almost 4 million people got no vote. There is something
in this bill that is very important to his people, but he is not
allowed to vote on it.
The last speaker represents many people whose origin is in Puerto
Rico, but they have a vote here in the Congress because they chose to
move to the mainland as Americans from Puerto Rico.
The next speaker, Mr. Speaker, that I am going to yield 2 minutes to
is in the same position. Mr. Qutierrez represents a lot of people whose
origins were in Puerto Rico but they are here now because they have got
a vote here in the Congress and they can vote for President.
I just do not think, as I editorialize here, we have paid enough
attention to the political novelties that we have created with Puerto
Rico. I think we better spend some time on it, Mr. Speaker.
Mr. Speaker, I yield 2 minutes to the gentleman from Illinois [Mr.
Gutierrez].
Mr. GUTIERREZ. Mr. Speaker, I want to begin my remarks by making
clear that I can support a break for small businesses, but I cannot
support breaking the economy of Puerto Rico to do it.
The supporters of this bill will give you lots of interesting
rhetoric about the great breaks they want to give small businesses
today. But they won't tell you the truth about what this bill means for
the 3.8 million American citizens who live in Puerto Rico.
We are breaking their backs.
We are breaking their dreams.
And, we are breaking our promise to give the Puerto Rican economy a
chance to thrive.
This is a simple bill. It is a bill to destroy Puerto Rico's economy.
Eliminating Section 936 will cause a stampede of companies to foreign
shores where they will be warmly received for the thousands of jobs
they will bring.
And what will this mean for the revenue we pretend to be generating
by targeting Puerto Rico's jobs for elimination? Empty factories don't
create profits. Empty factories don't pay taxes. Empty factories don't
create jobs.
Eliminating jobs is an awfully strange way to raise revenue. Yet,
it's not too surprising. Not surprising that the most powerless are
once again asked to pay for this Republican election-year political
payoff.
The people of Puerto Rico have not been asked or consulted about this
critical issue.
Let's be completely clear. The people of Puerto Rico overwhelmingly
support Section 936. And the people of Puerto Rico have earned the
right to be consulted. The names of more than 2,000 * * * 2,000 of the
sons of Puerto Rico--American citizens--are inscribed on the Vietnam
War Memorial Wall; 2,000. How do we recognize their supreme sacrifice?
How does this Congress show that we understand the importance and
contributions of the Puerto Rican people to our Nation? The majority
wishes to ram through a proposal that will eviscerate the jobs of
300,000 decent, hard working Puerto Rican working people who want only
to honestly earn a living for their families.
Puerto Rico has a per capita income one-third the United States
average, and three times its rate of unemployment. Yet we target them
for economic destruction.
The voices of hundreds of thousands of workers on the island ask only
for fairness for their families. They ask only not to become the pawn
in an election-year political game.
{time} 1930
They have paid the price, they have paid taxes, the taxes of their
blood, and I demand that this Congress respect it.
Mr. ARCHER. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, it is fascinating to me to listen to my colleagues on
the other side of the aisle, the minority, support tax breaks for big
corporations simply because they believe that the end result might
benefit something that they are interested in. But let us introduce a
tax rate reduction on capital gains that would create jobs for all
Americans, and they rail that we are giving special preference to the
big corporations and to the rich. But here they are today, emotionally
supporting tax breaks for big corporations. It is a strange irony, it
is almost a strange contradiction, and yet we are here witnessing it.
Mr. Speaker, I reserve the balance of my time.
Mr. GIBBONS. Mr. Speaker, I yield 30 seconds to the gentleman from
Illinois [Mr. Gutierrez].
Mr. GUTIERREZ. Mr. Speaker, it is not the companies we have come here
to support, it is the jobs, and I think that we all, if we honestly
speak about this, those corporations are going to Singapore, those
corporations are going to Mexico, those corporations are going to leave
Puerto Rico. What revenues do they have? Who are you going to tax when
the American corporations that are in Puerto Rico precisely because of
936 go to foreign shores? Where do our colleagues get the revenue for
them?
It is not the corporations that I am here to defend but the 300,000
jobs that are created. Let us look at the laws that govern Puerto Rico,
but we do not want to have a debate about that.
Mr. ARCHER. Mr. Speaker, I yield myself such time as I may consume.
The gentleman has made an outstanding argument in behalf of the
repealing the alternative minimum tax, repealing the foreign-source
income taxes, all of which apply to great corporations who would be
creating jobs in this country instead of overseas. But let us bring up
something about the alternative minimum tax and let them rail against
the help for big corporations. They do not want to talk about jobs
then. They want to talk about how the Republicans want a tax break for
big corporations, and here they are defending tax breaks for big
corporations because they say it creates jobs. It is one of the most
incredible inconsistencies that I have seen in the years that I have
been in the Congress of the United States, and apparently it is
supported by all of the minority Members. None of them has spoken
against it, none of them has spoken for doing away with 936, special
tax breaks for big corporations, but they have taken all of their time
supporting those big
[[Page H5473]]
tax breaks because they say it creates jobs.
I want to hear them again when we get back to capital gains and we
get back to alternative minimum tax and all of those parts of the code
that create jobs for all Americans across this country. Let them then
come and defend that.
Mr. Speaker, I reserve the balance of my time.
Mr. GIBBONS. Mr. Speaker, I yield 30 seconds to the gentleman from
New York [Mr. Rangel].
Mr. RANGEL. Mr. Speaker, all we are saying is that in this form of
Government we do not make these determinations in the backroom. If our
colleagues think that really is big corporations that is the
beneficiary, then let us have hearings on it, let us bring the
economists from Puerto Rico, let us bring the elected officials from
Puerto Rico, let us bring the businesses, and let us do the right
thing. But it is unfair for people who cannot vote not to have hearings
here and just make the determination that the benefits go to the
corporation.
If our colleagues bring a bill out, we will talk about it.
Mr. GIBBONS. Mr. Speaker, I yield 3 minutes to the gentleman from
Michigan [Mr. Levin], who does a very conscientious job in this body.
Mr. LEVIN. Mr. Speaker, I thank the distinguished gentleman from
Florida [Mr. Gibbons] for yielding this time to me.
Mr. Speaker, I rise in support of this bill. It has several important
bipartisan provisions. I have long supported increases in small
business expending and expensing employer-provided education assistance
and improving the targeted jobs tax credit and in simplifying pension
and subchapter S rules. I am pleased these are in the bill.
But there are several provisions in this bill that run counter to its
stated purpose to preserve and create small business jobs. I hope these
shortcomings are fixed in the Senate.
The first provision repeals the tax exclusion for employer-provided
graduate education. This provision helps hard-working Americans who, on
average, make $30,000 per year. They are small business people, nurses,
engineers, scientists, programmers, and teachers of tomorrow. They are
precisely the people everyone tells us we need more of in this global,
high-technology economy.
A majority of our Committee on Ways and Means voted for provision for
employer-provided graduate education, but the leadership blocked it. I
hope the Senate puts it back in.
The second provision repeals the tax exclusion for banks that lend to
employee owned companies. The ESOP provision in the bill today would
lose jobs, not protect them.
And let me just say the issue is not tax breaks. The issue is a Tax
Code provision: Does it encourage business expansion and job creation
or does it not? And I do not think we ought to throw labels around and
call it a break if we do not like it.
I am for changes in the alternative minimum tax if it is tailored to
help job creation, and I do not understand why this provision, this
ESOP provision in this bill, why it would eliminate a part of our
present code that helps employees keep their jobs, take control of
their companies, improve productivity and make CEO's more accountable.
So I hope this provision and the other one I mentioned on graduate
education is changed in the Senate.
Mr. ARCHER. Mr. Speaker, I yield 1 minute to the gentlewoman from
Connecticut [Ms. DeLauro].
Mr. GIBBONS. Mr. Speaker, I yield 30 seconds to the gentlewoman from
Connecticut [Ms. DeLauro].
The CHAIRMAN. The gentlewoman from Connecticut [Ms. DeLauro] is
recognized for 1\1/2\ minutes.
Ms. DeLAURO. Mr. Speaker, I thank my colleagues for yielding me the
time.
Mr. Speaker, working Americans deserve tax relief, and I am glad to
see that this bill takes needed steps in that direction.
We have heard a lot in this Congress about encouraging work, a goal I
strongly support, and I am happy to say that extending the targeted
jobs tax credit will encourage work. This credit, now named the work
opportunity tax credit, will give employers the proper incentive to
hire those who might not find work otherwise.
Continued education will enhance workers' skills and enable them and
their companies to prosper in an ever more competitive economy.
Extending the tax deduction for employer-provided educational
assistance will encourage businesses and individuals to invest in the
most valuable kind of capital, human capital.
I also support enhanced pension security for American workers, and am
glad that the bill takes steps in that direction. The bill guarantees
that workers in multiemployer pension plans, such as construction
workers, will not lose their pension benefits after 5 years instead of
10. The large number of workers in nonprofit organizations also will be
able to take advantage of 401(k) plans. I strongly support these steps
to help Americans in their retirement years, but I am concerned that
these steps do not do enough to ensure that all workers will have the
security they deserve after a lifetime of work.
We must be fair to those working American families who are struggling
harder and harder for less and less. This pension plan expands access
to retirement savings but does so in a way that leaves many low-wage
workers out. Let me read from the business section of today's New York
Times. It says, and I quote: ``In a break from decades of pension
policy, the bill would let owners reap tax benefits for themselves even
if their workers do not participate.''
Helping only those at the top is not the way Congress should improve
retirement security. A better and more comprehensive plan that would
help all workers has been outlined by the President and I hope that as
this bill moves forward, elements of the President's plan will be
incorporated so that all workers may benefit.
I encourage my colleagues to support this bill for its needed tax
relief, but I hope that its pension provisions may be improved before
becoming law.
Mr. ARCHER. Mr. Speaker, I yield 2 minutes to the gentleman from
Virginia [Mr. Payne].
Mr. PAYNE. of Virginia. Mr. Speaker, I rise in support of H.R. 3448,
and I commend the chairman and the ranking member for the work they
have done in this bill.
As a member of the coalition of conservative Democrats and a strong
proponent of deficit reduction, I have in the past opposed cutting
taxes before we have a blueprint in place which would bring us to a
balanced budget, and I was particularly concerned last year about the
tax cut provisions in the budget resolution in part because of their
magnitude and in part because they were back-end-loaded in a way that
would make the cost rise dramatically outside the budget window. This
package, however, is reasonable and provides opportunities to improve
our fiscal responsibility.
H.R. 3448 is a very targeted measure with its provisions benefiting
small businesses and their employees. These businesses are the engine
of economic growth in this country and represent the sector of our
economy that is least able to adjust in difficult economic times.
The bill's two major provisions and expansion of small business
ability to expense money that is spent on capital improvements and the
restoration of a tax provision that encourages business to send their
employees to college represent good public policy that will help our
Nation increase its stock of capital in both our equipment and our
people.
These provisions are accounted for honestly without accounting
gimmicks designed to mask their costs by pushing much of the revenue
into years outside the budget window, and while it is difficult to find
sources of revenue to replace this much money without some level of
controversy, the revenue offsets in this bill are not illusory. They
require the type of decisionmaking our constituents expect of us,
prioritizing how to best spend our limited resources.
This is a good bill, and I urge my colleagues to support it.
Mr. ARCHER. Mr. Speaker, I yield 2\1/2\ minutes to the gentleman from
Ohio [Mr. Kasich], the very active, very respective chairman of the
Committee on the Budget.
{time} 1945
Mr. KASICH. Mr. Speaker, I want to first of all pay a very high
tribute to
[[Page H5474]]
the gentleman from Texas [Mr. Archer]. Most of my lifetime as a young
man and then entering the Congress, still as a young man, I was very
frustrated as I heard a lot of rhetoric from many of my colleagues
about the fact that we had passed out so many tax breaks to all these
big corporations.
I come to find out that the minority party basically controlled the
Committee on Ways and Means for 40 years, and they passed out all these
loopholes to all these big corporations. So out of one side I heard
people saying, I do not like the fact that big business is getting all
these benefits, and it is an outrage, and at the other side of their
mouth, or the other side of their body, they were passing out the tax
breaks.
Mr. Speaker, I had said at the beginning of the last session of the
Congress to Chairman Archer, we need to close loopholes. We have to
take benefits away from corporations that had powerful lobbyists who
were able to get these things enacted into law. The gentleman from
Texas [Mr. Archer] said that there are things in this code that are
outdated. There are things in this code that do not make sense anymore.
Chairman Archer agreed to close loopholes. He agreed to take the
loopholes that lobbyists had passed in this town and take them out of
the Tax Code so hardworking Americans would have more in their pocket.
Mr. Speaker, this 936 business; we have given very powerful
corporations very large tax giveaways to locate in Puerto Rico. What we
find is that there are companies getting huge amounts of tax breaks and
they are supposedly creating jobs of Puerto Ricans, and frankly, in
some cases companies are getting several hundred thousand dollars'
worth of tax write-offs and the employees are only being paid $30,000.
What we intend to do is to repeal this whole section which has given
a huge tax loophole to very big, wealthy corporations. We are saying we
are going to scrap it.
Mr. Speaker, we are going to phrase this out over a period of 10
years. If in the course of time we figure out that a wage credit makes
some sense, we will come back and do it. But frankly, we started
phasing this out in 1993. I compliment the minority for beginning that
process, but we want to complete that process. We think this is a bad
provision for hardworking American taxpayers and, frankly, they ought
to be happy with the fact that we are closing the loopholes that I
heard many people complain about, and we are using this in order to
help Americans who work hard and pay their taxes and do not have
lobbyists to give them tax breaks.
Mr. GIBBONS. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I would say to the chairman of the Committee on the
Budget, this debate is not about taxes. This debate is about taxation
and representation, with an emphasis upon the representation. Puerto
Rico has in it 3.8 million Americans and no vote in this Congress. That
is what this debate is about. It is the fact that they were not
consulted; no attention has been properly paid to their economic
status. That is what this debate is about. You can go ahead and get
lost in the budget over there all you want to, but I am lost in the
equities of the fact that the Americans in Puerto Rico are just
disenfranchised.
Mr. Speaker, I yield such time as he may consume to the gentleman
from New York [Mr. Rangel].
Mr. RANGEL. Mr. Speaker, when you have the votes, you have the votes.
But this is very interesting. We are talking about a tax issue with the
eminent chairman from the Committee on Ways and Means here. The only
point we raised was that we never had any opportunity to determine
whether 936 was effective. But it makes a lot of sense.
It is the distinguished chairman of the Committee on the Budget that
comes to the floor. He needs some money. The Committee on the Budget
needs some money. Does the Committee on the Budget hold hearings? Does
the Committee on the Budget find out what programs work or what do not
work? Does the chairman of the Committee on the Budget go to Puerto
Rico to talk with the Governor? No. The Committee on the Budget
chairman dictates to the Committee on Ways and Means, do not have
hearings, just bring the money. That is exactly what we did.
Mr. ROMERO-BARCELO. Mr. Speaker, will the gentleman yield?
Mr. RANGEL. I yield to the gentleman from Puerto Rico.
Mr. ROMERO-BARCELO. Mr. Speaker, I thank the gentleman for yielding.
Mr. RANGEL. Mr. Speaker, I would ask the distinguished elected
representative in yielding, did anyone ever go to Puerto Rico, to his
Governor or to him, and ask him to study this bad bill and report back?
Mr. ROMERO-BARCELO. No. That is what I want to say. I have been a
proponent of elimination of the tax reservation of income of section
936 but to substitute it for a tax credit based on wages, so we would
really promote jobs in Puerto Rico. What has happened here is that the
way this bill is structured, they eliminate everything. No corporation
is going to get any new incentives, so there would be nothing for new
business. Then corporations are allowed for 10 years to keep what they
are earning and to not pay any taxes, or to pay limited taxes for 10
years.
That is the giveaway. That is unnecessary. We can take that tax and
provide a wage credit, and it would be more useful.
The SPEAKER pro tempore. All time for the minority has expired.
Mr. ARCHER. Mr. Speaker, I yield 1 minute to the gentleman from Ohio
[Mr. Kasich].
Mr. KASICH. Mr. Speaker, let me just say to the gentleman who is
going to be the ranking member, does he know the heat that we took when
we recommended, as both the Committee on the Budget and the Committee
on Ways and Means, that we close loopholes on corporations that won
over in Gucci Gluch? We took a lot of heat. No one ever dreamt that
Republicans would lead the way to close the loopholes on large
corporations.
The gentleman may not be totally thrilled with the whole process, I
would say to him, but let me just suggest to him that this way was not
easy. When the gentleman says hearings on 936, 936 as defined by
everybody who has analyzed this Tax Code, they have said this is a
loophole that is so unfair you could drive a truck through, and it
needed to be closed. This has been a mantra from people on both the
conservative and liberal side of economic expertise. They said 936 is
bad.
What I am saying to the gentleman is this: Imagine that at the end of
this century, the Republicans are beginning to clean up the Tax Code
and we are taking on a lot of people that this gentleman tries to take
on every week. This time, I say to the gentleman from New York [Mr.
Rangel], we are going to win.
Mr. ARCHER. Mr. Speaker, I yield 2\1/2\ minutes to the gentlewoman
from Connecticut [Mrs. Johnson], a valued member of the Committee on
Ways and Means and chairman of the Subcommittee on Oversight.
Mrs. JOHNSON of Connecticut. Mr. Speaker, first of all, I want to
commend the chairman of the committee, the gentleman from Texas [Mr.
Archer], for his leadership in this Congress on tax reform. It is
unfortunate, in my mind, that the really excellent tax bill that we
sent to the President I believe twice, and he vetoed, was talked about
in the press only as a bill containing capital gains relief and a $500
credit for families with children, because in that bill were many, many
provisions whose goal it was to stimulate growth and create jobs in our
economy, providing educational opportunity for our people, work
opportunity for women on welfare, and retirement security for many,
many women who work at home and many, many people who work for small
businesses.
So I am very proud to stand here today as a member of the Committee
on Ways and Means and recognize my chairman's leadership, because over
all the years that this body has legislated tax law it has not cared
about small business. In fact, over the years we have built a tax code
that rested on the interests of big business in America, thinking that
big business was the job creator in our economy.
We now know differently, so we have here before us tonight a bill
that drives growth in the small business sector; that for the first
time will expand expensing for small businesses, allowing them the
money to buy the equipment to create the jobs and hire the
[[Page H5475]]
people to drive our economy forward. This is an economic growth
package, because it addresses the tax needs and alleviates the tax
burden on the very sector that is creating the most jobs in America and
that holds the potential for future strength.
It also renews that opportunity for employers to supplement the
education of their people; and we know education, quality, expertise,
that creates high value-added jobs, high-wage jobs, and an opportunity.
Mr. Speaker, in addition, this bill renews the work opportunities tax
credit, formerly known as the targeted jobs tax credit, which again
will help those people on welfare get jobs. We want women to have the
independence and the self-respect of work, and this is one key piece of
the policy pyramid that has to be developed to give women that
independence and self-respect.
In addition, the pension reform section of this bill restores to
small business the opportunity to provide their employees the same
right to create retirement security as larger businesses have. I
commend my chairman on an excellent bill.
Mr. ARCHER. Mr. Speaker, I yield 1 minute to the gentleman from
Michigan [Mr. Smith], who has done such good work on cost recovery for
creation of jobs.
Mr. SMITH of Michigan. Mr. Speaker, I thank the chairman of the
committee for yielding time to me.
Mr. Speaker, in 1993 we increased the marginal tax rate on small
business from 31 to 39.6 percent. Small business creates jobs. The
first bill that I introduced when I came to Congress in 1993 was
neutral cost recovery. It allowed a business to deduct the cost of
machinery and equipment and facilities in the year they bought it.
This is an excellent bill for small business. It does include an
increase in expensing up to $25,000. It is what we have to do if we
want to expand jobs in this country, and ultimately expand revenues
coming into the Federal Government to pay off this mess that we have
found ourselves in as far as overspending and overborrowing.
Mr. ARCHER. Mr. Speaker, I yield myself the balance of my time.
Mr. Speaker, this is a good bill. That has been said on both sides of
the aisle. It is a good bill because it gives incentives for small
businesses to do their job, to create more jobs for working Americans.
As we all know, small businesses have been creating over 80 percent of
the new jobs. This bill give them assistance in expensing of capital
cost equipment, without having to go through laborious depreciation
schedules. It will give them tax credits to hire those who are the
least employable. It will give them the opportunity for pension reform,
pension simplification, so they, as well as big corporations, will be
able to provide retirement help for their workers and for themselves.
It implements a number of things that were in the Contract With America
and in the Balanced Budget Act of 1995. This time, Mr. Speaker, the
President will sign this legislation. It is not only good for small
business, it is good for working Americans. It is good for all of
America.
Mr. PETRI. Mr. Speaker, while the minimum wage debate is important,
what we are not debating is more important.
For the 20th time since the enactment of the Fair Labor Standards
Act, we will debate the part of that act that affects less than 10
percent of the American work force. For the 20th time we will ignore
the remainder of the statute--its overtime provisions--that affect 90
percent of the work force.
The original minimum wage was 25 cents. In failing to update the
act's overtime provisions, we are left with provisions that have as
much relevance to today's workforce needs as a 25-cent wage would to
today's economy.
Employers and employees can't ignore these provisions. Rather, they
must shoehorn their weekly operations into a construct that was
designed for the workplace of the 1930's, not the 1990's, let alone the
21st century.
For example, when an employee works more than 40 hours in a week, the
law requires her to be compensated for overtime with money. However,
many workers would prefer to be paid with more time off rather than
money. State, local, and Federal employees have such a choice. Yet, by
law, private sector employees do not.
In addition, many employees resent being strapped to the traditional
40-hour week concept. They prefer more flexible arrangement such as
``9/80'' schedules that allow employees to compress 80 hours into 9
workdays over a 2-week period. That way, they can take every other
Friday off.
Unfortunately, under current law employers who give them this option
have to pay overtime. That creates morale problems for other employees
with traditional schedules who work the same number of hours but don't
get overtime.
The law should allow employees to choose these schedules voluntarily
without incurring overtime penalties for their employer.
The most egregious effects of the law stem from the requirement that
covered employees be paid an hourly wage rather than a salary. For most
workers, this is not a problem.
But many employees--particularly professional and administrative
employees--prefer not to have their lives tied to a time clock. They
would prefer the certainty of a salary to an hourly paycheck that
requires them to clock overtime hours in order to meet their income
goals. The law requires payment on an hourly basis to anyone who does
not fall within the white-collar worker exemption.
The concept of the exemption is fine, but the reality is that the
employee has to have exactly the same duties as a 1950's white-collar
worker, which is when the definitions were written.
Thus many employees who clearly view themselves as while-collar
workers--such as engineers, accountants, marketing representatives, and
insurance underwriters--are outraged when they have to start filling
out time sheets and asking permission to work past 5 p.m.
What stands in the way of our addressing these problems and giving
the FLSA a long-overdue tuneup. Nothing less than pure demagoguery.
Exaggerated claims that even the most modest improvements to the FLSA
will mean the death of the 40-hour workweek have produced total
paralysis on these issues.
So we are left with modest tinkering with the statute, such as the
company vehicle provision, that address anomalies that have cropped up
in certain industries, but in the grand scheme of things affect very
few workers. The FLSA is already riddled with such provisions.
Mr. Chairman, after we resolve this current minimum wage issue, I
hope we can focus on issues that affect the day-to-day worklives of
most American workers.
Once the smoke has cleared on this issue and the rhetoric has toned
down a few notches, I will introduce legislation to provide this focus.
Mr. Chairman, reason, not paranoia, should prevail. Let's listen to
real workers and give them a wage-hour law they can live with.
Mr. SAXTON. Mr. Speaker, for a better understanding of why I believe
a higher minimum wage is the wrong course to take, I am putting into
the Record today the Joint Economic Committee's latest report entitled
``The Case Against a Higher Minimum Wage'' (May 1996).
Also, available from the Government Printing Office are the
transcripts of two Joint Economic Committee hearings held last year on
the minimum wage. When contacting the GPO, request the following two
documents:
Senate Hearing 104-377 Part I: JEC Hearing on Evidence Against a
Higher Minimum Wage: February 22, 1995, part I.
Senate Hearing 104-377 Part II: JEC Hearing on Evidence Against a
Higher Minimum Wage: April 5, 1995, part II.
For any additional information on this or any other economic issue,
please contact my JEC office located at 1537 Longworth HOB, Washington,
DC 20515.
Joint Economic Committee Report
the case against a higher minimum wage
The voices clamoring for a minimum wage hike are getting
ever louder. Proponents argue that the current wage level
does not provide an adequate incentive for work. Also, they
argue that an increase in the minimum wage will have only a
very minor impact on jobs. These arguments are not grounded
in fact. The impact of raising the minimum wage has been
studied since its inception. All credible research has come
to the same conclusion: raising the minimum wage hurts the
poor. It takes away jobs, keeps people on welfare, and
encourages high school students to drop out. Policy makers
should be clear on the consequence of higher minimum wages.
jobs and the minimum wage
Economists have studied the job-destroying features of a
higher minimum wage. Estimates of the job losses of raising
the minimum wage from $4.25 to $5.15 have ranged from 625,000
to 100,000 lost jobs. It is important to recognize that the
jobs lost are mainly entry-level jobs. By destroying entry-
level jobs, a higher minimum wage harms the lifetime earnings
prospects of low-skilled workers.
Proponents have been able to muddle the debate by pointing
to a study done by two Princeton economists, David Card and
Alan Krueger. These economists claimed to find that raising
the minimum wage does not lower employment.\1\ In one paper,
they succeeded in casting doubt on 200 years of economic
research and theory. Economists took
[[Page H5476]]
their challenge seriously and attempted to recreate their
results. It could not be done. Economists who attempted to
replicate their work demonstrated conclusively that raising
the minimum wage destroys jobs.\2\
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Footnotes at end of article.
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Even after the Card and Krueger study was fully discredited
by economic science, it is still being used by proponents of
higher minimum wages to support an increase. Why must they
rely on discredited research to support their call for
raising the minimum wage? Because they recognize that
Americans do not support proposals that destroy jobs.
Proponents often like to show survey results that say more
than eighty percent of Americans support a higher minimum
wage. Yet, the same survey shows less than half surveyed, 46
percent, support raising the minimum wage if it ``might
reduce the number of jobs available for workers with limited
skills.3 '' Clearly, if Americans were informed of the
true effects of raising the minimum wage, support would
rapidly erode.
Minimum Wage Workers
Supporters claim that raising the minimum wage is important
for working families. Secretary of Labor Robert Reich often
repeats the fact that forty percent of minimum wage workers
are the sole source of income for their families. This is
misleading because it relies on lumping single, non-family
individuals with families. Only 2.8 percent of workers
earning less than $5.15 are single parents.4 Only 1.2
percent of all minimum wage workers were adult heads of
households with incomes less than $10,000.5 Fifty-seven
percent of minimum wage workers are single individuals, many
of them living with their parents.
Minimum wage workers are not parents struggling to feed
their children. Rather, they are high school or college
students living at home. The level of the minimum wage is
irrelevant for most people in poverty. Only 9.2 percent of
poor people of working age have full-time jobs.6
Side Effects of Raising the Minimum Wage
It has been well documented that the minimum wage destroys
jobs, particularly the jobs of low-skilled, young workers.
However, there are other equally pernicious side effects of
higher minimum wages. Higher minimum wages make it more
difficult for people to leave welfare and induce high-school
students to drop out.
Dr. Peter Brandon of the Institute for Research on Poverty
studied how raising the minimum wage affects the transition
from welfare to work.7 He found that raising it keeps
welfare mothers on welfare longer. Mothers on welfare in
states that raised their minimum wage remained on welfare 44
percent longer than mothers on welfare in states where it was
not raised.8
The reason for this result is that raising the minimum wage
induces some people to enter the labor market who would not
apply if not for the higher level. With a larger labor
market, employers choose higher-skilled applicants. Thus,
raising the minimum wage hurts low-skilled workers in two
ways. First, there are fewer jobs available. Second, with a
larger pool of applicants, competition is stiffer. Low-
skilled workers have a more difficult time getting those job
skills that are crucial to economic well-being.
Another side effect of raising the minimum wage is that it
increased the number of high-school students who drop out.\9\
Some of these students do not find employment. Another group
of students are part of those applicants that compete jobs
away from welfare recipients. Dropping out of school is very
destructive. High school drop-outs have a very difficult time
improving their well-being.
The Elusive Benefits of a Higher Minimum Wage
The proponents of a higher minimum wage argue that it is
vitally important to raise it in order to improve the lives
of poor workers. However, the raise will have only a limited
impact on poor working families. \10\ A single parent with
two children living in California would gain only 26 cents
from a 90 cent increase in the minimum wage.
To put this gain in perspective, each minimum wage worker
who earns $4.25 an hour brings home $3.92 for each hour
worked once payroll taxes are deducted. The employer costs of
a minimum wage worker is $4.58 an hour when the employers
share of the payroll tax is included. \11\ If workers could
take home the amount of money it costs the employer to hire
workers, they could have 62 cents more per hour. Clearly, the
California parent would be better off if the tax wedge were
reduced, rather than increasing the minimum wage.
Conclusion
The campaign to raise the minimum wage will have little
positive impact on the lives of poor people. Rather, it is a
political measure that plays to a misunderstanding of the
impact of higher minimum wages. The future of the American
economy depends on a correct understanding of the causes of
prosperity. For too long, attempts to relieve poverty have
been misguided. To lift people out of poverty, we need a
system that maximizes opportunities for economic well-being
of low-skilled workers. Raising the minimum wage is a wrong-
headed solution that will deprive young, poor Americans of an
opportunity to improve their economic situation.
Endnotes
\1\ Card, David and Alan B. Krueger, ``Minimum Wages and
Employment: A Case Study of the Fast-Food Industry in New
Jersey and Pennsylvania.'' American Economic Review,
September 1994: pp. 772-793.
\2\ Neumark, David and William Wascher, The Effect of New
Jersey's Minimum Wage Increase on Fast-Food Employment: A Re-
evaluation using Payroll Records. National Bureau of Economic
Research: Cambridge, MA. 1995.
\3\ Washington Post, April 26, 1996, p. F1.
\4\ EPI Edge. Employment Policies Institute. April 1996.
\5\ Vedder, Richard and Lowell Gallaway, Should the Federal
Minimum Wage Be Increased? National Center for Policy
Analysis: Dallas, TX. 1995.
\6\ Ibid.
\7\ Brandon, Peter. Jobs Taken by Mothers Moving from Welfare
to Work and the Effects of Minimum Wages on this Transition.
Employment Policies Institute: Washington, DC. 1995.
\8\ Ibid.
\9\ Neumark, David and William Wascher, The Effects of
Minimum Wages of Teenage Employment and Enrollment: Evidence
from Matched CPS Surveys. National Bureau of Economic
Research: Cambridge, MA, 1995.
\10\ The reason for the minimum impact is that raising higher
incomes causes a loss of benefits in Aid to Families with
Dependent Children (AFDC), Food Stamps, and the Earned Income
Tax Credit (EITC).
\11\ This discussion only focuses on the payroll taxes. Many
other taxes such as workers compensation and employment
insurance also raise the costs of hiring workers for
employers.
Mr. LANTOS. Mr. Speaker, the time has come for the Congress to raise
the minimum wage--without gimmicks, without linking it with
unacceptable provisions, without political posturing, and without
delay. It is time to take this action without adding amendments and
gimmicks and riders and poison pills that will limit and lessen the
impact of an increase in the minimum wage.
Adjusted for inflation, the current minimum wage is worth 50 cents
less today than it was in 1991 when it was last increased. To restore
the same purchasing power that the minimum wage had in the late 1970's
would require us to increase its level to $6.10 today. Even if we adopt
the legislation I am supporting and increase the minimum wage to $5.15,
we are not keeping up with the increased cost of living.
Although the proposed increase is very modest, it will benefit our
national economy. Economists estimate that 12 million people will be
helped by a 90-cent increase. In addition, some 4 million workers who
earn less than $6.00 per hour will see their incomes increase as a
result of a boost in the Federal minimum wage. In my home State of
California our minimum wage is higher than the Federal level, but if we
increase the Federal minimum wage, it will have a positive effect on
the lowest wages in our area as well.
The people who will benefit from an increase are not just teenagers
at local fast food restaurants trying to earn extra cash for a rock
concert or a pair of baggy Levis. Of those earning the minimum wage, 63
percent are workers over the age of 20 and 46 percent are over the age
of 25; 59 percent of workers earning the minimum wage are women and
more than half of these women are over 25 years of age; 43 percent of
minimum wage earners are working full time.
Mr. Speaker, as a former professor of economics, I have been
particularly interested in recent economic research on the effects of
the minimum wage on workers and their families and the economy. A
number of studies demonstrate that the possible negative impact of
moderate increases in the minimum wage phased in over a period of more
than a year is minimal. Studies show that with the minimum wage
relatively low compared with the average wage--a consequence of the
fact that the minimum wage has not kept pace with the increase in the
cost of living--the effect of this increase on both employment and
incomes will be positive. In fact, several prominent scholars have
argued quite convincingly that the income gains from an increase in the
minimum wage would outweigh any job losses that might result from the
increase.
More importantly, Mr. Speaker, this is a question of fundamental
fairness. At a time when we are seeing a growing gap between wealthy
Americans and working Americans, it is fundamentally unfair to maintain
the minimum wage at levels which shrink with every increase in the cost
of living. At the same time, Mr. Speaker, we have seen vast increases
in the compensation of chief executive officers of America's
corporations--last year corporate executives saw their salaries jump by
31 percent while workers earning the minimum wage stayed at exactly the
same level.
Mr. Speaker, the time has come to increase the minimum wage. I urge
my colleagues to join me in supporting this action in the interest of
fundamental fairness and in the interest of millions of American
workers.
Mr. ORTON. Mr. Speaker, I rise in support of H.R. 3448, the Small
Business Job Protection Act.
This bill contains a number of provisions that I have long supported,
and which encourage the creation and growth of small businesses. First,
the bill increases the amount a small business can deduct for the
purchase of business-related equipment from $17,500 to $25,000.
The bill also includes a number of provisions which make it easier
for small businesses to receive S corporation classification,
[[Page H5477]]
the most notable being an increase in the maximum number of
shareholders from 35 to 75. This important change makes it easier for
many small businesses to maintain a simplified corporate structure,
without being subject to double taxation.
This legislation includes important pension simplification provisions
for small businesses, including a simplified retirement plan, called a
savings incentive match plan.
For restaurants, this bill expands a 1993 law which gives restaurants
a credit for the Federal payroll taxes paid on tips earned by their
employees. Specifically, the bill would now expand the credit to
include unreported tips, and would expand restaurant eligibility to
include carryouts.
Finally, the bill extends a number of expiring provisions, including
a revised targeted jobs tax credit and section 127, the exemption for
employer-provided educational assistance. I am concerned that section
127 renewal is limited to undergraduate education. It is my hope that
this can be expanded in conference to reinstate graduate education.
I am pleased to see that the revenue loss from these provisions is
fully offset with other provisions which increase revenues. In other
words, this bill will not increase the deficit. In fact, this is
precisely the pay-as-you-go approach advocated since early last year by
the blue dog coalition, of which I am a member.
Last year, the coalition questioned the approach of borrowing
hundreds of billions of dollars to pay for tax cuts. Instead, we in the
coalition argued that tax cuts should be considered apart from spending
cuts, and should be fully paid for with offsetting changes in the Tax
Code.
After a year of debate, the Republicans are now beginning to see the
wisdom of this approach. Two weeks ago, during debate on the budget
resolution, the Republican Budget Committee chairman announced that
they would fully pay for economic growth, savings, and job creation tax
incentives with offsetting revenue increases.
Last month, we expanded deductibility of health care costs for small
businesses, paid for through offsetting revenue increases. Today, we
are taking the same approach for a number of small business tax
incentives.
So, I applaud the majority for adopting our suggestion. I also
encourage the majority party in the next few months to act on capital
gains relief, expanded IRA eligibility, and estate tax relief for
family farms and businesses, with offsetting revenue increases to make
such changes deficit neutral. The result will be a stronger, more
efficient economy.
I urge adoption of this bill.
Mr. CRANE. Mr. Speaker, today I will vote for the Small Business Job
Protection Act. The highlights of the bill in my view include the
expansion of the expensing provisions for small business, the package
of S corporation reforms and pension simplification items, and the
employer-provided educational assistance provision. If signed into law,
these provisions will do a great deal of good for small businesses in
this country and will in turn provide real job opportunities for
American workers.
However, I must express my deep concern with regard to that portion
of this bill which would phase out section 936 of the Tax Code over a
10-year period. Section 936 of the Tax Code provides tax incentives to
companies that locate production facilities in Puerto Rico. Frankly, I
have been concerned that many of those who will vote for this entire
package know little about the positive impact that section 936 has had
on employment in Puerto Rico. Nor, I fear do they appreciate the
negative impact that eliminating section 936 will have with regard to
the economic vitality of Puerto Rico and what the decline in that
regard will mean to our Federal budget in the long run.
Having served on the committee with jurisdiction over this issue for
the past 20 years, the Ways and Means Committee, I can unequivocally
report to my colleagues that section 936 has been one of the most
successful provisions in our entire Tax Code. Section 936 has spurred
economic development in Puerto Rico which has in turn created thousands
of jobs, dramatically reduced the unemployment rate in Puerto Rico. By
removing this incentive for companies to locate in Puerto Rico, an
economic vacuum will be created which I do not see being filled any
time soon. This void will bring on increased unemployment, and hope and
opportunity, which has been on the rise over the last 20 years in
Puerto Rico, will decline steadily. As the economy declines there will
be an increased dependency--dependency on Uncle Sam to help those that
no longer have jobs. Just what form this dependency will take, whether
it be statehood or some other arrangement, remains to be seen, but mark
my words, it will mean greater expenditures by the U.S. Treasury. So I
would say to those that think they are savings taxpayers dollars when
they vote to eliminate this so-called corporate welfare in the Tax
Code, that you can either pay not by encouraging economic growth and
opportunity, or you can pay later by increasing Federal outlays for
welfare and creating a dependency which I don't think the American
citizens--either on the mainland or in Puerto Rico will appreciate.
Mr. Chairman, it is my sincere hope that Congress will either revise
the provision of the bill before it becomes law or revisit this issue
at a later time.
Mr. ARCHER. Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore (Mr. Walker). Pursuant to House Resolution
440, the previous question is ordered on the committee amendment in the
nature of a substitute and on the bill.
The question is on the committee amendment in the nature of a
substitute.
The committee amendment in the nature of a substitute was agreed to.
The SPEAKER pro tempore. The question is on the engrossment and third
reading of the bill.
The bill was ordered to be engrossed and read a third time, and was
read the third time.
The SPEAKER pro tempore. The question is on the passage of the bill.
Pursuant to House Resolution 440, the yeas and nays are ordered.
The vote was taken by electronic device, and there were--yeas 414,
nays 10, not voting 9, as follows:
[Roll No. 190]
YEAS--414
Abercrombie
Ackerman
Allard
Andrews
Archer
Armey
Bachus
Baesler
Baker (CA)
Baker (LA)
Baldacci
Ballenger
Barcia
Barr
Barrett (NE)
Barrett (WI)
Bartlett
Barton
Bass
Bateman
Becerra
Beilenson
Bentsen
Bereuter
Berman
Bevill
Bilbray
Bilirakis
Bishop
Blute
Boehlert
Boehner
Bonilla
Bonior
Bono
Borski
Boucher
Brewster
Browder
Brown (CA)
Brown (FL)
Brown (OH)
Brownback
Bryant (TN)
Bryant (TX)
Bunn
Bunning
Burr
Burton
Buyer
Callahan
Calvert
Camp
Campbell
Canady
Cardin
Castle
Chabot
Chambliss
Chapman
Chenoweth
Christensen
Chrysler
Clay
Clayton
Clement
Clinger
Clyburn
Coble
Coburn
Coleman
Collins (GA)
Collins (IL)
Collins (MI)
Combest
Condit
Cooley
Costello
Cox
Coyne
Cramer
Crane
Crapo
Cremeans
Cubin
Cummings
Cunningham
Danner
Davis
de la Garza
Deal
DeFazio
DeLauro
DeLay
Deutsch
Dickey
Dicks
Dingell
Dixon
Doggett
Dooley
Doolittle
Dornan
Doyle
Dreier
Duncan
Dunn
Durbin
Edwards
Ehlers
Ehrlich
Emerson
Engel
English
Ensign
Eshoo
Evans
Everett
Ewing
Farr
Fattah
Fawell
Fazio
Fields (LA)
Fields (TX)
Filner
Flake
Flanagan
Foglietta
Foley
Forbes
Ford
Fowler
Fox
Frank (MA)
Franks (CT)
Franks (NJ)
Frelinghuysen
Frisa
Frost
Funderburk
Furse
Gallegly
Ganske
Gejdenson
Gekas
Gephardt
Geren
Gibbons
Gilchrest
Gillmor
Gilman
Gonzalez
Goodlatte
Goodling
Gordon
Goss
Graham
Green (TX)
Greene (UT)
Greenwood
Gunderson
Gutknecht
Hall (OH)
Hall (TX)
Hamilton
Hancock
Hansen
Harman
Hastert
Hastings (FL)
Hastings (WA)
Hayes
Hayworth
Hefley
Hefner
Heineman
Herger
Hilleary
Hilliard
Hinchey
Hobson
Hoekstra
Hoke
Holden
Horn
Hostettler
Houghton
Hoyer
Hunter
Hutchinson
Hyde
Inglis
Istook
Jackson (IL)
Jackson-Lee (TX)
Jacobs
Jefferson
Johnson (CT)
Johnson (SD)
Johnson, E. B.
Johnson, Sam
Johnston
Jones
Kanjorski
Kaptur
Kasich
Kelly
Kennedy (MA)
Kennedy (RI)
Kennelly
Kildee
Kim
King
Kingston
Kleczka
Klink
Klug
Knollenberg
Kolbe
LaFalce
LaHood
Lantos
Latham
LaTourette
Laughlin
Lazio
Leach
Levin
Lewis (CA)
Lewis (GA)
Lewis (KY)
Lightfoot
Lincoln
Linder
Lipinski
Livingston
LoBiondo
Lofgren
Longley
Lowey
Lucas
Luther
Maloney
Manton
Manzullo
Markey
Martinez
Martini
Mascara
Matsui
McCarthy
McCollum
McCrery
McDermott
McHale
McHugh
McInnis
McIntosh
McKeon
McKinney
McNulty
Meehan
Meek
Metcalf
Meyers
Mica
Millender-McDonald
Miller (CA)
Miller (FL)
Minge
Mink
Moakley
Mollohan
Montgomery
Moorhead
Moran
Morella
Murtha
Myers
Myrick
Nadler
Neal
Nethercutt
Neumann
Ney
Norwood
Nussle
Oberstar
Obey
Olver
Ortiz
Orton
Owens
Oxley
Packard
Pallone
Parker
Pastor
Paxon
Payne (NJ)
[[Page H5478]]
Payne (VA)
Pelosi
Peterson (FL)
Peterson (MN)
Petri
Pickett
Pombo
Pomeroy
Porter
Portman
Poshard
Pryce
Quillen
Quinn
Radanovich
Rahall
Ramstad
Reed
Regula
Richardson
Riggs
Rivers
Roberts
Roemer
Rogers
Rohrabacher
Ros-Lehtinen
Roth
Roukema
Roybal-Allard
Royce
Rush
Sabo
Salmon
Sanders
Sanford
Sawyer
Saxton
Scarborough
Schaefer
Schiff
Schroeder
Schumer
Scott
Sensenbrenner
Shadegg
Shaw
Shays
Shuster
Sisisky
Skaggs
Skeen
Skelton
Slaughter
Smith (MI)
Smith (NJ)
Smith (TX)
Smith (WA)
Solomon
Souder
Spence
Spratt
Stearns
Stenholm
Stockman
Stokes
Studds
Stump
Stupak
Talent
Tanner
Tate
Tauzin
Taylor (MS)
Tejeda
Thomas
Thompson
Thornberry
Thornton
Thurman
Tiahrt
Torkildsen
Torres
Torricelli
Traficant
Upton
Vento
Visclosky
Volkmer
Walker
Walsh
Wamp
Waters
Watt (NC)
Watts (OK)
Waxman
Weldon (FL)
Weldon (PA)
Weller
White
Whitfield
Wicker
Williams
Wilson
Wise
Wolf
Woolsey
Wynn
Yates
Young (AK)
Young (FL)
Zeliff
Zimmer
NAYS--10
Conyers
Dellums
Gutierrez
Menendez
Rangel
Rose
Serrano
Stark
Towns
Velazquez
NOT VOTING--9
Bliley
Diaz-Balart
Largent
McDade
Molinari
Seastrand
Taylor (NC)
Vucanovich
Ward
{time} 2016
Mr. TOWNS changed his vote from ``yea'' to ``nay.''
So the bill was passed.
The result of the vote was announced as above recorded.
A motion to reconsider was laid on the table.
____________________