[Congressional Record Volume 143, Number 92 (Thursday, June 26, 1997)]
[Senate]
[Pages S6508-S6553]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
AMENDMENTS SUBMITTED
______
THE TAX FAIRNESS ACT OF 1997
______
KOHL (AND OTHERS) AMENDMENT NO. 524
(Ordered to lie on the table.)
[[Page S6509]]
Mr. KOHL (for himself, Mr. Hatch, and Mr. Daschle) submitted an
amendment intended to be proposed by them to the bill, S. 949, to
provide revenue reconciliation pursuant to section 104(b) of the
concurrent resolution on the budget for fiscal year 1998; as follows:
On page 20, between lines 5 and 6, insert:
SEC. 103. ALLOWANCE OF CREDIT FOR EMPLOYER EXPENSES FOR CHILD
CARE ASSISTANCE.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 (relating to business related credits) is amended
by adding at the end the following new section:
``SEC. 45D. EMPLOYER-PROVIDED CHILD CARE CREDIT.
``(a) In General.--For purposes of section 38, the
employer-provided child care credit determined under this
section for the taxable year is an amount equal to 50 percent
of the qualified child care expenditures of the taxpayer for
such taxable year.
``(b) Dollar Limitation.--The credit allowable under
subsection (a) for any taxable year shall not exceed
$150,000.
``(c) Definitions.--For purposes of this section--
``(1) Qualified child care expenditure.--The term
`qualified child care expenditure' means any amount paid or
incurred--
``(A) to acquire, construct, rehabilitate, or expand
property--
``(i) which is to be used as part of a qualified child care
facility of the taxpayer,
``(ii) with respect to which a deduction for depreciation
(or amortization in lieu of depreciation) is allowable, and
``(iii) which does not constitute part of the principal
residence (within the meaning of section 1034) of the
taxpayer or any employee of the taxpayer,
``(B) for the operating costs of a qualified child care
facility of the taxpayer, including costs related to the
training of employees, to scholarship programs, and to the
providing of increased compensation to employees with higher
levels of child care training,
``(C) under a contract with a qualified child care facility
to provide child care services to employees of the taxpayer,
``(D) under a contract to provide child care resource and
referral services to employees of the taxpayer, or
``(E) for the costs of seeking accreditation from a child
care credentialing or accreditation entity.
``(2) Qualified child care facility.--
``(A) In general.--The term `qualified child care facility'
means a facility--
``(i) the principal use of which is to provide child care
assistance, and
``(ii) which meets the requirements of all applicable laws
and regulations of the State or local government in which it
is located, including, but not limited to, the licensing of
the facility as a child care facility.
Clause (i) shall not apply to a facility which is the
principal residence (within the meaning of section 1034) of
the operator of the facility.
``(B) Special rules with respect to a taxpayer.--A facility
shall not be treated as a qualified child care facility with
respect to a taxpayer unless--
``(i) enrollment in the facility is open to employees of
the taxpayer during the taxable year,
``(ii) the facility is not the principal trade or business
of the taxpayer unless at least 30 percent of the enrollees
of such facility are dependents of employees of the taxpayer,
and
``(iii) the use of such facility (or the eligibility to use
such facility) does not discriminate in favor of employees of
the taxpayer who are highly compensated employees (within the
meaning of section 414(q)).
``(d) Recapture of Acquisition and Construction Credit.--
``(1) In general.--If, as of the close of any taxable year,
there is a recapture event with respect to any qualified
child care facility of the taxpayer, then the tax of the
taxpayer under this chapter for such taxable year shall be
increased by an amount equal to the product of--
``(A) the applicable recapture percentage, and
``(B) the aggregate decrease in the credits allowed under
section 38 for all prior taxable years which would have
resulted if the qualified child care expenditures of the
taxpayer described in subsection (c)(1)(A) with respect to
such facility had been zero.
``(2) Applicable recapture percentage.--
``(A) In general.--For purposes of this subsection, the
applicable recapture percentage shall be determined from the
following table:
The applicable
recapture
``If the recapture evpercentage is:
Years 1-3....................................................100
Year 4........................................................85
Year 5........................................................70
Year 6........................................................55
Year 7........................................................40
Year 8........................................................25
Years 9 and 10................................................10
Years 11 and thereafter........................................0.
``(B) Years.--For purposes of subparagraph (A), year 1
shall begin on the first day of the taxable year in which the
qualified child care facility is placed in service by the
taxpayer.
``(3) Recapture event defined.--For purposes of this
subsection, the term `recapture event' means--
``(A) Cessation of operation.--The cessation of the
operation of the facility as a qualified child care facility.
``(B) Change in ownership.--
``(i) In general.--Except as provided in clause (ii), the
disposition of a taxpayer's interest in a qualified child
care facility with respect to which the credit described in
subsection (a) was allowable.
``(ii) Agreement to assume recapture liability.--Clause (i)
shall not apply if the person acquiring such interest in the
facility agrees in writing to assume the recapture liability
of the person disposing of such interest in effect
immediately before such disposition. In the event of such an
assumption, the person acquiring the interest in the facility
shall be treated as the taxpayer for purposes of assessing
any recapture liability (computed as if there had been no
change in ownership).
``(4) Special rules.--
``(A) Tax benefit rule.--The tax for the taxable year shall
be increased under paragraph (1) only with respect to credits
allowed by reason of this section which were used to reduce
tax liability. In the case of credits not so used to reduce
tax liability, the carryforwards and carrybacks under section
39 shall be appropriately adjusted.
``(B) No credits against tax.--Any increase in tax under
this subsection shall not be treated as a tax imposed by this
chapter for purposes of determining the amount of any credit
under subpart A, B, or D of this part.
``(C) No recapture by reason of casualty loss.--The
increase in tax under this subsection shall not apply to a
cessation of operation of the facility as a qualified child
care facility by reason of a casualty loss to the extent such
loss is restored by reconstruction or replacement within a
reasonable period established by the Secretary.
``(e) Special Rules.--For purposes of this section--
``(1) Aggregation rules.--All persons which are treated as
a single employer under subsections (a) and (b) of section 52
shall be treated as a single taxpayer.
``(2) Pass-thru in the case of estates and trusts.--Under
regulations prescribed by the Secretary, rules similar to the
rules of subsection (d) of section 52 shall apply.
``(3) Allocation in the case of partnerships.--In the case
of partnerships, the credit shall be allocated among partners
under regulations prescribed by the Secretary.
``(f) No Double Benefit.--
``(1) Reduction in basis.--For purposes of this subtitle--
``(A) In general.--If a credit is determined under this
section with respect to any property by reason of
expenditures described in subsection (c)(1)(A), the basis of
such property shall be reduced by the amount of the credit so
determined.
``(B) Certain dispositions.--If during any taxable year
there is a recapture amount determined with respect to any
property the basis of which was reduced under subparagraph
(A), the basis of such property (immediately before the event
resulting in such recapture) shall be increased by an amount
equal to such recapture amount. For purposes of the preceding
sentence, the term `recapture amount' means any increase in
tax (or adjustment in carrybacks or carryovers) determined
under subsection (d).
``(2) Other deductions and credits.--No deduction or credit
shall be allowed under any other provision of this chapter
with respect to the amount of the credit determined under
this section.
``(g) Termination.--This section shall not apply to taxable
years beginning after December 31, 1999.''
(b) Conforming Amendments.--
(1) Section 38(b) is amended--
(A) by striking out ``plus'' at the end of paragraph (11),
(B) by striking out the period at the end of paragraph
(12), and inserting a comma and ``plus'', and
(C) by adding at the end the following new paragraph:
``(13) the employer-provided child care credit determined
under section 45D.''
(2) The table of sections for subpart D of part IV of
subchapter A of chapter 1 is amended by adding at the end the
following new item:
``Sec. 45D. Employer-provided child care credit.''
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
1997.
SEC. 104. EXPANSION OF COORDINATED ENFORCEMENT EFFORTS OF
INTERNAL REVENUE SERVICE AND HHS OFFICE OF
CHILD SUPPORT ENFORCEMENT.
(a) State Reporting of Custodial Data.--Section
454A(e)(4)(D) of the Social Security Act (42 U.S.C.
654(e)(4)(D)) is amended by striking ``the birth date of any
child'' and inserting ``the birth date and custodial status
of any child''.
(b) Matching Program by IRS of Custodial Data and Tax
Status Information.--
(1) National directory of new hires.--Section 453(i)(3) of
the Social Security Act (42 U.S.C. 653(i)(3)) is amended by
striking ``a claim with respect to employment in a tax
return'' and inserting ``information which is required on a
tax return''.
(2) Federal case registry of child support orders.--Section
453(h) of the such Act (42 U.S.C. 653(h)) is amended by
adding at the end the following:
``(3) Administration of federal tax laws.--The Secretary of
the Treasury shall
[[Page S6510]]
have access to the information described in paragraph (2),
consisting of the names and social security numbers of the
custodial parents linked with the children in the custody of
such parents, for the purpose of administering those sections
of the Internal Revenue Code of 1986 which grant tax benefits
based on support and residence provided dependent children.''
(c) Effective Date.--The amendments made by this section
shall take effect on October 1, 1997.
______
BOND AMENDMENTS NOS. 525-526
(Ordered to lie on the table.)
Mr. BOND submitted two amendments intended to be proposed by him to
the bill, S. 949, supra; as follows:
Amendment No. 525
On page 192, strike lines 13 through 18.
____
Amendment No. 526
On page 212, between lines 11 and 12, insert the following:
SEC. . CLARIFICATION OF DEFINITION OF PRINCIPAL PLACE OF
BUSINESS.
(a) In General.--Section 280A(f) (relating to definitions
and special rules) is amended by redesignating paragraphs
(2), (3), and (4) as paragraphs (3), (4), and (5),
respectively, and by inserting after paragraph (1) the
following new paragraph:
``(2) Principal Place of Business.--For purposes of
subsection (c), a home office shall in any case qualify as
the principal place of business if--
``(A) the office is the location where the taxpayer's
essential administrative or management activities are
conducted on a regular and systematic (and not incidental)
basis by the taxpayer, and
``(B) the office is necessary because the taxpayer has no
other location for the performance of the essential
administrative or management activities of the business.''
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
1996.
______
DASCHLE (AND OTHERS) AMENDMENT NO. 527
Mr DASCHLE (for himself, Mr. Bingaman, Mr. Conrad, Ms. Mikulski, Ms.
Boxer, Mr. Dodd, Mr. Kerry, Ms. Landrieu, Mr. Cleland, Mr. Durbin, Mr.
Kennedy, Mr. Ford, Mr. Lautenberg, Mr. Harkin, and Mr. Johnson)
proposed an amendment to the bill, S. 949, supra; as follows:
Strike titles I through VII of the bill and insert the
following:
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF
CONTENTS.
(a) Short Title.--This Act may be cited as the ``Revenue
Reconciliation Act of 1997''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is
expressed in terms of an amendment to, or repeal of, a
section or other provision, the reference shall be considered
to be made to a section or other provision of the Internal
Revenue Code of 1986.
(c) Table of Contents.--The table of contents for this Act
is as follows:
TITLE I--REFUNDABLE CHILD TAX CREDIT
Sec. 101. Refundable child tax credit.
TITLE II--TAX INCENTIVES FOR EDUCATION AND TRAINING
Subtitle A--Tax Benefits Relating to Education Expenses
Sec. 201. HOPE credit for higher education tuition and related
expenses.
Sec. 202. Deduction for interest on education loans.
Subtitle B--Expanded Education Investment Savings Opportunities
Part I--Qualified Tuition Programs
Sec. 211. Exclusion from gross income of education distributions from
qualified tuition programs.
Sec. 212. Eligible educational institutions permitted to maintain
qualified tuition programs; other modifications of
qualified State tuition programs.
Part II--KIDSAVE Accounts
Sec. 213. KIDSAVE accounts.
Subtitle C--Other Education Initiatives
Sec. 221. Extension of exclusion for employer-provided educational
assistance.
Sec. 222. Repeal of limitation on qualified 501(c)(3) bonds other than
hospital bonds.
Sec. 223. Tax credit for public elementary and secondary school
construction.
Sec. 224. Contributions of computer technology and equipment for
elementary or secondary school purposes.
Sec. 225. Increase in arbitrage rebate exception for governmental bonds
used to finance education facilities.
Sec. 226. 2-percent floor on miscellaneous itemized deductions not to
apply to certain continuing education expenses of
elementary and secondary school teachers.
TITLE III--TAX RELIEF FOR FAMILY SAVINGS AND BUSINESS CAPITAL FORMATION
Subtitle A--Tax Relief for Family Savings
Sec. 301. Capital gains deduction.
Sec. 302. Family dividend exclusion.
Sec. 303. Exemption from tax for gain on sale of principal residence.
Subtitle B--Business Capital Formation
Sec. 311. Rollover of capital gains on certain small business
investments.
Sec. 312. Modifications to exclusion of gain on certain small business
stock.
Sec. 313. Expansion of small business stock exclusion to family-owned
businesses.
TITLE IV--ESTATE TAX RELIEF FOR FAMILY BUSINESSES AND FARMS
Sec. 401. Family-owned business exclusion.
Sec. 402. Portion of estate tax subject to 4-percent interest rate
increased to $2,500,000.
Sec. 403. Certain cash rentals of farmland not to cause recapture of
special estate tax valuation.
TITLE V--EXTENSIONS
Sec. 501. Research tax credit.
Sec. 502. Contributions of stock to private foundations.
Sec. 503. Work opportunity tax credit.
Sec. 504. Orphan drug tax credit.
TITLE VI--INCENTIVES FOR REVITALIZATION OF THE DISTRICT OF COLUMBIA
Sec. 601. Tax incentives for revitalization of the District of
Columbia.
Sec. 602. Incentives conditioned on other DC reform.
TITLE VII--MISCELLANEOUS PROVISIONS
Subtitle A--Distressed Communities and Brownfields
Chapter 1--Additional Empowerment Zones
Sec. 701. Additional empowerment zones.
Chapter 2--New Empowerment Zones and Enterprise Communities
Sec. 711. Designation of additional empowerment zones and enterprise
communities.
Sec. 712. Volume cap not to apply to enterprise zone facility bonds
with respect to new empowerment zones.
Sec. 713. Modifications to enterprise zone facility bond rules for all
empowerment zones and enterprise communities.
Sec. 714. Modifications to enterprise zone business definition for all
empowerment zones and enterprise communities.
Chapter 3--Expensing of Environmental Remediation Costs
Sec. 721. Expensing of environmental remediation costs.
Subtitle B--Puerto Rico Economic Activity Credit Improvement
Sec. 731. Modifications of Puerto Rico economic activity credit.
Sec. 732. Comparable treatment for other economic activity credit.
Subtitle C--Revisions Relating to Disasters
Sec. 741. Treatment of livestock sold on account of weather-related
conditions.
Sec. 742. Gain or loss from sale of livestock disregarded for purposes
of earned income credit.
Sec. 743. Mortgage financing for residences located in disaster areas.
Subtitle D--Provisions Relating to Small Businesses
Sec. 751. Waiver of penalty through June 30, 1998, on small businesses
failing to make electronic fund transfers of taxes.
Sec. 752. Minimum tax not to apply to farmers' installment sales.
Subtitle E--Provisions Relating to Pensions and Fringe Benefits
Sec. 761. Treatment of multiemployer plans under section 415.
Sec. 762. Spousal consent required for certain distributions and loans
under qualified cash or deferred arrangement.
Sec. 763. Section 401(k) investment protection.
Subtitle F--Other Provisions
Sec. 771. Adjustment of minimum tax exemption amounts for taxpayers
other than corporations.
Sec. 772. Treatment of computer software as fsc export property.
Sec. 723. Full deduction for health insurance costs of self-employed
individuals.
TITLE I--REFUNDABLE CHILD TAX CREDIT
SEC. 101. REFUNDABLE CHILD TAX CREDIT.
(a) In General.--Subpart C of part IV of subchapter A of
chapter 1 (relating to refundable credits) is amended by
redesignating section 35 as section 36 and by inserting after
section 34 the following new section:
``SEC. 35. CHILD CREDIT.
``(a) Allowance of Credit.--There shall be allowed as a
credit against the tax imposed by this subtitle for the
taxable year with respect to each qualifying child of the
taxpayer an amount equal to the lesser of--
``(1) $350, or
``(2) $500, if such amount is contributed by the taxpayer
for such taxable year for the benefit of such child to a
KIDSAVE account (as defined in section 530).
``(b) Limitations.--
``(1) Limitation based on adjusted gross income.--The
dollar amounts in subsection
[[Page S6511]]
(a) shall be reduced (but not below zero) ratably for each
$1,000 (or fraction thereof) by which the taxpayer's modified
adjusted gross income exceeds $70,000 but does not exceed
$85,000. For purposes of the preceding sentence, the term
`modified adjusted gross income' means adjusted gross income
increased by any amount excluded from gross income under
section 911, 931, or 933.
``(2) Limitation based on amount of tax.--The aggregate
credit allowed by subsection (a) (determined after paragraph
(1)) shall not exceed the sum of--
``(A) the excess (if any) of--
``(i) the taxpayer's regular tax liability for the taxable
year reduced by the credits allowable against such tax under
this subpart (other than this section), over
``(ii) the taxpayer's tentative minimum tax for such
taxable year (determined without regard to the alternative
minimum tax foreign tax credit), plus
``(B) the excess (if any) of--
``(i) the sum of--
``(I) the taxpayer's liability for the taxable year under
sections 3101 and 3201,
``(II) the amount of tax paid on behalf of such taxpayer
for the taxable year under sections 3111 and 3221, plus
``(III) the taxpayer's liability for such year under
sections 1401 and 3211, over
``(ii) the credit allowed for the taxable year under
section 32.
``(c) Qualifying Child.--For purposes of this section--
``(1) In general.--The term `qualifying child' means any
individual if--
``(A) the taxpayer is allowed a deduction under section 151
with respect to such individual for the taxable year,
``(B) such individual has not attained the age of 14 (age
of 18 in the case of taxable years beginning after 2002) as
of the close of the calendar year in which the taxable year
of the taxpayer begins, and
``(C) such individual bears a relationship to the taxpayer
described in section 32(c)(3)(B).
``(2) Exception for certain noncitizens.--The term
`qualifying child' shall not include any individual who would
not be a dependent if the first sentence of section 152(b)(3)
were applied without regard to all that follows `resident of
the United States'.
``(d) Taxable Year Must Be Full Taxable Year.--Except in
the case of a taxable year closed by reason of the death of
the taxpayer, no credit shall be allowable under this section
in the case of a taxable year covering a period of less than
12 months.
``(e) Inflation Adjustments.--
``(1) In general.--In the case of a taxable year beginning
after 2000, each dollar amount contained in subsection (a)
shall be increased by an amount equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `calendar year 1999'
for `calendar year 1992' in subparagraph (B) thereof.
``(2) Rounding.--If an amount contained in subsection (a)
as adjusted under paragraph (1) is not a multiple of $50,
such amount shall be rounded to the next lower multiple of
$50.
``(f) Phasein of Credit.--In the case of taxable years
beginning in 1997 through 1999--
``(1) subsection (a)(1) shall be applied by substituting
`$250' for `$350', and
``(2) subsection (a)(2) shall be applied by substituting
`$350' for `$500'.''
(b) Conforming Amendments.--The table of sections for
subpart C of part IV of subchapter A of chapter 1 is amended
by striking the item relating to section 35 and inserting the
following new items:
``Sec. 35. Child credit.
``Sec. 36. Overpayments of tax.''
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
1996.
TITLE II--TAX INCENTIVES FOR EDUCATION AND TRAINING
Subtitle A--Tax Benefits Relating to Education Expenses
SEC. 201. HOPE CREDIT FOR HIGHER EDUCATION TUITION AND
RELATED EXPENSES.
(a) In General.--Subpart A of part IV of subchapter A of
chapter 1 (relating to nonrefundable personal credits) is
amended by inserting after section 25 the following new
section:
``SEC. 25A. HIGHER EDUCATION TUITION AND RELATED EXPENSES.
``(a) Allowance of Credit.--
``(1) In general.--In the case of an individual, there
shall be allowed as a credit against the tax imposed by this
chapter for the taxable year the amount equal to the sum of--
``(A) the complete Hope Scholarship Credit, plus
``(B) the partial Hope Scholarship Credit.
``(2) Complete credit.--
``(A) In general.--In the case of any individual to whom
this paragraph applies for any taxable year, the complete
Hope Scholarship Credit is an amount equal to the sum of--
``(i) 100 percent of so much of the qualified higher
education expenses paid by the taxpayer during the taxable
year (for education furnished to the individual during any
academic period beginning in such taxable year) as does not
exceed $1,000, plus
``(ii) 50 percent of such expenses so paid as exceeds
$1,000 but does not exceed the applicable limit.
``(B) Applicable limit.--For purposes of subparagraph (A),
the applicable limit is--
``(i) $1,100 for taxable years beginning in 1997, 1998, or
1999,
``(ii) $1,200 for taxable years beginning in 2000, or
``(iii) $1,500 for taxable years beginning in 2001 or
thereafter.
``(3) Partial hope scholarship credit.--
``(A) In general.--The partial Hope Scholarship Credit is
20 percent of the qualified higher education expenses paid by
the taxpayer during the taxable year for education furnished
to an individual during any academic period beginning in such
taxable year. Education expenses with respect to an
individual for whom a complete Hope Scholarship credit is
determined for the taxable year shall not be taken into
account under this paragraph.
``(B) Dollar limitation.--The amount of qualified higher
education expenses taken into account under subparagraph (A)
for any taxable year shall not exceed--
``(i) $4,000 for taxable years beginning in 1997, 1998, or
1999,
``(ii) $7,500 for taxable years beginning in 2000, and
``(iii) $10,000 for taxable years beginning in 2001 or
thereafter.
``(b) Limitations.--
``(1) Election required.--
``(A) In general.--No credit shall be allowed under
subsection (a) for a taxable year with respect to the
qualified tuition and related expenses of an individual
unless the taxpayer elects to have this section apply with
respect to such individual for such year.
``(B) Complete credit allowed only for 2 taxable years.--An
election under this paragraph shall not take effect with
respect to an individual for the complete Hope Scholarship
Credit under subsection (a)(2) for any taxable year if such
election under this paragraph (by the taxpayer or any other
individual) is in effect with respect to such individual for
any 2 prior taxable years.
``(C) Coordination with exclusions.--An election under this
paragraph shall not take effect with respect to an individual
for any taxable year if there is in effect for such taxable
year an election under section 529(c)(3)(B) or 530(c)(1) (by
the taxpayer or any other individual) to exclude from gross
income distributions from a qualified tuition program or
KIDSAVE account used to pay qualified higher education
expenses of the individual.
``(3) Credit allowed for year only if individual is at
least \1/2\ time student for portion of year.--No credit
shall be allowed under subsection (a) for a taxable year with
respect to the qualified tuition and related expenses of an
individual unless such individual is an eligible student for
at least one academic period which begins during such year.
``(4) Complete credit allowed only for first 2 years of
postsecondary education.--No credit shall be allowed under
subsection (a)(2) for a taxable year with respect to the
qualified tuition and related expenses of an individual if
the individual has completed (before the beginning of such
taxable year) the first 2 years of postsecondary education at
an eligible educational institution.
``(c) Limitation Based on Modified Adjusted Gross Income.--
``(1) In general.--The amount which would (but for this
subsection) be taken into account under subsection (a) for
the taxable year shall be reduced (but not below zero) by the
amount determined under paragraph (2).
``(2) Amount of reduction.--The amount determined under
this paragraph is the amount which bears the same ratio to
the amount which would be so taken into account as--
``(A) the excess of--
``(i) the taxpayer's modified adjusted gross income for
such taxable year, over
``(ii) $50,000 ($80,000 in the case of a joint return),
bears to
``(B) $20,000.
``(3) Modified adjusted gross income.--The term `modified
adjusted gross income' means the adjusted gross income of the
taxpayer for the taxable year increased by any amount
excluded from gross income under section 911, 931, or 933.
``(d) Definitions.--For purposes of this section--
``(1) Qualified tuition and related expenses.--
``(A) In general.--The term `qualified tuition and related
expenses' means tuition and fees required for the enrollment
or attendance of--
``(i) the taxpayer,
``(ii) the taxpayer's spouse, or
``(iii) any dependent of the taxpayer with respect to whom
the taxpayer is allowed a deduction under section 151,
at an eligible educational institution and books required for
courses of instruction of such individual at such
institution.
``(B) Exception for education involving sports, etc.--Such
term does not include expenses with respect to any course or
other education involving sports, games, or hobbies, unless
such course or other education is part of the individual's
degree program.
``(C) Exception for nonacademic fees.--Such term does not
include student activity fees, athletic fees, insurance
expenses, or other expenses unrelated to an individual's
academic course of instruction.
``(2) Eligible educational institution.--The term `eligible
educational institution' means an institution--
``(A) which is described in section 481 of the Higher
Education Act of 1965 (20 U.S.C. 1088), as in effect on the
date of the enactment of this section, and
``(B) which is eligible to participate in a program under
title IV of such Act.
[[Page S6512]]
``(3) Eligible student.--The term `eligible student' means,
with respect to any academic period, a student who--
``(A) meets the requirements of section 484(a)(1) of the
Higher Education Act of 1965 (20 U.S.C. 1091(a)(1)), as in
effect on the date of the enactment of this section, and
``(B) is carrying at least \1/2\ the normal full-time work
load for the course of study the student is pursuing.
``(e) Treatment of Expenses Paid by Dependent.--If a
deduction under section 151 with respect to an individual is
allowed to another taxpayer for a taxable year beginning in
the calendar year in which such individual's taxable year
begins--
``(1) no credit shall be allowed under subsection (a) to
such individual for such individual's taxable year, and
``(2) qualified tuition and related expenses paid by such
individual during such individual's taxable year shall be
treated for purposes of this section as paid by such other
taxpayer.
``(f) Treatment of Certain Prepayments.--If qualified
tuition and related expenses are paid by the taxpayer during
a taxable year for an academic period which begins during the
first 3 months following such taxable year, such academic
period shall be treated for purposes of this section as
beginning during such taxable year.
``(g) Special Rules.--
``(1) Identification requirement.--No credit shall be
allowed under subsection (a) to a taxpayer with respect to
the qualified tuition and related expenses of an individual
unless the taxpayer includes the name and taxpayer
identification number of such individual on the return of tax
for the taxable year.
``(2) Adjustment for certain scholarships, etc.--The amount
of qualified tuition and related expenses otherwise taken
into account under subsection (a) with respect to an
individual for an academic period shall be reduced (before
the application of subsections (b) and (c)) by the sum of any
amounts paid for the benefit of such individual which are
allocable to such period as--
``(A) a qualified scholarship which is excludable from
gross income under section 117,
``(B) an educational assistance allowance under chapter 30,
31, 32, 34, or 35 of title 38, United States Code, or under
chapter 1606 of title 10, United States Code, and
``(C) a payment (other than a gift, bequest, devise, or
inheritance within the meaning of section 102(a)) for such
individual's educational expenses, or attributable to such
individual's enrollment at an eligible educational
institution, which is excludable from gross income under any
law of the United States.
``(3) Denial of credit if student convicted of a felony
drug offense.--No credit shall be allowed under subsection
(a) for qualified tuition and related expenses for the
enrollment or attendance of a student for any academic period
if such student has been convicted of a Federal or State
felony offense consisting of the possession or distribution
of a controlled substance before the end of the taxable year
with or within which such period ends.
``(4) Denial of double benefit.--No credit shall be allowed
under this section for any expense for which a deduction is
allowed under any other provision of this chapter.
``(5) No credit for married individuals filing separate
returns.--If the taxpayer is a married individual (within the
meaning of section 7703), this section shall apply only if
the taxpayer and the taxpayer's spouse file a joint return
for the taxable year.
``(6) Nonresident aliens.--If the taxpayer is a nonresident
alien individual for any portion of the taxable year, this
section shall apply only if such individual is treated as a
resident alien of the United States for purposes of this
chapter by reason of an election under subsection (g) or (h)
of section 6013.
``(h) Inflation Adjustments.--
``(1) Dollar limitation on amount of credit.--
``(A) In general.--In the case of a taxable year beginning
after 2001, applicable dollar amounts under each of the
subsection (a) (2) and (3) shall be increased by an amount
equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `calendar year 2001'
for `calendar year 1992' in subparagraph (B) thereof.
``(B) Rounding.--If any amount as adjusted under
subparagraph (A) is not a multiple of $50, such amount shall
be rounded to the next lowest multiple of $50.
``(2) Income limits.--
``(A) In general.--In the case of a taxable year beginning
after 2000, the $50,000 and $80,000 amounts in subsection
(c)(2) shall each be increased by an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `calendar year 2001'
for `calendar year 1992' in subparagraph (B) thereof.
``(B) Rounding.--If any amount as adjusted under
subparagraph (A) is not a multiple of $5,000, such amount
shall be rounded to the next lowest multiple of $5,000.
``(i) Regulations.--The Secretary may prescribe such
regulations as may be necessary or appropriate to carry out
this section, including regulations providing for a recapture
of credit allowed under this section in cases where there is
a refund in a subsequent taxable year of any amount which was
taken into account in determining the amount of such
credit.''
(b) Extension of Procedures Applicable to Mathematical or
Clerical Errors.--Paragraph (2) of section 6213(g) (relating
to the definition of mathematical or clerical errors) is
amended by striking ``and'' at the end of subparagraph (G),
by striking the period at the end of subparagraph (H) and
inserting ``, and'', and by inserting after subparagraph (H)
the following new subparagraph:
``(I) an omission of a correct TIN required under section
25A(g)(1) (relating to higher education tuition and related
expenses) to be included on a return.''
(c) Returns Relating to Tuition and Related Expenses.--
(1) In general.--Subpart B of part III of subchapter A of
chapter 61 (relating to information concerning transactions
with other persons) is amended by inserting after section
6050R the following new section:
``SEC. 6050S. RETURNS RELATING TO HIGHER EDUCATION TUITION
AND RELATED EXPENSES.
``(a) In General.--Any person--
``(1) which is an eligible educational institution which
receives payments for qualified tuition and related expenses
with respect to any individual for any calendar year, or
``(2) which is engaged in a trade or business and which, in
the course of such trade or business, makes payments during
any calendar year to any individual which constitute
reimbursements or refunds (or similar amounts) of qualified
tuition and related expenses of such individual,
shall make the return described in subsection (b) with
respect to the individual at such time as the Secretary may
by regulations prescribe.
``(b) Form and Manner of Returns.--A return is described in
this subsection if such return--
``(1) is in such form as the Secretary may prescribe,
``(2) contains--
``(A) the name, address, and TIN of the individual with
respect to whom payments described in subsection (a) were
received from (or were paid to),
``(B) the name, address, and TIN of any individual
certified by the individual described in subparagraph (A) as
the taxpayer who will claim the individual as a dependent for
purposes of the deduction allowable under section 151 for any
taxable year ending with or within the calendar year, and
``(C) the--
``(i) aggregate amount of payments for qualified tuition
and related expenses received with respect to the individual
described in subparagraph (A) during the calendar year, and
``(ii) aggregate amount of reimbursements or refunds (or
similar amounts) paid to such individual during the calendar
year, and
``(D) such other information as the Secretary may
prescribe.
``(c) Application to Governmental Units.--For purposes of
this section--
``(1) a governmental unit or any agency or instrumentality
thereof shall be treated as a person, and
``(2) any return required under subsection (a) by such
governmental entity shall be made by the officer or employee
appropriately designated for the purpose of making such
return.
``(d) Statements To Be Furnished to Individuals With
Respect to Whom Information Is Required.--Every person
required to make a return under subsection (a) shall furnish
to each individual whose name is required to be set forth in
such return under subparagraph (A) or (B) of subsection
(b)(2) a written statement showing--
``(1) the name, address, and phone number of the
information contact of the person required to make such
return, and
``(2) the aggregate amounts described in subparagraph (C)
of subsection (b)(2).
The written statement required under the preceding sentence
shall be furnished on or before January 31 of the year
following the calendar year for which the return under
subsection (a) was required to be made.
``(e) Definitions.--For purposes of this section, the terms
`eligible educational institution' and `qualified tuition and
related expenses' have the meanings given such terms by
section 25A.
``(f) Returns Which Would Be Required To Be Made by 2 or
More Persons.--Except to the extent provided in regulations
prescribed by the Secretary, in the case of any amount
received by any person on behalf of another person, only the
person first receiving such amount shall be required to make
the return under subsection (a).
``(g) Regulations.--The Secretary shall prescribe such
regulations as may be necessary to carry out the provisions
of this section. No penalties shall be imposed under section
6724 with respect to any return or statement required under
this section until such time as such regulations are
issued.''
(2) Assessable penalties.--
(A) Subparagraph (B) of section 6724(d)(1) (relating to
definitions) is amended by redesignating clauses (ix) through
(xiv) as clauses (x) through (xv), respectively, and by
inserting after clause (viii) the following new clause:
``(ix) section 6050S (relating to returns relating to
payments for qualified tuition and related expenses),''.
[[Page S6513]]
(B) Paragraph (2) of section 6724(d) is amended by striking
``or'' at the end of the next to last subparagraph, by
striking the period at the end of the last subparagraph and
inserting ``, or'', and by adding at the end the following
new subparagraph:
``(Z) section 6050S(d) (relating to returns relating to
qualified tuition and related expenses).''
(3) Clerical amendment.--The table of sections for subpart
B of part III of subchapter A of chapter 61 is amended by
inserting after the item relating to section 6050R the
following new item:
``Sec. 6050S. Returns relating to higher education tuition and related
expenses.''
(d) Coordination With Section 135.--Subsection (d) of
section 135 is amended by redesignating paragraphs (2) and
(3) as paragraphs (3) and (4), respectively, and by inserting
after paragraph (1) the following new paragraph:
``(2) Coordination with higher education credit.--The
amount of the qualified higher education expenses otherwise
taken into account under subsection (a) with respect to the
education of an individual shall be reduced (before the
application of subsection (b)) by the amount of such expenses
which are taken into account in determining the credit
allowable to the taxpayer or any other person under section
25A with respect to such expenses.
(e) Clerical Amendment.--The table of sections for subpart
A of part IV of subchapter A of chapter 1 is amended by
inserting after the item relating to section 25 the following
new item:
``Sec. 25A. Higher education tuition and related expenses.''
(f) Effective Date.--The amendments made by this section
shall apply to expenses paid after December 31, 1997 (in
taxable years ending after such date), for education
furnished in academic periods beginning after such date.
SEC. 202. DEDUCTION FOR INTEREST ON EDUCATION LOANS.
(a) In General.--Part VII of subchapter B of chapter 1
(relating to additional itemized deductions for individuals)
is amended by redesignating section 221 as section 222 and by
inserting after section 220 the following new section:
``SEC. 221. INTEREST ON EDUCATION LOANS.
``(a) Allowance of Deduction.--In the case of an
individual, there shall be allowed as a deduction for the
taxable year an amount equal to the interest paid by the
taxpayer during the taxable year on any qualified education
loan.
``(b) Maximum Deduction.--
``(1) In general.--Except as provided in paragraph (2), the
deduction allowed by subsection (a) for the taxable year
shall not exceed $2,500.
``(2) Limitation based on modified adjusted gross income.--
``(A) In general.--The amount which would (but for this
paragraph) be allowable as a deduction under this section
shall be reduced (but not below zero) by the amount
determined under paragraph (2).
``(B) Amount of reduction.--The amount determined under
this paragraph is the amount which bears the same ratio to
the amount which would be so taken into account as--
``(i) the excess of--
``(I) the taxpayer's modified adjusted gross income for
such taxable year, over
``(II) $40,000 ($80,000 in the case of a joint return),
bears to
``(ii) $10,000 ($20,000 in the case of a joint return).
``(C) Modified adjusted gross income.--The term `modified
adjusted gross income' means adjusted gross income
determined--
``(i) without regard to this section and sections 135, 911,
931, and 933, and
``(ii) after application of sections 86, 219, and 469.
For purposes of sections 86, 135, 219, and 469, adjusted
gross income shall be determined without regard to the
deduction allowed under this section.
``(c) Dependents Not Eligible for Deduction.--No deduction
shall be allowed by this section to an individual for the
taxable year if a deduction under section 151 with respect to
such individual is allowed to another taxpayer for the
taxable year beginning in the calendar year in which such
individual's taxable year begins.
``(d) Limit on Period Deduction Allowed.--A deduction shall
be allowed under this section only with respect to interest
paid on any qualified education loan during the first 60
months (whether or not consecutive) in which interest
payments are required. For purposes of this paragraph, any
loan and all refinancing of such loan shall be treated as 1
loan.
``(e) Definitions.--For purposes of this section--
``(1) Qualified education loan.--The term `qualified
education loan' means any indebtedness incurred to pay
qualified higher education expenses--
``(A) which are incurred on behalf of the taxpayer, the
taxpayer's spouse, or any dependent of the taxpayer as of the
time the indebtedness was incurred,
``(B) which are paid or incurred within a reasonable period
of time before or after the indebtedness is incurred, and
``(C) which are attributable to education furnished during
a period during which the recipient was an eligible student.
Such term includes indebtedness used to refinance
indebtedness which qualifies as a qualified education loan.
The term `qualified education loan' shall not include any
indebtedness owed to a person who is related (within the
meaning of section 267(b) or 707(b)(1)) to the taxpayer.
``(2) Qualified higher education expenses.--The term
`qualified higher education expenses' means the cost of
attendance (as defined in section 472 of the Higher Education
Act of 1965, 20 U.S.C. 1087ll, as in effect on the day before
the date of the enactment of this Act) at an eligible
educational institution, reduced by the sum of--
``(A) the amount excluded from gross income under section
135, 529, or 530 by reason of such expenses, and
``(B) the amount of any scholarship, allowance, or payment
described in section 25A(g)(2).
For purposes of the preceding sentence, the term `eligible
educational institution' has the same meaning given such term
by section 25A(d)(2), except that such term shall also
include an institution conducting an internship or residency
program leading to a degree or certificate awarded by an
institution of higher education, a hospital, or a health care
facility which offers postgraduate training.
``(3) Eligible student.--The term `eligible student' has
the meaning given such term by section 25A(d)(3).
``(4) Dependent.--The term `dependent' has the meaning
given such term by section 152.
``(f) Special Rules.--
``(1) Denial of double benefit.--No deduction shall be
allowed under this section for any amount for which a
deduction is allowable under any other provision of this
chapter.
``(2) Married couples must file joint return.--If the
taxpayer is married at the close of the taxable year, the
deduction shall be allowed under subsection (a) only if the
taxpayer and the taxpayer's spouse file a joint return for
the taxable year.
``(3) Marital status.--Marital status shall be determined
in accordance with section 7703.
``(g) Inflation Adjustments.--
``(1) Dollar limitation on amount of credit.--
``(A) In general.--In the case of a taxable year beginning
after 1998, the $2,500 amount in subsection (b)(1) shall be
increased by an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `calendar year 1997'
for `calendar year 1992' in subparagraph (B) thereof.
``(B) Rounding.--If any amount as adjusted under
subparagraph (A) is not a multiple of $50, such amount shall
be rounded to the next lowest multiple of $50.
``(2) Income limits.--In the case of a taxable year
beginning in a calendar year after 2000, the $40,000 and
$80,000 amounts in subsection (b)(2) shall each be increased
in the same manner as amounts are increased under section
25A(h)(2) for taxable years beginning in such calendar
year.''
(b) Deduction Allowed Whether or Not Taxpayer Itemizes
Other Deductions.--Subsection (a) of section 62 is amended by
inserting after paragraph (17) the following new paragraph:
``(18) Interest on education loans.--The deduction allowed
by section 221.''
(c) Reporting Requirement.--
(1) In general.--Section 6050S(a)(2) (relating to returns
relating to higher education tuition and related expenses) is
amended to read as follows:
``(2) which is engaged in a trade or business and which, in
the course of such trade or business--
``(A) makes payments during any calendar year to any
individual which constitutes reimbursements or refunds (or
similar amounts) of qualified tuition and related expenses of
such individual, or
``(B) except as provided in regulations, receives from any
individual interest aggregating $600 or more for any calendar
year on 1 or more qualified education loans,''.
(2) Information.--Section 6050S(b)(2) is amended--
(A) by inserting ``or interest'' after ``payments'' in
subparagraph (A), and
(B) in subparagraph (C), by striking ``and'' at the end of
clause (i), by inserting ``and'' at the end of clause (ii),
and by inserting after clause (ii) the following:
``(iii) aggregate amount of interest received for the
calendar year from such individual,''.
(3) Definition.--Section 6050S(e) is amended by inserting
``, and except as provided in regulations, the term
`qualified education loan' has the meaning given such term by
section 221(e)(1)'' after ``section 25A''.
(d) Clerical Amendment.--The table of sections for part VII
of subchapter B of chapter 1 is amended by striking the last
item and inserting the following new items:
``Sec. 221. Interest on education loans.
``Sec. 222. Cross reference.''
(e) Effective Date.--The amendments made by this section
shall apply to any qualified education loan (as defined in
section 221(e)(1) of the Internal Revenue Code of 1986, as
added by this section) incurred on, before, or after the date
of the enactment of this Act, but only with respect to--
(1) any loan interest payment due after December 31, 1996,
and
[[Page S6514]]
(2) the portion of the 60-month period referred to in
section 221(d) of the Internal Revenue Code of 1986 (as added
by this section) after December 31, 1996.
Subtitle B--Expanded Education Investment Savings Opportunities
PART I--QUALIFIED TUITION PROGRAMS
SEC. 211. EXCLUSION FROM GROSS INCOME OF EDUCATION
DISTRIBUTIONS FROM QUALIFIED TUITION PROGRAMS.
(a) In General.--Subparagraph (B) of section 529(c)(3)
(relating to distributions) is amended to read as follows:
``(B) Distributions for qualified higher education
expenses.--If a distributee elects the application of this
subparagraph for any taxable year--
``(i) no amount shall be includible in gross income by
reason of a distribution which consists of providing a
benefit to the distributee which, if paid for by the
distributee, would constitute payment of a qualified higher
education expense, and
``(ii) the amount which (but for the election) would be
includible in gross income by reason of any other
distribution shall not be so includible in an amount which
bears the same ratio to the amount which would be so
includible as the amount of the qualified higher education
expenses of the distributee bears to the amount of the
distribution.''
(b) Effective Date.--The amendments made by this section
shall apply to distributions after December 31, 1997, for
education furnished in academic periods beginning after such
date.
SEC. 212. ELIGIBLE EDUCATIONAL INSTITUTIONS PERMITTED TO
MAINTAIN QUALIFIED TUITION PROGRAMS; OTHER
MODIFICATIONS OF QUALIFIED STATE TUITION
PROGRAMS.
(a) Eligible Educational Institutions Permitted To Maintain
Qualified Tuition Programs.--Paragraph (1) of section 529(b)
(defining qualified State tuition program) is amended by
inserting ``or by one or more eligible educational
institutions'' after ``maintained by a State or agency or
instrumentality thereof''.
(b) Qualified Higher Education Expenses To Include Room and
Board.--Paragraph (3) of section 529(e) (defining qualified
higher education expenses) is amended to read as follows:
``(3) Qualified higher education expenses.--
``(A) In general.--The term `qualified higher education
expenses' means tuition, fees, books, supplies, and equipment
required for the enrollment or attendance of a designated
beneficiary at an eligible education institution.
``(B) Room and board included for students who are at least
half-time.--In the case of an individual who is an eligible
student (as defined in section 25A(d)(3)) for any academic
period, such term shall also include reasonable costs for
such period (as determined under the qualified tuition
program) incurred by the designated beneficiary for room and
board while attending such institution. The amount treated as
qualified higher education expenses by reason of the
preceding sentence shall not exceed the minimum amount
(applicable to the student) included for room and board for
such period in the cost of attendance (as defined in section
472 of the Higher Education Act of 1965, 20 U.S.C. 1087ll, as
in effect on the date of the enactment of this paragraph) for
the eligible educational institution for such period.''
(c) Additional Modifications.--
(1) Member of family.--Paragraph (2) of section 529(e)
(relating to other definitions and special rules) is amended
to read as follows:
``(2) Member of family.--The term `member of the family'
means--
``(A) an individual who bears a relationship to another
individual which is a relationship described in paragraphs
(1) through (8) of section 152(a), and
``(B) the spouse of any individual described in
subparagraph (A).''
(2) Eligible educational institution.--Section 529(e) is
amended by adding at the end the following:
``(5) Eligible educational institution.--The term `eligible
educational institution' means an institution--
``(A) which is described in section 481 of the Higher
Education Act of 1965 (20 U.S.C. 1088), as in effect on the
date of the enactment of this paragraph, and
``(B) which is eligible to participate in a program under
title IV of such Act.''
(3) No contributions after beneficiary attains age 18;
distributions required in certain cases.--
(A) In general.--Subsection (b) of section 529 is amended
by adding at the end the following new paragraph:
``(8) Restrictions relating to age of beneficiary;
completion of education.--
``(A) In general.--A program shall be treated as a
qualified tuition program only if--
``(i) no contribution is accepted on behalf of a designated
beneficiary after the date on which such beneficiary attains
age 18, and
``(ii) any balance to the credit of a designated
beneficiary (if any) on the account termination date shall be
distributed within 30 days after such date to such
beneficiary (or in the case of death, the estate of the
beneficiary).
``(B) Account termination date.--For purposes of
subparagraph (A), the term `account termination date' means
whichever of the following dates is the earliest:
``(i) The date on which the designated beneficiary attains
age 30.
``(ii) The date on which the designated beneficiary dies.''
(B) Rollovers.--Section 529(c)(3) is amended by adding at
the end the following:
``(E) Rollovers to individual retirement accounts at age
30.--Subparagraph (A) shall not apply to any distribution to
the designated beneficiary required under subsection (b)(8)
by reason of the beneficiary attaining age 30 to the extent
the beneficiary, within 60 days of the distribution,
transfers such distribution to an individual retirement
account established on the individual's behalf.''
(C) Conforming amendments.--
(i) Section 408(a)(1) is amended by striking ``or
403(b)(8)'' and inserting ``403(b)(8), or 529(c)(3)(E)''.
(ii) Subparagraph (A) of section 4973(b)(1) is amended by
striking ``or 408(b)(3)'' and inserting ``408(b)(3), or
529(c)(3)(E)''.
(4) Estate and gift tax treatment.--
(A) Gift tax treatment.--
(i) Paragraph (2) of section 529(c) is amended to read as
follows:
``(2) Gift tax treatment of contributions.--For purposes of
chapters 12 and 13, any contribution to a qualified tuition
program on behalf of any designated beneficiary shall--
``(A) be treated as a completed gift to such beneficiary
which is not a future interest in property, and
``(B) shall not be treated as a qualified transfer under
section 2503(e).''
(ii) Paragraph (5) of section 529(c) is amended to read as
follows:
``(5) Other gift tax rules.--For purposes of chapters 12
and 13--
``(A) Treatment of distributions.--In no event shall a
distribution from a qualified tuition program be treated as a
taxable gift.
``(B) Treatment of designation of new beneficiary.--The
taxes imposed by chapters 12 and 13 shall apply to a transfer
by reason of a change in the designated beneficiary under the
program (or a rollover to the account of a new beneficiary)
only if the new beneficiary is a generation below the
generation of the old beneficiary (determined in accordance
with section 2651).''
(B) Estate tax treatment.--Paragraph (4) of section 529(c)
is amended to read as follows:
``(4) Estate tax treatment.--
``(A) In general.--No amount shall be includible in the
gross estate of any individual for purposes of chapter 11 by
reason of an interest in a qualified tuition program.
``(B) Amounts includible in estate of designated
beneficiary in certain cases.--Subparagraph (A) shall not
apply to amounts distributed on account of the death of a
beneficiary.''
(5) Limitation on contributions to qualified tuition
programs not maintained by a state.--Subsection (b) of
section 529 is amended by adding at the end the following new
paragraph:
``(9) Limitation on contributions to qualified tuition
programs not maintained by a state.--In the case of a program
not maintained by a State or agency or instrumentality
thereof, such program shall not be treated as a qualified
tuition program unless it limits the annual contribution to
the program on behalf of a designated beneficiary to the sum
of $2,000 plus the amount of the credit allowable under
section 25A for 1 qualifying child.''
(d) Additional Tax on Amounts Not Used For Higher Education
Expenses.--Section 529 is amended by adding at the end the
following new subsection:
``(f) Imposition of Additional Tax.--
``(1) In general.--In the case of a qualified tuition
program not maintained by a State or any agency or
instrumentality thereof, the tax imposed by this chapter for
any taxable year on any taxpayer who receives a payment or
distribution from such program which is includible in gross
income shall be increased by 10 percent of the amount which
is so includible.
``(2) Exceptions.--Paragraph (1) shall not apply if the
payment or distribution is--
``(A) made to a beneficiary (or to the estate of the
designated beneficiary) on or after the death of the
designated beneficiary,
``(B) attributable to the designated beneficiary's being
disabled (within the meaning of section 72(m)(7)), or
``(C) made on account of a scholarship, allowance, or
payment described in section 25A(g)(2) received by the
account holder to the extent the amount of the payment or
distribution does not exceed the amount of the scholarship,
allowance, or payment.
``(3) Excess contributions returned before due date of
return.--In the case of a qualified tuition program not
maintained by a State or any agency or instrumentality
thereof, paragraph (1) shall not apply to the distribution to
a contributor of any contribution made during a taxable year
on behalf of a designated beneficiary to the extent that such
contribution exceeds the limitation in section 4973(e) if--
``(A) such distribution is received on or before the day
prescribed by law (including extensions of time) for filing
such contributor's return for such taxable year, and
``(B) such distribution is accompanied by the amount of net
income attributable to such excess contribution.
Any net income described in subparagraph (B) shall be
included in the gross income of the contributor for the
taxable year in which such excess contribution was made.''
(e) Coordination With Education Savings Bond.--Section
135(c)(2) (defining qualified
[[Page S6515]]
higher education expenses) is amended by adding at the end
the following:
``(C) Contributions to qualified tuition program.--Such
term shall include any contribution to a qualified tuition
program (as defined in section 529) on behalf of a designated
beneficiary (as defined in such section) who is an individual
described in subparagraph (A); but there shall be no increase
in the investment in the contract for purposes of applying
section 72 by reason of any portion of such contribution
which is not includible in gross income by reason of this
subparagraph.''
(f) Tax on Excess Contributions.--
(1) In general.--Subsection (a) of section 4973 is amended
by striking ``or'' at the end of paragraph (2) and by
inserting after paragraph (3) the following new paragraphs:
``(4) a qualified tuition program (as defined in section
529) not maintained by a State or any agency or
instrumentality thereof, or
``(5) a KIDSAVE account (as defined in section 530),''.
(2) Excess contributions defined.--Section 4973 is amended
by adding at the end the following new subsection:
``(e) Excess Contributions to Private Qualified Tuition
Program and KIDSAVE Accounts.--For purposes of this section--
``(1) In general.--In the case of private education
investment accounts maintained for the benefit of any 1
beneficiary, the term `excess contributions' means the amount
by which the amount contributed for the taxable year to such
accounts exceeds the sum of $2,000 plus the amount of the
credit allowed under section 25A for such beneficiary for
such taxable year.
``(2) Private education investment account.--For purposes
of paragraph (1), the term `private education investment
account' means--
``(A) a qualified tuition program (as defined in section
529) not maintained by a State or any agency or
instrumentality thereof, and
``(B) a KIDSAVE account (as defined in section 530).
``(3) Special rules.--For purposes of paragraph (1), the
following contributions shall not be taken into account:
``(A) Any contribution which is distributed out of the
KIDSAVE account in a distribution to which section
530(c)(3)(B) applies.
``(B) Any contribution to a qualified tuition program (as
so defined) described in section 530(b)(2)(B) from any such
account.
``(C) Any rollover contribution.''
(g) Clarification of Taxation of Distributions.--
Subparagraph (A) of section 529(c)(3) is amended to read as
follows:
``(A) In general.--Any distribution from a qualified
tuition program--
``(i) shall be includible in the gross income of the
distributee to the extent allocable to income under the
program, and
``(ii) shall not be includible in gross income to the
extent allocable to the investment in the contract.
For purposes of the preceding sentence, rules similar to the
rules of section 72(e)(3) shall apply.''
(h) Technical Amendments.--
(1) Paragraph (2) of section 26(b) is amended by
redesignating subparagraphs (E) through (P) as subparagraphs
(F) through (Q), respectively, and by inserting after
subparagraph (D) the following new subparagraph:
``(E) section 529(f) (relating to additional tax on certain
distributions from qualified tuition programs),''.
(2) The text of section 529 is amended by striking
``qualified State tuition program'' each place it appears and
inserting ``qualified tuition program''.
(3)(A) The section heading of section 529 is amended to
read as follows:
``SEC. 529. QUALIFIED TUITION PROGRAMS.''
(B) The item relating to section 529 in the table of
sections for part VIII of subchapter F of chapter 1 is
amended by striking ``State''.
(4)(A) The heading for part VIII of subchapter F of chapter
1 is amended to read as follows:
``PART VIII--HIGHER EDUCATION SAVINGS ENTITIES''.
(B) The table of parts for subchapter F of chapter 1 is
amended by striking the item relating to part VIII and
inserting:
``Part VIII. Higher education savings entities.''
(5)(A) Section 529(d) is amended to read as follows:
``(d) Reports.--Each officer or employee having control of
the qualified tuition program or their designee shall make
such reports regarding such program to the Secretary and to
designated beneficiaries with respect to contributions,
distributions, and such other matters as the Secretary may
require under regulations. The reports required by this
subsection shall be filed at such time and in such manner and
furnished to such individuals at such time and in such manner
as may be required by those regulations.''
(B) Paragraph (2) of section 6693(a) (relating to failure
to provide reports on individual retirement accounts or
annuities) is amended by striking ``and'' at the end of
subparagraph (A), by striking the period at the end of
subparagraph (B) and inserting ``, and'', and by adding at
the end the following new subparagraph:
``(C) Section 529(d) (relating to qualified tuition
programs).''
(C) The section heading for section 6693 is amended by
striking ``individual retirement'' and inserting ``certain
tax-favored''.
(D) The item relating to section 6693 in the table of
sections for part I of subchapter B of chapter 68 is amended
by striking ``individual retirement'' and inserting ``certain
tax-favored''.
(i) Effective Dates.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall take
effect on January 1, 1998.
(2) Expenses to include room and board, etc.--The
amendments made by subsection (b) and (c)(2) shall apply to
distributions after December 31, 1997, with respect to
expenses paid after such date (in taxable years ending after
such date), for education furnished in academic periods
beginning after such date.
(3) Coordination with education savings bonds.--The
amendment made by subsection (e) shall apply to taxable years
beginning after December 31, 1997.
(4) Estate and gift tax changes.--
(A) Gift tax changes.--Paragraphs (2) and (5) of section
529(c) of the Internal Revenue Code of 1986, as amended by
this section, shall apply to transfers (including
designations of new beneficiaries) made after the date of the
enactment of this Act.
(B) Estate tax changes.--Paragraph (4) of such section
529(c) shall apply to estates of decedents dying after June
8, 1997.
(5) Reporting.--The amendments made by subsection (g) shall
apply after June 16, 1997.
PART II--KIDSAVE ACCOUNTS
SEC. 213. KIDSAVE ACCOUNTS.
(a) In General.--Part VIII of subchapter F of chapter 1
(relating to qualified State tuition programs) is amended by
adding at the end the following new section:
``SEC. 530. KIDSAVE ACCOUNTS.
``(a) General Rule.--A KIDSAVE account shall be exempt from
taxation under this subtitle. Notwithstanding the preceding
sentence, the KIDSAVE account shall be subject to the taxes
imposed by section 511 (relating to imposition of tax on
unrelated business income of charitable organizations).
``(b) Definitions and Special Rules.--For purposes of this
section--
``(1) KIDSAVE account.--The term `KIDSAVE account' means a
trust created or organized in the United States exclusively
for the purpose of paying the qualified higher education
expenses of the account holder, but only if the written
governing instrument creating the trust meets the following
requirements:
``(A) No contribution will be accepted--
``(i) unless it is in cash,
``(ii) after the date on which the account holder attains
age 18, or
``(iii) except in the case of rollover contributions, if
such contribution would result in aggregate contributions for
the taxable year exceeding the amount of the credit allowable
under section 35 for the taxable year for 1 qualifying child.
``(B) The trustee is a bank (as defined in section 408(n))
or another person who demonstrates to the satisfaction of the
Secretary that the manner in which that person will
administer the trust will be consistent with the requirements
of this section.
``(C) No part of the trust assets will be invested in life
insurance contracts.
``(D) The assets of the trust shall not be commingled with
other property except in a common trust fund or common
investment fund.
``(E) Upon the death of the account holder, any balance in
the account will be distributed as required under section
529(b)(8) (as if such account were a qualified tuition
program).
``(2) Qualified higher education expenses.--
``(A) In general.--The term `qualified higher education
expenses' has the same meaning given such term by section
529(e)(3).
``(B) Qualified tuition programs.--Such term shall include
amounts paid or incurred to purchase tuition credits or
certificates, or to make contributions to an account, under a
qualified tuition program (as defined in section 529(b)) for
the benefit of the account holder.
``(3) Eligible educational institution.--The term `eligible
educational institution' has the meaning given such term by
section 529(e)(5).
``(4) Account holder.--The term `account holder' means the
individual for whose benefit the KIDSAVE account is
established.
``(c) Tax Treatment of Distributions.--
``(1) In general.--Any amount paid or distributed out of a
KIDSAVE account shall be includible in gross income to the
extent required by section 529(c)(3) (determined as if the
account were a qualified tuition program).
``(2) Special rules for applying estate and gift taxes with
respect to account.--Rules similar to the rules of paragraphs
(2), (4), and (5) of section 529(c) shall apply for purposes
of this section.
``(3) Additional tax for distributions not used for
educational expenses.--
``(A) In general.--The tax imposed by section 529(f) shall
apply to payments and distributions from a KIDSAVE account in
the same manner as such tax applies to qualified tuition
programs (as defined in section 529).
``(B) Excess contributions returned before due date of
return.--Subparagraph (A) shall not apply to the distribution
to a contributor of any contribution paid during a taxable
year to a KIDSAVE account to the
[[Page S6516]]
extent that such contribution exceeds the limitation in
section 4973(e) if such distribution (and the net income with
respect to such excess contribution) meet requirements
comparable to the requirements of section 529(f)(3).
``(4) Rollover contributions--Paragraph (1) shall not apply
to any amount paid or distributed from a KIDSAVE account to
the extent that the amount received is paid into another
KIDSAVE retirement account for the benefit of the account
holder or a member of the family (within the meaning of
section 529(e)(2)) of the account holder not later than the
60th day after the date of such payment or distribution. The
preceding sentence shall not apply to any payment or
distribution if it applied to any prior payment or
distribution during the 12-month period ending on the date of
the payment or distribution.
``(5) Change in account holder.--Any change in the account
holder of a KIDSAVE account shall not be treated as a
distribution for purposes of paragraph (1) if the new account
holder is a member of the family (as so defined) of the old
account holder.
``(6) Special rules for death and divorce.--Rules similar
to the rules of paragraphs (7) and (8) of section 220(f)
shall apply.
``(d) Tax Treatment of Accounts.--Rules similar to the
rules of paragraphs (2) and (4) of section 408(e) shall apply
to any KIDSAVE account.
``(e) Community Property Laws.--This section shall be
applied without regard to any community property laws.
``(f) Custodial Accounts.--For purposes of this section, a
custodial account shall be treated as a trust if the assets
of such account are held by a bank (as defined in section
408(n)) or another person who demonstrates, to the
satisfaction of the Secretary, that the manner in which he
will administer the account will be consistent with the
requirements of this section, and if the custodial account
would, except for the fact that it is not a trust, constitute
an account described in subsection (b)(1). For purposes of
this title, in the case of a custodial account treated as a
trust by reason of the preceding sentence, the custodian of
such account shall be treated as the trustee thereof.
``(g) Reports.--The trustee of a KIDSAVE account shall make
such reports regarding such account to the Secretary and to
the account holder with respect to contributions,
distributions, and such other matters as the Secretary may
require under regulations. The reports required by this
subsection shall be filed at such time and in such manner and
furnished to such individuals at such time and in such manner
as may be required by those regulations.''
(b) Tax on Prohibited Transactions.--
(1) In general.--Paragraph (1) of section 4975(e) (relating
to prohibited transactions) is amended by striking ``or'' at
the end of subparagraph (D), by redesignating subparagraph
(E) as subparagraph (F), and by inserting after subparagraph
(D) the following new subparagraph:
``(E) A KIDSAVE account described in section 530, or''.
(2) Special rule.--Subsection (c) of section 4975 is
amended by adding at the end of subsection (c) the following
new paragraph:
``(5) Special rule for KIDSAVE accounts.--An individual for
whose benefit a KIDSAVE account is established and any
contributor to such account shall be exempt from the tax
imposed by this section with respect to any transaction
concerning such account (which would otherwise be taxable
under this section) if section 530(d) applies with respect to
such transaction.''
(c) Failure To Provide Reports on KIDSAVE Accounts.--
Paragraph (2) of section 6693(a) (relating to failure to
provide reports on individual retirement accounts or
annuities) 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 at
the end the following new subparagraph:
``(D) Section 530(g) (relating to KIDSAVE retirement
accounts).''
(d) Technical Amendments.--
(1) Subparagraph (F) of section 26(b)(2), as added by the
preceding section, is amended by inserting before the comma
``and section 530(c)(3) (relating to additional tax on
certain distributions from KIDSAVE accounts)''.
(2) Subparagraph (C) of section 135(c)(2), as added by the
preceding section, is amended by inserting ``, or to a
KIDSAVE account (as defined in section 530) on behalf of an
account holder (as defined in such section),'' after ``(as
defined in such section)''.
(3) The table of sections for part VIII of subchapter F of
chapter 1 is amended by adding at the end the following new
item:
``Sec. 530. KIDSAVE accounts.''
(e) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
1997.
Subtitle C--Other Education Initiatives
SEC. 221. EXTENSION OF EXCLUSION FOR EMPLOYER-PROVIDED
EDUCATIONAL ASSISTANCE.
(a) In General.--Section 127 (relating to educational
assistance programs) is amended by striking subsection (d)
and by redesignating subsection (e) as subsection (d).
(b) Repeal of Limitation on Graduate Education.--The last
sentence of section 127(c)(1) is amended by striking ``, and
such term also does not include any payment for, or the
provision of any benefits with respect to, any graduate level
course of a kind normally taken by an individual pursuing a
program leading to a law, business, medical, or other
advanced academic or professional degree''.
(c) Effective Dates.--
(1) Extension.--The amendments made by subsection (a) shall
apply to taxable years beginning after December 31, 1996.
(2) Graduate education.--The amendment made by subsection
(b) shall apply with respect to expenses relating to courses
beginning after December 31, 1996.
SEC. 222. REPEAL OF LIMITATION ON QUALIFIED 501(C)(3) BONDS
OTHER THAN HOSPITAL BONDS.
Section 145(b) (relating to qualified 501(c)(3) bond) is
amended by adding at the end the following new paragraph:
``(5) Termination of limitation.--This subsection shall not
apply with respect to bonds issued after the date of the
enactment of this paragraph to finance capital expenditures
incurred after such date.''
SEC. 223. TAX CREDIT FOR PUBLIC ELEMENTARY AND SECONDARY
SCHOOL CONSTRUCTION.
(a) In General.--Subpart B of part IV of subchapter A of
chapter 1 (relating to general business credits) is amended
by adding at the end the following new section:
``SEC. 45B. CREDIT FOR PUBLIC ELEMENTARY AND SECONDARY SCHOOL
CONSTRUCTION.
``(a) In General.--For purposes of section 38, the amount
of the school construction credit determined under this
section for an eligible taxpayer for any taxable year with
respect to an eligible school construction project shall be
an amount equal to the lesser of--
``(1) the applicable percentage of the qualified school
construction costs, or
``(2) the excess (if any) of--
``(A) the taxpayer's allocable school construction amount
with respect to such project under subsection (d), over
``(B) any portion of such allocable amount used under this
section for preceding taxable years.
``(b) Eligible Taxpayer; Eligible School Construction
Project.--For purposes of this section--
``(1) Eligible taxpayer.--The term `eligible taxpayer'
means any person which--
``(A) has entered into a contract with a local educational
agency for the performance of construction or related
activities in connection with an eligible school construction
project, and
``(B) has received an allocable school construction amount
with respect to such contract under subsection (d).
``(2) Eligible school construction project.--
``(A) In general.--The term `eligible school construction
project' means any project related to a public elementary
school or secondary school that is conducted for 1 or more of
the following purposes:
``(i) Construction of school facilities in order to ensure
the health and safety of all students, which may include--
``(I) the removal of environmental hazards,
``(II) improvements in air quality, plumbing, lighting,
heating and air conditioning, electrical systems, or basic
school infrastructure, and
``(III) building improvements that increase school safety.
``(ii) Construction activities needed to meet the
requirements of section 504 of the Rehabilitation Act of 1973
(29 U.S.C. 794) or of the Americans with Disabilities Act of
1990 (42 U.S.C. 12101 et seq.).
``(iii) Construction activities that increase the energy
efficiency of school facilities.
``(iv) Construction that facilitates the use of modern
educational technologies.
``(v) Construction of new school facilities that are needed
to accommodate growth in school enrollments.
``(vi) Such other construction as the Secretary of
Education determines appropriate.
``(B) Special rules.--For purposes of this paragraph--
``(i) the term `construction' includes reconstruction,
renovation, or other substantial rehabilitation, and
``(ii) an eligible school construction project shall not
include the costs of acquiring land (or any costs related to
such acquisition).
``(c) Qualified School Construction Costs; Applicable
Percentage.--For purposes of this section--
``(1) In general.--The term `qualified school construction
costs' means the aggregate amounts paid to an eligible
taxpayer during the taxable year under the contract described
in subsection (b)(1).
``(2) Applicable percentage.--The term `applicable
percentage' means, in the case of an eligible school
construction project related to a local educational agency,
the higher of the following percentages:
``(A) If the local educational agency has a percentage or
number of children described in clause (i)(I) or (ii)(I) of
section 1125(c)(2)(A) of the Elementary and Secondary
Education Act of 1965 (20 U.S.C. 6335(c)(2)(A)), the
applicable percentage is 10 percent.
``(B) If the local educational agency has a percentage or
number of children described in clause (i)(II) or (ii)(II) of
such section, the applicable percentage is 15 percent.
``(C) If the local educational agency has a percentage or
number of children described in clause (i)(III) or (ii)(III)
of such section, the applicable percentage is 20 percent.
``(D) If the local educational agency has a percentage or
number of children described in clause (i)(IV) or (ii)(IV) of
such section, the applicable percentage is 25 percent.
[[Page S6517]]
``(E) If the local educational agency has a percentage or
number of children described in clause (i)(V) or (ii)(V) of
such section, the applicable percentage is 30 percent.
``(d) Allocable Amount.--For purposes of this section--
``(1) In general.--Subject to paragraph (3), a local
educational agency may allocate to any person a school
construction amount with respect to any eligible school
construction project.
``(2) Time for making allocation.--An allocation shall be
taken into account under paragraph (1) only if the allocation
is made at the time the contract described in subsection
(b)(1) is entered into (or such later time as the Secretary
may by regulation allow).
``(3) Coordination with state program.--A local educational
agency may not allocate school construction amounts for any
calendar year--
``(A) which in the aggregate exceed the amount of the State
school construction ceiling allocated to such agency for such
calendar year under subsection (e), and
``(B) which is consistent with any specific allocation
required by the State or this section.
``(e) State Ceilings and Allocation.--
``(1) In general.--A State educational agency shall
allocate to local educational agencies within the State for
any calendar year a portion of the State school construction
ceiling for such year. Such allocations shall be consistent
with the State application which has been approved under
subsection (f) and with any requirement of this section.
``(2) State school construction ceiling.--
``(A) In general.--The State school construction ceiling
for any State for any calendar year shall be an amount equal
to the State's allocable share of the national school
construction amount.
``(B) State's allocable share.--The State's allocable share
of the national school construction amount for a fiscal year
shall bear the same relation to the national school
construction amount for the fiscal year as the amount the
State received under section 1124 of the Elementary and
Secondary Education Act of 1965 (20 U.S.C. 6333) for the
preceding fiscal year bears to the total amount received by
all States under such section for such preceding fiscal year.
``(C) National school construction amount.--The national
school construction amount is $750,000,000 for each of
calendar years 1998, 1999, 2000, 2001, and 2002, reduced by
any amount described in paragraph (3).
``(3) Special allocations for indian tribes and
territories.--
``(A) Allocation to indian tribes.--The national school
construction amount under paragraph (2)(C) shall be reduced
by 1.5 percent for each calendar year and the Secretary of
Interior shall allocate such amount among Indian tribes
according to their respective need for assistance under this
section.
``(B) Allocation to territories.--The national school
construction amount under paragraph (2)(C) shall be reduced
by 0.5 percent for each calendar year and the Secretary of
Education shall allocate such amount among the territories
according to their respective need for assistance under this
section.
``(4) Reallocation.--If the Secretary of Education
determines that a State is not making satisfactory progress
in carrying out the State's plan for the use of funds
allocated to the State under this section, the Secretary may
reallocate all or part of the State school construction
ceiling to 1 or more other States that are making
satisfactory progress.
``(e) State Application.--
``(1) In general.--A State educational agency shall not be
eligible to allocate any amount to a local educational agency
for any calendar year unless the agency submits to the
Secretary of Education (and the Secretary approves) an
application containing such information as the Secretary may
require, including--
``(A) an estimate of the overall condition of school
facilities in the State, including the projected cost of
upgrading schools to adequate condition;
``(B) an estimate of the capacity of the schools in the
State to house projected student enrollments, including the
projected cost of expanding school capacity to meet rising
student enrollment;
``(C) the extent to which the schools in the State have the
basic infrastructure elements necessary to incorporate modern
technology into their classrooms, including the projected
cost of upgrading school infrastructure to enable the use of
modern technology in classrooms;
``(D) the extent to which the schools in the State offer
the physical infrastructure needed to provide a high-quality
education to all students; and
``(E) an identification of the State agency that will
allocate credit amounts to local educational agencies within
the State.
``(2) Specific items in allocation.--The State shall
include in the State's application the process by which the
State will allocate the credits to local educational agencies
within the State. The State shall consider in its allocation
process the extent to which--
``(A) the school district served by the local educational
agency has--
``(i) a high number or percentage of the total number of
children aged 5 to 17, inclusive, in the State who are
counted under section 1124(c) of the Elementary and Secondary
Education Act of 1965 (20 U.S.C. 6333(c)); or
``(ii) a high percentage of the total number of low-income
residents in the State;
``(B) the local educational agency lacks the fiscal
capacity, including the ability to raise funds through the
full use of such agency's bonding capacity and otherwise, to
undertake the eligible school construction project without
assistance;
``(C) the local area makes an unusually high local tax
effort, or has a history of failed attempts to pass bond
referenda;
``(D) the local area contains a significant percentage of
federally owned land that is not subject to local taxation;
``(E) the threat the condition of the physical facility
poses to the safety and well-being of students;
``(F) there is a demonstrated need for the construction,
reconstruction, renovation, or rehabilitation based on the
condition of the facility;
``(G) the extent to which the facility is overcrowded; and
``(H) the extent to which assistance provided will be used
to support eligible school construction projects that would
not otherwise be possible to undertake.
``(3) Identification of areas.--The State shall include in
the State's application the process by which the State will
identify the areas of greatest needs (whether those areas are
in large urban centers, pockets of rural poverty, fast-
growing suburbs, or elsewhere) and how the State intends to
meet the needs of those areas.
``(4) Allocations on basis of application.--The Secretary
of Education shall evaluate applications submitted under this
subsection and shall approve any such application which meets
the requirements of this section.
``(g) Required Allocations.--Notwithstanding any process
for allocation under a State application under subsection
(f), in the case of a State which contains 1 or more of the
100 school districts within the United States which contains
the largest number of poor children (as determined by the
Secretary of Education), the State shall allocate each
calendar year to the local educational agency serving such
districts that portion of the State school construction
ceiling which bears the same ratio to such ceiling as the
number of children in such district for the preceding
calendar year who are counted for purposes of section 1124(c)
of the Elementary and Secondary Education Act of 1965 (20
U.S.C. 6333(c)) bears to the total number of children in such
State who are so counted.
``(h) Definitions.--For purposes of this section--
``(1) Elementary school; local educational agency;
secondary school; state educational agency.--The terms
`elementary school', `local educational agency', `secondary
school', and `State educational agency' have the meanings
given the terms in section 14101 of the Elementary and
Secondary Education Act of 1965 (20 U.S.C. 8801).
``(2) Territories.--The term `territories' means the United
States Virgin Islands, Guam, American Samoa, the Commonwealth
of the Northern Mariana Islands, the Republic of the Marshall
Islands, the Federated States of Micronesia, and the Republic
of Palau.
``(3) State.--The term `State' means each of the several
States of the United States, the District of Columbia, and
the Commonwealth of Puerto Rico.''
(b) Inclusion in General Business Credit.--
(1) In general.--Section 38(b) is amended by striking
``plus'' at the end of paragraph (11), by striking the period
at the end of paragraph (12) and inserting ``, plus'', and by
adding at the end the following new paragraph:
``(13) the school construction credit determined under
section 45D(a).''
(2) Transition rule.--Section 39(d) is amended by adding at
the end the following new paragraph:
``(8) No carryback of section 45d credit before
enactment.--No portion of the unused business credit for any
taxable year which is attributable to the school construction
credit determined under section 45D may be carried back to a
taxable year ending before the date of the enactment of
section 45D.''
(c) Conforming Amendment.--The table of sections for
subpart D of part IV of subchapter A of chapter 1 is amended
by adding at the end the following new item:
``Sec. 45B. Credit for public elementary and secondary school
construction.''
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
1997.
SEC. 224. CONTRIBUTIONS OF COMPUTER TECHNOLOGY AND EQUIPMENT
FOR ELEMENTARY OR SECONDARY SCHOOL PURPOSES.
(a) Contributions of Computer Technology and Equipment for
Elementary or Secondary School Purposes.--Subsection (e) of
section 170 is amended by adding at the end the following new
paragraph:
``(6) Special rule for contributions of computer technology
and equipment for elementary or secondary school purposes.--
``(A) Limit on reduction.--In the case of a qualified
elementary or secondary educational contribution, the
reduction under paragraph (1)(A) shall be no greater than the
amount determined under paragraph (3)(B).
``(B) Qualified elementary or secondary educational
contribution.--For purposes of
[[Page S6518]]
this paragraph, the term `qualified elementary or secondary
educational contribution' means a charitable contribution by
a corporation of any computer technology or equipment, but
only if--
``(i) the contribution is to--
``(I) an educational organization described in subsection
(b)(1)(A)(ii), or
``(II) an entity described in section 501(c)(3) and exempt
from tax under section 501(a) (other than an entity described
in subclause (I)) that is organized primarily for purposes of
supporting elementary and secondary education,
``(ii) the contribution is made not later than 2 years
after the date the taxpayer acquired the property (or in the
case of property constructed by the taxpayer, the date the
construction of the property is substantially completed),
``(iii) substantially all of the use of the property by the
donee is for use within the United States for educational
purposes in any of the grades K-12 that are related to the
purpose or function of the organization or entity,
``(iv) the property is not transferred by the donee in
exchange for money, other property, or services, except for
shipping, installation and transfer costs,
``(v) the property will fit productively into the entity's
education plan, and
``(vi) the entity's use and disposition of the property
will be in accordance with the provisions of clauses (iii)
and (iv).
``(C) Contribution to private foundation.--A contribution
by a corporation of any computer technology or equipment to a
private foundation (as defined in section 509) shall be
treated as a qualified elementary or secondary educational
contribution for purposes of this paragraph if--
``(i) the contribution to the private foundation satisfies
the requirements of clauses (ii) and (iv) of subparagraph
(B), and
``(ii) within 30 days after such contribution, the private
foundation--
``(I) contributes the property to an entity described in
clause (i) of subparagraph (B) that satisfies the
requirements of clauses (iii) through (vi) of subparagraph
(B), and
``(II) notifies the donor of such contribution.
``(D) Special rule relating to construction of property.--
For the purposes of this paragraph, the rules of paragraph
(4)(C) shall apply.
``(E) Definitions.--For the purposes of this paragraph--
``(i) Computer technology or equipment.--The term `computer
technology or equipment' means computer software (as defined
by section 197(e)(3)(B)), computer or peripheral equipment
(as defined by section 168(i)(2)(B)), and fiber optic cable
related to computer use.
``(ii) Corporation.--The term `corporation' has the meaning
given to such term by paragraph (4)(D).''
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after the calendar
year in which this Act is enacted.
SEC. 225. INCREASE IN ARBITRAGE REBATE EXCEPTION FOR
GOVERNMENTAL BONDS USED TO FINANCE EDUCATION
FACILITIES.
(a) In General.--Section 148(f)(4)(D) (relating to
exception for governmental units issuing $5,000,000 or less
of bonds) is amended by adding at the end the following new
clause:
``(vii) Increase in exception for bonds financing public
school capital expenditures.--Each of the $5,000,000 amounts
in the preceding provisions of this subparagraph shall be
increased by the lesser of $5,000,000 or so much of the
aggregate face amount of the bonds as are attributable to
financing the construction (within the meaning of
subparagraph (C)(iv)) of public school facilities.''
(b) Effective Date.--The amendments made by this section
shall apply to bonds issued after December 31, 1997.
SEC. 226. 2-PERCENT FLOOR ON MISCELLANEOUS ITEMIZED
DEDUCTIONS NOT TO APPLY TO CERTAIN CONTINUING
EDUCATION EXPENSES OF ELEMENTARY AND SECONDARY
SCHOOL TEACHERS.
(a) In General.--Section 67(b) (defining miscellaneous
itemized deductions) is amended by striking ``and'' at the
end of paragraph (11), by striking the period at the end of
paragraph (12) and inserting ``, and'', and by adding at the
end the following:
``(13) any deduction allowable for the qualified
professional development expenses of an eligible teacher.''
(b) Definitions.--Section 67 is amended by adding at the
end the following new subsection:
``(g) Qualified Professional Development Expenses of
Eligible Teachers.--For purposes of subsection (b)(13)--
``(1) Qualified professional development expenses.--
``(A) In general.--The term `qualified professional
development expenses' means expenses--
``(i) for tuition, fees, books, supplies, equipment, and
transportation required for the enrollment or attendance of
an individual in a qualified course of instruction, and
``(ii) with respect to which a deduction is allowable under
section 162 (determined without regard to this section).
``(B) Qualified course of instruction.--The term `qualified
course of instruction' means a course of instruction which--
``(i) is at an institution of higher education (as defined
in section 481 of the Higher Education Act of 1965 (20 U.S.C.
1088), as in effect on the date of the enactment of this
subsection), and
``(ii) is part of a program of professional development
which is approved and certified by the appropriate local
educational agency as directly related to the improvement of
the individual's capacity to use learning technology in
teaching.
``(C) Local educational agency.--The term `local
educational agency' has the meaning given such term by
section 14101 of the Elementary and Secondary Education Act
of 1965, as so in effect.
``(2) Eligible teacher.--
``(A) In general.--The term `eligible teacher' means an
individual who--
``(i) is a kindergarten through grade 12 teacher in an
elementary or secondary school, and
``(ii) has completed at least 2 academic years as a teacher
described in subparagraph (A) before the qualified
professional development expenses of the individual have been
incurred.
``(B) Elementary or secondary school.--The terms
`elementary school' and `secondary school' have the meanings
given such terms by section 14101 of the Elementary and
Secondary Education Act of 1965 (20 U.S.C. 8801), as so in
effect.''
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
1997.
TITLE III--TAX RELIEF FOR FAMILY SAVINGS AND BUSINESS CAPITAL FORMATION
Subtitle A--Tax Relief for Family Savings
SEC. 301. CAPITAL GAINS DEDUCTION.
(a) In General.--Part I of subchapter P of chapter 1
(relating to treatment of capital gains) is amended by
redesignating section 1202 as section 1203 and by inserting
after section 1201 the following new section:
``SEC. 1202. CAPITAL GAINS DEDUCTION.
``(a) General Rule.--If for any taxable year a taxpayer
other than a corporation has a net capital gain, there shall
be allowed as a deduction an amount equal to 30 percent of
the taxpayer's qualified 3-year gain for such taxable year.
``(b) Qualified 3-Year Gain.--For purposes of this section,
the term `qualified 3-year gain' means the lesser of--
``(1) net capital gain, or
``(2) the amount of gain from the sale or exchange of
capital assets held more than 3 years.
``(c) Estates and Trusts.--In the case of an estate or
trust, the deduction shall be computed by excluding the
portion (if any) of the gains for the taxable year from sales
or exchanges of capital assets which, under sections 652 and
662 (relating to inclusions of amounts in gross income of
beneficiaries of trusts), is includible by the income
beneficiaries as gain derived from the sale or exchange of
capital assets.
``(d) Coordination With Treatment of Capital Gain Under
Limitation on Investment Interest.--For purposes of this
section, the net capital gain for any taxable year shall be
reduced (but not below zero) by the amount which the taxpayer
takes into account as investment income under section
163(d)(4)(B)(iii).
``(e) Adjustments to Net Capital Gain.--For purposes of
this section--
``(1) Collectibles.--
``(A) In general.--Net capital gain shall be computed
without regard to collectibles gain.
``(B) Collectibles gain.--
``(i) In general.--The term `collectibles gain' means gain
from the sale or exchange of a collectible (as defined in
section 408(m) without regard to paragraph (3) thereof) which
is a capital asset held for more than 1 year but only to the
extent such gain is taken into account in computing gross
income.
``(ii) Partnerships, etc.--For purposes of clause (i), any
gain from the sale of an interest in a partnership, S
corporation, or trust which is attributable to unrealized
appreciation in the value of collectibles shall be treated as
gain from the sale or exchange of a collectible. Rules
similar to the rules of section 751 shall apply for purposes
of the preceding sentence.
``(2) Gain from small business stock.--Net capital gain
shall be computed without regard to any gain from the sale or
exchange of any qualified small business stock (within the
meaning of section 1203(c)) held more than 5 years which is
taken into account in computing gross income.
``(3) Pre-effective date gain.--
``(A) In general.--In the case of a taxable year which
includes May 7, 1997, net capital gain shall be computed
without regard to pre-effective date gain.
``(B) Pre-effective date gain.--The term `pre-effective
date gain' means the amount which would be net capital gain
under subsection (a) for a taxable year if such net capital
gain were determined by taking into account only gain or loss
properly taken into account for the portion of the taxable
year before May 7, 1997.
``(C) Special rules for pass-thru entities.--
``(i) In general.--In applying subparagraph (A) with
respect to any pass-thru entity, the determination of when
gains and losses are properly taken into account shall be
made at the entity level.
``(ii) Pass-thru entity defined.--For purposes of clause
(i), the term `pass-thru entity' means--
``(I) a regulated investment company,
``(II) a real estate investment trust,
[[Page S6519]]
``(III) an S corporation,
``(IV) a partnership,
``(V) an estate or trust, and
``(VI) a common trust fund.
``(f) Maximum Rate on Nondeductible Capital Gain.--
``(1) In general.--If a taxpayer other than a corporation
has a nondeductible net capital gain for any taxable year,
then the tax imposed by section 1 for the taxable year shall
not exceed the sum of--
``(A) a tax computed on the taxable income reduced by the
amount of the nondeductible net capital gain, at the same
rates and in the same manner as if this subsection had not
been enacted, plus
``(B) a tax of 28 percent of the nondeductible net capital
gain.
``(2) Nondeductible net capital gain.--For purposes of
paragraph (1), the term `nondeductible net capital gain'
means an amount equal to net capital gain, reduced by the
amount of gain to which subsection (a) applies.''
(b) Deduction Allowable in Computing Adjusted Gross
Income.--Subsection (a) of section 62 is amended by inserting
after paragraph (16) the following new paragraph:
``(17) Long-term capital gains.--The deduction allowed by
section 1202.''
(c) Technical and Conforming Changes.--
(1)(A) Section 1 is amended by striking subsection (h).
(B) Section 641(d)(2)(A) is amended by striking ``Except as
provided in section 1(h), the'' and inserting ``The''.
(2) Paragraph (1) of section 170(e) is amended by striking
``the amount of gain'' in the material following subparagraph
(B)(ii) and inserting ``the amount of gain (70 percent of
such gain in the case of property other than a collectible
held more than 3 years)''.
(3) Subparagraph (B) of section 172(d)(2) is amended to
read as follows:
``(B) the deduction under section 1202 shall not be
allowed.''
(4) The last sentence of section 453A(c)(3) is amended by
striking all that follows ``long-term capital gain,'' and
inserting ``the maximum rate on net capital gain under
section 1201 or the deduction, or maximum rate under section
1202 (whichever is appropriate) shall be taken into
account.''
(5) Paragraph (4) of section 642(c) is amended to read as
follows:
``(4) Adjustments.--To the extent that the amount otherwise
allowable as a deduction under this subsection consists of
gain from the sale or exchange of capital assets held for
more than 3 years, proper adjustment shall be made for any
deduction allowable to the estate or trust under section 1202
(relating to capital gains deduction). In the case of a
trust, the deduction allowed by this subsection shall be
subject to section 681 (relating to unrelated business
income).''
(6) The last sentence of section 643(a)(3) is amended to
read as follows: ``The deduction under section 1202 (relating
to capital gains deduction) shall not be taken into
account.''
(7) Subparagraph (C) of section 643(a)(6) is amended by
inserting ``(i)'' before ``there shall'' and by inserting
before the period ``, and (ii) the deduction under section
1202 (relating to capital gains deduction) shall not be taken
into account''.
(8)(A) Paragraph (2) of section 904(b) is amended by
striking subparagraph (A), by redesignating subparagraph (B)
as subparagraph (A), and by inserting after subparagraph (A)
(as so redesignated) the following new subparagraph:
``(B) Other taxpayers.--In the case of a taxpayer other
than a corporation, taxable income from sources outside the
United States shall include gain from the sale or exchange of
capital assets only to the extent of foreign source capital
gain net income.''
(B) Subparagraph (A) of section 904(b)(2), as so
redesignated, is amended--
(i) by striking all that precedes clause (i) and inserting
the following:
``(A) Corporations.--In the case of a corporation--'', and
(ii) by striking in clause (i) ``in lieu of applying
subparagraph (A),''.
(C) Paragraph (3) of section 904(b) is amended by striking
subparagraphs (D) and (E) and inserting the following new
subparagraph:
``(D) Rate differential portion.--The rate differential
portion of foreign source net capital gain, net capital gain,
or the excess of net capital gain from sources within the
United States over net capital gain, as the case may be, is
the same proportion of such amount as the excess of the
highest rate of tax specified in section 11(b) over the
alternative rate of tax under section 1201(a) bears to the
highest rate of tax specified in section 11(b).''
(D) Clause (v) of section 593(b)(2)(D) is amended--
(i) by striking ``if there is a capital gain rate
differential (as defined in section 904(b)(3)(D)) for the
taxable year,'', and
(ii) by striking ``section 904(b)(3)(E)'' and inserting
``section 904(b)(3)(D)''.
(9) The last sentence of section 1044(d) is amended by
striking ``1202'' and inserting ``1203''.
(10) Paragraph (1) of section 1402(i) is amended by
inserting ``, and the deduction provided by section 1202
shall not apply'' before the period at the end thereof.
(d) Clerical Amendment.--The table of sections for part I
of subchapter P of chapter 1 is amended by striking the item
relating to section 1202 and by inserting after the item
relating to section 1201 the following new items:
``Sec. 1202. Capital gains deduction.
``Sec. 1203. 50-percent exclusion for gain from certain small business
stock.''
(e) Effective Date.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply
to taxable years ending after May 6, 1997.
(2) Contributions.--The amendment made by subsection (c)(2)
shall apply to contributions after May 6, 1997.
SEC. 302. FAMILY DIVIDEND EXCLUSION.
(a) In General.--Part III of subchapter B of chapter 1
(relating to amounts specifically excluded from gross income)
is amended by inserting after section 115 the following new
section:
``SEC. 116. PARTIAL EXCLUSION OF DIVIDENDS RECEIVED BY
INDIVIDUALS.
``(a) Exclusion From Gross Income.--In the case of taxable
years beginning after December 31, 2002, gross income does
not include 30 percent of the amount of eligible dividends
received during the taxable year by an individual.
``(b) Eligible Dividends.--For purposes of this section--
``(1) In general.--The term `eligible dividends' means, for
any taxable year, the portion of the dividends from domestic
corporations not in excess of $250 ($500 in the case of a
joint return).
``(2) Certain dividends excluded.--Such term shall not
include any dividend from a corporation which, for the
taxable year of the corporation in which the distribution is
made, or for the next preceding taxable year of the
corporation, is a corporation exempt from tax under section
501 (relating to certain charitable, etc., organization) or
section 521 (relating to farmers' cooperative associations).
``(c) Special Rules.--For purposes of this section--
``(1) Distributions from regulated investment companies and
real estate investment trusts.--Subsection (a) shall apply
with respect to distributions by--
``(A) regulated investment companies to the extent provided
in section 854(c), and
``(B) real estate investment trusts to the extent provided
in section 857(c).
``(2) Distributions by a trust.--For purposes of subsection
(a), the amount of eligible dividends properly allocable to a
beneficiary under section 652 or 662 shall be deemed to have
been received by the beneficiary ratably on the same date
that the dividends were received by the estate or trust.
``(3) Certain nonresident aliens ineligible for
exclusion.--In the case of a nonresident alien individual,
subsection (a) shall apply only--
``(A) in determining the tax imposed for the taxable year
pursuant to section 871(b)(1) and only in respect of eligible
dividends which are effectively connected with the conduct of
a trade or business within the United States, or
``(B) in determining the tax imposed for the taxable year
pursuant to section 877(b).''
(b) Clerical and Conforming Amendments.--
(1) The table of sections for part III of subchapter B of
chapter 1 is amended by inserting after the item relating to
section 115 the following new item:
``Sec. 116. Partial exclusion of dividends received by individuals.''
(2) Subsection (c) of section 584 is amended by adding at
the end the following new flush sentence:
``The proportionate share of each participant in the amount
of dividends received by the common trust fund and to which
section 116 applies shall be considered for purposes of such
section as having been received by such participant.''
(3) Subsection (a) of section 643 is amended by inserting
after paragraph (6) the following new paragraph:
``(7) Dividends.--There shall be included the amount of any
dividends excluded from gross income pursuant to section
116.''
(4) Section 854 is amended by adding at the end the
following new subsection:
``(c) Treatment Under Section 116.--
``(1) In general.--For purposes of section 116, in the case
of any dividend (other than a dividend described in
subsection (a)) received from a regulated investment company
which meets the requirements of section 852 for the taxable
year in which it paid the dividend--
``(A) the entire amount of such dividend shall be treated
as a dividend if the aggregate dividends received by such
company during the taxable year equal or exceed 75 percent of
its gross income, or
``(B) if subparagraph (A) does not apply, a portion of such
dividend shall be treated as a dividend (and a portion of
such dividend shall be treated as interest) based on the
portion of the company's gross income which consists of
aggregate dividends.
``(2) Notice to shareholders.--The amount of any
distribution by a regulated investment company which may be
taken into account as a dividend for purposes of the
exclusion under section 116 shall not exceed the amount so
designated by the company in a written notice to its
shareholders mailed not later than 45 days after the close of
its taxable year.
``(3) Definitions.--For purposes of this subsection--
``(A) the term `gross income' does not include gain from
the sale or other disposition of stock or securities, and
[[Page S6520]]
``(B) the term `aggregate dividends received' includes only
dividends received from domestic corporations other than
dividends described in section 116(b)(2).
In determining the amount of any dividend for purposes of
subparagraph (B), the rules provided in section 116(c)(1)
(relating to certain distributions) shall apply.''
(5) Subsection (c) of section 857 is amended to read as
follows:
``(c) Limitations Applicable to Dividends Received From
Real Estate Investment Trusts.--For purposes of section 116
(relating to an exclusion for dividends received by
individuals) and section 243 (relating to deductions for
dividends received by corporations), a dividend received from
a real estate investment trust which meets the requirements
of this part shall not be considered as a dividend.
(c) Effective Date.--The amendments made by this section
shall apply with respect to amounts received after December
31, 2002, in taxable years ending after such date.
SEC. 303. EXEMPTION FROM TAX FOR GAIN ON SALE OF PRINCIPAL
RESIDENCE.
(a) In General.--Section 121 (relating to one-time
exclusion of gain from sale of principal residence by
individual who has attained age 55) is amended to read as
follows:
``SEC. 121. EXCLUSION OF GAIN FROM SALE OF PRINCIPAL
RESIDENCE.
``(a) Exclusion.--Gross income shall not include gain from
the sale or exchange of property if, during the 5-year period
ending on the date of the sale or exchange, such property has
been owned and used by the taxpayer as the taxpayer's
principal residence for periods aggregating 2 years or more.
``(b) Limitations.--
``(1) In general.--The amount of gain excluded from gross
income under subsection (a) with respect to any sale or
exchange shall not exceed $250,000.
``(2) $500,000 limitation for certain joint returns.--
Paragraph (1) shall be applied by substituting `$500,000' for
`$250,000' if--
``(A) a husband and wife make a joint return for the
taxable year of the sale or exchange of the property,
``(B) either spouse meets the ownership requirements of
subsection (a) with respect to such property,
``(C) both spouses meet the use requirements of subsection
(a) with respect to such property, and
``(D) neither spouse is ineligible for the benefits of
subsection (a) with respect to such property by reason of
paragraph (3).
``(3) Application to only 1 sale or exchange every 2
years.--
``(A) In general.--Subsection (a) shall not apply to any
sale or exchange by the taxpayer if, during the 2-year period
ending on the date of such sale or exchange, there was any
other sale or exchange by the taxpayer to which subsection
(a) applied.
``(B) Pre-may 7, 1997, sales not taken into account.--
Subparagraph (A) shall be applied without regard to any sale
or exchange before May 7, 1997.
``(c) Exclusion for Taxpayers Failing To Meet Certain
Requirements.--
``(1) In general.--In the case of a sale or exchange to
which this subsection applies, the ownership and use
requirements of subsection (a) shall not apply and subsection
(b)(3) shall not apply; but the amount of gain excluded from
gross income under subsection (a) with respect to such sale
or exchange shall not exceed--
``(A) the amount which bears the same ratio to the amount
which would be so excluded if such requirements had been met,
as
``(B) the shorter of--
``(i) the aggregate periods, during the 5-year period
ending on the date of such sale or exchange, such property
has been owned and used by the taxpayer as the taxpayer's
principal residence, or
``(ii) the period after the date of the most recent prior
sale or exchange by the taxpayer to which subsection (a)
applied and before the date of such sale or exchange,
bears to 2 years.
``(2) Sales and exchanges to which subsection applies.--
This subsection shall apply to any sale or exchange if--
``(A) subsection (a) would not (but for this subsection)
apply to such sale or exchange by reason of--
``(i) a failure to meet the ownership and use requirements
of subsection (a), or
``(ii) subsection (b)(3), and
``(B) such sale or exchange is by reason of a change in
place of employment, health, or, to the extent provided in
regulations, unforeseen circumstances.
``(d) Special Rules.--
``(1) Property of deceased spouse.--For purposes of this
section, in the case of an unmarried individual whose spouse
is deceased on the date of the sale or exchange of property,
the period such unmarried individual owned such property
shall include the period such deceased spouse owned such
property before death.
``(2) Property owned by spouse or former spouse.--For
purposes of this section--
``(A) Property transferred to individual from spouse or
former spouse.--In the case of an individual holding property
transferred to such individual in a transaction described in
section 1041(a), the period such individual owns such
property shall include the period the transferor owned the
property.
``(B) Property used by former spouse pursuant to divorce
decree, etc.--Solely for purposes of this section, an
individual shall be treated as using property as such
individual's principal residence during any period of
ownership while such individual's spouse or former spouse is
granted use of the property under a divorce or separation
instrument (as defined in section 71(b)(2)).
``(3) Tenant-stockholder in cooperative housing
corporation.--For purposes of this section, if the taxpayer
holds stock as a tenant-stockholder (as defined in section
216) in a cooperative housing corporation (as defined in such
section), then--
``(A) the holding requirements of subsection (a) shall be
applied to the holding of such stock, and
``(B) the use requirements of subsection (a) shall be
applied to the house or apartment which the taxpayer was
entitled to occupy as such stockholder.
``(4) Involuntary conversions.--
``(A) In general.--For purposes of this section, the
destruction, theft, seizure, requisition, or condemnation of
property shall be treated as the sale of such property.
``(B) Application of section 1033.--In applying section
1033 (relating to involuntary conversions), the amount
realized from the sale or exchange of property shall be
treated as being the amount determined without regard to this
section, reduced by the amount of gain not included in gross
income pursuant to this section.
``(C) Property acquired after involuntary conversion.--If
the basis of the property sold or exchanged is determined (in
whole or in part) under section 1033(b) (relating to basis of
property acquired through involuntary conversion), then the
holding and use by the taxpayer of the converted property
shall be treated as holding and use by the taxpayer of the
property sold or exchanged.
``(5) Recognition of gain attributable to depreciation.--
Subsection (a) shall not apply to so much of the gain from
the sale of any property as does not exceed the portion of
the depreciation adjustments (as defined in section
1250(b)(3)) attributable to periods after May 6, 1997, in
respect of such property.
``(6) Determination of use during periods of out-of-
residence care.--In the case of a taxpayer who--
``(A) becomes physically or mentally incapable of self-
care, and
``(B) owns property and uses such property as the
taxpayer's principal residence during the 5-year period
described in subsection (a) for periods aggregating at least
1 year,
then the taxpayer shall be treated as using such property as
the taxpayer's principal residence during any time during
such 5-year period in which the taxpayer owns the property
and resides in any facility (including a nursing home)
licensed by a State or political subdivision to care for an
individual in the taxpayer's condition.
``(7) Determination of marital status.--In the case of any
sale or exchange, for purposes of this section--
``(A) the determination of whether an individual is married
shall be made as of the date of the sale or exchange, and
``(B) an individual legally separated from his spouse under
a decree of divorce or of separate maintenance shall not be
considered as married.
``(8) Sales of remainder interests.--For purposes of this
section--
``(A) In general.--At the election of the taxpayer, this
section shall not fail to apply to the sale or exchange of an
interest in a principal residence by reason of such interest
being a remainder interest in such residence, but this
section shall not apply to any other interest in such
residence which is sold or exchanged separately.
``(B) Exception for sales to related parties.--Subparagraph
(A) shall not apply to any sale to, or exchange with, any
person who bears a relationship to the taxpayer which is
described in section 267(b) or 707(b).
``(e) Denial of Exclusion for Expatriates.--This section
shall not apply to any sale or exchange by an individual if
the treatment provided by section 877(a)(1) applies to such
individual.
``(f) Election To Have Section Not Apply.--This section
shall not apply to any sale or exchange with respect to which
the taxpayer elects not to have this section apply.
``(g) Residences Acquired in Rollovers Under Section
1034.--For purposes of this section, in the case of property
the acquisition of which by the taxpayer resulted under
section 1034 (as in effect on the day before the date of the
enactment of this section) in the nonrecognition of any part
of the gain realized on the sale or exchange of another
residence, in determining the period for which the taxpayer
has owned and used such property as the taxpayer's principal
residence, there shall be included the aggregate periods for
which such other residence (and each prior residence taken
into account under section 1223(7) in determining the holding
period of such property) had been so owned and used.''
(b) Repeal of Nonrecognition of Gain on Rollover of
Principal Residence.--Section 1034 (relating to rollover of
gain on sale of principal residence) is hereby repealed.
(c) Exception From Reporting.--Subsection (e) of section
6045 (relating to return required in the case of real estate
transactions) is amended by adding at the end the following
new paragraph:
``(5) Exception for sales or exchanges of certain principal
residences.--
``(A) In general.--Paragraph (1) shall not apply to any
sale or exchange of a residence for $250,000 or less if the
person referred to in paragraph (2) receives written
assurance in a form acceptable to the Secretary from the
seller that--
[[Page S6521]]
``(i) such residence is the principal residence (within the
meaning of section 121) of the seller,
``(ii) if the Secretary requires the inclusion on the
return under subsection (a) of information as to whether
there is federally subsidized mortgage financing assistance
with respect to the mortgage on residences, that there is no
such assistance with respect to the mortgage on such
residence, and
``(iii) the full amount of the gain on such sale or
exchange is excludable from gross income under section 121.
If such assurance includes an assurance that the seller is
married, the preceding sentence shall be applied by
substituting `$500,000' for `$250,000'.
``(B) Seller.--For purposes of this paragraph, the term
`seller' includes the person relinquishing the residence in
an exchange.''
(d) Conforming Amendments.--
(1) The following provisions of the Internal Revenue Code
of 1986 are each amended by striking ``section 1034'' and
inserting ``section 121'': sections 25(e)(7), 56(e)(1)(A),
56(e)(3)(B)(i), 143(i)(1)(C)(i)(I), 163(h)(4)(A)(i)(I),
280A(d)(4)(A), 464(f)(3)(B)(i), 1033(h)(4), 1274(c)(3)(B),
6334(a)(13), and 7872(f)(11)(A).
(2) Paragraph (4) of section 32(c) is amended by striking
``(as defined in section 1034(h)(3))'' and by adding at the
end the following new sentence: ``For purposes of the
preceding sentence, the term `extended active duty' means any
period of active duty pursuant to a call or order to such
duty for a period in excess of 90 days or for an indefinite
period.''
(3) Subparagraph (A) of 143(m)(6) is amended by inserting
``(as in effect on the day before the date of the enactment
of the Revenue Reconciliation Act of 1997)'' after
``1034(e)''.
(4) Subsection (e) of section 216 is amended by striking
``such exchange qualifies for nonrecognition of gain under
section 1034(f)'' and inserting ``such dwelling unit is used
as his principal residence (within the meaning of section
121)''.
(5) Section 512(a)(3)(D) is amended by inserting ``(as in
effect on the day before the date of the enactment of the
Revenue Reconciliation Act of 1997)'' after ``1034''.
(6) Paragraph (7) of section 1016(a) is amended by
inserting ``(as in effect on the day before the date of the
enactment of the Revenue Reconciliation Act of 1997)'' after
``1034'' and by inserting ``(as so in effect)'' after
``1034(e)''.
(7) Paragraph (3) of section 1033(k) is amended to read as
follows:
``(3) For exclusion from gross income of gain from
involuntary conversion of principal residence, see section
121.''
(8) Subsection (e) of section 1038 is amended to read as
follows:
``(e) Principal Residences.--If--
``(1) subsection (a) applies to a reacquisition of real
property with respect to the sale of which gain was not
recognized under section 121 (relating to gain on sale of
principal residence); and
``(2) within 1 year after the date of the reacquisition of
such property by the seller, such property is resold by him,
then, under regulations prescribed by the Secretary,
subsections (b), (c), and (d) of this section shall not apply
to the reacquisition of such property and, for purposes of
applying section 121, the resale of such property shall be
treated as a part of the transaction constituting the
original sale of such property.''
(9) Paragraph (7) of section 1223 is amended by inserting
``(as in effect on the day before the date of the enactment
of the Revenue Reconciliation Act of 1997)'' after ``1034''.
(10)(A) Subsection (d) of section 1250 is amended by
striking paragraph (7) and by redesignating paragraphs (9)
and (10) as paragraphs (7) and (8), respectively.
(B) Subsection (e) of section 1250 is amended by striking
paragraph (3).
(11) Subsection (c) of section 6012 is amended by striking
``(relating to one-time exclusion of gain from sale of
principal residence by individual who has attained age 55)''
and inserting ``(relating to gain from sale of principal
residence)''.
(12) Paragraph (2) of section 6212(c) is amended by
striking subparagraph (C) and by redesignating the succeeding
subparagraphs accordingly.
(13) Section 6504 is amended by striking paragraph (4) and
by redesignating the succeeding paragraphs accordingly.
(14) The item relating to section 121 in the table of
sections for part III of subchapter B of chapter 1 is amended
to read as follows:
``Sec. 121. Exclusion of gain from sale of principal residence.''
(15) The table of sections for part III of subchapter O of
chapter 1 of such Code is amended by striking the item
relating to section 1034.
(e) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to sales and exchanges after May 6, 1997.
(2) Sales before date of enactment.--At the election of the
taxpayer, the amendments made by this section shall not apply
to any sale or exchange before the date of the enactment of
this Act.
(3) Binding contracts.--At the election of the taxpayer,
the amendments made by this section shall not apply to a sale
or exchange after the date of the enactment of this Act, if--
(A) such sale or exchange is pursuant to a contract which
was binding on such date, or
(B) without regard to such amendments, gain would not be
recognized under section 1034 of the Internal Revenue Code of
1986 (as in effect on the day before the date of the
enactment of this Act) on such sale or exchange by reason of
a new residence acquired on or before such date or with
respect to the acquisition of which by the taxpayer a binding
contract was in effect on such date.
This paragraph shall not apply to any sale or exchange by an
individual if the treatment provided by section 877(a)(1) of
the Internal Revenue Code of 1986 applies to such individual.
Subtitle B--Business Capital Formation
SEC. 311. ROLLOVER OF CAPITAL GAINS ON CERTAIN SMALL BUSINESS
INVESTMENTS.
(a) In General.--Part III of subchapter O of chapter 1
(relating to common nontaxable exchanges) is amended by
adding at the end the following new section:
``SEC. 1045. ROLLOVER OF GAIN ON SMALL BUSINESS INVESTMENTS.
``(a) Nonrecognition of Gain.--In the case of the sale of
any eligible small business investment with respect to which
the taxpayer elects the application of this section, gain
from such sale shall be recognized only to the extent that
the amount realized on such sale exceeds--
``(1) the cost of any other eligible small business
investment purchased by the taxpayer during the 6-month
period beginning on the date of such sale, reduced by
``(2) any portion of such cost previously taken into
account under this section.
This section shall not apply to any gain which is treated as
ordinary income for purposes of this subtitle.
``(b) Definitions and Special Rules.--For purposes of this
section--
``(1) Purchase.--The term `purchase' has the meaning given
such term by section 1043(b)(4).
``(2) Eligible small business investment.--Except as
otherwise provided in this section, the term `eligible small
business investment' means any stock in a domestic
corporation, and any partnership interest in a domestic
partnership, which is originally issued after December 31,
1996, if--
``(A) as of the date of issuance, such corporation or
partnership is a qualified small business entity,
``(B) such stock or partnership interest is acquired by the
taxpayer at its original issue (directly or through an
underwriter)--
``(i) in exchange for money or other property (not
including stock), or
``(ii) as compensation for services (other than services
performed as an underwriter of such stock or partnership
interest), and
``(C) the taxpayer has held such stock or interest at least
6 months as of the time of the sale described in subsection
(a).
A rule similar to the rule of section 1202(c)(3) shall apply
for purposes of this section.
``(3) Active business requirement.--Stock in a corporation,
and a partnership interest in a partnership, shall not be
treated as an eligible small business investment unless,
during substantially all of the taxpayer's holding period for
such stock or partnership interest, such corporation or
partnership meets the active business requirements of
subsection (c). A rule similar to the rule of section
1202(c)(2)(B) shall apply for purposes of this section.
``(4) Qualified small business entity.--
``(A) In general.--The term `qualified small business
entity' means any domestic corporation or partnership if--
``(i) such entity (and any predecessor thereof) had
aggregate gross assets (as defined in section 1202(d)(2)) of
less than $25,000,000 at all times before the issuance of the
interest described in paragraph (2), and
``(ii) the aggregate gross assets (as so defined) of the
entity immediately after the issuance (determined by taking
into account amounts received in the issuance) are less than
$25,000,000.
``(B) Aggregation rules.--Rules similar to the rules of
section 1202(d)(3) shall apply for purposes of this
paragraph.
``(c) Active Business Requirement.--
``(1) In general.--For purposes of subsection (b)(3), the
requirements of this subsection are met by a qualified small
business entity for any period if--
``(A) the entity is engaged in the active conduct of a
trade or business, and
``(B) at least 80 percent (by value) of the assets of such
entity are used in the active conduct of a qualified trade or
business (within the meaning of section 1202(e)(3)).
Such requirements shall not be treated as met for any period
if during such period the entity is described in subparagraph
(A), (B), (C), or (D) of section 1202(e)(4).
``(2) Special rule for certain activities.--For purposes of
paragraph (1), if, in connection with any future trade or
business, an entity is engaged in--
``(A) startup activities described in section 195(c)(1)(A),
``(B) activities resulting in the payment or incurring of
expenditures which may be treated as research and
experimental expenditures under section 174, or
``(C) activities with respect to in-house research expenses
described in section 41(b)(4),
such entity shall be treated with respect to such activities
as engaged in (and assets used in such activities shall be
treated as used in) the active conduct of a trade or
business. Any determination under this paragraph shall be
made without regard to whether the
[[Page S6522]]
entity has any gross income from such activities at the time
of the determination.
``(3) Certain rules to apply.--Rules similar to the rules
of paragraphs (5), (6), (7), and (8) of section 1202(e) shall
apply for purposes of this subsection.
``(d) Certain Other Rules To Apply.--Rules similar to the
rules of subsections (f), (g), (h), and (j) of section 1202
shall apply for purposes of this section, except that a 6-
month holding period shall be substituted for a 5-year
holding period where applicable.
``(e) Basis Adjustments.--If gain from any sale is not
recognized by reason of subsection (a), such gain shall be
applied to reduce (in the order acquired) the basis for
determining gain or loss of any eligible small business
investment which is purchased by the taxpayer during the 6-
month period described in subsection (a).
``(f) Statute of Limitations.--If any gain is realized by
the taxpayer on the sale or exchange of any eligible small
business investment and there is in effect an election under
subsection (a) with respect to such gain, then--
``(1) the statutory period for the assessment of any
deficiency with respect to such gain shall not expire before
the expiration of 3 years from the date the Secretary is
notified by the taxpayer (in such manner as the Secretary may
by regulations prescribe) of--
``(A) the taxpayer's cost of purchasing other eligible
small business investments which the taxpayer claims results
in nonrecognition of any part of such gain,
``(B) the taxpayer's intention not to purchase other
eligible small business investments within the 6-month period
described in subsection (a), or
``(C) a failure to make such purchase within such 6-month
period, and
``(2) such deficiency may be assessed before the expiration
of such 3-year period notwithstanding the provisions of any
other law or rule of law which would otherwise prevent such
assessment.
``(g) Regulations.--The Secretary shall prescribe such
regulations as may be appropriate to carry out the purposes
of this section, including regulations to prevent the
avoidance of the purposes of this section through splitups,
shell corporations, partnerships, or otherwise and
regulations to modify the application of section 1202 to the
extent necessary to apply such section to a partnership
rather than a corporation.''
(b) Conforming Amendment.--Paragraph (23) of section
1016(a) is amended--
(1) by striking ``or 1044'' and inserting ``, 1044, or
1045'', and
(2) by striking ``or 1044(d)'' and inserting ``, 1044(d),
or 1045(e)''.
(c) Clerical Amendment.--The table of sections for part III
of subchapter O of chapter 1 is amended by adding at the end
the following new item:
``Sec. 1045. Rollover of gain on small business investments.''
(d) Effective Date.--The amendments made by this section
shall apply to taxable years ending after December 31, 1996.
SEC. 312. MODIFICATIONS TO EXCLUSION OF GAIN ON CERTAIN SMALL
BUSINESS STOCK.
(a) Exclusion Available to Corporations.--
(1) In general.--Subsection (a) of section 1203, as
redesignated by section 301(a), is amended by striking
``other than a corporation''.
(2) Technical amendment.--Subsection (c) of section 1203,
as so redesignated, is amended by adding at the end the
following new paragraph:
``(4) Stock held among members of controlled group not
eligible.--Stock shall not be treated as qualified small
business stock if such stock was at any time held by any
member of the parent-subsidiary controlled group (as defined
in subsection (d)(3)) which includes the qualified small
business.''
(b) Repeal of Minimum Tax Preference.--
(1) In general.--Section 57(a) is amended by striking
paragraph (7).
(2) Technical amendment.--Section 53(d)(1)(B)(ii)(II) is
amended by striking ``, (5), and (7)'' and inserting ``and
(5)''.
(c) Size of Businesses Eligible for Exclusion.--
(1) Section 1203(d)(1), as so redesignated, is amended to
read as follows:
``(1) In general.--The term `qualified small business'
means any domestic corporation which is a C corporation--
``(A) if--
``(i) the aggregate gross assets of such corporation (or
any predecessor thereof) at all times on or after the date of
the enactment of the Revenue Reconciliation Act of 1997 and
before the issuance did not exceed $100,000,000, and
``(ii) the aggregate gross assets of such corporation
immediately after the issuance (determined by taking into
account amounts received in the issuance) do not exceed
$100,000,000, and
``(B) such corporation agrees to submit such reports to the
Secretary and to shareholders as the Secretary may require to
carry out the purposes of this section.''
(2) Section 1203(d), as so redesignated, is amended by
adding at the end the following new paragraph:
``(4) Inflation adjustment.--
``(A) In general.--In the case of stock issued in any
calendar year after 1998, each dollar amount referred to in
subsection (d)(1)(A) shall be increased by an amount equal
to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `calendar year 1997'
for `calendar year 1992' in subparagraph (B) thereof.
``(B) Rounding.--If any amount contained in subsection
(d)(1)(A)(i) as adjusted under subparagraph (A) is not a
multiple of $1,000,000, such amount shall be rounded to the
next lower multiple of $1,000,000.''
(3) Section 1203(e)(3), as so redesignated, is amended by
striking subparagraph (C) and redesignating subparagraphs (D)
and (E) as subparagraphs (C) and (D), respectively.
(d) Per-Issuer Limitation.--Section 1203(b)(1)(A), as so
redesignated, is amended by striking ``$10,000,000'' and
inserting ``$20,000,000''.
(e) Other Modifications.--
(1) Working capital limitation.--Section 1203(e)(6), as so
redesignated, is amended by striking ``2 years'' each place
it appears and inserting ``5 years''.
(2) Redemption rules.--Section 1203(c)(3), as so
redesignated, is amended by adding at the end the following
new subparagraph:
``(D) Waiver where business purpose.--A purchase of stock
by the issuing corporation shall be disregarded for purposes
of subparagraph (B) if the issuing corporation establishes
that there was a business purpose for such purchase and one
of the principal purposes of the purchase was not to avoid
the limitation of this section.''
(f) Effective Dates.--
(1) In general.--The amendments made by this section shall
apply to stock issued after the date of the enactment of this
Act.
(2) Special rule.--The amendments made by subsection (b),
(d), and (e) shall apply to stock issued after August 10,
1993.
SEC. 313. EXPANSION OF SMALL BUSINESS STOCK EXCLUSION TO
FAMILY-OWNED BUSINESSES.
(a) In General.--Section 1203(a), as redesignated by
section 301(a) and amended by section 312, is amended to read
as follows:
``(a) 50-Percent Exclusion.--Gross income shall not include
50 percent of any gain from the sale or exchange of--
``(1) qualified small business stock held for more than 5
years, and
``(2) any qualified family-owned business interest held for
more than 5 years.''
(b) Qualified Family-Owned Business Interest.--Section
1203, as so redesignated, is amended by redesignating
subsection (k) as subsection (l) and by inserting after
subsection (j) the following new subsection:
``(k) Qualified Family-Owned Business Interest.--For
purposes of this section--
``(1) In general.--The term `qualified family-owned
business interest' means any interest--
``(A) which consists of--
``(i) stock in an S corporation,
``(ii) an interest in a partnership or other pass-through
entity, or
``(iii) an interest as a sole proprietor in a trade or
business,
which, as of the time the interest was acquired, constitutes
a qualified family-owned business,
``(B) which was acquired after the date of the enactment of
this subsection (and in the case of stock, which was
originally issued after such date)--
``(i) in exchange for money or other property (not
including such an interest), or
``(ii) as compensation for services provided to the entity.
``(2) Active business requirement.--An interest shall not
qualify under paragraph (1) unless, during substantially all
of the taxpayer's holding period for such interest, the
qualified family-owned business meets the active business
requirements of subsection (e) (without regard to paragraph
(3)(C) thereof).
``(3) Qualified family-owned business.--
``(A) In general.--The term `qualified family-owned
business' means a trade or business which--
``(i) is described in section 2033A(e) (determined by
substituting `taxpayer' for `decedent' each place it
appears), and
``(ii) except as provided in subparagraph (B), meets the
aggregate gross assets tests described in subsection (d)(1).
``(B) Special rule for farms.--In the case of a trade or
business of farming (within the meaning of section 2032A)--
``(i) subparagraph (A)(ii) shall not apply, and
``(ii) such trade or business shall not be treated as a
qualified family-owned business unless the average gross
receipts of the trade or business (or any predecessor) for
the 3 taxable years preceding the taxable year in which the
interest is acquired did not exceed $2,000,000.
``(4) Special rules.--For purposes of this subsection.--
``(A) Aggregation.--In applying the $2,000,000 limit under
paragraph (3) all persons treated as 1 person under section
52 (a) or (b) shall be treated as 1 person and all trades or
businesses of such person shall be treated as 1 trade or
business.
``(B) Indexing.--The $2,000,000 amount under paragraph (3)
shall be indexed at the same time and manner as under
subsection (d)(4), except that subparagraph (B) thereof shall
be applied by substituting `$50,000' for `$1,000,000'.''
(c) Effective Date.--The amendments made by this section
shall apply to interests acquired after the date of enactment
of this Act, in taxable years ending after such date.
[[Page S6523]]
TITLE IV--ESTATE TAX RELIEF FOR FAMILY BUSINESSES AND FARMS
SEC. 401. FAMILY-OWNED BUSINESS EXCLUSION.
(a) In General.--Part III of subchapter A of chapter 11
(relating to gross estate) is amended by inserting after
section 2033 the following new section:
``SEC. 2033A. FAMILY-OWNED BUSINESS EXCLUSION.
``(a) In General.--In the case of an estate of a decedent
to which this section applies, the value of the gross estate
shall not include the lesser of--
``(1) the adjusted value of the qualified family-owned
business interests of the decedent otherwise includible in
the estate, or
``(2) $900,000, reduced by the amount of any exclusion
allowed under this section with respect to the estate of a
previously deceased spouse of the decedent.
``(b) Estates to Which Section Applies.--
``(1) In general.--This section shall apply to an estate
if--
``(A) the decedent was (at the date of the decedent's
death) a citizen or resident of the United States,
``(B) the sum of--
``(i) the adjusted value of the qualified family-owned
business interests described in paragraph (2), plus
``(ii) the amount of the gifts of such interests determined
under paragraph (3),
exceeds 50 percent of the adjusted gross estate, and
``(C) during the 8-year period ending on the date of the
decedent's death there have been periods aggregating 5 years
or more during which--
``(i) such interests were owned by the decedent or a member
of the decedent's family, and
``(ii) there was material participation (within the meaning
of section 2032A(e)(6)) by the decedent or a member of the
decedent's family in the operation of the business to which
such interests relate.
``(2) Includible qualified family-owned business
interests.--The qualified family-owned business interests
described in this paragraph are the interests which--
``(A) are included in determining the value of the gross
estate (without regard to this section), and
``(B) are acquired by any qualified heir from, or passed to
any qualified heir from, the decedent (within the meaning of
section 2032A(e)(9)).
``(3) Includible gifts of interests.--The amount of the
gifts of qualified family-owned business interests determined
under this paragraph is the excess of--
``(A) the sum of--
``(i) the amount of such gifts from the decedent to members
of the decedent's family taken into account under subsection
2001(b)(1)(B), plus
``(ii) the amount of such gifts otherwise excluded under
section 2503(b),
to the extent such interests are continuously held by members
of such family (other than the decedent's spouse) between the
date of the gift and the date of the decedent's death, over
``(B) the amount of such gifts from the decedent to members
of the decedent's family otherwise included in the gross
estate.
``(c) Adjusted Gross Estate.--For purposes of this section,
the term `adjusted gross estate' means the value of the gross
estate (determined without regard to this section)--
``(1) reduced by any amount deductible under paragraph (3)
or (4) of section 2053(a), and
``(2) increased by the excess of--
``(A) the sum of--
``(i) the amount of gifts determined under subsection
(b)(3), plus
``(ii) the amount (if more than de minimis) of other
transfers from the decedent to the decedent's spouse (at the
time of the transfer) within 10 years of the date of the
decedent's death, plus
``(iii) the amount of other gifts (not included under
clause (i) or (ii)) from the decedent within 3 years of such
date, other than gifts to members of the decedent's family
otherwise excluded under section 2503(b), over
``(B) the sum of the amounts described in clauses (i),
(ii), and (iii) of subparagraph (A) which are otherwise
includible in the gross estate.
For purposes of the preceding sentence, the Secretary may
provide that de minimis gifts to persons other than members
of the decedent's family shall not be taken into account.
``(d) Adjusted Value of the Qualified Family-Owned Business
Interests.--For purposes of this section, the adjusted value
of any qualified family-owned business interest is the value
of such interest for purposes of this chapter (determined
without regard to this section), reduced by the excess of--
``(1) any amount deductible under paragraph (3) or (4) of
section 2053(a), over
``(2) the sum of--
``(A) any indebtedness on any qualified residence of the
decedent the interest on which is deductible under section
163(h)(3), plus
``(B) any indebtedness to the extent the taxpayer
establishes that the proceeds of such indebtedness were used
for the payment of educational and medical expenses of the
decedent, the decedent's spouse, or the decedent's dependents
(within the meaning of section 152), plus
``(C) any indebtedness not described in clause (i) or (ii),
to the extent such indebtedness does not exceed $10,000.
``(e) Qualified Family-Owned Business Interest.--
``(1) In general.--For purposes of this section, the term
`qualified family-owned business interest' means--
``(A) an interest as a proprietor in a trade or business
carried on as a proprietorship, or
``(B) an interest in an entity carrying on a trade or
business, if--
``(i) at least--
``(I) 50 percent of such entity is owned (directly or
indirectly) by the decedent and members of the decedent's
family,
``(II) 70 percent of such entity is so owned by members of
2 families, or
``(III) 90 percent of such entity is so owned by members of
3 families, and
``(ii) for purposes of subclause (II) or (III) of clause
(i), at least 30 percent of such entity is so owned by the
decedent and members of the decedent's family.
``(2) Limitation.--Such term shall not include--
``(A) any interest in a trade or business the principal
place of business of which is not located in the United
States,
``(B) any interest in an entity, if the stock or debt of
such entity or a controlled group (as defined in section
267(f)(1)) of which such entity was a member was readily
tradable on an established securities market or secondary
market (as defined by the Secretary) at any time within 3
years of the date of the decedent's death,
``(C) any interest in a trade or business not described in
section 542(c)(2), if more than 35 percent of the adjusted
ordinary gross income of such trade or business for the
taxable year which includes the date of the decedent's death
would qualify as personal holding company income (as defined
in section 543(a)),
``(D) that portion of an interest in a trade or business
that is attributable to--
``(i) cash or marketable securities, or both, in excess of
the reasonably expected day-to-day working capital needs of
such trade or business, and
``(ii) any other assets of the trade or business (other
than assets used in the active conduct of a trade or business
described in section 542(c)(2)), the income of which is
described in section 543(a) or in subparagraph (B), (C), (D),
or (E) of section 954(c)(1) (determined by substituting
`trade or business' for `controlled foreign corporation').
``(3) Rules regarding ownership.--
``(A) Ownership of entities.--For purposes of paragraph
(1)(B)--
``(i) Corporations.--Ownership of a corporation shall be
determined by the holding of stock possessing the appropriate
percentage of the total combined voting power of all classes
of stock entitled to vote and the appropriate percentage of
the total value of shares of all classes of stock.
``(ii) Partnerships.--Ownership of a partnership shall be
determined by the owning of the appropriate percentage of the
capital interest in such partnership.
``(B) Ownership of tiered entities.--For purposes of this
section, if by reason of holding an interest in a trade or
business, a decedent, any member of the decedent's family,
any qualified heir, or any member of any qualified heir's
family is treated as holding an interest in any other trade
or business--
``(i) such ownership interest in the other trade or
business shall be disregarded in determining if the ownership
interest in the first trade or business is a qualified
family-owned business interest, and
``(ii) this section shall be applied separately in
determining if such interest in any other trade or business
is a qualified family-owned business interest.
``(C) Individual ownership rules.--For purposes of this
section, an interest owned, directly or indirectly, by or for
an entity described in paragraph (1)(B) shall be considered
as being owned proportionately by or for the entity's
shareholders, partners, or beneficiaries. A person shall be
treated as a beneficiary of any trust only if such person has
a present interest in such trust.
``(f) Tax Treatment of Failure To Materially Participate in
Business or Dispositions of Interests.--
``(1) In general.--There is imposed an additional estate
tax if, within 10 years after the date of the decedent's
death and before the date of the qualified heir's death--
``(A) the material participation requirements described in
section 2032A(c)(6)(B) are not met with respect to the
qualified family-owned business interest which was acquired
(or passed) from the decedent,
``(B) the qualified heir disposes of any portion of a
qualified family-owned business interest (other than by a
disposition to a member of the qualified heir's family or
through a qualified conservation contribution under section
170(h)),
``(C) the qualified heir loses United States citizenship
(within the meaning of section 877) or with respect to whom
an event described in subparagraph (A) or (B) of section
877(e)(1) occurs, and such heir does not comply with the
requirements of subsection (g), or
``(D) the principal place of business of a trade or
business of the qualified family-owned business interest
ceases to be located in the United States.
``(2) Additional estate tax.--
``(A) In general.--The amount of the additional estate tax
imposed by paragraph (1) shall be equal to--
``(i) the applicable percentage of the adjusted tax
difference attributable to the
[[Page S6524]]
qualified family-owned business interest (as determined under
rules similar to the rules of section 2032A(c)(2)(B)), plus
``(ii) interest on the amount determined under clause (i)
at the underpayment rate established under section 6621 for
the period beginning on the date the estate tax liability was
due under this chapter and ending on the date such additional
estate tax is due.
``(B) Applicable percentage.--For purposes of this
paragraph, the applicable percentage shall be determined
under the following table:
``If the event described in
paragraph (1) occurs in
the folThe applicable
material percentage is:
1 through 6..................................................100 ....
7.............................................................80 ....
8.............................................................60 ....
9.............................................................40 ....
10............................................................20.....
``(g) Security Requirements for Noncitizen Qualified
Heirs.--
``(1) In general.--Except upon the application of
subparagraph (F) or (M) of subsection (h)(3), if a qualified
heir is not a citizen of the United States, any interest
under this section passing to or acquired by such heir
(including any interest held by such heir at a time described
in subsection (f)(1)(C)) shall be treated as a qualified
family-owned business interest only if the interest passes or
is acquired (or is held) in a qualified trust.
``(2) Qualified trust.--The term `qualified trust' means a
trust--
``(A) which is organized under, and governed by, the laws
of the United States or a State, and
``(B) except as otherwise provided in regulations, with
respect to which the trust instrument requires that at least
1 trustee of the trust be an individual citizen of the United
States or a domestic corporation.
``(h) Other Definitions and Applicable Rules.--For purposes
of this section--
``(1) Qualified heir.--The term `qualified heir'--
``(A) has the meaning given to such term by section
2032A(e)(1), and
``(B) includes any active employee of the trade or business
to which the qualified family-owned business interest relates
if such employee has been employed by such trade or business
for a period of at least 10 years before the date of the
decedent's death.
``(2) Member of the family.--The term `member of the
family' has the meaning given to such term by section
2032A(e)(2).
``(3) Applicable rules.--Rules similar to the following
rules shall apply:
``(A) Section 2032A(b)(4) (relating to decedents who are
retired or disabled).
``(B) Section 2032A(b)(5) (relating to special rules for
surviving spouses).
``(C) Section 2032A(c)(2)(D) (relating to partial
dispositions).
``(D) Section 2032A(c)(3) (relating to only 1 additional
tax imposed with respect to any 1 portion).
``(E) Section 2032A(c)(4) (relating to due date).
``(F) Section 2032A(c)(5) (relating to liability for tax;
furnishing of bond).
``(G) Section 2032A(c)(7) (relating to no tax if use begins
within 2 years; active management by eligible qualified heir
treated as material participation).
``(H) Section 2032A(e)(10) (relating to community
property).
``(I) Section 2032A(e)(14) (relating to treatment of
replacement property acquired in section 1031 or 1033
transactions).
``(J) Section 2032A(f) (relating to statute of
limitations).
``(K) Section 6166(b)(3) (relating to farmhouses and
certain other structures taken into account).
``(L) Subparagraphs (B), (C), and (D) of section 6166(g)(1)
(relating to acceleration of payment).
``(M) Section 6324B (relating to special lien for
additional estate tax).''
(b) Clerical Amendment.--The table of sections for part III
of subchapter A of chapter 11 is amended by inserting after
the item relating to section 2033 the following new item:
``Sec. 2033A. Family-owned business exclusion.''
(c) Effective Date.--The amendments made by this section
shall apply to estates of decedents dying after December 31,
1996.
SEC. 402. PORTION OF ESTATE TAX SUBJECT TO 4-PERCENT INTEREST
RATE INCREASED TO $2,500,000.
(a) In General.--Subparagraph (B) of section 6601(j)(2)
(defining 4-percent portion) is amended by striking
``$345,800'' and inserting ``$1,025,800''.
(b) Effective Date.--The amendment made by this section
shall apply to estates of decedents dying after December 31,
1996.
SEC. 403. CERTAIN CASH RENTALS OF FARMLAND NOT TO CAUSE
RECAPTURE OF SPECIAL ESTATE TAX VALUATION.
(a) In General.--Subsection (c) of section 2032A (relating
to tax treatment of dispositions and failures to use for
qualified use) is amended by adding at the end the following
new paragraph:
``(8) Certain cash rental not to cause recapture.--For
purposes of this subsection, a qualified heir shall not be
treated as failing to use property in a qualified use solely
because such heir rents such property on a net cash basis to
a member of the decedent's family, but only if, during the
period of the lease, such member of the decedent's family
uses such property in a qualified use.''
(b) Effective Date.--The amendment made by subsection (a)
shall apply with respect to rentals occurring after December
31, 1976.
TITLE V--EXTENSIONS
SEC. 501. RESEARCH TAX CREDIT.
(a) In General.--Paragraph (1) of section 41(h) (relating
to termination) is amended--
(1) by striking ``May 31, 1997'' and inserting ``December
31, 1998'', and
(2) by striking in the last sentence ``during the first 11
months of such taxable year.'' and inserting ``during the 30-
month period beginning with the first month of such year. The
30 months referred to in the preceding sentence shall be
reduced by the number of full months after June 1996 (and
before the first month of such first taxable year) during
which the taxpayer paid or incurred any amount which is taken
into account in determining the credit under this section.''
(b) Technical Amendments.--
(1) Subparagraph (B) of section 41(c)(4) is amended to read
as follows:
``(B) Election.--An election under this paragraph shall
apply to the taxable year for which made and all succeeding
taxable years unless revoked with the consent of the
Secretary.''
(2) Paragraph (1) of section 45C(b) is amended by striking
``May 31, 1997'' and inserting ``December 31, 1998''.
(c) Effective Date.--The amendments made by this section
shall apply to amounts paid or incurred after May 31, 1997.
SEC. 502. CONTRIBUTIONS OF STOCK TO PRIVATE FOUNDATIONS.
(a) In General.--Clause (ii) of section 170(e)(5)(D)
(relating to termination) is amended by striking ``May 31,
1997'' and inserting ``December 31, 1998''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to contributions made after May 31, 1997.
SEC. 503. WORK OPPORTUNITY TAX CREDIT.
(a) Extension.--Subparagraph (B) of section 51(c)(4)
(relating to termination) is amended by striking ``September
30, 1997'' and inserting ``September 30, 1998''.
(b) Modification of Eligibility Requirement Based on Period
on Welfare.--
(1) In general.--Subparagraph (A) of section 51(d)(2)
(defining qualified IV-A recipient) is amended by striking
all that follows ``a IV-A program'' and inserting ``for any 9
months during the 18-month period ending on the hiring
date.''
(2) Conforming amendment.--Subparagraph (A) of section
51(d)(3) is amended to read as follows:
``(A) In general.--The term `qualified veteran' means any
veteran who is certified by the designated local agency as
being a member of a family receiving assistance under a food
stamp program under the Food Stamp Act of 1977 for at least a
3-month period ending during the 12-month period ending on
the hiring date.''
(c) Qualified SSI Recipients Treated as Members of Targeted
Groups.--
(1) In general.--Section 51(d)(1) (relating to members of
targeted groups) is amended by striking ``or'' at the end of
subparagraph (F), by striking the period at the end of
subparagraph (G) and inserting ``, or'', and by adding at the
end the following new subparagraph:
``(H) a qualified SSI recipient.''
(2) Qualified ssi recipients.--Section 51(d) is amended by
redesignating paragraphs (9), (10), and (11) as paragraphs
(10), (11), and (12), respectively, and by inserting after
paragraph (8) the following new paragraph:
``(9) Qualified ssi recipient.--The term `qualified SSI
recipient' means any individual who is certified by the
designated local agency as receiving supplemental security
income benefits under title XVI of the Social Security Act
(including supplemental security income benefits of the type
described in section 1616 of such Act or section 212 of
Public Law 93-66) for any month ending within the 60-day
period ending on the hiring date.''
(d) Percentage of Wages Allowed as Credit.--
(1) In general.--Subsection (a) of section 51 (relating to
determination of amount) is amended by striking ``35
percent'' and inserting ``40 percent''.
(2) Application of credit for individuals performing fewer
than 400 hours of services.--Paragraph (3) of section 51(i)
is amended to read as follows:
``(3) Individuals not meeting minimum employment periods.--
``(A) Reduction of credit for individuals performing fewer
than 400 hours of services.--In the case of an individual who
has completed at least 120 hours, but less than 400 hours, of
services performed for the employer, subsection (a) shall be
applied by substituting `25 percent' for `40 percent'.
``(B) Denial of credit for individuals performing fewer
than 120 hours of services.--No wages shall be taken into
account under subsection (a) with respect to any individual
unless such individual has completed at least 120 hours of
services performed for the employer.''
(e) Effective date.--The amendments made by this section
shall apply to individuals who begin work for the employer
after September 30, 1997.
SEC. 504. ORPHAN DRUG TAX CREDIT.
(a) In General.--Section 45C (relating to clinical testing
expenses for certain drugs for rare diseases or conditions)
is amended by striking subsection (e).
(b) Effective Date.--The amendment made by subsection (a)
shall apply to amounts paid or incurred after May 31, 1997.
[[Page S6525]]
TITLE VI--INCENTIVES FOR REVITALIZATION OF THE DISTRICT OF COLUMBIA
SEC. 601. TAX INCENTIVES FOR REVITALIZATION OF THE DISTRICT
OF COLUMBIA.
(a) In General.--Chapter 1 is amended by adding at the end
the following new subchapter:
``Subchapter W--Incentives for the Revitalization of the District of
Columbia
``Sec. 1400. First-time homebuyer credit for District of Columbia.
``Sec. 1400A. Credit for equity investments in and loans to District of
Columbia businesses.
``Sec. 1400B. Zero percent capital gains rate.
``SEC. 1400. FIRST-TIME HOMEBUYER CREDIT FOR DISTRICT OF
COLUMBIA.
``(a) Allowance of Credit.--In the case of an individual
who is a first-time homebuyer of a principal residence in the
District of Columbia during any taxable year, there shall be
allowed as a credit against the tax imposed by this chapter
for the taxable year an amount equal to so much of the
purchase price of the residence as does not exceed $5,000.
``(b) First-Time Homebuyer.--For purposes of this section--
``(1) In general.--The term `first-time homebuyer' has the
same meaning as when used in section 72(t)(8)(D)(i), except
that `principal residence in the District of Columbia during
the 1-year period' shall be substituted for `principal
residence during the 2-year period' in subclause (I) thereof.
``(2) One-time only.--If an individual is treated as a
first-time homebuyer with respect to any principal residence,
such individual may not be treated as a first-time homebuyer
with respect to any other principal residence.
``(3) Principal residence.--The term `principal residence'
has the same meaning as when used in section 121.
``(4) Date of acquisition.--The term `date of acquisition'
has the same meaning as when used in section 72t(8)(D)(iii).
``(c) Carryover of Credit.--If the credit allowable under
subsection (a) exceeds the limitation imposed by section
26(a) for such taxable year reduced by the sum of the credits
allowable under subpart A of part IV of subchapter A (other
than this section and section 25), such excess shall be
carried to the succeeding taxable year and added to the
credit allowable under subsection (a) for such taxable year.
``(d) Special Rules.--For purposes of this section--
``(1) Allocation of dollar limitation.--
``(A) Married individuals filing jointly.--In the case of a
husband and wife who file a joint return, the $5,000
limitation under subsection (a) shall apply to the joint
return.
``(B) Married individuals filing separately.--In the case
of a married individual filing a separate return, subsection
(a) shall be applied by substituting `$2,500' for `$5,000'.
``(C) Other taxpayers.--If 2 or more individuals who are
not married purchase a principal residence, the amount of the
credit allowed under subsection (a) shall be allocated among
such individuals in such manner as the Secretary may
prescribe, except that the total amount of the credits
allowed to all such individuals shall not exceed $5,000.
``(2) Purchase.--The term `purchase' means any acquisition,
but only if--
``(A) the property is not acquired from a person whose
relationship to the person acquiring it would result in the
disallowance of losses under section 267 or 707(b) (but, in
applying section 267 (b) and (c) for purposes of this
section, paragraph (4) of section 267(c) shall be treated as
providing that the family of an individual shall include only
his spouse, ancestors, and lineal descendants), and
``(B) the basis of the property in the hands of the person
acquiring it is not determined--
``(i) in whole or in part by reference to the adjusted
basis of such property in the hands of the person from whom
acquired, or
``(ii) under section 1014(a) (relating to property acquired
from a decedent).
``(3) Purchase price.--The term `purchase price' means the
adjusted basis of the principal residence on the date of
acquisition.
``(d) Reporting.--If the Secretary requires information
reporting under section 6045 to verify the eligibility of
taxpayers for the credit allowable by this section, the
exception provided by section 6045(e)(5) shall not apply.
``(e) Credit Treated as Nonrefundable Personal Credit.--For
purposes of this title, the credit allowed by this section
shall be treated as a credit allowable under subpart A of
part IV of subchapter A of this chapter.
``SEC. 1400A. CREDIT FOR EQUITY INVESTMENTS IN AND LOANS TO
DISTRICT OF COLUMBIA BUSINESSES.
``(a) General Rule.--For purposes of section 38, the DC
investment credit determined under this section for any
taxable year is--
``(1) the qualified lender credit for such year, and
``(2) the qualified equity investment credit for such year.
``(b) Qualified Lender Credit.--For purposes of this
section--
``(1) In general.--The qualified lender credit for any
taxable year is the amount of credit specified for such year
by the Economic Development Corporation with respect to
qualified District loans made by the taxpayer.
``(2) Limitation.--In no event may the qualified lender
credit with respect to any loan exceed 25 percent of the cost
of the property purchased with the proceeds of the loan.
``(3) Qualified district loan.--For purposes of paragraph
(1), the term `qualified district loan' means any loan for
the purchase (as defined in section 179(d)(2)) of property to
which section 168 applies (or would apply but for section
179) (or land which is functionally related and subordinate
to such property) and substantially all of the use of which
is in the District of Columbia and is in the active conduct
of a trade or business in the District of Columbia. A rule
similar to the rule of section 1397C(a)(2) shall apply for
purposes of the preceding sentence.
``(c) Qualified Equity Investment Credit.--
``(1) In general.--For purposes of this section, the
qualified equity investment credit determined under this
section for any taxable year is an amount equal to the
percentage specified by the Economic Development Corporation
(but not greater than 25 percent) of the aggregate amount
paid in cash by the taxpayer during the taxable year for the
purchase of District business investments.
``(2) District business investment.--For purposes of this
subsection, the term `District business investment' means--
``(A) any District business stock, and
``(B) any District partnership interest.
``(3) District business stock.--For purposes of this
subsection--
``(A) In general.--Except as provided in subparagraph (B),
the term `District business stock' means any stock in a
domestic corporation if--
``(i) such stock is acquired by the taxpayer at its
original issue (directly or through an underwriter) solely in
exchange for cash, and
``(ii) as of the time such stock was issued, such
corporation was engaged in a trade or business in the
District of Columbia (or, in the case of a new corporation,
such corporation was being organized for purposes of engaging
in such a trade or business).
``(B) Redemptions.--A rule similar to the rule of section
1202(c)(3) shall apply for purposes of this paragraph.
``(4) Qualified district partnership interest.--For
purposes of this subsection, the term `qualified District
partnership interest' means any interest in a partnership
if--
``(A) such interest is acquired by the taxpayer from the
partnership solely in exchange for cash, and
``(B) as of the time such interest was acquired, such
partnership was engaging in a trade or business in the
District of Columbia (or, in the case of a new partnership,
such partnership was being organized for purposes of engaging
in such a trade or business).
A rule similar to the rule of paragraph (3)(B) shall apply
for purposes of this paragraph.
``(5) Recapture of credit upon certain dispositions of
district business investments.--
``(A) In general.--If a taxpayer disposes of any District
business investment (or any other property the basis of which
is determined in whole or in part by reference to the
adjusted basis of such investment) before the end of the 5-
year period beginning on the date such investment was
acquired by the taxpayer, the taxpayer's tax imposed by this
chapter for the taxable year in which such distribution
occurs shall be increased by the aggregate decrease in the
credits allowed under section 38 for all prior taxable years
which would have resulted solely from reducing to zero any
credit determined under this section with respect to such
investment.
``(B) Exceptions.--Subparagraph (A) shall not apply to any
gift, transfer, or transaction described in paragraph (1),
(2), or (3) of section 1245(b).
``(C) Special rule.--Any increase in tax under subparagraph
(A) shall not be treated as a tax imposed by this chapter for
purposes of--
``(i) determining the amount of any credit allowable under
this chapter, and
``(ii) determining the amount of the tax imposed by section
55.
``(6) Basis reduction.--For purposes of this title, the
basis of any District business investment shall be reduced by
the amount of the credit determined under this section with
respect to such investment.
``(d) Limitation on Amount of Credit.--
``(1) In general.--The amount of the DC investment credit
determined under this section with respect to any taxpayer
for any taxable year shall not exceed the credit amount
allocated to such taxpayer for such taxable year by the
Economic Development Corporation.
``(2) Overall limitation.--The aggregate credit amount
which may be allocated by the Economic Development
Corporation under this section shall not exceed $75,000,000.
``(3) Criteria for allocating credit amounts.--The
allocation of credit amounts under this section shall be made
in accordance with criteria established by the Economic
Development Corporation. In establishing such criteria, such
Corporation shall take into account--
``(A) the degree to which the business receiving the loan
or investment will provide job opportunities for low and
moderate income residents of a targeted area, and
``(B) whether such business is within a targeted area.
``(4) Targeted area.--For purposes of paragraph (3), the
term `targeted area' means--
[[Page S6526]]
``(A) any census tract located in the District of Columbia
which is part of an enterprise community designated under
subchapter U before the date of the enactment of this
subchapter, and
``(B) any other census tract which is located in the
District of Columbia and which has a poverty rate of not less
than 35 percent.
``(e) Economic Development Corporation.--For purposes of
this section, the term `Economic Development Corporation'
means an entity which is created by Federal law in 1997 as
part of the District of Columbia government.
``(f) Regulations.--The Secretary shall prescribe such
regulations as may be appropriate to carry out this section.
``(g) Application of Section.--This section shall apply to
any credit amount allocated for taxable years beginning after
December 31, 1997, and before January 1, 2003.
``SEC. 1400B. ZERO PERCENT CAPITAL GAINS RATE.
``(a) Exclusion.--Gross income shall not include
qualified capital gain from the sale or exchange of any DC
asset held for more than 5 years.
``(b) DC Asset.--For purposes of this section--
``(1) In general.--The term `DC asset' means--
``(A) any DC business stock,
``(B) any DC partnership interest, and
``(C) any DC business property.
``(2) DC business stock.--
``(A) In general.--The term `DC business stock' means any
stock in a domestic corporation which is originally issued
after December 31, 1997, if--
``(i) such stock is acquired by the taxpayer, before
January 1, 2003, at its original issue (directly or through
an underwriter) solely in exchange for cash,
``(ii) as of the time such stock was issued, such
corporation was a DC business (or, in the case of a new
corporation, such corporation was being organized for
purposes of being a DC business), and
``(iii) during substantially all of the taxpayer's holding
period for such stock, such corporation qualified as a DC
business.
``(B) Redemptions.--A rule similar to the rule of section
1202(c)(3) shall apply for purposes of this paragraph.
``(3) DC partnership interest.--The term `DC partnership
interest' means any capital or profits interest in a domestic
partnership which is originally issued after December 31,
1997, if--
``(A) such interest is acquired by the taxpayer, before
January 1, 2003, from the partnership solely in exchange for
cash,
``(B) as of the time such interest was acquired, such
partnership was a DC business (or, in the case of a new
partnership, such partnership was being organized for
purposes of being a DC business), and
``(C) during substantially all of the taxpayer's holding
period for such interest, such partnership qualified as a DC
business.
A rule similar to the rule of paragraph (2)(B) shall apply
for purposes of this paragraph.
``(4) DC business property.--
``(A) In general.--The term `DC business property' means
tangible property if--
``(i) such property was acquired by the taxpayer by
purchase (as defined in section 179(d)(2)) after December 31,
1997, and before January 1, 2003,
``(ii) the original use of such property in the District of
Columbia commences with the taxpayer, and
``(iii) during substantially all of the taxpayer's holding
period for such property, substantially all of the use of
such property was in a DC business of the taxpayer.
``(B) Special rule for buildings which are substantially
improved.--
``(i) In general.--The requirements of clauses (i) and (ii)
of subparagraph (A) shall be treated as met with respect to--
``(I) property which is substantially improved by the
taxpayer before January 1, 2003, and
``(II) any land on which such property is located.
``(ii) Substantial improvement.--For purposes of clause
(i), property shall be treated as substantially improved by
the taxpayer only if, during any 24-month period beginning
after December 31, 1997, additions to basis with respect to
such property in the hands of the taxpayer exceed the greater
of--
``(I) an amount equal to the adjusted basis of such
property at the beginning of such 24-month period in the
hands of the taxpayer, or
``(II) $5,000.
``(6) Treatment of subsequent purchasers, etc.--The term
`DC asset' includes any property which would be a DC asset
but for paragraph (2)(A)(i), (3)(A), or (4)(A)(ii) in the
hands of the taxpayer if such property was a DC asset in the
hands of a prior holder.
``(7) 5-year safe harbor.--If any property ceases to be a
DC asset by reason of paragraph (2)(A)(iii), (3)(C), or
(4)(A)(iii) after the 5-year period beginning on the date the
taxpayer acquired such property, such property shall continue
to be treated as meeting the requirements of such paragraph;
except that the amount of gain to which subsection (a)
applies on any sale or exchange of such property shall not
exceed the amount which would be qualified capital gain had
such property been sold on the date of such cessation.
``(c) DC Business.--For purposes of this section, the term
`DC business' means any entity which is an enterprise zone
business (as defined in section 1397B), determined--
``(1) by treating the District of Columbia as an
empowerment zone and as if no other area is an empowerment
zone or enterprise community, and
``(2) without regard to subsections (b)(6) and (c)(5) of
section 1397B.
``(d) Other Definitions and Special Rules.--For purposes of
this section--
``(1) Qualified capital gain.--Except as otherwise provided
in this subsection, the term `qualified capital gain' means
any gain recognized on the sale or exchange of--
``(A) a capital asset, or
``(B) property used in the trade or business (as defined in
section 1231(b)).
``(2) Gain before 1998 not qualified.--The term `qualified
capital gain' shall not include any gain attributable to
periods before January 1, 1998.
``(3) Certain gain on real property not qualified.--The
term `qualified capital gain' shall not include any gain
which would be treated as ordinary income under section 1250
if section 1250 applied to all depreciation rather than the
additional depreciation.
``(4) Intangibles and land not integral part of dc
business.--The term `qualified capital gain' shall not
include any gain which is attributable to real property, or
an intangible asset, which is not an integral part of a DC
business.
``(5) Related party transactions.--The term `qualified
capital gain' shall not include any gain attributable,
directly or indirectly, in whole or in part, to a transaction
with a related person. For purposes of this paragraph,
persons are related to each other if such persons are
described in section 267(b) or 707(b)(1).
``(e) Certain Other Rules To Apply.--Rules similar to the
rules of subsections (g), (h), (i)(2), and (j) of section
1202 shall apply for purposes of this section.
``(f) Sales and Exchanges of Interests in Partnerships and
S Corporations Which Are DC Businesses.--In the case of the
sale or exchange of an interest in a partnership, or of stock
in an S corporation, which was a DC business during
substantially all of the period the taxpayer held such
interest or stock, the amount of qualified capital gain shall
be determined without regard to--
``(1) any gain which is attributable to real property, or
an intangible asset, which is not an integral part of a DC
business, and
``(2) any gain attributable to periods before January 1,
1998.''
(b) Credits Made Part of General Business Credit.--
(1) Subsection (b) of section 38 is amended by striking
``plus'' at the end of paragraph (11), by striking the period
at the end of paragraph (12) and inserting ``, plus'', and by
adding at the end the following new paragraph:
``(13) the DC investment credit determined under section
1400A(a).''
(2) Subsection (d) of section 39 is amended by adding at
the end the following new paragraph:
``(8) No carryback of dc credits before effective date.--No
portion of the unused business credit for any taxable year
which is attributable to the credit under section 1400A may
be carried back to a taxable year ending before the date of
the enactment of such section.''
(3) Subsection (c) of section 196 is amended by striking
``and'' at the end of paragraph (6), by striking the period
at the end of paragraph (7) and inserting ``, and'', and by
adding at the end the following new paragraph:
``(8) the DC investment credit determined under section
1400A(a).''
(c) Clerical Amendment.--The table of subchapters for
chapter 1 is amended by adding at the end the following new
item:
``Subchapter W. Incentives for the Revitalization of the District of
Columbia.''
(d) Effective Date.--This section shall take effect on the
date of the enactment of this Act.
SEC. 602. INCENTIVES CONDITIONED ON OTHER DC REFORM.
The amendments made by section 601 shall not take effect
unless an entity known as the Economic Development
Corporation is created by Federal law in 1997 as part of the
District of Columbia government.
TITLE VII--MISCELLANEOUS PROVISIONS
Subtitle A--Distressed Communities and Brownfields
CHAPTER 1--ADDITIONAL EMPOWERMENT ZONES
SEC. 701. ADDITIONAL EMPOWERMENT ZONES.
(a) In General.--Paragraph (2) of section 1391(b) (relating
to designations of empowerment zones and enterprise
communities) is amended--
(1) by striking ``9'' and inserting ``11'',
(2) by striking ``6'' and inserting ``8'', and
(3) by striking ``750,000'' and inserting ``1,000,000''.
(b) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act,
except that designations of new empowerment zones made
pursuant to such amendments shall be made during the 180-day
period beginning on the date of the enactment of this Act.
CHAPTER 2--NEW EMPOWERMENT ZONES AND ENTERPRISE COMMUNITIES
SEC. 711. DESIGNATION OF ADDITIONAL EMPOWERMENT ZONES AND
ENTERPRISE COMMUNITIES.
(a) In General.--Section 1391 (relating to designation
procedure for empowerment
[[Page S6527]]
zones and enterprise communities) is amended by adding at the
end the following new subsection:
``(g) Additional Designations Permitted.--
``(1) In general.--In addition to the areas designated
under subsection (a)--
``(A) Enterprise communities.--The appropriate Secretaries
may designate in the aggregate an additional 80 nominated
areas as enterprise communities under this section, subject
to the availability of eligible nominated areas. Of that
number, not more than 50 may be designated in urban areas and
not more than 30 may be designated in rural areas.
``(B) Empowerment zones.--The appropriate Secretaries may
designate in the aggregate an additional 20 nominated areas
as empowerment zones under this section, subject to the
availability of eligible nominated areas. Of that number, not
more than 15 may be designated in urban areas and not more
than 5 may be designated in rural areas.
``(2) Period designations may be made.--A designation may
be made under this subsection after the date of the enactment
of this subsection and before January 1, 1999.
``(3) Modifications to eligibility criteria, etc.--
``(A) Poverty rate requirement.--
``(i) In general.--A nominated area shall be eligible for
designation under this subsection only if the poverty rate
for each population census tract within the nominated area is
not less than 20 percent and the poverty rate for at least 90
percent of the population census tracts within the nominated
area is not less than 25 percent.
``(ii) Treatment of census tracts with small populations.--
A population census tract with a population of less than
2,000 shall be treated as having a poverty rate of not less
than 25 percent if--
``(I) more than 75 percent of such tract is zoned for
commercial or industrial use, and
``(II) such tract is contiguous to 1 or more other
population census tracts which have a poverty rate of not
less than 25 percent (determined without regard to this
clause).
``(iii) Exception for developable sites.--Clause (i) shall
not apply to up to 3 noncontiguous parcels in a nominated
area which may be developed for commercial or industrial
purposes. The aggregate area of noncontiguous parcels to
which the preceding sentence applies with respect to any
nominated area shall not exceed 1,000 acres (2,000 acres in
the case of an empowerment zone).
``(iv) Certain provisions not to apply.--Section 1392(a)(4)
(and so much of paragraphs (1) and (2) of section 1392(b) as
relate to section 1392(a)(4)) shall not apply to an area
nominated for designation under this subsection.
``(v) Special rule for rural empowerment zones and
enterprise communities.--The Secretary of Agriculture may
designate not more than 1 empowerment zone, and not more than
5 enterprise communities, in rural areas without regard to
clause (i) if such areas satisfy emigration criteria
specified by the Secretary of Agriculture.
``(B) Size limitation.--
``(i) In general.--The parcels described in subparagraph
(A)(iii) shall not be taken into account in determining
whether the requirement of subparagraph (A) or (B) of section
1392(a)(3) is met.
``(ii) Special rule for rural areas.--If a population
census tract (or equivalent division under section
1392(b)(4)) in a rural area exceeds 1,000 square miles or
includes a substantial amount of land owned by the Federal,
State, or local government, the nominated area may exclude
such excess square mileage or governmentally owned land and
the exclusion of that area will not be treated as violating
the continuous boundary requirement of section 1392(a)(3)(B).
``(C) Aggregate population limitation.--The aggregate
population limitation under the last sentence of subsection
(b)(2) shall not apply to a designation under paragraph
(1)(B).
``(D) Previously designated enterprise communities may be
included.--Subsection (e)(5) shall not apply to any
enterprise community designated under subsection (a) that is
also nominated for designation under this subsection.
``(E) Indian reservations may be nominated.--
``(i) In general.--Section 1393(a)(4) shall not apply to an
area nominated for designation under this subsection.
``(ii) Special rule.--An area in an Indian reservation
shall be treated as nominated by a State and a local
government if it is nominated by the reservation governing
body (as determined by the Secretary of Interior).''
(b) Employment Credit Not To Apply to New Empowerment
Zones.--Section 1396 (relating to empowerment zone employment
credit) is amended by adding at the end the following new
subsection:
``(e) Credit Not To Apply to Empowerment Zones Designated
Under Section 1391(g).--This section shall be applied without
regard to any empowerment zone designated under section
1391(g).''
(c) Increased Expensing Under Section 179 Not To Apply in
Developable Sites.--Section 1397A (relating to increase in
expensing under section 179) is amended by adding at the end
the following new subsection:
``(c) Limitation.--For purposes of this section, qualified
zone property shall not include any property substantially
all of the use of which is in any parcel described in section
1391(g)(3)(A)(iii).''
(d) Conforming Amendments.--
(1) Subsections (e) and (f) of section 1391 are each
amended by striking ``subsection (a)'' and inserting ``this
section''.
(2) Section 1391(c) is amended by striking ``this section''
and inserting ``subsection (a)''.
SEC. 712. VOLUME CAP NOT TO APPLY TO ENTERPRISE ZONE FACILITY
BONDS WITH RESPECT TO NEW EMPOWERMENT ZONES.
(a) In General.--Section 1394 (relating to tax-exempt
enterprise zone facility bonds) is amended by adding at the
end the following new subsection:
``(f) Bonds for Empowerment Zones Designated Under Section
1391(g).--
``(1) In general.--In the case of a new empowerment zone
facility bond--
``(A) such bond shall not be treated as a private activity
bond for purposes of section 146, and
``(B) subsection (c) of this section shall not apply.
``(2) Limitation on amount of bonds.--
``(A) In general.--Paragraph (1) shall apply to a new
empowerment zone facility bond only if such bond is
designated for purposes of this subsection by the local
government which nominated the area to which such bond
relates.
``(B) Limitation on bonds designated.--The aggregate face
amount of bonds which may be designated under subparagraph
(A) with respect to any empowerment zone shall not exceed--
``(i) $60,000,000 if such zone is in a rural area,
``(ii) $130,000,000 if such zone is in an urban area and
the zone has a population of less than 100,000, and
``(iii) $230,000,000 if such zone is in an urban area and
the zone has a population of at least 100,000.
``(C) Special rules.--
``(i) Coordination with limitation in subsection (c).--
Bonds to which paragraph (1) applies shall not be taken into
account in applying the limitation of subsection (c) to other
bonds.
``(ii) Current refunding not taken into account.--In the
case of a refunding (or series of refundings) of a bond
designated under this paragraph, the refunding obligation
shall be treated as designated under this paragraph (and
shall not be taken into account in applying subparagraph (B))
if--
``(I) the amount of the refunding bond does not exceed the
outstanding amount of the refunded bond, and
``(II) the refunded bond is redeemed not later than 90 days
after the date of issuance of the refunding bond.
``(3) New empowerment zone facility bond.--For purposes of
this subsection, the term `new empowerment zone facility
bond' means any bond which would be described in subsection
(a) if only empowerment zones designated under section
1391(g) were taken into account under sections 1397B and
1397C.''
(b) Effective Date.--The amendment made by this section
shall apply to obligations issued after the date of the
enactment of this Act.
SEC. 713. MODIFICATIONS TO ENTERPRISE ZONE FACILITY BOND
RULES FOR ALL EMPOWERMENT ZONES AND ENTERPRISE
COMMUNITIES.
(a) Modifications Relating to Enterprise Zone Business.--
Paragraph (3) of section 1394(b) (defining enterprise zone
business) is amended to read as follows:
``(3) Enterprise zone business.--
``(A) In general.--Except as modified in this paragraph,
the term `enterprise zone business' has the meaning given
such term by section 1397B.
``(B) Modifications.--In applying section 1397B for
purposes of this section--
``(i) Businesses in enterprise communities eligible.--
References in section 1397B to empowerment zones shall be
treated as including references to enterprise communities.
``(ii) Waiver of requirements during startup period.--A
business shall not fail to be treated as an enterprise zone
business during the startup period if--
``(I) as of the beginning of the startup period, it is
reasonably expected that such business will be an enterprise
zone business (as defined in section 1397B as modified by
this paragraph) at the end of such period, and
``(II) such business makes bona fide efforts to be such a
business.
``(iii) Reduced requirements after testing period.--A
business shall not fail to be treated as an enterprise zone
business for any taxable year beginning after the testing
period by reason of failing to meet any requirement of
subsection (b) or (c) of section 1397B if at least 35 percent
of the employees of such business for such year are residents
of an empowerment zone or an enterprise community. The
preceding sentence shall not apply to any business which is
not a qualified business by reason of paragraph (1), (4), or
(5) of section 1397B(d).
``(C) Definitions relating to subparagraph (b).--For
purposes of subparagraph (B)--
``(i) Startup period.--The term `startup period' means,
with respect to any property being provided for any business,
the period before the first taxable year beginning more than
2 years after the later of--
[[Page S6528]]
``(I) the date of issuance of the issue providing such
property, or
``(II) the date such property is first placed in service
after such issuance (or, if earlier, the date which is 3
years after the date described in subclause (I)).
``(ii) Testing period.--The term `testing period' means the
first 3 taxable years beginning after the startup period.
``(D) Portions of business may be enterprise zone
business.--The term `enterprise zone business' includes any
trades or businesses which would qualify as an enterprise
zone business (determined after the modifications of
subparagraph (B)) if such trades or businesses were
separately incorporated.''
(b) Modifications Relating to Qualified Zone Property.--
Paragraph (2) of section 1394(b) (defining qualified zone
property) is amended to read as follows:
``(2) Qualified zone property.--The term `qualified zone
property' has the meaning given such term by section 1397C;
except that--
``(A) the references to empowerment zones shall be treated
as including references to enterprise communities, and
``(B) section 1397C(a)(2) shall be applied by substituting
`an amount equal to 15 percent of the adjusted basis' for `an
amount equal to the adjusted basis'.''
(c) Effective Date.--The amendments made by this section
shall apply to obligations issued after the date of the
enactment of this Act.
SEC. 714. MODIFICATIONS TO ENTERPRISE ZONE BUSINESS
DEFINITION FOR ALL EMPOWERMENT ZONES AND
ENTERPRISE COMMUNITIES.
(a) In General.--Section 1397B (defining enterprise zone
business) is amended--
(1) by striking ``80 percent'' in subsections (b)(2) and
(c)(1) and inserting ``50 percent'',
(2) by striking ``substantially all'' each place it appears
in subsections (b) and (c) and inserting ``a substantial
portion'',
(3) by striking ``, and exclusively related to,'' in
subsections (b)(4) and (c)(3),
(4) by adding at the end of subsection (d)(2) the following
new flush sentence:
``For purposes of subparagraph (B), the lessor of the
property may rely on a lessee's certification that such
lessee is an enterprise zone business.'',
(5) by striking ``substantially all'' in subsection (d)(3)
and inserting ``at least 50 percent'', and
(6) by adding at the end the following new subsection:
``(f) Treatment of Businesses Straddling Census Tract
Lines.--For purposes of this section, if--
``(1) a business entity or proprietorship uses real
property located within an empowerment zone,
``(2) the business entity or proprietorship also uses real
property located outside the empowerment zone,
``(3) the amount of real property described in paragraph
(1) is substantial compared to the amount of real property
described in paragraph (2), and
``(4) the real property described in paragraph (2) is
contiguous to part or all of the real property described in
paragraph (1),
then all the services performed by employees, all business
activities, all tangible property, and all intangible
property of the business entity or proprietorship that occur
in or is located on the real property described in paragraphs
(1) and (2) shall be treated as occurring or situated in an
empowerment zone.''
(b) Effective Dates.--
(1) In general.--The amendments made by this section shall
apply to taxable years beginning on or after the date of the
enactment of this Act.
(2) Special rule for enterprise zone facility bonds.--For
purposes of section 1394(b) of the Internal Revenue Code of
1986, the amendments made by this section shall apply to
obligations issued after the date of the enactment of this
Act.
CHAPTER 3--EXPENSING OF ENVIRONMENTAL REMEDIATION COSTS
SEC. 721. EXPENSING OF ENVIRONMENTAL REMEDIATION COSTS.
(a) In General.--Part VI of subchapter B of chapter 1 is
amended by adding at the end the following new section:
``SEC. 198. EXPENSING OF ENVIRONMENTAL REMEDIATION COSTS.
``(a) In General.--A taxpayer may elect to treat any
qualified environmental remediation expenditure which is paid
or incurred by the taxpayer as an expense which is not
chargeable to capital account. Any expenditure which is so
treated shall be allowed as a deduction for the taxable year
in which it is paid or incurred.
``(b) Qualified Environmental Remediation Expenditure.--For
purposes of this section--
``(1) In general.--The term `qualified environmental
remediation expenditure' means any expenditure--
``(A) which is otherwise chargeable to capital account, and
``(B) which is paid or incurred in connection with the
abatement or control of hazardous substances at a qualified
contaminated site.
``(2) Special rule for expenditures for depreciable
property.--Such term shall not include any expenditure for
the acquisition of property of a character subject to the
allowance for depreciation which is used in connection with
the abatement or control of hazardous substances at a
qualified contaminated site; except that the portion of the
allowance under section 167 for such property which is
otherwise allocated to such site shall be treated as a
qualified environmental remediation expenditure.
``(c) Qualified Contaminated Site.--For purposes of this
section--
``(1) Qualified contaminated site.--
``(A) In general.--The term `qualified contaminated site'
means any area--
``(i) which is held by the taxpayer for use in a trade or
business or for the production of income, or which is
property described in section 1221(1) in the hands of the
taxpayer,
``(ii) which is within a targeted area, and
``(iii) which contains (or potentially contains) any
hazardous substance.
``(B) Taxpayer must receive statement from state
environmental agency.--An area shall be treated as a
qualified contaminated site with respect to expenditures paid
or incurred during any taxable year only if the taxpayer
receives a statement from the appropriate agency of the State
in which such area is located that such area meets the
requirements of clauses (ii) and (iii) of subparagraph (A).
``(C) Appropriate state agency.-- For purposes of
subparagraph (B), the appropriate agency of a State is the
agency designated by the Administrator of the Environmental
Protection Agency for purposes of this section. If no agency
of a State is designated under the preceding sentence, the
appropriate agency for such State shall be the Environmental
Protection Agency.
``(2) Targeted area.--
``(A) In general.--The term `targeted area' means--
``(i) any population census tract with a poverty rate of
not less than 20 percent,
``(ii) a population census tract with a population of less
than 2,000 if--
``(I) more than 75 percent of such tract is zoned for
commercial or industrial use, and
``(II) such tract is contiguous to 1 or more other
population census tracts which meet the requirement of clause
(i) without regard to this clause,
``(iii) any empowerment zone or enterprise community (and
any supplemental zone designated on December 21, 1994), and
``(iv) any site announced before February 1, 1997, as being
included as a brownfields pilot project of the Environmental
Protection Agency.
``(B) National priorities listed sites not included.--Such
term shall not include any site which is on the national
priorities list under section 105(a)(8)(B) of the
Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 (as in effect on the date of the
enactment of this section).
``(C) Certain rules to apply.--For purposes of this
paragraph, the rules of sections 1392(b)(4) and 1393(a)(9)
shall apply.
``(D) Treatment of certain sites.--For purposes of this
paragraph, a single contaminated site shall be treated as
within a targeted area if--
``(i) a substantial portion of the site is located within a
targeted area described in subparagraph (A) (determined
without regard to this subparagraph), and
``(ii) the remaining portions are contiguous to, but
outside, such targeted area.
``(d) Hazardous Substance.--For purposes of this section--
``(1) In general.--The term `hazardous substance' means--
``(A) any substance which is a hazardous substance as
defined in section 101(14) of the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, and
``(B) any substance which is designated as a hazardous
substance under section 102 of such Act.
``(2) Exception.--Such term shall not include any substance
with respect to which a removal or remedial action is not
permitted under section 104 of such Act by reason of
subsection (a)(3) thereof.
``(e) Deduction Recaptured as Ordinary Income on Sale,
Etc.--Solely for purposes of section 1245, in the case of
property to which a qualified environmental remediation
expenditure would have been capitalized but for this
section--
``(1) the deduction allowed by this section for such
expenditure shall be treated as a deduction for depreciation,
and
``(2) such property (if not otherwise section 1245
property) shall be treated as section 1245 property solely
for purposes of applying section 1245 to such deduction.
``(f) Coordination With Other Provisions.--Sections 280B
and 468 shall not apply to amounts which are treated as
expenses under this section.
``(g) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this section.''
(b) Clerical Amendment.--The table of sections for part VI
of subchapter B of chapter 1 is amended by adding at the end
the following new item:
``Sec. 198. Expensing of environmental remediation costs.''
(c) Effective Date.--The amendments made by this section
shall apply to expenditures paid or incurred after the date
of the enactment of this Act, in taxable years ending after
such date.
Subtitle B--Puerto Rico Economic Activity Credit Improvement
SEC. 731. MODIFICATIONS OF PUERTO RICO ECONOMIC ACTIVITY
CREDIT.
(a) Corporations Eligible To Claim Credit.--Section
30A(a)(2) (defining qualified domestic corporation) is
amended to read as follows:
[[Page S6529]]
``(2) Qualified domestic corporation.--For purposes of
paragraph (1)--
``(A) In general.--A domestic corporation shall be treated
as a qualified domestic corporation for a taxable year if it
is actively conducting within Puerto Rico during the taxable
year--
``(i) a line of business with respect to which the domestic
corporation is an existing credit claimant under section
936(j)(9), or
``(ii) an eligible line of business not described in clause
(i).
``(B) Limitation to lines of business.--A domestic
corporation shall be treated as a qualified domestic
corporation under subparagraph (A) only with respect to the
lines of business described in subparagraph (A) which it is
actively conducting in Puerto Rico during the taxable year.
``(C) Exception for corporations electing reduced credit.--
A domestic corporation shall not be treated as a qualified
corporation if such corporation (or any predecessor) had an
election in effect under section 936(a)(4)(B)(iii) for any
taxable year beginning after December 31, 1996.''
(b) Application on Separate Line of Business Basis;
Eligible Line of Business.--Section 30A is amended by
redesignating subsection (g) as subsection (h) and by
inserting after subsection (f) the following new subsection:
``(g) Application on Line of Business Basis; Eligible Lines
of Business.--For purposes of this section--
``(1) Application to separate line of business.--
``(A) In general.--In determining the amount of the credit
under subsection (a), this section shall be applied
separately with respect to each substantial line of business
of the qualified domestic corporation.
``(B) Exceptions for existing credit claimant.--This
paragraph shall not apply to a substantial line of business
with respect to which the qualified domestic corporation is
an existing credit claimant under section 936(j)(9).
``(C) Allocation.--The Secretary shall prescribe rules
necessary to carry out the purposes of this paragraph,
including rules--
``(i) for the allocation of items of income, gain,
deduction, and loss for purposes of determining taxable
income under subsection (a), and
``(ii) for the allocation of wages, fringe benefit
expenses, and depreciation allowances for purposes of
applying the limitations under subsection (d).
``(2) Eligible line of business.--The term `eligible line
of business' means a substantial line of business in any of
the following trades or businesses:
``(A) Manufacturing.
``(B) Agriculture.
``(C) Forestry.
``(D) Fishing.
``(3) Substantial line of business.--For purposes of this
subsection, the determination of whether a line of business
is a substantial line of business shall be determined by
reference to 2-digit codes under the North American Industry
Classification System (62 Fed. Reg. 17288 et seq., formerly
known as `SIC codes').''
(c) Repeal of Base Period Cap.--
(1) In general.--Section 30A(a)(1) (relating to allowance
of credit) is amended by striking the last sentence.
(2) Conforming amendment.--Section 30A(e)(1) is amended by
inserting ``but not including subsection (j)(3)(A)(ii)
thereof'' after ``thereunder''.
(d) Application of Credit.--Section 30A(h) (relating to
applicability of section), as redesignated by subsection (b),
is amended to read as follows:
``(h) Application of Section.--
``(1) In general.--This section shall apply to taxable
years beginning after December 31, 1995, and before the
termination date.
``(2) Termination date.--For purposes of paragraph (1)--
``(A) In general.--The termination date is the first day of
the 4th calendar year following the close of the first period
for which a certification is issued by the Secretary under
subparagraph (B).
``(B) Certification.--
``(i) In general.--The Secretary shall issue a
certification under this subparagraph for the first 3-
consecutive calendar year period beginning after December 31,
1997, for which the Secretary determines that Puerto Rico has
met the requirements of clause (ii) for each calendar year
within the period.
``(ii) Requirements.--The requirements of this clause are
met with respect to Puerto Rico for any calendar year if--
``(I) the average monthly rate of unemployment in Puerto
Rico does not exceed 150 percent of the average monthly rate
of unemployment for the United States for such year,
``(II) the per capita income of Puerto Rico is at least 66
percent of the per capita income of the United States, and
``(III) the poverty level within Puerto Rico does not
exceed 30 percent.''
(e) Conforming Amendments.--
(1) Section 30A(b) is amended by striking ``within a
possession'' each place it appears and inserting ``within
Puerto Rico''.
(2) Section 30A(d) is amended by striking ``possession''
each place it appears.
(3) Section 30A(f) is amended to read as follows:
``(f) Definitions.--For purposes of this section--
``(1) Qualified income taxes.--The qualified income taxes
for any taxable year allocable to nonsheltered income shall
be determined in the same manner as under section 936(i)(3).
``(2) Qualified wages.--The qualified wages for any taxable
year shall be determined in the same manner as under section
936(i)(1).
``(3) Other terms.--Any term used in this section which is
also used in section 936 shall have the same meaning given
such term by section 936.''
(f) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
1997.
SEC. 732. COMPARABLE TREATMENT FOR OTHER ECONOMIC ACTIVITY
CREDIT.
(a) Corporations Eligible To Claim Credit.--Section
936(j)(2)(A) (relating to economic activity credit) is
amended to read as follows:
``(A) Economic activity credit.--
``(i) In general.--In the case of a domestic corporation
which, during the taxable year, is actively conducting within
a possession other than Puerto Rico--
``(I) a line of business with respect to which the domestic
corporation is an existing credit claimant under paragraph
(9), or
``(II) an eligible line of business not described in
subclause (I),
the credit determined under subsection (a)(1)(A) shall be
allowed for taxable years beginning after December 31, 1995,
and before January 1, 2002.
``(ii) Limitation to lines of business.--Clause (i) shall
only apply with respect to the lines of business described in
clause (i) which the domestic corporation is actively
conducting in a possession other than Puerto Rico during the
taxable year.
``(iii) Exception for corporations electing reduced
credit.--Clause (i) shall not apply to a domestic corporation
if such corporation (or any predecessor) had an election in
effect under subsection (a)(4)(B)(iii) for any taxable year
beginning after December 31, 1996.''
(b) Application on Separate Line of Business Basis;
Eligible Line of Business.--
(1) In general.--Section 936(j) is amended by adding at the
end the following new paragraph:
``(11) Application on line of business basis; eligible
lines of business.--For purposes of this section--
``(A) Application to separate line of business.--
``(i) In general.--In determining the amount of the credit
under subsection (a)(1)(A) for a corporation to which
paragraph (2)(A) applies, this section shall be applied
separately with respect to each substantial line of business
of the corporation.
``(ii) Exceptions for existing credit claimant.--This
paragraph shall not apply to a line of business with respect
to which the qualified domestic corporation is an existing
credit claimant under paragraph (9).
``(iii) Allocation.--The Secretary shall prescribe rules
necessary to carry out the purposes of this subparagraph,
including rules--
``(I) for the allocation of items of income, gain,
deduction, and loss for purposes of determining taxable
income under subsection (a)(1)(A), and
``(II) for the allocation of wages, fringe benefit
expenses, and depreciation allowances for purposes of
applying the limitations under subsection (a)(4)(A).
``(B) Eligible line of business.--For purposes of this
subsection, the term `eligible line of business' means a
substantial line of business in any of the following trades
or businesses:
``(i) Manufacturing.
``(ii) Agriculture.
``(iii) Forestry.
``(iv) Fishing.''
(2) New lines of business.--Section 936(j)(9)(B) is amended
to read as follows:
``(B) New lines of business.--A corporation shall not be
treated as an existing credit claimant with respect to any
substantial new line of business which is added after October
13, 1995, unless such addition is pursuant to an acquisition
described in subparagraph (A)(ii).''
(3) Separate lines of business.--Section 936(j), as amended
by paragraph (1), is amended by adding at the end the
following new paragraph:
``(12) Substantial line of business.--For purposes of this
subsection (other than paragraph (9)(B) thereof), the
determination of whether a line of business is a substantial
line of business shall be determined by reference to 2-digit
codes under the North American Industry Classification System
(62 Fed. Reg. 17288 et seq., formerly known as `SIC
codes').''
(c) Repeal of Base Period Cap for Economic Activity
Credit.--
(1) In general.--Section 936(j)(3) is amended to read as
follows:
``(3) Additional restricted reduced credit.--
``(A) In general.--In the case of an existing credit
claimant to which paragraph (2)(B) applies, the credit
determined under subsection (a)(1)(A) shall be allowed for
any taxable year beginning after December 31, 1997, and
before January 1, 2006, except that the aggregate amount of
taxable income taken into account under subsection (a)(1)(A)
for such taxable year shall not exceed the adjusted base
period income of such claimant.
``(B) Coordination with subsection (a)(4)(B).--The amount
of income described in subsection (a)(1)(A) which is taken
into account in applying subsection (a)(4)(B) shall
[[Page S6530]]
be such income as reduced under this paragraph.''
(2) Conforming amendment.--Section 936(j)(2)(A), as amended
by subsection (a), is amended by striking ``2002'' and
inserting ``2006''.
(d) Application of Credit.--
(1) In general.--Section 936(j)(2)(A), as amended by this
section, is amended by striking ``January 1, 2006'' and
inserting ``the termination date''.
(2) Special rules for applicable possessions.--Section
936(j)(8)(A) is amended to read as follows:
``(A) In general.--In the case of an applicable
possession--
``(i) this section (other than the preceding paragraphs of
this subsection) shall not apply for taxable years beginning
after December 31, 1995, and before January 1, 2006, with
respect to any substantial line of business actively
conducted in such possession by a domestic corporation which
is an existing credit claimant with respect to such line of
business, and
``(ii) this section (including this subsection) shall
apply--
``(I) with respect to any substantial line of business not
described in clause (i) for taxable years beginning after
December 31, 1997, and before the termination date, and
``(II) with respect to any substantial line of business
described in clause (i) for taxable years beginning after
December 31, 2006, and before the termination date.''
(3) Termination date.--Section 936(j), as amended by
subsection (b), is amended by adding at the end the following
new paragraph.
``(13) Termination date.--For purposes of this subsection--
``(A) In general.--The termination date for any possession
other than Puerto Rico is the first day of the 4th calendar
year following the close of the first period for which a
certification is issued by the Secretary under subparagraph
(B).
``(B) Certification.--
``(i) In general.--The Secretary shall issue a
certification for a possession under this subparagraph for
the first 3-consecutive calendar year period beginning after
December 31, 1997, for which the Secretary determines that
the possession has met the requirements of clause (ii) for
each calendar year within the period.
``(ii) Requirements.--The requirements of this clause are
met with respect to a possession for any calendar year if--
``(I) the average monthly rate of unemployment in the
possession does not exceed 150 percent of the average monthly
rate of unemployment for the United States for such year,
``(II) the per capita income of the possession is at least
66 percent of the per capita income of the United States, and
``(III) the poverty level within the possession does not
exceed 30 percent.''
(e) Effective Dates.--
(1) In general.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1997.
(2) New lines of business.--The amendment made by
subsection (b)(2) shall apply to taxable years beginning
after December 31, 1995.
Subtitle C--Revisions Relating to Disasters
SEC. 741. TREATMENT OF LIVESTOCK SOLD ON ACCOUNT OF WEATHER-
RELATED CONDITIONS.
(a) Deferral of Income Inclusion.--Subsection (e) of
section 451 (relating to special rules for proceeds from
livestock sold on account of drought) is amended--
(1) by striking ``drought conditions, and that these
drought conditions'' in paragraph (1) and inserting
``drought, flood, or other weather-related conditions, and
that such conditions''; and
(2) by inserting ``, Flood, or Other Weather-Related
Conditions'' after ``Drought'' in the subsection heading.
(b) Involuntary Conversions.--Subsection (e) of section
1033 (relating to livestock sold on account of drought) is
amended--
(1) by inserting ``, flood, or other weather-related
conditions'' before the period at the end thereof; and
(2) by inserting ``, Flood, or Other Weather-Related
Conditions'' after ``Drought'' in the subsection heading.
(c) Effective Date.--The amendments made by this section
shall apply to sales and exchanges after December 31, 1996.
SEC. 742. GAIN OR LOSS FROM SALE OF LIVESTOCK DISREGARDED FOR
PURPOSES OF EARNED INCOME CREDIT.
(a) In General.--Section 32(i)(2)(D) (relating to
disqualified income) is amended by inserting ``determined
without regard to gain or loss from the sale of livestock
described in section 1231(b)(3),'' after ``taxable year,''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
1995.
SEC. 743. MORTGAGE FINANCING FOR RESIDENCES LOCATED IN
DISASTER AREAS.
Subsection (k) of section 143 (relating to mortgage revenue
bonds; qualified mortgage bond and qualified veteran's
mortgage bond) is amended by adding at the end the following
new paragraph:
``(11) Special rules for residences located in disaster
areas.--In the case of a residence located in an area
determined by the President to warrant assistance from the
Federal Government under the Disaster Relief and Emergency
Assistance Act (as in effect on the date of the enactment of
the Revenue Reconciliation Act of 1997), this section shall
be applied with the following modifications to financing
provided with respect to such residence within 1 year after
the date of the disaster declaration:
``(A) Subsection (d) (relating to 3-year requirement) shall
not apply.
``(B) Subsections (e) and (f) (relating to purchase price
requirement and income requirement) shall be applied as if
such residence were a targeted area residence.
The preceding sentence shall apply only with respect to bonds
issued after December 31, 1996, and before January 1, 1999.''
Subtitle D--Provisions Relating to Small Businesses
SEC. 751. WAIVER OF PENALTY THROUGH JUNE 30, 1998, ON SMALL
BUSINESSES FAILING TO MAKE ELECTRONIC FUND
TRANSFERS OF TAXES.
No penalty shall be imposed under the Internal Revenue Code
of 1986 solely by reason of a failure by a person to use the
electronic fund transfer system established under section
6302(h) of such Code if--
(1) such person is a member of a class of taxpayers first
required to use such system on or after July 1, 1997, and
(2) such failure occurs before July 1, 1998.
SEC. 752. MINIMUM TAX NOT TO APPLY TO FARMERS' INSTALLMENT
SALES.
(a) In General.--Subsection (a) of section 56 is amended by
striking paragraph (6) (relating to treatment of installment
sales).
(b) Effective Dates.--
(1) In general.--The amendment made by this section shall
apply to dispositions in taxable years beginning after
December 31, 1987.
(2) Special rule for 1987.--In the case of taxable years
beginning in 1987, the last sentence of section 56(a)(6) of
the Internal Revenue Code of 1986 (as in effect for such
taxable years) shall be applied by inserting ``or in the case
of a taxpayer using the cash receipts and disbursements
method of accounting, any disposition described in section
453C(e)(1)(B)(ii)'' after ``section 453C(e)(4)''.
Subtitle E--Provisions Relating to Pensions and Fringe Benefits
SEC. 761. TREATMENT OF MULTIEMPLOYER PLANS UNDER SECTION 415.
(a) In General.--Section 415(b)(11) is amended--
(1) by inserting ``or a multiemployer plan (as defined in
section 414(f))'' after ``section 414(d))'', and
(2) by inserting ``and multiemployer'' after
``governmental'' in the heading thereof.
(b) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 1997.
SEC. 762. SPOUSAL CONSENT REQUIRED FOR CERTAIN DISTRIBUTIONS
AND LOANS UNDER QUALIFIED CASH OR DEFERRED
ARRANGEMENT.
(a) In General.--Section 401(k) is amended by adding at the
end the following new paragraph:
``(13) Spousal consent required.--
``(A) In general.--An arrangement shall not be treated as a
qualified cash or deferred arrangement unless--
``(i) a distribution under the plan of which such
arrangement is a part, or
``(ii) a loan all or part of which is secured by the
participant's interest in the plan of which such arrangement
is a part,
may not be made without the written consent of the spouse.
``(B) Exceptions.--Subparagraph (A) shall not apply--
``(i) to distributions described in section 402(c)(4)(A) or
411(a)(11), or
``(ii) in any case described in section 417(a)(2) (relating
to cases where spouse cannot be located).
``(C) Other rules.--The Secretary shall prescribe rules
similar to the rules under section 417 for the form and
timing of any consent required by this paragraph.''
(b) Effective Date.--
(1) In general.--The amendment made by this section shall
apply to plan years beginning after December 31, 1998.
(2) Plan amendments.--A plan shall not be treated as
failing to meet the requirements of section 411(d)(6) of the
Internal Revenue Code of 1986 or section 204(g) of the
Employee Retirement Income Security Act of 1974 merely
because it is amended to meet the requirements of section
401(k)(4)(13) of such Code (as added by subsection (a)).
SEC. 763. SECTION 401(K) INVESTMENT PROTECTION.
(a) Limitations on Investment in Employer Securities and
Employer Real Property by Cash or Deferred Arrangements.--
Paragraph (3) of section 407(d) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1107(d)) is amended by
adding at the end the following new subparagraph:
``(D) The term `eligible individual account plan' does not
include that portion of an individual account plan that
consists of elective deferrals (as defined in section
402(g)(3) of the Internal Revenue Code of 1986) pursuant to a
qualified cash or deferred arrangement as defined in section
401(k) of the Internal Revenue Code of 1986 (and earnings
thereon), if such elective deferrals (or earnings thereon)
are required to be invested in qualifying employer securities
or qualifying employer real property or both pursuant to the
documents and instruments governing the plan or at the
direction of a person other than the participant (or the
participant's beneficiary) on whose behalf such elective
[[Page S6531]]
deferrals are made to the plan. For the purposes of
subsection (a), such portion shall be treated as a separate
plan. This subparagraph shall not apply to an individual
account plan if the fair market value of the assets of all
individual account plans maintained by the employer equals
not more than 10 percent of the fair market value of the
assets of all pension plans maintained by the employer.''
(b) Effective Date.--
(1) In general.--The amendments made by this section shall
take effect on the date of the enactment of this Act.
(2) Transition rule for plans holding excess securities or
property.--
(A) In general.--In the case of a plan which on the date of
the enactment of this Act, has holdings of employer
securities and employer real property (as defined in section
407(d) of the Employee Retirement Income Security Act of 1974
(29 U.S.C. 1107(d)) in excess of the amount specified in such
section 407, the amendment made by this section applies to
any acquisition of such securities and property on or after
such date, but does not apply to the specific holdings which
constitute such excess during the period of such excess.
(B) Special rule for certain acquisitions.--Employer
securities and employer real property acquired pursuant to a
binding written contract to acquire such securities and real
property entered into and in effect on the date of the
enactment of this Act, shall be treated as acquired
immediately before such date.
Subtitle F--Other Provisions
SEC. 771. ADJUSTMENT OF MINIMUM TAX EXEMPTION AMOUNTS FOR
TAXPAYERS OTHER THAN CORPORATIONS.
(a) In General.--Subsection (d) of section 55 is amended by
adding at the end the following new paragraph:
``(4) Adjustment of exemption amounts for taxpayers other
than corporations.--
``(A) Taxable years beginning after december 31, 2000, and
before january 1, 2004.--In the case of any calendar year
after 2000 and before 2004--
``(i) the dollar amount applicable under paragraph (1)(A)
for such a calendar year shall be $600 greater than the
dollar amount applicable under paragraph (1)(A) for the prior
calendar year, and
``(ii) the dollar amount applicable under paragraph (1)(B)
for such a calendar year shall be $400 greater than the
dollar amount applicable under paragraph (1)(B) for the prior
calendar year.
``(B) Application of taxable years.--The dollar amount
applicable under this paragraph to any calendar year shall
apply to taxable years beginning in such calendar year.''
(b) Conforming Amendments.--
(1) Subparagraph (C) of section 55(d)(1) is amended by
striking ``$22,500'' and inserting ``the amount equal to \1/
2\ the dollar amount applicable under subparagraph (A) for
the taxable year''.
(2) The last sentence of section 55(d)(3) is amended by
striking ``$165,000 or (ii) $22,500'' and inserting ``the
minimum amount of such income (as so determined) for which
the exemption amount under paragraph (1)(C) is zero, or (ii)
such exemption amount (determined without regard to this
paragraph)''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2000.
SEC. 772. TREATMENT OF COMPUTER SOFTWARE AS FSC EXPORT
PROPERTY.
(a) In General.--Subparagraph (B) of section 927(a)(2)
(relating to property excluded from eligibility as FSC export
property) is amended by inserting ``, and other than computer
software (whether or not patented)'' before ``, for
commercial or home use''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to gross receipts attributable to periods after
December 31, 1997, in taxable years ending after such date.
SEC. 773. WELFARE-TO-WORK INCENTIVES.
(a) Additional Temporary Incentives for Employing Long-Term
Family Assistance Recipients.--Section 51 (relating to amount
of work opportunity credit) is amended by inserting after
subsection (d) the following new subsection:
``(e) Additional Temporary Incentives for Employing Long-
Term Family Assistance Recipients.--
``(1) Treatment as member of targeted group.--A long-term
family assistance recipient shall be treated for purposes of
this section as a member of a targeted group.
``(2) Modification to percentage and years of credit.--In
the case of a long-term family assistance recipient, the
amount of the work opportunity credit determined under this
section for the taxable year shall be equal to the sum of--
``(A) 50 percent of the qualified first-year wages, and
``(B) 50 percent of the qualified second-year wages.
``(3) Modification to amount of wages taken into account.--
In the case of a long-term family assistance recipient--
``(A) $10,000 of wages may be taken into account.--In lieu
of applying subsection (b)(3), the amount of the qualified
first-year wages, and the amount of qualified second-year
wages, which may be taken into account with respect to any
individual shall not exceed $10,000 per year.
``(B) Certain amounts treated as wages.--The term `wages'
includes amounts paid or incurred by the employer which are
excludable from such recipient's gross income under--
``(i) section 105 (relating to amounts received under
accident and health plans),
``(ii) section 106 (relating to contributions by employer
to accident and health plans),
``(iii) section 127 (relating to educational assistance
programs) or would be so excludable but for section 127(d),
but only to the extent paid or incurred to a person not
related to the employer, or
``(iv) section 129 (relating to dependent care assistance
programs).
The amount treated as wages by clause (i) or (ii) for any
period shall be based on the reasonable cost of coverage for
the period, but shall not exceed the applicable premium for
the period under section 4980B(f)(4).
``(C) Special rules for agricultural and railway labor.--If
such recipient is an employee to which subparagraph (A) or
(B) of subsection (h)(1) applies--
``(i) such subparagraph (A) shall be applied by
substituting `$10,000' for `$6,000' and
``(ii) such subparagraph (B) shall be applied by
substituting `$825' for `$500'.
``(D) Termination.--In lieu of applying subsection (c)(4),
this subsection shall not apply to amounts paid or incurred
with respect to an individual who begins work for the
employer after September 30, 2000.
``(4) Long-term family assistance recipient.--For purposes
of this subsection, the term `long-term family assistance
recipient' means any individual who is certified by the
designated local agency--
``(A) as being a member of a family receiving assistance
under a IV-A program (as defined in subsection (d)(2)(B)) for
at least the 18-month period ending with the month preceding
the month in which the hiring date occurs,
``(B)(i) as being a member of a family receiving such
assistance for 18 months beginning after the date of the
enactment of this subsection, and
``(ii) as having a hiring date which is not more than 2
years after the end of the earliest such 18-month period, or
``(C)(i) as being a member of a family which ceased to be
eligible after the date of the enactment of this subsection
for such assistance by reason of any limitation imposed by
Federal or State law on the maximum period such assistance is
payable to a family, and
``(ii) as having a hiring date which is not more than 2
years after the date of such cessation.
``(5) Qualified second-year wages.--For purposes of this
subsection, the term `qualified second-year wages' means,
with respect to any individual, the qualified wages
attributable to service rendered during the 1-year period
beginning on the day after the last day of the 1-year period
with respect to such individual determined under subsection
(b)(2).''
(b) Certain Older Food Stamp Recipients Treated as Members
of Targeted Group.--Paragraph (8) of section 51(d) (defining
qualified food stamp recipient) is amended to read as
follows:
``(8) Qualified food stamp recipient.--
``(A) In general.--The term `qualified food stamp
recipient' 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 being a member of a family receiving assistance
under a food stamp program under the Food Stamp Act of 1977
for the 6-month period ending on the hiring date.
``(B) Certain older recipients.--The term `qualified food
stamp recipient' includes any individual who is certified by
the designated local agency--
``(i) as having attained age 18 but not age 50 on the
hiring date,
``(ii) as being a recipient of benefits under the food
stamp program who is affected by section 6(o) of the Food
Stamp Act of 1977 but who has not been made ineligible for
refusing to work in accordance with section 6(o)(2)(A) of
such Act, or failing to comply with the requirements of a
work program under subparagraph (B), (C), or (D) of section
6(o)(2)(A) of such Act, and
``(iii) as having a hiring date which is not more than 1
year after the date of such cessation.
``(C) Termination.--In lieu of applying subsection (c)(4),
this subsection shall not apply to amounts paid or incurred
with respect to an individual who begins work for the
employer after September 30, 2000.''
(c) Effective Date.--The amendments made by this section
shall apply to individuals who begin work for the employer
after the date of the enactment of this Act.
______
MC CAIN AMENDMENTS NOS. 528-529
(Ordered to lie on the table.)
Mr. McCAIN submitted two amendments intended to be proposed by him to
the bill, S. 949, supra; as follows:
Amendment No. 528
On page 183, beginning with line 22, strike through line 18
on page 192.
____
Amendment No. 529
On page 192, line 18, after the period insert the
following: ``This subsection shall not take effect until the
first fiscal year beginning after the date on which an Act,
enacted after the date of enactment of this Act, takes effect
that provides for reform of Amtrak.''.
______
D'AMATO (AND DASCHLE) AMENDMENT NO. 530
(Ordered to lie on the table.)
[[Page S6532]]
Mr. D'AMATO (for himself and Mr. Daschle) submitted an amendment
intended to be proposed by him to the bill, S. 949, supra; as follows:
In section 1045, rollover of gain from qualified small
business stock to another qualified small business stock, on
page 106, line 12, strike ``5 years'' and in lieu of, insert
``6 months''
______
THOMAS AMENDMENT NO. 531
(Ordered to lie on the table.)
Mr. THOMAS submitted an amendment intended to be proposed by him to
the bill, S. 949, supra; as follows:
On page 267, between lines 15 and 16, insert the following:
SEC. . RESTORATION OF DEDUCTION FOR LOBBYING EXPENSES IN
CONNECTION WITH STATE LEGISLATION.
(a) In General.--Paragraph (2) of section 162(e) (relating
to denial of deduction for certain lobbying and political
activities) is amended--
(1) by inserting ``any State legislature or of'' before
``any local council'' in the material preceeding subparagraph
(A), and
(2) in subparagraph (B)(i), by striking ``such council''
and inserting ``such legislature, council,''.
(b) Clerical Amendment.--The paragraph heading of paragraph
(2) of section 162(e) is amended by inserting ``state or''
before ``local''.
(c) Effective Date.--The amendments made by this section
shall apply to amounts paid or incurred after the date of the
enactment of this Act.
SEC. . INCREASED MILEAGE REQUIREMENT FOR MOVING EXPENSES
DEDUCTION.
(a) In General.--Paragraph (1) of section 217(c) (relating
to moving expenses) is amended--
(1) in subparagraph (A), by striking ``50 miles'' and
inserting ``55 miles''; and
(2) in subparagraph (B), by striking ``50 miles'' and
inserting ``55 miles''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
1997.
______
LANDRIEU AMENDMENT NO. 532
(Ordered to lie on the table.)
Ms. LANDRIEU submitted an amendment intended to be proposed by her to
the bill, S. 949, supra; as follows:
On page 13, beginning on line 9, strike all through page
17, line 23, and insert the following:
``(2) Limitation based on adjusted gross income.--
``(A) In general.--The $500 amount in subsection (a) shall
be reduced (but not below zero) by $25 for each $1,000 (or
fraction thereof) by which the taxpayer's modified adjusted
gross income exceeds the threshold amount. For purposes of
the preceding sentence, the term `modified adjusted gross
income' means adjusted gross income increased by any
amount excluded from gross income under section 911, 931,
or 933.
``(B) Threshold amount.--For purposes of subparagraph (A),
the term `threshold amount' means--
``(i) $90,000 in the case of a joint return,
``(ii) $60,000 in the case of an individual who is not
married, and
``(iii) $45,000 in the case of a married individual filing
a separate return.
For purposes of this subparagraph, marital status shall be
determined under section 7703.
``(c) Qualifying Child.--For purposes of this section--
``(1) In general.--The term `qualifying child' means any
individual if--
``(A) the taxpayer is allowed a deduction under section 151
with respect to such individual for the taxable year,
``(B) such individual has not attained the age of 17 (age
of 18 in the case of taxable years beginning after 2002) as
of the close of the calendar year in which the taxable year
of the taxpayer begins, and
``(C) such individual bears a relationship to the taxpayer
described in section 32(c)(3)(B).
``(2) Exception for certain noncitizens.--The term
`qualifying child' shall not include any individual who would
not be a dependent if the first sentence of section 152(b)(3)
were applied without regard to all that follows `resident of
the United States'.
``(d) Taxable Year Must Be Full Taxable Year.--Except in
the case of a taxable year closed by reason of the death of
the taxpayer, no credit shall be allowable under this section
in the case of a taxable year covering a period of less than
12 months.
``(e) Recapture of Credit.--
``(1) In general.--If--
``(A) during any taxable year any amount is withdrawn from
a qualified tuition program or an education individual
retirement account maintained for the benefit of a
beneficiary and such amount is subject to tax under section
529(f) or 530(c)(3), and
``(B) the amount of the credit allowed under this section
for the prior taxable year was contingent on a contribution
being made to such a program or account for the benefit of
such beneficiary,
The taxpayer's tax imposed by this chapter for the taxable
year shall be increased by the lesser of the amount described
in subparagraph (A) or the credit described in subparagraph
(B).
``(2) No credits against tax, etc.--Any increase in tax
under this subsection shall not be treated as a tax imposed
by this chapter for purposes of determining--
``(A) the amount of any credit under this subpart or
subpart B or D of this part, and
``(B) the amount of the minimum tax imposed by section 55.
``(f) Other Definitions.--For purposes of this section, the
term `qualified tuition program' and `education individual
retirement account' have the meanings given such terms by
section 529 and 530, respectively.
``(g) Phasein of Credit.--In the case of taxable years
beginning in 1997--
``(1) subsection (a)(1) shall be applied by substituting
`$250' for `$500', and
``(2) subsection (c)(1)(B) shall be applied by substituting
`age of 13' for `age of 17'.''
(b) Conforming Amendment.--The table of sections for
supbart A of part IV of subchapter A of chapter 1 is amended
by inserting after the item relating to section 23 the
following new item:
``Sec. 24. Child tax credit.''
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
1996.
______
FAIRCLOTH AMENDMENT NO. 533
(Ordered to lie on the table.)
Mr. FAIRCLOTH submitted an amendment intended to be proposed by him
to bill, S. 949, supra; as follows:
On page 267, between lines 15 and 16, insert the following:
SEC. . CURRENT REFUNDINGS OF CERTAIN TAX-EXEMPT BONDS.
(a) In General.--Subsection (c) of section 10632 of the
Revenue Act of 1987 (relating to bonds issued by Indian
tribal governments) is amended by adding at the end the
following new sentence: ``The amendments made by this section
shall not apply to any obligation issued after such date if--
``(1) such obligation is issued (or is part of a series of
obligations issued) to refund an obligation issued on or
before such date,
``(2) the average maturity date of the issue of which the
refunding obligation is a part is not later than the average
maturity date of the obligations to be refunded by such
issue,
``(3) the amount of the refunding obligation does not
exceed the outstanding amount of the refunded obligation, and
``(4) the net proceeds of the refunding obligation are used
to redeem the refunded obligation not later than 90 days
after the date of the issuance of the refunding obligation.
For purposes of paragraph (2), average maturity shall be
determined in accordance with section 147(b)(2)(A) of the
Internal Revenue Code of 1986.''
(b) Effective Date.--The amendment made by subsection (a)
shall apply to refunding obligations issued after the date of
the enactment of this Act.
______
BROWNBACK (AND OTHERS) AMENDMENT NO. 534
(Ordered to lie on the table.)
Mr. BROWNBACK (for himself, Mr. Kohl, and Mr. McCain) submitted an
amendment intended to be proposed by them to the bill, S. 949; as
follows:
At the end of the pending Amendment, add the following:
TITLE __--BUDGET CONTROL
SEC. __01. SHORT TITLE; PURPOSE.
(a) Short Title.--This title may be cited as the
``Bipartisan Budget Enforcement Act of 1997''.
(b) Purpose.--The purpose of this title is--
(1) to ensure a balanced Federal budget by fiscal year
2002;
(2) to ensure that the Bipartisan Budget Agreement is
implemented; and
(3) to create a mechanism to monitor total costs of direct
spending programs, and, in the event that actual or projected
costs exceed targeted levels, to require the President and
Congress to address adjustments in direct spending.
SEC. __02. ESTABLISHMENT OF DIRECT SPENDING TARGETS.
(a) In General.--The initial direct spending targets for
each of fiscal years 1998 through 2002 shall equal total
outlays for all direct spending except net interest as
determined by the Director of the Office of Management and
Budget (hereinafter referred to in this title as the
``Director``) under subsection (b).
(b) Initial Report by Director.--
(1) In general.--Not later than 30 days after the date of
enactment of this title, the Director shall submit a report
to Congress setting forth projected direct spending targets
for each of fiscal years 1998 through 2002.
(2) Projections and assumptions.--The Director's
projections shall be based on legislation enacted as of 5
days before the report is submitted under paragraph (1). The
Director shall use the same economic and technical
assumptions used in preparing the concurrent resolution on
the budget for fiscal year 1998 (H.Con.Res. 84).
SEC. __03. ANNUAL REVIEW OF DIRECT SPENDING AND RECEIPTS BY
PRESIDENT.
As part of each budget submitted under section 1105(a) of
title 31, United States Code, the President shall provide an
annual review of direct spending and receipts, which shall
include--
(1) information on total outlays for programs covered by
the direct spending targets, including actual outlays for the
prior fiscal year and projected outlays for the current
fiscal year and the 5 succeeding fiscal years; and
[[Page S6533]]
(2) information on the major categories of Federal
receipts, including a comparison between the levels of those
receipts and the levels projected as of the date of enactment
of this title.
SEC. __04. SPECIAL DIRECT SPENDING MESSAGE BY PRESIDENT.
(a) Trigger.--If the information submitted by the President
under section __03 indicates--
(1) that actual outlays for direct spending in the prior
fiscal year exceeded the applicable direct spending target;
or
(2) that outlays for direct spending for the current or
budget year are projected to exceed the applicable direct
spending targets,
the President shall include in his budget a special direct
spending message meeting the requirements of subsection (b).
(b) Contents.--
(1) Inclusions.--The special direct spending message shall
include--
(A) an analysis of the variance in direct spending over the
direct spending targets; and
(B) the President's recommendations for addressing the
direct spending overages, if any, in the prior, current, or
budget year.
(2) Additional matters.--The President's recommendations
may consist of any of the following:
(A) Proposed legislative changes to recoup or eliminate the
overage for the prior, current, and budget years in the
current year, the budget year, and the 4 outyears.
(B) Proposed legislative changes to recoup or eliminate
part of the overage for the prior, current, and budget year
in the current year, the budget year, and the 4 outyears,
accompanied by a finding by the President that, because of
economic conditions or for other specified reasons, only some
of the overage should be recouped or eliminated by outlay
reductions or revenue increases, or both.
(C) A proposal to make no legislative changes to recoup or
eliminate any overage, accompanied by a finding by the
President that, because of economic conditions or for other
specified reasons, no legislative changes are warranted.
(c) Proposed Special Direct Spending Resolution.--If the
President recommends reductions consistent with subsection
(b)(2)(A) or (B), the special direct spending message shall
include the text of a special direct spending resolution
implementing the President's recommendations through
reconciliation directives instructing the appropriate
committees of the House of Representatives and Senate to
determine and recommend changes in laws within their
jurisdictions. If the President recommends no reductions
pursuant to (b)(2)(C), the special direct spending message
shall include the text of a special resolution concurring in
the President's recommendation of no legislative action.
SEC. __05. REQUIRED RESPONSE BY CONGRESS.
(a) In General.--It shall not be in order in the House of
Representatives or the Senate to consider a concurrent
resolution on the budget unless that conference report fully
addresses the entirety of any overage contained in the
applicable report of the President under section __04 through
reconciliation directives.
(b) Waiver and Suspension.--This section may be waived or
suspended in the Senate only by the affirmative vote of
three-fifths of the Members, duly chosen and sworn. This
section shall be subject to the provisions of section 258 of
the Balanced Budget and Emergency Deficit Control Act of
1985.
(c) Appeals.--Appeals in the Senate from the decisions of
the Chair relating to any provision of this section shall be
limited to 1 hour, to be equally divided between, and
controlled by, the appellant and the manager of the bill or
joint resolution, as the case may be. An affirmative vote of
three-fifths of the Members of the Senate, duly chosen and
sworn, shall be required in the Senate to sustain an appeal
of the ruling of the Chair on a point of order raised under
this section.
SEC. __06. RELATIONSHIP TO BALANCED BUDGET AND EMERGENCY
DEFICIT CONTROL ACT.
Reductions in outlays or increases in receipts resulting
from legislation reported pursuant to section __05 shall not
be taken into account for purposes of any budget enforcement
procedures under the Balanced Budget and Emergency Deficit
Control Act of 1985.
SEC. __07. ESTIMATING MARGIN.
For any fiscal year for which the overage is less than one-
half of 1 percent of the direct spending target for that
year, the procedures set forth in sections __04 and __05
shall not apply.
SEC. __08. EFFECTIVE DATE.
This title shall apply to direct spending targets for
fiscal years 1998 through 2002 and shall expire at the end of
fiscal year 2002.
______
SANTORUM (AND OTHERS) AMENDMENT NO. 535
(Ordered to lie on the table.)
Mr. SANTORUM (for himself, Mr. Abraham, Mr. Coats, Mr. Coverdell, Mr.
Gramm, Mr. Nickles, Mr. Enzi, Mr. Hagel, Mr. Allard, and Mr. Kyl)
submitted an amendment intended to be proposed by them to the bill, S.
949, supra; as follows:
On page 267, between lines 15 and 16, insert the following:
SEC. --. SENSE OF THE SENATE.
(a) Findings.--The Senate finds that--
(1) Congress has not provided a genuine tax cut for
America's middle-class families since 1981;
(2) President Clinton promised middle-class tax cuts in
1992;
(3) President Clinton raised taxes by $240,000,000,000 in
1993;
(4) President Clinton vetoed middle-class tax cuts in 1995;
(5) the middle-class American worker had to work until May
9 in order to earn enough money to pay all Federal, State,
and local taxes in 1997;
(6) the Joint Economic Committee reports that real total
Government taxes per household in 1994 totaled $18,600;
(7) more than 70 percent of the tax cuts in both the House
of Representatives and the Senate tax relief bills will go to
Americans earning less than $75,000 annually;
(8) the Joint Economic Committee estimates that a family of
4 earning $30,000 will receive 53 percent of the tax relief
under the reconciliation bill;
(9) the earned income tax credit was already expanded in
President Clinton's 1993 tax bill;
(10) the fiscal year 1998 budget resolution does not make
the $500-per-child tax credit refundable; and
(11) those who receive the earned income tax credit do not
pay Federal income taxes but receive a substantial cash
transfer from the Federal Government in the form of refund
checks above and beyond income tax rebates.
(b) Sense of the Senate.--It is the sense of the Senate
that America's middle-class taxpayers shoulder the biggest
tax burden and that only those who pay Federal income taxes
should benefit from the tax cuts contained in the Revenue
Reconciliation Act of 1997.
______
SANTORUM (AND OTHERS) AMENDMENT NO. 536
(Ordered to lie on the table.)
Mr. SANTORUM (for himself, Mr. Abraham, and Mr. Enzi) submitted an
amendment intended to be proposed by them to the bill, S. 949, supra;
as follows:
On page 267, between lines 15 and 16, insert the following:
SEC. . SENSE OF THE SENATE.
(a) Findings.--The Senate finds that--
(1) the Department of the Treasury relies upon the Family
Economic Income broad-based income concept to estimate family
incomes and the impact of Federal income tax relief;
(2) the Family Economic Income is constructed by adding to
adjusted gross income unreported and underreported income;
nontaxable transfer payments such as social security payments
and TANF payments; employer-provided fringe benefits; inside
build-up on pensions, IRAs, Keoghs, and life insurance; tax-
exempt interest; and imputed rent on owner-occupied housing;
(3) neither individual families nor the Internal Revenue
Service (IRS) rely on or use Family Economic Income as a
calculation of income;
(4) the Treasury Department, using Family Economic Income,
estimates that 65.5 percent of the tax relief under the
Revenue Reconciliation Act of 1997 will go to the top 20
percent of taxpayers;
(5) the Treasury Department, using Family Economic Income,
estimates that the top 10 percent of taxpayers would get 42.8
percent of the tax relief under the Revenue Reconciliation
Act of 1997;
(6) the Joint Committee on Taxation, using conventional
income calculations, estimates that 74 percent of the tax
relief under the reconciliation bill will actually benefit
those families with income under $75,000;
(7) the Joint Committee on Taxation, using conventional
income calculations, estimates that 93 percent of the tax
relief under the Revenue Reconciliation Act of 1997 will
actually benefit those families with income under $100,000;
and
(8) the Joint Economic Committee, using conventional income
calculations, estimates that a family of 4 earning $30,000
will receive 53 percent of the tax relief under the Revenue
Reconciliation Act of 1997.
(b) Sense of the Senate.--It is the sense of the Senate
that Family Economic Income overstates and unfairly skews
family incomes, making those with lower incomes appear to be
rich.
______
DOMENICI (AND LAUTENBERG) AMENDMENT NO. 537
Mr. DOMENICI (for himself and Mr. Lautenberg) proposed an amendment
to the bill. S. 949, supra; as follows:
At the end of the bill, add the following:
TITLE XV--BUDGET ENFORCEMENT
SEC. 1500. TABLE OF CONTENTS.
The table of contents for this title is as follows:
Sec. 1500. Table of contents.
Subtitle A--Amendments to the Congressional Budget and Impoundment
Control Act of 1974
Sec. 1511. Amendments to section 201.
Sec. 1512. Amendments to section 202.
Sec. 1513. Amendment to section 300.
Sec. 1514. Amendments to section 301.
Sec. 1515. Amendments to section 302.
Sec. 1516. Amendments to section 303.
Sec. 1517. Amendment to section 305.
[[Page S6534]]
Sec. 1518. Amendment to section 308.
Sec. 1519. Amendments to section 311.
Sec. 1520. Amendment to section 312.
Sec. 1521. Adjustments.
Sec. 1522. Amendments to title V.
Sec. 1523. Repeal of title VI.
Sec. 1524. Amendments to section 904.
Sec. 1525. Repeal of sections 905 and 906.
Sec. 1526. Amendments to sections 1022 and 1024.
Sec. 1527. Amendment to section 1026.
Subtitle B--Amendments to the Balanced Budget and Emergency Deficit
Control Act of 1985
Sec. 1551. Purpose.
Sec. 1552. General statement and definitions.
Sec. 1553. Enforcing discretionary spending limits.
Sec. 1554. Violent Crime Reduction Trust Fund.
Sec. 1555. Enforcing pay-as-you-go.
Sec. 1556. Reports and orders.
Sec. 1557. Exempt programs and activities.
Sec. 1558. General and special sequestration rules.
Sec. 1559. The baseline.
Sec. 1560. Technical correction.
Sec. 1561. Judicial review.
Sec. 1562. Effective date.
Sec. 1563. Reduction of preexisting balances and exclusion of effects
of this Act from paygo scorecard.
Subtitle A--Amendments to the Congressional Budget and Impoundment
Control Act of 1974
SEC. 1511. AMENDMENTS TO SECTION 201.
Section 201 of the Congressional Budget Act of 1974 is
amended by redesignating subsection (g) (relating to revenue
estimates) as subsection (f).
SEC. 1512. AMENDMENTS TO SECTION 202.
(a) Assistance to Budget Committees.--The first sentence of
section 202(a) of the Congressional Budget Act of 1974 is
amended by inserting ``primary'' before ``duty''.
(b) Elimination of Executed Provision.--Section 202 of the
Congressional Budget Act of 1974 is amended by striking
subsection (e) and by redesignating subsections (f), (g), and
(h) as subsections (e), (f), and (g), respectively.
SEC. 1513. AMENDMENT TO SECTION 300.
The item relating to February 25 in the timetable set forth
in section 300 of the Congressional Budget Act of 1974 is
amended by striking ``February 25'' and inserting ``Within 6
weeks after President submits budget''.
SEC. 1514. AMENDMENTS TO SECTION 301.
(a) Terms of Budget Resolutions.--Section 301(a) of the
Congressional Budget Act of 1974 is amended by striking ``,
and planning levels for each of the two ensuing fiscal
years,'' and inserting ``and for at least each of the 4
ensuing fiscal years''.
(b) Contents of Budget Resolutions.--Paragraphs (1) and (4)
of section 301(a) of the Congressional Budget Act of 1974 are
amended by striking ``, budget outlays, direct loan
obligations, and primary loan guarantee commitments'' each
place it appears and inserting ``and budget outlays''.
(c) Additional Matters.--Section 301(b) of the
Congressional Budget Act of 1974 is amended by--
(1) amending paragraph (7) to read as follows--
``(7) set forth pay-as-you-go procedures in the Senate
whereby committee allocations, aggregates, and other levels
can be revised for legislation if such legislation would not
increase the deficit or would not increase the deficit when
taken with other legislation enacted after the adoption of
the resolution for the first fiscal year or the total period
of fiscal years covered by the resolution;'';
(2) in paragraph 8, striking the period and inserting ``;
and''; and
(3) adding the following new paragraph:
``(9) set forth direct loan obligations and primary loan
commitment guarantee levels.''.
(d) Views and Estimates.--The first sentence of section
301(d) of the Congressional Budget Act of 1974 is amended by
inserting ``or at such time as may be requested by the
Committee on the Budget,'' after ``Code,''.
(e) Hearings and Report.--Section 301(e) of the
Congressional Budget Act of 1974 is amended--
(1) by striking ``In developing'' and inserting the
following:
``(1) In general.--In developing''; and
(2) by striking the sentence beginning with ``The report
accompanying '' and all that follows through the end of the
subsection and inserting the following:
``(2) Required contents of report.--The report accompanying
such concurrent resolution shall include--
``(A) a comparison of the appropriate levels of total new
budget authority, total budget outlays, and total revenues as
set forth in such concurrent resolution with those requested
in the budget submitted by the President;
``(B) with respect to each major functional category, an
estimate of total new budget authority and total outlays with
the estimates divided between permanent authority and funds
provided in appropriations Acts;
``(C) the economic assumptions which underlie each of the
matters set forth in such concurrent resolution and any
alternative economic assumptions and objectives that the
committee considered;
``(D) projections for the period of 5 fiscal years
beginning with such fiscal year, of the estimated levels of
total new budget authority, total outlays and total revenues
and the surplus or deficit for each fiscal year;
``(E) information, data, and comparisons indicating the
manner in which, and the basis on which, the committee
determined each of the matters set forth in the concurrent
resolutions;
``(F) the estimated levels of tax expenditures (the tax
expenditures budget) by major items and functional categories
for the President's budget and in the concurrent resolution;
and
``(G) allocations described in section 302(a).
``(3) Additional contents of report.--The report
accompanying such concurrent resolution may include--
``(A) a statement of any significant changes in the
proposed levels of Federal assistance to State and local
governments;
``(B) an allocation of the level of Federal revenues
recommended in the concurrent resolution among the major
sources of such revenues;
``(C) information, data, and comparisons on the share of
total Federal budget outlays and of gross domestic product
devoted to investment in the budget submitted by the
President and in the concurrent resolution; and
``(D) other matters, relating to the budget and fiscal
policy, the committee deems appropriate.''.
(f) Social Security Corrections.--Section 301(i) of the
Congressional Budget Act of 1974 is amended by--
(1) inserting ``Social security point of order.--'' after
``(i)''; and
(2) striking ``as reported to the Senate'' and inserting
``(or amendment, motion, or conference report on such a
resolution)''.
(g) Repeal of Budget Resolution Provision.--Section 22 of
House Concurrent Resolution 218 (103d Congress) is repealed.
SEC. 1515. AMENDMENTS TO SECTION 302.
(a) Allocations and Suballocations.--Subsections (a) and
(b) of section 302 of the Congressional Budget Act of 1974
are amended to read as follows:
``(a) Committee Spending Allocations.--
``(1) House of representatives.--
``(A) Allocation among committees.--The joint explanatory
statement accompanying a conference report on a budget
resolution shall include allocations, consistent with the
resolution recommended in the conference report, of the
appropriate levels (for each fiscal year covered by that
resolution and a total for all such years) of--
``(i) total new budget authority;
``(ii) total entitlement authority; and
``(iii) total outlays;
among each committee of the House of Representatives that has
jurisdiction over legislation providing or creating such
amounts.
``(B) No double counting.--Any item allocated to one
committee of the House of Representatives may not be
allocated to another such committee.
``(C) Further division of amounts.--The amounts allocated
to each committee for each fiscal year, other than the
Committee on Appropriations, shall be further divided between
amounts provided or required by law on the date of filing of
that conference report and amounts not so provided or
required. The amounts allocated to the Committee on
Appropriations for each fiscal year shall be further divided
between discretionary and mandatory amounts or programs, as
appropriate.
``(2) Senate allocation among committees.--The joint
explanatory statement accompanying a conference report on a
budget resolution shall include an allocation, consistent
with the resolution recommended in the conference report, of
the appropriate levels of--
``(A) total new budget authority; and
``(B) total outlays;
among each committee of the Senate that has jurisdiction over
legislation providing or creating such amounts.
``(3) Amounts not allocated.--
``(A) In the house.--In the House of Representatives, if a
committee receives no allocation of new budget authority,
entitlement authority, or outlays, that committee shall be
deemed to have received an allocation equal to zero for new
budget authority, entitlement authority, or outlays.
``(B) In the senate.--In the Senate, if a committee
receives no allocation of new budget authority, outlays, or
social security outlays, that committee shall be deemed to
have received an allocation equal to zero for new budget
authority, outlays, or social security outlays.
``(4) Scope of allocations in the senate.--In the Senate,
the allocations made pursuant to paragraph (2) shall be made
for all committees for the first fiscal year covered by the
resolution and for all committees other than the Committee on
Appropriations for the period of fiscal years covered by such
resolution.
``(b) Suballocations by Appropriation Committees.--As soon
as practicable after a concurrent resolution on the budget is
agreed to, the Committee on Appropriations of each House
(after consulting with the Committee on Appropriations of the
other House) shall suballocate each amount allocated to it
for the budget year under subsection (a)(1)(A) or (a)(2)
among its subcommittees. Each Committee on Appropriations
shall promptly report to its House suballocations made or
revised under this paragraph.''.
(b) Point of Order.--Section 302(c) of the Congressional
Budget Act of 1974 is amended to read as follows:
``(c) Point of Order.--After the Committee on
Appropriations has received an allocation pursuant to
subsection (a) for a fiscal year, it shall not be in order in
the House of
[[Page S6535]]
Representatives or the Senate to consider any bill, joint
resolution, amendment, motion, or conference report providing
new budget authority for that fiscal year within the
jurisdiction of that committee, until such committee makes
the suballocations required by subsection (b).''.
(c) Enforcement of Point of Order.--Section 302(f)(2) of
the Congressional Budget Act of 1974 is amended to read as
follows:
``(2) Enforcement of committee allocations and
suballocations.--After a concurrent resolution on the budget
is agreed to, it shall not be in order in the Senate to
consider any bill, joint resolution, amendment, motion, or
conference report that would cause--
``(A) in the case of any committee except the Committee on
Appropriations, the appropriate allocation of new budget
authority or outlays under subsection (a) to be exceeded; or
``(B) in the case of the Committee on Appropriations, the
appropriate suballocation of new budget authority or outlays
under subsection (b) to be exceeded.''.
(d) Separate Allocations.--Section 302(g) is amended to
read as follows:
``(g) Separate Allocations.--The Committees on
Appropriations and the Budget shall make separate allocations
under subsections (a) and (b) consistent with the categories
in section 251(c) of the Balanced Budget and Emergency
Deficit Control Act of 1985.''
SEC. 1516. AMENDMENTS TO SECTION 303.
(a) In General.--Section 303 of the Congressional Budget
Act of 1974 is amended--
(1) by striking ``NEW CREDIT AUTHORITY,'' in the center
heading;
(2) by striking paragraph (4) of subsection (a) and be
redesignating paragraphs (5) and (6) as paragraphs (4) and
(5), respectively;
(3) in subsection (b)(1)(A), by inserting ``advanced,
discretionary'' before ``new budget authority''; and
(4) by striking subsection (c).
(b) Conforming Amendment.--The item relating to section 303
in the table of contents set forth in section 1(b) of the
Congressional Budget and Impoundment Control Act of 1974 is
amended by striking ``new credit authority,''.
SEC. 1517. AMENDMENT TO SECTION 305.
Section 305(a)(1) of the Congressional Budget Act of 1974
is amended by inserting ``when the House is not in session''
after ``holidays'' each place it appears.
SEC. 1518. AMENDMENT TO SECTION 308.
(a) Elimination of References to Credit Authority.--Section
308 of the Congressional Budget Act of 1974 is amended--
(1) by striking the center heading and inserting the
following:
``REPORTS ON SPENDING AND REVENUE LEGISLATION'';
(2) in paragraphs (1) and (2) of subsection (a), by
striking ``or new credit authority,'' each place it appears
and insert ``and'' before ``new spending'' each place it
appears;
(3) in subsection (b)(1), by striking ``or new credit
authority,'' and insert ``and'' before ``new spending''; and
(4) in subsection (c), by inserting ``and'' after the
semicolon at the end of paragraph (3), strike ``; and'' at
the end of paragraph (4) and insert a period; and strike
paragraph (5).
(b) Conforming Amendment.--The item relating to section 308
in the table of contents set forth in section 1(b) of the
Congressional Budget and Impoundment Control Act of 1974 is
amended by striking ``or new credit authority'' and by
inserting ``and'' after the first comma.
SEC. 1519. AMENDMENTS TO SECTION 311.
Section 311 of the Congressional Budget Act of 1974 is
amended to read as follows:
``NEW BUDGET AUTHORITY, NEW SPENDING AUTHORITY, AND REVENUE LEGISLATION
MUST BE WITHIN APPROPRIATE LEVELS
``Sec. 311. (a) Enforcement of Budget Aggregates.--
``(1) In the house of representatives.--Except as provided
by subsection (c), after the Congress has completed action on
a concurrent resolution on the budget for a fiscal year, it
shall not be in order in the House of Representatives to
consider any bill, joint resolution, amendment, motion, or
conference report providing new budget authority for such
fiscal year, providing new entitlement authority effective
during such fiscal year, or reducing revenues for such fiscal
year, if--
``(A) the enactment of such bill or resolution as reported;
``(B) the adoption and enactment of such amendment; or
``(C) the enactment of such bill or resolution in the form
recommended in such conference report;
would cause the appropriate level of total new budget
authority or total budget outlays set forth in the most
recently agreed to concurrent resolution on the budget for
such fiscal year to be exceeded, or would cause revenues to
be less than the appropriate level of total revenues set
forth in such concurrent resolution except in the case that a
declaration of war by the Congress is in effect.
``(2) In the senate.--After a concurrent resolution on the
budget is agreed to, it shall not be in order in the Senate
to consider any bill, resolution, amendment, motion, or
conference report that--
``(A) would cause the appropriate level of total new budget
authority or total outlays set forth for the first fiscal
year in such resolution to be exceeded; or
``(B) would cause revenues to be less than the appropriate
level of total revenues set forth for the first fiscal year
covered by such resolution or for the period including the
first fiscal year plus the following 4 fiscal years in such
resolution.
``(3) Enforcement of social security levels in the
senate.--After a concurrent resolution on the budget is
agreed to, it shall not be in order in the Senate to consider
any bill, resolution, amendment, motion, or conference report
that would cause a decrease in social security surpluses or
an increase in social security deficits derived from the
levels of social security revenues and social security
outlays set forth for the first fiscal year covered by the
resolution and for the period including the first fiscal year
plus the following 4 fiscal years in such resolution.
``(b) Social Security Levels.--
``(1) In general.--For the purposes of subsection (a)(3),
social security surpluses equal the excess of social security
revenues over social security outlays in a fiscal year or
years with such an excess and social security deficits equal
the excess of social security outlays over social security
revenues in a fiscal year or years with such an excess.
``(2) Tax treatment.--For the purposes of this section, no
provision of any legislation involving a change in chapter 1
of the Internal Revenue Code of 1986 shall be treated as
affecting the amount of social security revenues or outlays
unless such provision changes the income tax treatment of
social security benefits.
``(c) Exception in the House of Representatives.--
Subsection (a)(1) shall not apply in the House of
Representatives to any bill, resolution, or amendment which
provides new budget authority or new entitlement authority
effective during such fiscal year, or to any conference
report on any such bill or resolution, if--
``(1) the enactment of such bill or resolution as reported;
``(2) the adoption and enactment of such amendment; or
``(3) the enactment of such bill or resolution in the form
recommended in such conference report;
would not cause the appropriate allocation of new
discretionary budget authority or new entitlement authority
made pursuant to section 302(a) for such fiscal year, for the
committee within whose jurisdiction such bill, resolution, or
amendment falls, to be exceeded.''.
SEC. 1520. AMENDMENT TO SECTION 312.
(a) In General.--Section 312 of the Congressional Budget
Act of 1974 is amended to read as follows:
``points of order
``Sec. 312. (a) Determinations.--For purposes of this title
and title IV, the levels of new budget authority, budget
outlays, spending authority as described in section
401(c)(2), direct spending, new entitlement authority, and
revenues for a fiscal year shall be determined on the basis
of estimates made by the Committee on the Budget of the House
of Representatives or the Senate, as the case may be.
``(b) Discretionary Spending Point of Order in the
Senate.--
``(1) Except as otherwise provided in this subsection, it
shall not be in order in the Senate to consider any
concurrent resolution on the budget (or amendment, motion, or
conference report on such a resolution) that would exceed any
of the discretionary spending limits in section 251(c) of the
Balanced Budget and Emergency Deficit Control Act of 1985.
``(2) This subsection shall not apply if a declaration of
war by the Congress is in effect or if a joint resolution
pursuant to section 258 of the Balanced Budget and Emergency
Deficit Control Act of 1985 has been enacted.
``(c) Maximum Deficit Amount Point of Order in the
Senate.--It shall not be in order in the Senate to consider
any concurrent resolution on the budget for a fiscal year
under section 301, or to consider any amendment to that
concurrent resolution, or to consider a conference report on
that concurrent resolution--
``(1) if the level of total budget outlays for the first
fiscal year that is set forth in that concurrent resolution
or conference report exceeds the recommended level of Federal
revenues set forth for that year by an amount that is greater
than the maximum deficit amount, if any, specified in the
Balanced Budget and Emergency Deficit Control Act of 1985 for
such fiscal year; or
``(2) if the adoption of such amendment would result in a
level of total budget outlays for that fiscal year which
exceeds the recommended level of Federal revenues for that
fiscal year, by an amount that is greater than the maximum
deficit amount, if any, specified in the Balanced Budget and
Emergency Deficit Control Act of 1985 for such fiscal year.
``(d) Timing of Points of Order in the Senate.--A point of
order under this Act may not be raised against a bill,
resolution, amendment, motion, or conference report while an
amendment or motion, the adoption of which would remedy the
violation of this Act, is pending before the Senate.
``(e) Points of Order in the Senate Against Amendments
Between the Houses.--Each provision of this Act that
establishes a point of order against an amendment also
establishes a point of order in the Senate against an
amendment between the Houses. If a point of order under this
Act is raised in the Senate against an amendment
[[Page S6536]]
between the Houses, and the point of order is sustained, the
effect shall be the same as if the Senate had disagreed to
the amendment.
``(f) Effect of a Point of Order on a Bill in the Senate.--
In the Senate, if the Chair sustains a point of order under
this Act against a bill, the Chair shall then send the bill
to the committee of appropriate jurisdiction for further
consideration.''.
(b) Conforming Amendments.--Sections 302(g), 311(c), and
313(e) of the Congressional Budget Act of 1974 are repealed.
SEC. 1521. ADJUSTMENTS.
(a) In General.--Title III of the Congressional Budget Act
of 1974 is amended by adding at the end the following new
sections:
``adjustments
``Sec. 314. (a) Adjustments.--When--
``(1)(A) the Committee on Appropriations reports an
appropriation measure for fiscal year 1998, 1999, 2000, 2001,
or 2002 that specifies an amount for emergencies pursuant to
section 251(b)(2)(A) of the Balanced Budget and Emergency
Deficit Control Act of 1985 or for continuing disability
reviews pursuant to section 251(b)(2)(C) of that Act;
``(B) any other committee reports emergency legislation
described in section 252(e) of that Act;
``(C) the Committee on Appropriations reports an
appropriation measure for fiscal year 1998, 1999, 2000, 2001,
or 2002 that includes an appropriation with respect to clause
(i) or (ii), the adjustment shall be the amount of budget
authority in the measure that is the dollar equivalent, in
terms of Special Drawing Rights, of--
``(i) an increase in the United States quota as part of the
International Monetary Fund Eleventh General Review of Quotas
(United States Quota); or
``(ii) an increase in the maximum amount available to the
Secretary of the Treasury pursuant to section 17 of the
Bretton Woods Agreements Act, as amended from time to time
(New Arrangements to Borrow); or
``(D) the Committee on Appropriations reports an
appropriation measure for fiscal year 1998, 1999, or 2000
that includes an appropriation for arrearages for
international organizations, international peacekeeping, and
multilateral development banks during that fiscal year, and
the sum of the appropriations for the period of fiscal years
1998 through 2000 does not exceed $1,884,000,000 in budget
authority; or
``(2) a conference committee submits a conference report
thereon;
the chairman of the Committee on the Budget of the Senate or
House of Representatives (whichever is appropriate) shall
make the adjustments referred to in subsection (c) to reflect
the additional new budget authority for such matter provided
in that measure or conference report and the additional
outlays flowing from such amounts for such matter.
``(b) Application of Adjustments.--The adjustments and
revisions to allocations, aggregates, and limits made by the
Chairman of the Committee on the Budget pursuant to
subsection (a) for legislation shall only apply while such
legislation is under consideration shall only permanently
take effect upon the enactment of that legislation.
``(c) Content of Adjustments.--The adjustments referred to
in subsection (a) shall consist of adjustments, as
appropriate, to--
``(1) the discretionary spending limits as set forth in the
most recently adopted concurrent resolution on the budget;
``(2) the allocations made pursuant to the most recently
adopted concurrent resolution on the budget pursuant to
section 302(a); and
``(3) the budgetary aggregates as set forth in the most
recently adopted concurrent resolution on the budget.
``(d) Reporting Revised Suballocations.--Following the
adjustments made under subsection (a), the Committees on
Appropriations of the Senate and the House of Representatives
shall report appropriately revised suballocations pursuant to
section 302(b) to carry out this subsection.
``(e) Definitions.--As used in subsection (a)(1)(A), when
referring to continuing disability reviews, the terms
`continuing disability reviews', `additional new budget
authority', and `additional outlays' shall have the same
meanings as provided in section 251(b)(2)(C)(ii) of the
Balanced Budget and Emergency Deficit Control Act of 1985.''.
(b) Table of Contents.--The table of contents set forth in
section 1(b) of the Congressional Budget and Impoundment
Control Act of 1974 is amended by--
(1) striking the item for section 312 and inserting the
following:
``Sec. 312. Points of order.''; and
(2) adding after the item relating to section 313 the
following new item:
``Sec. 314. Adjustments.''.
SEC. 1522. AMENDMENTS TO TITLE V.
(a) Section 502.--Section 502 of the Federal Credit Reform
Act of 1990 is amended as follows:
(1) In the second sentence of paragraph (1), insert ``and
refinancing arrangements that defer payment for more than 90
days, including the sale of a government asset on credit
terms'' before the period.
(2) In paragraph (5)(A), insert ``or modification thereof''
before the first comma.
(3) In paragraph (5)(B)(iii), strike ``and other
recoveries'' and insert ``, other recoveries, and routine
workouts of troubled loans or loans in imminent default when
those workouts are to maximize repayments to the Government
or to minimize claims on the Government''.
(4) In paragraph (5)(C), strike ``, and'' at the end of
clause (i), strike ``the'' in clause (ii) and strike the
period and insert ``, and'' at the end of that clause, and at
the end add the following new clause:
``(iii) routine workouts of troubled loans or loans in
imminent default when those workouts are to maximize the
repayments to the Government or to minimize claims on the
Government.''.
(5) In paragraph (5), amend subparagraph (D) to read as
follows:
``(D) The cost of a modification is the difference in cost
that results from the modification of a direct loan or loan
guarantee (or direct loan obligation or loan guarantee
commitment). This difference in cost is the difference
between the currently estimated net present value of the
remaining cash flows under the terms of the direct loan or
loan guarantee contract assumed in the most recent
President's budget submitted to Congress, and the currently
estimated net present value of the remaining cash flows under
the terms of the contract, as modified. Except for interest
rates, the estimates shall be consistent with the economic
and technical assumptions underlying the most recent
President's budget submitted to Congress.''.
(6) Redesignate paragraph (9) as paragraph (10) and after
paragraph (8) add the following new paragraph:
``(9) The term `modification' means any Government action
that alters the estimated cost of an outstanding direct loan
(or direct loan obligation) or an outstanding loan guarantee
(or loan guarantee commitment) from the estimate based on the
cash flows contained in the most recent President's budget
submitted to Congress. This includes the sale of loan assets,
with or without recourse, and the purchase of guaranteed
loans. This also includes any action resulting from new
legislation, or from the exercise of administrative
discretion under existing law, that directly or indirectly
alters the estimated cost of outstanding direct loans (or
direct loan obligations) or loan guarantees (or loan
guarantee commitments) such as a change in collection
procedures. The term `modification' does not include the
routine administrative work-outs of troubled loans or loans
in imminent default. Work-outs are actions undertaken to
maximize the repayments to the Government under existing
direct loans or to minimize claims under existing loan
guarantees. The expected effects of such work-outs shall be
included in the original estimate of the cash flows. Insofar
as the effects on cash flows are more or less than originally
estimated, the differences in cash flows shall be included in
a reestimate of the cost. The term `modification' does not
include changes in loan or guarantee terms resulting from the
exercise by the borrower of an option included in the loan or
guarantee contract. The expected effects of such changes in
terms shall be included in the original estimate of the cash
flow. Insofar as the effects on cash flow are more or less
than originally estimated, the differences in cash flow shall
be included in a reestimate of the cost; and''.
(b) Section 504.--Section 504 of the Federal Credit Reform
Act of 1990 is amended as follows:
(1) Amend subsection (b)(1) to read as follows:
``(1) new budget authority to cover their costs is provided
in advance in appropriation Acts;''.
(2) In subsection (b)(2), strike ``enacted'' and insert
``provided in an appropriation Act''.
(3) In subsection (d)(1), strike ``directly or indirectly
alter the costs of outstanding direct loans and loan
guarantees'' and insert ``modify outstanding direct loans (or
direct loan obligations) or loan guarantees (or loan
guarantee commitments)''.
(4) In subsection (e), strike ``A direct loan obligation or
loan guarantee commitment'' and insert ``An outstanding
direct loan (or direct loan obligation) or loan guarantee (or
loan guarantee commitment)'', after ``unless'' insert
``new'', and strike ``or from other budgetary resources''.
(c) Section 505.--Section 505 of the Federal Credit Reform
Act of 1990 is amended as follows:
(1) In subsection (c), by inserting before the period at
the end of the second sentence the following: ``, except that
the rate of interest charged by the Secretary on lending to
financing accounts (including amounts treated as lending to
financing accounts by the Federal Financing Bank (hereinafter
in this subsection referred to as the `Bank`) pursuant to
section 406(b)) and the rate of interest paid to financing
accounts on uninvested balances in financing accounts shall
be the same as the rate determined pursuant to section
502(5)(E). For guaranteed loans financed by the Bank and
treated as direct loans by a Federal agency pursuant to
section 406(b), any fee or interest surcharge (the amount by
which the interest rate charged exceeds the rate determined
pursuant to section 502(5)(E)) that the Bank charges to a
private borrower pursuant to section 6(c) of the Federal
Financing Bank Act of 1973 shall be considered a cash flow to
the Government for the purposes of determining the cost of
the direct loan pursuant to section 502(5). All such amounts
shall be credited to the appropriate financing account. The
Bank is authorized to require reimbursement from a Federal
agency to cover the administrative expenses of the Bank that
are attributable to the direct loans financed for that
agency. All such payments by an agency shall be considered
administrative
[[Page S6537]]
expenses subject to section 504(g). This section shall apply
to transactions related to direct loan obligations or loan
guarantee commitments made on or after October 1, 1991.''.
(2) In subsection (c), by striking ``supercede'' and
inserting ``supersede''.
(3) By amending subsection (d) to read as follows:
``(d) Authorization for Liquidating Accounts.--(1) Amounts
in liquidating accounts shall be available only for payments
resulting from direct loan obligations or loan guarantee
commitments made prior to October 1, 1991. These payments
shall include--
``(A) interest payments and principal repayments to the
Treasury or the Federal Financing Bank for amounts borrowed;
``(B) disbursements of loans;
``(C) default and other guarantee claim payments;
``(D) interest supplement payments;
``(E) payments for the costs of foreclosing, managing, and
selling collateral that are capitalized or routinely deducted
from the proceeds of sales;
``(F) payments to financing accounts when required for
modifications;
``(G) administrative expenses, if--
``(i) amounts credited to the liquidating account would
have been available for administrative expenses under a
provision of law in effect prior to October 1, 1991; and
``(ii) no direct loan obligation or loan guarantee
commitment has been made, or any modification of a direct
loan or loan guarantee has been made, since September 30,
1991; and
``(H) such other payments as are necessary for the
liquidation of such direct loan obligations and loan
guarantee commitments.
``(2) Amounts credited to liquidating accounts in any year
shall be available only for payments required in that year.
Any unobligated balances in liquidating accounts at the end
of a fiscal year shall be transferred to miscellaneous
receipts as soon as practicable after the end of the fiscal
year.
``(3) If funds in liquidating accounts are insufficient to
satisfy obligations and commitments of said accounts, there
is hereby provided permanent, indefinite authority to make
any payments required to be made on such obligations and
commitments.''.
SEC. 1523. REPEAL OF TITLE VI.
(a) Repealer.--Title VI of the Congressional Budget Act of
1974 is repealed.
(b) Conforming Amendments.--Title VI of the table of
contents set forth in section 1(b) of the Congressional
Budget and Impoundment Control Act of 1974 is repealed.
SEC. 1524. AMENDMENTS TO SECTION 904.
(a) Waivers.--Section 904(c) of the Congressional Budget
Act of 1974 is amended to read as follows:
``(c) Waivers.--
``(1) Sections 305(b)(2), 305(c)(4), 306, 310(d)(2), 313,
904(c), and 904(d) of this Act may be waived or suspended in
the Senate only by the affirmative vote of three-fifths of
the Members, duly chosen and sworn.
``(2) Sections 301(i), 302(c), 302(f), 310(g), 311(a),
312(b), and 312(c) of this Act and sections 258(a)(4)(C),
258A(b)(3)(C)(I), 258B(f)(1), 258B(h)(1), 258(h)(3),
258C(a)(5), and 258C(b)(1) of the Balanced Budget and
Emergency Deficit Control Act of 1985 may be waived or
suspended in the Senate only by the affirmative vote of
three-fifths of the Members, duly chosen and sworn.''.
(b) Appeals.--Section 904(d) of the Congressional Budget
Act of 1974 is amended to read as follows:
``(d) Appeals.--
``(1) Appeals in the Senate from the decisions of the Chair
relating to any provision of title III or IV or section 1017
shall, except as otherwise provided therein, be limited to 1
hour, to be equally divided between, and controlled by, the
mover and the manager of the resolution, concurrent
resolution, reconciliation bill, or rescission bill, as the
case may be.
``(2) An affirmative vote of three-fifths of the Members,
duly chosen and sworn, shall be required in the Senate to
sustain an appeal of the ruling of the Chair on a point of
order raised under sections 305(b)(2), 305(c)(4), 306,
310(d)(2), 313, 904(c), and 904(d) of this Act.
``(3) An affirmative vote of three-fifths of the Members,
duly chosen and sworn, shall be required in the Senate to
sustain an appeal of the ruling of the Chair on a point of
order raised under sections 301(i), 302(c), 302(f), 310(g),
311(a), 312(b), and 312(c) of this Act and sections
258(a)(4)(C), 258A(b)(3)(C)(I), 258B(f)(1), 258B(h)(1),
258(h)(3), 258C(a)(5), and 258C(b)(1) of the Balanced Budget
and Emergency Deficit Control Act of 1985.''.
(c) Expiration of Supermajority Voting Requirements.--
Section 904 of the Congressional Budget Act of 1974 is
amended by adding at the end the following:
``(e) Expiration of Certain Supermajority Voting
Requirements.--Subsections (c)(2) and (d)(3) shall expire on
September 30, 2002.''.
SEC. 1525. REPEAL OF SECTIONS 905 AND 906.
(a) Repealer.--Sections 905 and 906 of the Congressional
Budget and Impoundment Control Act of 1974 are repealed.
(b) Conforming Amendments.--The table of contents set forth
in section 1(b) of the Congressional Budget and Impoundment
Control Act of 1974 is amended by striking the items relating
to sections 905 and 906.
SEC. 1526. AMENDMENTS TO SECTIONS 1022 AND 1024.
(a) Section 1022.--Section 1022(b)(1)(F) of Congressional
Budget and Impoundment Control Act of 1974 is amended by
striking ``section 601'' and inserting ``section 251(c) the
Balanced Budget and Emergency Deficit Control Act of 1985''.
(b) Section 1024.--Section 1024(a)(1)(B) of Congressional
Budget and Impoundment Control Act of 1974 is amended by
striking ``section 601(a)(2)'' and inserting ``section 251(c)
the Balanced Budget and Emergency Deficit Control Act of
1985''.
SEC. 1527. AMENDMENT TO SECTION 1026.
Section 1026(7)(A)(iv) of the Congressional Budget and
Impoundment Control Act of 1974 is amended by striking
``and'' the second place it appears and inserting ``or''.
Subtitle B--Amendments to the Balanced Budget and Emergency Deficit
Control Act of 1985
SEC. 1551. PURPOSE.
This subtitle extends discretionary spending limits and
pay-as-you-go requirements.
SEC. 1552. GENERAL STATEMENT AND DEFINITIONS.
(a) General Statement.--Section 250(b) of the Balanced
Budget and Emergency Deficit Control Act of 1985 is amended
by striking the first two sentences and inserting the
following: ``This part provides for the enforcement of a
balanced budget by fiscal year 2002 as called for in House
Concurrent Resolution 84 (105th Congress, 1st session).''.
(b) Definitions.--Section 250(c) of the Balanced Budget and
Emergency Deficit Control Act of 1985 is amended--
(1) by striking paragraph (4) and inserting the following:
``(4) The term `category' means defense, nondefense, and
violent crime reduction discretionary appropriations as
specified in the joint explanatory statement accompanying a
conference report on the Balanced Budget Act of 1997. New
accounts or activities shall be categorized only after
consultation with the committees on Appropriations and the
Budget of the House of Representatives and the Senate and
such consultation shall include written communication to such
committees that affords such committees the opportunity to
comment before official action is taken with respect to new
accounts or activities.'';
(2) by striking paragraph (6) and inserting the following:
``(6) The term `budgetary resources' means new budget
authority, unobligated balances, direct spending authority,
and obligation limitations.'';
(3) in paragraph (9), by striking ``submission of the
fiscal year 1992 budget that are not included with a budget
submission'' and inserting ``that budget submission that are
not included with that budget submission'';
(4) in paragraph (14), by inserting ``first 4'' before
``fiscal years'' and by striking ``1995'' and inserting
``2006''; and
(5) by striking paragraphs (17) and (20) and by
redesignating paragraphs (18), (19), and (21) as paragraphs
(17), (18), and (19), respectively.
SEC. 1553. ENFORCING DISCRETIONARY SPENDING LIMITS.
(a) Extension Through Fiscal Year 2002.--Section 251 of the
Balanced Budget and Emergency Deficit Control Act of 1985 is
amended--
(1) in the side heading of subsection (a), by striking
``1991-1998'' and inserting ``1997-2002'';
(2) in subsection (a)(7), by inserting ``(excluding
Saturdays, Sundays, and legal holidays)'' after ``days'';
(3) in the first sentence of subsection (b)(1), by striking
``1992, 1993, 1994, 1995, 1996, 1997 or 1998'' and inserting
``1997 or any fiscal year thereafter through 2002'' and by
striking ``through 1998'' and inserting ``through 2002'';
(4) in subsection (b)(1), by striking ``the following:''
and all that follows through ``in concepts and definitions''
the first place it appears and inserting ``the following: the
adjustments'' and by striking subparagraphs (B) and (C);
(5) in subsection (b)(1), as amended, by striking the last
sentence and inserting ``Changes in concepts and definitions
may only be made after consultation with the committees on
Appropriations and the Budget of the House of Representatives
and the Senate and such consultation shall include written
communication to such committees that affords such committees
the opportunity to comment before official action is taken
with respect to such changes.'';
(6) in subsection (b)(2), by striking ``1991, 1992, 1993,
1994, 1995, 1996, 1997, or 1998'' and inserting ``1997 or any
fiscal year thereafter through 2002'', by striking ``through
1998'' and inserting ``through 2002'', and by striking
subparagraphs (A), (B), (C), (E), and (G), and by
redesignating subparagraphs (D), (F), and (H) as
subparagraphs (A), (B), and (C), respectively;
(7) in subsection (b)(2)(A), as redesignated, by striking
``(i)'', by striking clause (ii), and by inserting ``fiscal''
before ``years'';
(8) in subsection (b)(2)(B), as redesignated, by striking
everything after ``the adjustment in outlays'' and inserting
``for a fiscal year is the amount of the excess but not to
exceed 0.5 percent of the adjusted discretionary spending
limit on outlays for that fiscal year in fiscal year 1997 or
any fiscal year thereafter through 2002;
(9) in subsection (b)(2)(C)(i), as redesignated--
(A) in subclause (III) by striking ``$245,000,000'' and
inserting ``$290,000,000'';
(B) in subclause (IV), by striking ``$280,000,000'' and
inserting ``$520,000,000'';
[[Page S6538]]
(C) in subclause (V), by striking ``$317,500,000'' and
inserting ``$520,000,000'';
(D) in subclause (VI), by striking ``$317,500,000'' and
inserting ``$520,000,000''; and
(E) in subclause (VII), by striking ``$317,000,000'' and
inserting ``$520,000,000''; and
(10) by adding at the end of subsection (b)(2) the
following:
``(D) Allowance for IMF.--If an appropriations bill or
joint resolution is enacted for fiscal year 1998, 1999, 2000,
2001, or 2002 that includes an appropriation with respect to
clause (i) or (ii), the adjustment shall be the amount of
budget authority in the measure that is the dollar
equivalent, in terms of Special Drawing Rights, of--
``(i) an increase in the United States quota as part of the
International Monetary Fund Eleventh General Review of Quotas
(United States Quota); or
``(ii) any increase in the maximum amount available to the
Secretary of the Treasury pursuant to section 17 of the
Bretton Woods Agreements Act, as amended from time to time
(New Arrangements to Borrow).
``(E) Allowance for international arrearages.--
``(i) Adjustments.--If an appropriations bill or joint
resolution is enacted for fiscal year 1998, 1999 or 2000 that
includes an appropriation for arrearages for international
organizations, international peacekeeping, and multilateral
development banks for that fiscal year, the adjustment shall
be the amount of budget authority in such measure and the
outlays flowing in all fiscal years from such budget
authority.
``(ii) Limitations.--The total amount of adjustments made
pursuant to this subparagraph shall not exceed $1,884,000,000
in budget authority.
``(F) Allowances for transportation.--
``(i) In general.--If during the 105th Congress, revenue
increases or direct spending reductions creditable under
section 252 are enacted for transportation reserve funds as
provided in sections 207, 207A, 208, or 209 of House
Concurrent Resolution 84 (105th Congress), OMB shall
determine the amount of the budget authority adjustment for
the applicable program for each fiscal year through 2002.
``(ii) Adjustments.--If for fiscal years 1998 through 2002,
discretionary appropriations are enacted for a fiscal year
that designates funding for the applicable program, the
adjustment is the amount of the discretionary budget
authority appropriated for such program in such fiscal year
and the outlays in all years flowing from such discretionary
budget authority, but not to exceed the amount available for
such program pursuant to this subparagraph.
``(iii) Limitations.--(I) Revenue increases and direct
spending reductions credited under this subparagraph shall be
so designated in statute and shall not be credited under
section 252.
``(II) The amount of the budget authority adjustment
determined for a fiscal year under clause (ii) shall not
exceed the amount of the revenue increase or direct spending
reduction credited for a fiscal year under clause (i) and
shall meet the terms and conditions of sections 207, 207A,
208, or 209 of House Concurrent Resolution 84 (105th
Congress), as applicable.
(b) Shifting of Discretionary Spending Limits into Gramm-
Rudman.--
(1) In general.--Section 251 of the Balanced Budget and
Emergency Deficit Control Act of 1985 is amended by adding at
the end the following:
``(c) Discretionary Spending Limit.--As used in this part,
the term `discretionary spending limit' means--
``(1) with respect to fiscal year 1997, for the
discretionary category, the current adjusted amount of new
budget authority and outlays;
``(2) with respect to fiscal year 1998--
``(A) for the defense category: $269,000,000,000 in new
budget authority and $266,823,000,000 in outlays;
``(B) for the nondefense category: $252,357,000,000 in new
budget authority and $282,853,000,000 in outlays; and
``(C) for the violent crime reduction category:
$5,500,000,000 in new budget authority and $3,592,000,000 in
outlays;
``(3) with respect to fiscal year 1999--
``(A) for the defense category: $271,500,000,000 in new
budget authority and $266,518,000,000 in outlays;
``(B) for the nondefense category: $255,699,000,000 in new
budget authority and $287,850,000,000 in outlays; and
``(C) for the violent crime reduction category:
$5,800,000,000 in new budget authority and $4,953,000,000 in
outlays;
``(4) with respect to fiscal year 2000--
``(A) for the discretionary category: $532,693,000,000 in
new budget authority and $558,711,000,000 in outlays; and
``(B) for the violent crime reduction category:
$4,500,000,000 in new budget authority and $5,554,000,000 in
outlays;
``(5) with respect to fiscal year 2001, for the
discretionary category: $542,032,000,000 in new budget
authority and $564,396,000,000 in outlays; and
``(6) with respect to fiscal year 2002, for the
discretionary category: $551,074,000,000 in new budget
authority and $560,799,000,000 in outlays;
as adjusted in strict conformance with subsection (b).''.
(2) Repeal of duplicative provisions.--Sections 201, 202,
and 206 of House Concurrent Resolution 84 (105th Congress)
are repealed.
SEC. 1554. VIOLENT CRIME REDUCTION TRUST FUND.
(a) Sequestration Regarding Violent Crime Reduction Trust
Fund.--Section 251A of the Balanced Budget and Emergency
Deficit Control Act of 1985 is repealed.
(b) Conforming Amendment.--Section 310002 of Public Law
103-322 (42 U.S.C. 14212) is repealed.
SEC. 1555. ENFORCING PAY-AS-YOU-GO.
(a) Extension.--Section 252 of the Balanced Budget and
Emergency Deficit Control Act of 1985 is amended--
(1) by striking subsections (a) and (b) and inserting the
following:
``(a) Purpose.--The purpose of this section is to assure
that any legislation enacted prior to September 30, 2002,
affecting direct spending or receipts that increases the
deficit will trigger an offsetting sequestration.
``(b) Sequestration.--
``(1) Timing.--For fiscal years 1998 through 2002, within
15 calendar days after Congress adjourns to end a session and
on the same day as a sequestration (if any) under sections
251 and 253, there shall be a sequestration to offset the
amount of any net deficit increase in the budget year caused
by all direct spending and receipts legislation (after
adjusting for any prior sequestration as provided by
paragraph (2)) plus any net deficit increase in the prior
fiscal year caused by all direct spending and receipts
legislation not reflected in the final OMB sequestration
report for that year.
``(2) Calculation of deficit increase.--OMB shall calculate
the amount of deficit increase, if any, in the budget year by
adding--
``(A) all applicable estimates of direct spending and
receipts legislation transmitted under subsection (d)
applicable to the budget year, other than any amounts
included in such estimates resulting from--
``(i) full funding of, and continuation of, the deposit
insurance guarantee commitment in effect under current law;
and
``(ii) emergency provisions as designated under subsection
(e);
``(B) the estimated amount of savings in direct spending
programs applicable to the budget year resulting from the
prior year's sequestration under this section or section 253,
if any (except for any amounts sequestered as a result of any
deficit increase in the fiscal year immediately preceding the
prior fiscal year), as published in OMB's final sequestration
report for that prior year; and
``(C) all applicable estimates of direct spending and
receipts legislation transmitted under subsection (d) for the
current year that are not reflected in the final OMB
sequestration report for that year, other than any amounts
included in such estimates resulting from--
``(i) full funding of, and continuation of, the deposit
insurance guarantee commitment in effect under current law;
and
``(ii) emergency provisions as designated under subsection
(e).'';
(2) by amending subsection (d) to read as follows:
``(d) Estimates.--
``(1) CBO estimates.--As soon as practicable after Congress
completes action on any direct spending or receipts
legislation, CBO shall provide an estimate to OMB of the
legislation.
``(2) OMB estimates.--Not later than 5 calendar days
(excluding Saturdays, Sundays, and legal holidays) after the
enactment of any direct spending or receipts legislation, OMB
shall transmit a report to the House of Representatives and
to the Senate containing--
``(A) the CBO estimate of that legislation;
``(B) an OMB estimate of that legislation using current
economic and technical assumptions; and
``(C) an explanation of any difference between the 2
estimates.
``(3) Scope of estimates.--The estimates shall be prepared
in conformance with scorekeeping guidelines and shall include
the amount of change in outlays or receipts, as the case may
be, for the current year (if applicable), the budget year,
and each outyear.
``(4) Consultation.--OMB and CBO, after consultation with
each other and the Committees on the Budget of the House of
Representatives and the Senate, shall--
``(A) determine scorekeeping guidelines; and
``(B) in conformance with such guidelines, prepare
estimates under this subsection.''; and
(3) in subsection (e), by striking ``, for any fiscal year
from 1991 through 1998,'' and by striking ``through 1995''.
SEC. 1556. REPORTS AND ORDERS.
Section 254 of the Balanced Budget and Emergency Deficit
Control Act of 1985 is amended--
(1) by striking subsection (c) and redesignating
subsections (d) through (k) as (c) through (j), respectively;
(2) in subsection (c)(2) (as redesignated), by striking
``1998'' and inserting ``2002'';
(3)(A) in subsection (f)(2)(A) (as redesignated), by
striking ``1998'' and inserting ``2002''; and
(B) in subsection (f)(3) (as redesignated), by striking
``through 1998''; and
(4) by striking subsection (h), as redesignated, and
redesignating subsection (i), as redesignated, as subsection
(h).
SEC. 1557. EXEMPT PROGRAMS AND ACTIVITIES.
(a) Veterans Programs.--Section 255(b) of the Balanced
Budget and Emergency Deficit Control Act of 1985 is amended
as follows:
[[Page S6539]]
(1) In the item relating to Veterans Insurance and
Indemnity, strike ``Indemnity'' and insert ``Indemnities''.
(2) In the item relating to Veterans' Canteen Service
Revolving Fund, strike ``Veterans'''.
(3) In the item relating to Benefits under chapter 21 of
title 38, strike ``(36-0137-0-1-702)'' and insert ``(36-0120-
0-1-701)''.
(4) In the item relating to Veterans' compensation, strike
``Veterans' compensation'' and insert ``Compensation''.
(5) In the item relating to Veterans' pensions, strike
``Veterans' pensions'' and insert ``Pensions''.
(6) After the last item, insert the following new items:
``Benefits under chapter 35 of title 38, United States
Code, related to educational assistance for survivors and
dependents of certain veterans with service-connected
disabilities (36-0137-0-1-702);
``Assistance and services under chapter 31 of title 38,
United States Code, relating to training and rehabilitation
for certain veterans with service-connected disabilities (36-
0137-0-1-702);
``Benefits under subchapters I, II, and III of chapter 37
of title 38, United States Code, relating to housing loans
for certain veterans and for the spouses and surviving
spouses of certain veterans Guaranty and Indemnity Program
Account (36-1119-0-1-704);
``Loan Guaranty Program Account (36-1025-0-1-704); and
``Direct Loan Program Account (36-1024-0-1-704).''.
(b) Certain Program Bases.--Section 255(f) of the Balanced
Budget and Emergency Deficit Control Act of 1985 is amended
to read as follows:
``(f) Optional Exemption of Military Personnel.--
``(1) The President may, with respect to any military
personnel account, exempt from sequestration or provide for a
lower uniform percentage reduction than would otherwise
apply.
``(2) The President may not use the authority provided by
paragraph (1) unless he notifies the Congress of the manner
in which such authority will be exercised on or before the
date specified in section 254(d) for the budget year.''.
(c) Other Programs and Activities.--(1) Section
255(g)(1)(A) of the Balanced Budget Emergency Deficit Control
Act of 1985 is amended as follows:
(A) After the first item, insert the following new item:
``Activities financed by voluntary payments to the
Government for goods or services to be provided for such
payments;''.
(B) Strike ``Thrift Savings Fund (26-8141-0-7-602);''.
(C) In the first item relating to the Bureau of Indian
Affairs, insert ``Indian land and water claims settlements
and'' after the comma.
(D) In the second item relating to the Bureau of Indian
Affairs, strike ``miscellaneous'' and ``, tribal trust
funds'' and insert ``Miscellaneous'' before ``trust funds''.
(E) Strike ``Claims, defense (97-0102-0-1-051);''.
(F) In the item relating to Claims, judgments, and relief
acts, strike ``806'' and insert ``808''.
(G) Strike ``Coinage profit fund (20-5811-0-2-803);''.
(H) Insert ``Compact of Free Association (14-0415-0-1-
808);'' after the item relating to claims, judgments, and
relief acts.
(I) Insert ``Conservation Reserve Program (12-2319-0-1-
302);'' after the item relating to the Compensation of the
President.
(J) In the item relating to the Customs Service, strike
``852'' and insert ``806''.
(K) In the item relating to the Comptroller of the
Currency, insert ``, Assessment funds (20-8413-0-8-373)''
before the semicolon.
(L) Strike ``Director of the Office of Thrift
Supervision;''.
(M) Strike ``Eastern Indian land claims settlement fund
(14-2202-0-1-806);''.
(N) After the item relating to the Exchange stabilization
fund, insert the following new items:
``Farm Credit Administration, Limitation on Administrative
Expenses (78-4131-0-3-351);
``Farm Credit System Financial Assistance Corporation,
interest payment (20-1850-0-1-908);''.
(O) Strike ``Federal Deposit Insurance Corporation;''.
(P) In the first item relating to the Federal Deposit
Insurance Corporation, insert ``(51-4064-0-3-373)'' before
the semicolon.
(Q) In the second item relating to the Federal Deposit
Insurance Corporation, insert ``(51-4065-0-3-373)'' before
the semicolon.
(R) In the third item relating to the Federal Deposit
Insurance Corporation, insert ``(51-4066-0-3-373)'' before
the semicolon.
(S) In the item relating to the Federal Housing Finance
Board, insert ``(95-4039-0-3-371)'' before the semicolon.
(T) In the item relating to the Federal payment to the
railroad retirement account, strike ``account'' and insert
``accounts''.
(U) In the item relating to the health professions graduate
student loan insurance fund, insert ``program account'' after
``fund'' and strike ``(Health Education Assistance Loan
Program) (75-4305-0-3-553)'' and insert ``(75-0340-0-1-
552)''.
(V) In the item relating to Higher education facilities,
strike ``and insurance''.
(W) In the item relating to Internal revenue collections
for Puerto Rico, strike ``852'' and insert ``806''.
(X) Amend the item relating to the Panama Canal Commission
to read as follows:
``Panama Canal Commission, Panama Canal Revolving Fund (95-
4061-0-3-403);''.
(Y) In the item relating to the Medical facilities
guarantee and loan fund, strike ``(75-4430-0-3-551)'' and
insert ``(75-9931-0-3-550)''.
(Z) In the first item relating to the National Credit Union
Administration, insert ``operating fund (25-4056-0-3-373)''
before the semicolon.
(AA) In the second item relating to the National Credit
Union Administration, strike ``central'' and insert
``Central'' and insert ``(25-4470-0-3-373)'' before the
semicolon.
(BB) In the third item relating to the National Credit
Union Administration, strike ``credit'' and insert ``Credit''
and insert ``(25-4468-0-3-373)'' before the semicolon.
(CC) After the third item relating to the National Credit
Union Administration, insert the following new item:
``Office of Thrift Supervision (20-4108-0-3-373);''.
(DD) In the item relating to Payments to health care trust
funds, strike ``572'' and insert ``571''.
(EE) Strike ``Compact of Free Association, economic
assistance pursuant to Public Law 99-658 (14-0415-0-1-
806);''.
(FF) In the item relating to Payments to social security
trust funds, strike ``571'' and insert ``651''.
(GG) Strike ``Payments to state and local government fiscal
assistance trust fund (20-2111-0-1-851);''.
(HH) In the item relating to Payments to the United States
territories, strike ``852'' and insert ``806''.
(II) Strike ``Resolution Funding Corporation;''.
(JJ) In the item relating to the Resolution Trust
Corporation, insert ``Revolving Fund (22-4055-0-3-373)''
before the semicolon.
(KK) After the item relating to the Tennessee Valley
Authority funds, insert the following new items:
``Thrift Savings Fund;
``United States Enrichment Corporation (95-4054-0-3-271);
``Vaccine Injury Compensation (75-0320-0-1-551);
``Vaccine Injury Compensation Program Trust Fund (20-8175-
0-7-551);''.
(2) Section 255(g)(1)(B) of the Balanced Budget and
Emergency Deficit Control Act of 1985 is amended as follows:
(A) Strike ``The following budget'' and insert ``The
following Federal retirement and disability''.
(B) In the item relating to Black lung benefits, strike
``lung benefits'' and insert ``Lung Disability Trust Fund''.
(C) In the item relating to the Court of Federal Claims
Court Judges' Retirement Fund, strike ``Court of Federal''.
(D) In the item relating to Longshoremen's compensation
benefits, insert ``Special workers compensation expenses,''
before ``Longshoremen's''.
(E) In the item relating to Railroad retirement tier II,
insert ``Industry Pension Fund'' after ``tier II'', and
strike ``retirement tier II''.
(3) Section 255(g)(2) of the Balanced Budget and Emergency
Deficit Control Act of 1985 is amended as follows:
(A) Strike the following items:
``Agency for International Development, Housing, and other
credit guarantee programs (72-4340-0-3-151);
``Agricultural credit insurance fund (12-4140-0-1-351);''.
(B) In the item relating to Check forgery, strike ``Check''
and insert ``United States Treasury check''.
(C) Strike ``Community development grant loan guarantees
(86-0162-0-1-451);''.
(D) After the item relating to the United States Treasury
Check forgery insurance fund, insert the following new item:
``Credit liquidating accounts;''.
(E) Strike the following items:
``Credit union share insurance fund (25-4468-0-3-371);
``Economic development revolving fund (13-4406-0-3);
``Export-Import Bank of the United States, Limitation of
program activity (83-4027-0-1-155);
``Federal deposit Insurance Corporation (51-8419-0-8-371);
``Federal Housing Administration fund (86-4070-0-3-371);
``Federal ship financing fund (69-4301-0-3-403);
``Federal ship financing fund, fishing vessels (13-4417-0-
3-376);
``Government National Mortgage Association, Guarantees of
mortgage-backed securities (86-4238-0-3-371);
``Health education loans (75-4307-0-3-553);
``Indian loan guarantee and insurance fund (14-4410-0-3-
452);
``Railroad rehabilitation and improvement financing fund
(69-4411-0-3-401);
``Rural development insurance fund (12-4155-0-3-452);
``Rural electric and telephone revolving fund (12-4230-8-3-
271);
``Rural housing insurance fund (12-4141-0-3-371);
``Small Business Administration, Business loan and
investment fund (73-4154-0-3-376);
``Small Business Administration, Lease guarantees revolving
fund (73-4157-0-3-376);
``Small Business Administration, Pollution control
equipment contract guarantee revolving fund (73-4147-0-3-
376);
``Small Business Administration, Surety bond guarantees
revolving fund (73-4156-0-3-376);
[[Page S6540]]
``Department of Veterans Affairs Loan guaranty revolving
fund (36-4025-0-3-704);''.
(d) Low-Income Programs.--Section 255(h) of the Balanced
Budget and Emergency Deficit Control Act of 1985 is amended
as follows:
(1) In the item relating to Aid to families with dependent
children, strike ``0412'' and insert ``1501''.
(2) Amend the item relating to Child nutrition to read as
follows:
``State child nutrition programs (with the exception of
special milk programs) (12-3539-0-1-605);''.
(3) After the item relating to State child nutrition
programs, insert the following new item:
``Commodity supplemental food program (12-3512-0-1-605);''.
(4) Amend the item relating to the Women, infants, and
children program to read as follows:
``Special supplemental nutrition program for women,
infants, and children (WIC) (12-3510-0-1-605).''.
(e) Identification of Programs.--Section 255(i) of the
Balanced Budget and Emergency Deficit Control Act of 1985 is
amended to read as follows:
``(i) Identification of Programs.--For purposes of
subsections (b), (g), and (h), each account is identified by
the designated budget account identification code number set
forth in the Budget of the United States Government 1998-
Appendix, and an activity within an account is designated by
the name of the activity and the identification code number
of the account.''.
(f) Optional Exemption of Military Personnel.--Section
255(h) of the Balanced Budget and Emergency Deficit Control
Act of 1985 is repealed.
SEC. 1558. GENERAL AND SPECIAL SEQUESTRATION RULES.
(a) Conforming Amendments.--
(1) Section heading.--The section heading of section 256 of
the Balanced Budget and Emergency Deficit Control Act of 1985
is amended by striking ``exceptions, limitations, and special
rules'' and inserting ``general and special sequestration
rules''.
(2) Table of contents.--The item relating to section 256 in
the table contents set forth in section 250(a) of the
Balanced Budget and Emergency Deficit Control Act of 1985 is
amended to read as follows:
``Sec. 256. General and special sequestration rules.''.
(b) Automatic Spending Increases.--Section 256(a) of the
Balanced Budget and Emergency Deficit Control Act of 1985 is
amended by striking paragraph (1) and redesignating
paragraphs (2) and (3) as paragraphs (1) and (2),
respectively.
(c) Guaranteed Student Loan Program.--Section 256(b) of the
Balanced Budget and Emergency Deficit Control Act of 1985 is
amended to read as follows:
``(b) Student Loans.--For all student loans under part B or
D of title IV of the Higher Education Act of 1965 made during
the period when a sequestration order under section 254 is in
effect, origination fees under sections 438(c)(2) and 456(c)
of that Act shall be increased by a uniform percentage
sufficient to produce the dollar savings in student loan
programs (as a result of that sequestration order) required
by section 252 or 253, as applicable.''.
(d) Health Centers.--Section 256(e)(1) of the Balanced
Budget and Emergency Deficit Control Act of 1985 is amended
by striking the dash and all that follows thereafter and
inserting ``2 percent.''.
(e) Treatment of Federal Administrative Expenses.--Section
256(h)(4) of the Balanced Budget and Emergency Deficit
Control Act of 1985 is amended by striking subparagraphs (D)
and (H), by redesignating subparagraphs (E), (F), (G), and
(I), as subparagraphs (D), (E), (F), and (G), respectively,
and by adding at the end the following new subparagraph:
``(H) Farm Credit Administration.''.
(f) Commodity Credit Corporation.--Section 256(j)(5) of the
Balanced Budget and Emergency Deficit Control Act of 1985 is
amended to read as follows:
``(5) Dairy program.--Notwithstanding other provisions of
this subsection, as the sole means of achieving any reduction
in outlays under the milk price support program, the
Secretary of Agriculture shall provide for a reduction to be
made in the price received by producers for all milk produced
in the United States and marketed by producers for commercial
use. That price reduction (measured in cents per hundred
weight of milk marketed) shall occur under section
201(d)(2)(A) of the Agricultural Act of 1949 (7 U.S.C.
1446(d)(2)(A)), shall begin on the day any sequestration
order is issued under section 254, and shall not exceed the
aggregate amount of the reduction in outlays under the milk
price support program that otherwise would have been achieved
by reducing payments for the purchase of milk or the products
of milk under this subsection during the applicable fiscal
year.''.
(g) Effects of Sequestration.--Section 256(k) of the
Balanced Budget and Emergency Deficit Control Act of 1985 is
amended as follows:
(1) in paragraph (1), strike ``other than a trust or
special fund account'' and insert ``, except as provided in
paragraph (5)'' before the period; and
(2) strike paragraph (4), redesignate paragraphs (5) and
(6) as paragraphs (4) and (5), respectively, and amend
paragraph (5) (as redesignated) to read as follows:
``(5) Budgetary resources sequestered in revolving, trust,
and special fund accounts, and offsetting collections
sequestered in appropriation accounts shall not be available
for obligation during the fiscal year in which the
sequestration occurs, but shall be available in subsequent
years to the extent otherwise provided in law.''.
SEC. 1559. THE BASELINE.
(a) In General.--Section 257 of the Balanced Budget and
Emergency Deficit Control Act of 1985 is amended--
(1) by striking subsection (b)(2)(A) and inserting the
following:
``(A)(i) No program with estimated current year outlays
greater than $50 million shall be assumed to expire in the
budget year or the outyears except as provided in clause
(ii).
``(ii) If legislation eliminates direct spending authority
for a program for the budget year or any outyear and such
legislation provides that the Federal Government has no legal
authority or obligation to incur financial obligations for
such program, clause (i) shall not apply and CBO and OMB, as
appropriate, may score such legislation with the budget
authority and outlay effects resulting from terminating such
program as provided in such legislation and the baseline may
assume the expiration of that program as provided in such
legislation.'';
(2) by adding the end of subsection (b)(2) the following
new subparagraph:
``(D) If any law expires before the budget year or any
outyear, then any program with estimated current year outlays
greater than $50 million which operates under that law shall
be assumed to continue to operate under that law as in effect
immediately before its expiration.'';
(3) in subsection (c)(5), in the second sentence, by
striking ``national product fixed-weight price index'' and
inserting ``domestic product chain-type price index''; and
(4) by striking subsection (e) and inserting the following:
``(e) Asset Sales.--Amounts realized from the sale of an
asset shall not be counted for purposes of sections 251, 252,
and 253 against legislation if that sale would result in a
financial cost to the Federal Government.''.
(b) Budgetary Treatment of Certain Trust Fund Operations.--
Section 710 of the Social Security Act (42 U.S.C. 911) is
amended to read as follows:
``budgetary treatment of trust fund operations
``Sec. 710. (a) The receipts and disbursements of the
Federal Old-Age and Survivors Insurance Trust Fund and the
Federal Disability Insurance Trust Fund and the taxes imposed
under sections 1401 and 3101 of the Internal Revenue Code of
1986 shall not be included in the totals of the budget of the
United States Government as submitted by the President or of
the congressional budget and shall be exempt from any general
budget limitation imposed by statute on expenditures and net
lending (budget outlays) of the United States Government.
``(b) No provision of law enacted after the date of
enactment of the Balanced Budget and Emergency Deficit
Control Act of 1985 (other than a provision of an
appropriation Act that appropriated funds authorized under
the Social Security Act as in effect on the date of the
enactment of the Balanced Budget and Emergency Deficit
control Act of 1985) may provide for payments from the
general fund of the Treasury to any Trust Fund specified in
paragraph (1) or for payments from any such Trust Fund to the
general fund of the Treasury.''.
SEC. 1560. TECHNICAL CORRECTION.
Section 258 of the Balanced Budget and Emergency Deficit
Control Act of 1985, entitled ``Modification of Presidential
Order'', is repealed.
SEC. 1561. JUDICIAL REVIEW.
Section 274 of the Balanced Budget and Emergency Deficit
Control Act of 1985 is amended as follows:
(1) Strike ``252'' or ``252(b)'' each place it appears and
insert ``254''.
(2) In subsection (d)(1)(A), strike ``257(l) to the extent
that'' and insert ``256(a) if'', strike the parenthetical
phrase, and at the end insert ``or''.
(3) In subsection (d)(1)(B), strike ``new budget'' and all
that follows through ``spending authority'' and insert
``budgetary resources'' and strike ``or'' after the comma.
(4) Strike subsection (d)(1)(C).
(5) Strike subsection (f) and redesignate subsections (g)
and (h) as subsections (f) and (g), respectively.
(6) In subsection (g) (as redesignated), strike ``base
levels of total revenues and total budget outlays, as'' and
insert ``figures'', and ``251(a)(2)(B) or (c)(2),'' and
insert ``254''.
SEC. 1562. EFFECTIVE DATE.
(a) Expiration.--Section 275(b) of the Balanced Budget and
Emergency Deficit Control Act of 1985 is amended--
(1) by striking ``Part C of this title, section'' and
inserting ``Sections 251, 252, 253, 258B, and'';
(2) by striking ``1995'' and inserting ``2002''; and
(3) by adding at the end the following new sentence: ``The
remaining sections of part C of this title shall expire
September 30, 2006.''.
(b) Expiration.--Section 14002(c)(3) of the Omnibus Budget
Reconciliation Act of 1993 is repealed.
[[Page S6541]]
SEC. 1563. REDUCTION OF PREEXISTING BALANCES AND EXCLUSION OF
EFFECTS OF THIS ACT FROM PAYGO SCORECARD.
Upon the enactment of this Act, the Director of the Office
of Management and Budget shall--
(1) reduce any balances of direct spending and receipts
legislation for any fiscal year under section 252 of the
Balanced Budget and Emergency Deficit Control Act of 1985 to
zero; and
(2) not make any estimates of changes in direct spending
outlays and receipts under subsection (d) of such section 252
for any fiscal year resulting from the enactment of this Act
or any Act enacted pursuant to section 104 or 105 of House
Concurrent Resolution 84 (105th Congress).
______
ABRAHAM (AND OTHERS) AMENDMENT NO. 538
(Ordered to lie on the table.)
Mr. ABRAHAM (for himself, Mr. Brownback, Mr. Kyl, Mr. Sessions, Mr.
Enzi, Mr. Inhofe, and Mr. Grams) submitted an amendment intended to be
proposed by them to the bill, S. 949, supra; as follows:
In the pending amendment, insert the following at the
appropriate place:
SEC. . ECONOMIC GROWTH PROTECTION.
Section 252 of the Balanced Budget and Emergency Deficit
Control Act of 1985 (2 U.S.C. 902) is amended by adding at
the end the following:
``(f) Economic Growth Protection.--
``(1) Estimate.--OMB shall, for any amount by which
revenues for a budget year and any out-years through fiscal
year 2002 exceed the revenue target absent growth, estimate
the excess and include such estimate as a separate entry in
the report prepared pursuant to subsection (d) at the same
time as the OMB sequestration preview report is issued.
``(2) Inclusion in scorecard. OMB shall include the amount
of any change in revenues determined pursuant to paragraph
(1) as a deficit decrease under this part in the estimates
and reports required by subsection (b) of section 254 unless
such amount is offset by legislation enacted in compliance
with paragraph (3).
``(3) Use of adjustment.--An amount not to exceed the
amount of deficit decrease determined under paragraph (2) may
be offset by legislation decreasing revenues.
``(4) Revenue target absent growth.--For purposes of this
subsection, the revenue target absent growth is--
``(A) for fiscal year 1998, $1,601,800,000,000;
``(B) for fiscal year 1999, $1,664,200,000,000;
``(C) for fiscal year 2000, $1,728,100,000,000;
``(D) for fiscal year 2001, $1,805,100,000,000;
``(E) for fiscal year 2002, $1,890,400,000,000.''
SEC. . CONGRESSIONAL PAY-AS-YOU-GO
Legislation decreasing revenues in compliance with section
252(f)(3) of the Balanced Budget and Emergency Deficit
Control Act of 1985, as added by section , shall be
considered to be in order for purposes of section 202 of
House Concurrent Resolution 67 (104th Congress).
______
BIDEN (AND GRAMM) AMENDMENT NO. 539
Mr. BIDEN (for himself and Mr. Gramm) proposed an amendment to
amendment No. 537 proposed by Mr. Domenici to the bill, S. 949, supra;
as follows:
On page 43 of the amendment, strike lines 14 through 21 and
insert the following:
``(5) with respect to fiscal year 2001--
``(A) for the discretionary category: $537,677,000,000 in
new budget authority and $558,460,000,000 in outlays; and
``(B) for the violent crime reduction category:
$4,355,000,000 in new budget authority and $5,936,000,000 in
outlays;
``(6) with respect to fiscal year 2002--
``(A) for the discretionary category: $546,619,000,000 in
new budget authority and $556,314,000,000 in outlays; and
``(B) for the violent crime reduction category:
$4,455,000,000 in new budget authority and $4,485,000,000 in
outlays;
as adjusted in strict conformance with subsection (b).''.
(2) Transfers into the fund.--On the first day of the
following fiscal years, the following amounts shall be
transferred from the general fund to the Violent Crime
Reduction Trust Fund--
(A) for fiscal year 2001, $4,355,000,000; and
(A) for fiscal year 2002, $4,455,000,000.
______
BYRD AMENDMENT NO. 540
Mr. BYRD proposed an amendment to the bill, S. 949, supra; as
follows:
At the end of the bill, add the following:
TITLE __--ALCOHOL ADVERTISING RESPONSIBILITY ACT
SEC. __01. SHORT TITLE.
This title may be cited as the ``Alcohol Advertising
Responsibility Act''.
SEC. __02. FINDINGS AND PURPOSES.
(a) Findings.--Congress finds that--
(1) alcohol is used by more Americans than any other drug;
(2) it is estimated that the costs to society from
alcoholism and alcohol abuse were approximately
$100,000,000,000 in 1990 alone;
(3) in 1995, the alcoholic beverage industry spent
$1,040,300,000 on advertising, while the National Institute
for Alcohol Abuse and Alcoholism was funded at only
$181,445,000;
(4) more than 100,000 deaths each year in the United States
result from alcohol-related causes;
(5) 41.3 percent of all traffic fatalities in 1995, or
17,274 deaths, were alcohol related;
(6) in addition to severe health consequences, alcohol
misuse is involved in approximately 30 percent of all
suicides, 50 percent of homicides, 68 percent of manslaughter
cases, 52 percent of rapes and other sexual assaults, 48
percent of robberies, 62 percent of assaults, and 49 percent
of all other violent crimes;
(7) approximately 30 percent of all accidental deaths are
attributable to alcohol abuse;
(8) alcohol advertising may influence children's
perceptions toward and inclinations to consume alcoholic
beverages;
(9) 26 percent of eighth graders, 40 percent of tenth
graders, and 51 percent of twelfth graders report having used
alcohol in the past month; and
(10) college presidents nationwide view alcohol abuse as
their paramount campus-life problem.
(b) Purposes.--The purposes of this title are--
(1) to repeal the existing tax subsidization for expenses
incurred to promote the consumption of alcoholic beverages;
(2) to reduce the amount of alcohol advertising to which
our Nation's youth are exposed; and
(3) to increase funding for those programs that educate and
prevent the abuse of alcohol among our Nation's youth.
SEC. __03. DISALLOWANCE OF DEDUCTION FOR ADVERTISING AND
PROMOTION EXPENSES RELATING TO ALCOHOLIC
BEVERAGES.
(a) In General.--Part IX of subchapter B of chapter 1
(relating to items not deductible) is amended by adding at
the end the following:
``SEC. 280I. ADVERTISING AND PROMOTION EXPENDITURES RELATING
TO ALCOHOLIC BEVERAGES.
``(a) In General.--No deduction otherwise allowable under
this chapter shall be allowed for any amount paid or incurred
to advertise or promote by any means any alcoholic beverage.
``(b) Alcoholic Beverage.--For purposes of this section,
the term `alcoholic beverage' means any item which is subject
to tax under subpart A, C, or D of part I of subchapter A of
chapter 51 (relating to taxes on distilled spirits, wines,
and beer).''.
(b) Conforming Amendment.--The table of sections for part
IX of subchapter B of chapter 1 is amended by adding at the
end the following:
``Sec. 280I. Advertising and promotion expenditures relating to
alcoholic beverages.''.
(c) Effective Date.--The amendments made by this section
shall apply to amounts paid or incurred in taxable years
beginning after December 31 of the year in which this Act is
enacted.
SEC. __04. ALCOHOL ABUSE EDUCATION AND PREVENTION AMONG
YOUTH.
(a) In General.--Subject to subsection (c), there shall be
transferred, from funds in the Treasury not otherwise
appropriated, to the entities described in subsection (b)
amounts to the extent specified under subsection (b).
(b) Education and Prevention Programs.--
(1) Substance abuse and mental health services
administration.--The amounts specified in this subsection
shall be:
(A) In general.--With respect to the Substance Abuse and
Mental Health Services Administration, $120,000,000 for
fiscal year 1998, $180,000,000 for fiscal year 1999,
$180,000,000 for fiscal year 2000, $210,000,000 for fiscal
year 2001, and $210,000,000 for fiscal year 2002, to
supplement substance abuse prevention activities authorized
under section 501 of the Public Health Service Act (42 U.S.C.
290aa).
(B) Use of funds.--Amounts provided to the Substance Abuse
and Mental Health Services Administration under subparagraph
(A) shall be used directly or through grants and cooperative
agreements to carry out activities to prevent the use of
alcohol among youth, including the development and
distribution of public service announcements.
(2) Centers for disease control and prevention.--
(A) In general.--With respect to the Centers for Disease
Control and Prevention, $120,000,000 for fiscal year 1998,
$180,000,000 for fiscal year 1999, $180,000,000 for fiscal
year 2000, $210,000,000 for fiscal year 2001, and
$210,000,000 for fiscal year 2002, to carry out a
comprehensive strategy to prevent alcohol-related disease and
disability.
(B) Required uses.--In carrying out the comprehensive
strategy under subparagraph (A), the Centers for Disease
Control and Prevention shall--
(i) enhance and expand State-based and national
surveillance activities to monitor the scope of alcohol use
among the youth of the United States;
(ii) enhance comprehensive school-based health programs
that focus on alcohol use prevention strategies;
(iii) develop and distribute commercial advertising to
prevent alcohol abuse among youth; and
(iv) enhance and expand Fetal Alcohol Syndrome prevention
activities throughout the United States.
(3) National highway traffic safety administration.--With
respect to the National
[[Page S6542]]
Highway Traffic Safety Administration, and in addition to any
funds authorized from the Highway Trust Fund, $120,000,000
for fiscal year 1998, $180,000,000 for fiscal year 1999,
$180,000,000 for fiscal year 2000, $210,000,000 for fiscal
year 2001, and $210,000,000 for fiscal year 2002, to carry
out programs under sections 402, 403, and 410 of title 23,
United States Code, and to develop and implement a paid media
campaign targeting high-risk youth populations to improve the
balance of media messages related to alcohol impaired
driving.
(4) Indian health service.--With respect to the Indian
Health Service, $40,000,000 for fiscal year 1998, $60,000,000
for fiscal year 1999, $60,000,000 for fiscal year 2000,
$70,000,000 for fiscal year 2001, and $70,000,000 for fiscal
year 2002, to supplement the programs that such Service is
authorized to carry out pursuant to titles II and III of the
Public Health Service Act (42 U.S.C. 202 et seq., 241 et
seq.).
(c) Authority to Transfer Funds.--The Committee on
Appropriations of the House of Representatives and the
Committee on Appropriations of the Senate, acting through
appropriations Acts, may transfer the amounts specified under
subsection (b) in each fiscal year among the entities
referred to in such subsection.
______
BINGAMAN AMENDMENT NO. 541
(Ordered to lie on the table.)
Mr. BINGAMAN submitted an amendment intended to be proposed by him to
the bill, S. 949, supra; as follows:
Beginning on page 79, line 4, strike all through page 88,
line 7.
______
BIDEN AMENDMENT NO. 542
(Ordered to lie on the table.)
Mr. BIDEN submitted an amendment intended to be proposed by him to
the bill, S. 949, supra; as follows:
At the appropriate place, insert the following:
SEC. . SURVIVOR BENEFITS FOR PUBLIC SAFETY OFFICERS KILLED
IN THE LINE OF DUTY.
(a) In General.--Part III of subchapter B of chapter 1
(relating to items specifically excluded from gross income)
is amended by redesignating section 138 as section 139 and by
inserting after section 137 the following new section:
``SEC. 138. SURVIVOR BENEFITS ATTRIBUTABLE TO SERVICE BY A
PUBLIC SAFETY OFFICER WHO IS KILLED IN THE LINE
OF DUTY.
``(a) In General.--Gross income shall not include any
amount paid as a survivor annuity on account of the death of
a public safety officer (as such term is defined in section
1204 of the Omnibus Crime Control and Safe Streets Act of
1968) killed in the line of duty--
``(1) if such annuity is provided under a governmental plan
which meets the requirements of section 401(1) to the spouse
(or a former spouse) of the public safety officer or to a
child of such officer; and
``(2) to the extent such annuity is attributable to such
officer's service as a public safety officer.
``(b) Exceptions.--
``(1) In General.--Subsection (a) shall not apply with
respect to the death of any public safety officer if--
``(A) the death was caused by the intentional misconduct of
the officer or by such officer's intention to bring about
such officer's death;
``(B) the officer was voluntarily intoxicated (as defined
in section 1204 of the Omnibus Crime Control and Safe Streets
Act of 1968) at the time of death; or
``(C) the officer was performing such officer's duties in a
grossly negligent manner at the time of death.
``(2) Exemption for benefits paid to certain individuals.--
Subsection (a) shall not apply to any payment to an
individual whose actions were a substantial contributing
factor to the death of the officer.
(b) Effective Date.--The amendments made by this subsection
shall apply to amounts received in taxable years beginning
after December 31, 1996, with respect to individuals dying
after such date.
______
THOMAS (AND OTHERS) AMENDMENT NO. 543
(Ordered to lie on the table.)
Mr. THOMAS (for himself, Mr. Enzi, and Mr. Conrad) submitted an
amendment intended to be proposed by them to the bill, S. 949, supra;
as follows:
On page 267, between lines 15 and 16, insert the following:
SEC. . EXTENSION OF BINDING CONTRACT DATE FOR BIOMASS AND
COAL FACILITIES.
(a) In General.--Subparagraph (A) of section 29(g)(1)
(relating to the extension of certain facilities) is amended
by striking ``July 1, 1998'' and inserting ``July 1, 1999''.
(b) Effective Date.--The amendment made by this section
shall take effect on the date of enactment of this Act.
On page 400, between lines 14 and 15, insert the following:
SEC. . DETERMINATION OF ORIGINAL ISSUE DISCOUNT WHERE POOLED
DEBT OBLIGATIONS SUBJECT TO ACCELERATION.
(a) In General.--Subparagraph (C) of section 1272(a)(6)
(relating to debt instruments to which the paragraph applies)
is amended by striking ``or'' at the end of clause (i), by
striking the period at the end of clause (ii) and inserting
``, or'', and by inserting after clause (i) the following:
``(iii) any pool of debt instruments the yield on which may
be reduced by reason of prepayments (or to the extent
provided in regulations, by reason of other events).
To the extent provided in regulations prescribed by the
Secretary, in the case of a business engaged in the trade or
business of selling tangible personal property at retail,
clause (iii) shall not apply to debt instruments incurred in
the ordinary course of such trade or business.''
(b) Effective Dates.--
(1) In general.--The amendment made by this subsection
shall apply to taxable years beginning after the date of
enactment of this Act.
(2) Change of method of accounting.--In the case of any
taxpayer required by this section to change its method of
accounting for its first taxable year beginning after the
date of enactment of this Act--
(A) such change shall be treated as initiated by the
taxpayer,
(B) such change shall be treated as made with the consent
of the Secretary; and
(C) the net amount of the adjustments required to be taken
into account by the taxpayer under section 481 of the
Internal Revenue Code of 1986 shall be taken into account
ratably over the 4-taxable-year period beginning with such
first taxable year.
______
SPECTER AMENDMENTS NOS. 544-546
(Ordered to lie on the table)
Mr. SPECTER submitted three amendments intended to be proposed by him
to the bill, S. 949, supra; as follows:
Amendment No. 544
At the appropriate place in the bill, insert the following
new section:
SEC. . SENSE OF THE SENATE.
(a) Findings.--The Senate finds that--
(1) the Centers for Disease Control and Prevention has
identified tobacco use as the leading preventable cause of
death in the United States, causing more than 400,000 deaths
each year, resulting in more than $50 billion in direct
medical costs each year;
(2) funds appropriated to the National Institutes of Health
comprise 30 percent of national expenditures on health
research and development; and
(3) biomedical research has been shown to be effective in
saving lives and reducing health care expenditures.
(b) Sense of the Senate.--It is the sense of the Senate
that if Congress considers legislation implementing the
tobacco litigation settlement, such legislation should ensure
that funds from the settlement are used for disease
prevention research and medical treatment research for
diseases linked to tobacco use.
____
Amendment No. 545
At the appropriate place in the bill, insert the following
new section:
SEC. . SENSE OF THE SENATE.
(a) Findings.--The Senate finds that--
(1) The current Internal Revenue Code, with its myriad
deductions, credits and schedules, and over 12,000 pages of
rules and regulations, is long overdue for a complete
overhaul;
(2) It is an unacceptable waste of our nation's precious
resources when Americans spend an estimated 5.4 billion hours
every year compiling information and filling out Internal
Revenue Code tax forms, and in addition, spend hundreds of
billions of dollars every year in tax code compliance.
America's resources could be dedicated to far more productive
pursuits; and
(3) The primary goals of any tax reform must be fairness,
simplicity, unleashing economic growth and removing the
inefficiencies of the current tax code;
(b) Sense of the Senate.--It is the sense of the Senate
that Congress should proceed expeditiously to consider
fundamental tax reform legislation which would replace the
current tax code with a fairer, simpler, pro-growth and
deficit neutral tax.
On page 20, between lines 5 and 6, insert the following:
SEC. 105. ADOPTION EXPENSES.
(a) Distributions From Certain Plans May Be Used Without
Penalty To Pay Adoption Expenses.--
(1) In general.--Section 72(t)(2) (relating to exceptions
to 10-percent additional tax on early distributions from
qualified retirement plans) is amended by adding at the end
the following:
``(E) Distributions from certain plans for adoption
expenses.--Distributions to an individual from an individual
retirement plan of so much of the qualified adoption expenses
(as defined in section 23(d)(1)) of the individual as does
not exceed $2,000.''.
(2) Conforming amendment.--Section 72(t)(2)(B) is amended
by striking ``or (D)'' and inserting ``, (D) or (E)''.
(3) Effective date.--The amendments made by this subsection
shall apply to payments and distributions after December 31,
1996.
______
LEVIN (AND McCAIN) AMENDMENT NO. 547
(Ordered to lie on the table.)
[[Page S6543]]
Mr. LEVIN (for himself and Mr. McCain) submitted an amendment
intended to be proposed by him to the bill, S. 949, supra; as follows:
On page 267, between lines 15 and 16, insert the following:
SEC. . SENSE OF THE SENATE REGARDING TAX TREATMENT OF STOCK
OPTIONS.
(a) Findings.--The Senate finds that--
(1) currently businesses can deduct the value of stock options as a
business expense on their income tax returns, even though the stock
options are not treated as an expense on the books of those same
businesses; and
(2) stock options are the only form of compensation that is treated
in this way.
(b) Sense of the Senate.--It is the sense of the Senate that the
Committee on Finance of the Senate should hold hearings on the tax
treatment of stock options.
______
McCAIN AMENDMENT NO. 548
(Ordered to lie on the table.)
Mr. McCAIN submitted an amendment intended to be proposed by him to
the bill, S. 949, supra; as follows:
Strike section 707 of the bill.
______
D'AMATO AMENDMENTS NO. 549-550
(Ordered to lie on the table.)
Mr. D'AMATO submitted two amendments intended to be proposed by him
to the bill, S. 949, supra; as follows:
Amendment No. 549
On page 106, beginning with line 10, strike all through
page 107, line 18, and insert:
``(2) Eligible gain.--The term `eligible gain' means any
gain from the sale or exchange of qualified small business
stock held for more than 6 months.
``(3) Purchase.--A taxpayer shall be treated as having
purchased any property if, but for paragraph (4), the
unadjusted basis of such property in the hands of the
taxpayer would be its cost (within the meaning of section
1012).
``(4) Basis adjustments.--If gain from any sale is not
recognized by reason of subsection (a), such gain shall be
applied to reduce (in the order acquired) the basis for
determining gain or loss of any qualified small business
stock which is purchased by the taxpayer during the 60-day
period described in subsection (a).
``(c) Special Rules for Treatment of Replacement Stock.--
``(1) Holding period for accrued gain.--For purposes of
this chapter, gain from the disposition of any replacement
qualified small business stock shall be treated as gain from
the sale of exchange of qualified small business stock held
more than 6 monhts to the extent that the amount of such gain
does not exceed the amount of the reduction in the basis of
such stock by reason of subsection (b)(4).
``(2) Tacking of holding period for purposes of deferral.--
Solely for purposes of applying this section, if any
replacement qualified small business stock is disposed of
before the taxpayer has held such stock for more than 6
months, gain from such stock shall be treated eligible gain
for purposes of subsection (a).
On page 400, between lines 14 and 15, insert:
SEC. . WITHHOLDING ON GUARANTEED PAYMENTS RECEIVED BY
LIMITED PARTNERS OF PROFESSIONAL SERVICE
PARTNERSHIPS.
(a) In General.--Section 3401 (relating to withholding on
wages) is amended by adding at the end the following new
subsection:
``(i) Special Rule for Guaranteed Payments of Certain
Limited Partners.--
``(1) In general.--For purposes of this chapter, the term
`wages' shall include any guaranteed payments described in
section 707 (a) or (c) to a limited partner of a professional
service partnership for services actually rendered to or on
behalf of the partnership to the extent that such payments
are established to be in the nature of remuneration for such
services.
``(2) Professional service partnership.--For purposes of
paragraph (1), the term `professional service partnership'
means a partnership substantially all of the services of
which are in the fields of health, law, engineering,
architecture, accounting, actuarial science, performing
arts, or consulting.
``(3) Treatment as employer and employee.--Solely for
purposes of applying this chapter to payments described in
paragraph (1)--
``(A) the professional service partnership shall be treated
as an employer, and
``(B) the limited partner shall be treated as an
employee.''
(b) Effective Date.--The amendment made by this section
shall apply to payments with respect to services performed
after December 31, 1997.
____
Amendment No. 550
On page 267, between lines 15 and 16, insert the following:
SEC. . REMOVAL OF DOLLAR LIMITATION ON BENEFIT PAYMENTS
FROM A DEFINED BENEFIT PLAN MAINTAINED FOR
CERTAIN POLICE AND FIRE EMPLOYEES.
(a) In General.--Subparagraph (G) of section 415(b)(2) is
amended by striking ``participant--'' and all that follows
and inserting ``participant, subparagraphs (C) and (D) of
this paragraph and subparagraph (B) of paragraph (1) shall
not apply.''
(b) Effective Date.--The amendment made by subsection (a)
shall apply to years beginning after December 31, 1996.
______
NICKLES (AND OTHERS) AMENDMENT NO. 551
Mr. NICKLES (for himself, Mr. Hagel, Mr. Cleland, Mr. Domenici, and
Mr. Thurmond) proposed an amendment to the bill, S. 949, supra; as
follows:
On page 212, between lines 11 and 12, insert:
SEC. __. INCREASE IN DEDUCTION FOR HEALTH INSURANCE COSTS OF
SELF-EMPLOYED INDIVIDUALS.
(a) In General.--The table contained in section
162(l)(1)(B) is amended to read as follows:
The applicable percentage is--in calendar year--
1997..........................................................50 ....
1998..........................................................55 ....
1999 through 2001.............................................60 ....
2002..........................................................65 ....
2003 through 2005.............................................80 ....
2006..........................................................90 ....
2007 or thereafter.........................................100.''....
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
1996.
On page 159, line 15, strike ``December 31, 1999'' and
insert ``May 31, 1999''.
On page 159, line 18, strike ``42-month'' and insert ``35-
month''.
On page 159, line 19, strike ``42 months'' and insert ``35
months''.
On page 160, lines 10 and 11, strike ``December 31, 1999''
and insert ``May 31, 1999''.
On page 160, lines 19 and 20, strike ``December 31, 1999''
and insert ``May 31, 1999''.
On page 400, between lines 14 and 15, insert:
SEC. __. MODIFICATION OF RULES FOR ALLOCATING INTEREST
EXPENSE TO TAX-EXEMPT INTEREST.
(a) Pro Rata Allocation Rules Applicable to Corporations.--
(1) In general.--Paragraph (1) of section 265(b) is amended
by striking ``In the case of a financial institution'' and
inserting ``In the case of a corporation''.
(2) Only obligations acquired after June 8, 1997, taken
into account.--Subparagraph (A) of section 265(b)(2) is
amended by striking ``August 7, 1986'' and inserting ``June
8, 1997 (August 7, 1986, in the case of a financial
institution)''.
(3) Small issuer exception not to apply.--Subparagraph (A)
of section 265(b)(3) is amended by striking ``Any qualified''
and inserting ``In the case of a financial institution, any
qualified''.
(4) Exception for certain bonds acquired on sale of goods
or services.--Subparagraph (B) of section 265(b)(4) is
amended by adding at the end the following new sentence: ``In
the case of a taxpayer other than a financial institution,
such term shall not include a nonsalable obligation acquired
by such taxpayer in the ordinary course of business as
payment for goods or services provided by such taxpayer to
any State or local government.''
(5) Look-thru rules for partnerships.--Paragraph (6) of
section 265(b) is amended by adding at the end the following
new subparagraph:
``(C) Look-thru rules for partnerships.--In the case of a
corporation which is a partner in a partnership, such
corporation shall be treated for purposes of this subsection
as holding directly its allocable share of the assets of the
partnership.''
(6) Application of pro rata disallowance on affiliated
group basis.--Subsection (b) of section 265 is amended by
adding at the end the following new paragraph:
``(7) Application of disallowance on affiliated group
basis.--
``(A) In general.--For purposes of this subsection, all
members of an affiliated group filing a consolidated return
under section 1501 shall be treated as 1 taxpayer.
``(B) Treatment of insurance companies.--This subsection
shall not apply to an insurance company, and subparagraph (A)
shall be applied without regard to any member of an
affiliated group which is an insurance company.''
(6) De minimis exception for nonfinancial institutions.--
Subsection (b) of section 265 is amended by adding at the end
the following new paragraph:
``(8) De minimis exception for nonfinancial institutions.--
In the case of a corporation, paragraph (1) shall not apply
for any taxable year if the amount described in paragraph
(2)(A) with respect to such corporation does not exceed the
lesser of--
``(A) 2 percent of the amount described in paragraph
(2)(B), or
``(B) $1,000,000.
The preceding sentence shall not apply to a financial
institution or to a dealer in tax-exempt obligations.''
(7) Clerical amendment.--The subsection heading for section
265(b) is amended by striking ``Financial Institutions'' and
inserting ``Corporations''.
(b) Application of Section 265(a)(2) With Respect to
Controlled Groups.--Paragraph (2) of section 265(a) is
amended after
[[Page S6544]]
``obligations'' by inserting ``held by the taxpayer (or any
corporation which is a member of a controlled group (as
defined in section 267(f)(1)) which includes the taxpayer)''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
______
GRAMM (AND OTHERS) AMENDMENT NO. 552
Mr. GRAMM (for himself, Mr. Coats, Mr. Nickles, Mr. Hutchinson, Mr.
Grams, Mr. Smith of New Hampshire, Mr. Sessions, Mr. Abraham, and Mr.
Thurmond) proposed an amendment to the bill, S. 949, supra; as follows:
At the appropriate place, insert:
SECTION 1. CHILD TAX CREDIT FLEXIBILITY.
On page 12, line 13, strike all through page 13, line 8,
and on page 16, line 3, strike all through page 17, line 6.
______
SHELBY (AND OTHERS) AMENDMENT NO. 553
Mr. ROTH (for Mr. Shelby, for himself, Mr. Craig, Mr. Abraham, Mr.
Faircloth, Mr. Santorum, Mr. Coverdell, Mr. Gramm, and Mr. Sessions)
proposed an amendment to the bill, S. 949, supra; as follows:
At the end of page 11, insert the following:
SEC. . SENSE OF THE SENATE REGARDING REFORM OF THE INTERNAL
REVENUE CODE OF 1986.
(a) Findings.--The Senate find that--
(1) the Internal Revenue Code of 1986 (``tax code'') is
unnecessarily complex, having grown from 14 pages at its
inception to 3,458 pages by 1995;
(2) this complexity resulted in taxpayers spending about
5,300,000,000 hours and $225,000,000,000 trying to comply
with the tax code in 1996;
(3) the current congressional budgetary process is weighted
too heavily toward tax increase, as evidenced by the fact
that since 1954 there have been 27 major bills enacted that
increased Federal income taxes and only 9 bills that
decreased Federal income taxes, 3 of which were de minimis
decreases;
(4) the tax burden on working families has reach an
unsustainable level, as evidenced by the fact that in 1948
the average American family with children paid only 4.3
percent of its income to the Federal Government in direct
taxes and today the average family pays about 25 percent;
(5) the tax code unfairly penalizes saving and investment
by double taxing these activities while only taxing income
used for consumption once, and as a result the United States
has one of the lowest savings rates, at 4.7 percent, in the
industrialized world;
(6) the tax code stifles economic growth by discouraging
work and capital formation through excessively high tax
rates;
(7) Congress and the President have found it necessary, on
2 separate occasions, to enact laws to protect taxpayers from
the abuses of the Internal Revenue Service and a third bill
has been introduced by the 105th Congress; and
(8) the complexity of the tax code has increased the number
of Internal Revenue Service employees responsible for
administering the tax laws to 110,000 and this costs the
taxpayers $9,800,000,000 each year.
(b) Sense of the Senate.--It is the sense of the Senate
that--
(1) the Internal Revenue Code of 1986 needs broad-based
reform; and
(2) the President should submit to Congress a comprehensive
proposal to reform the Internal Revenue Code of 1986.
______
KERRY (AND OTHERS) AMENDMENT NO. 554
Mr. KERRY (for himself, Mr. Conrad, and Mr. Johnson) proposed an
amendment to the bill, S. 949, supra; as follows:
On page 13, beginning with line 9, strike all through page
17, line 12, and insert the following:
``(2) Limitation based on adjusted gross income.--The
dollar amount in subsection (a) shall be reduced (but not
below zero) ratably for each $1,000 (or fraction thereof) by
which the taxpayer's modified adjusted gross income exceeds
$60,000 but does not exceed $75,000. For purposes of the
preceding sentence, the term `modified adjusted gross income'
means adjusted gross income increased by any amount excluded
from gross income under section 911, 931, or 933.
``(3) Limitation based on amount of tax.--The aggregate
credit allowed by subsection (a) (determined after paragraph
(2)) shall not exceed the sum of--
``(A) the excess (if any) of--
``(i) the taxpayer's regular tax liability for the taxable
year reduced by the credits allowable against such tax under
this subpart (other than this section), over
``(ii) the taxpayer's tentative minimum tax for such
taxable year (determined without regard to the alternative
minimum tax foreign tax credit), plus
``(B) the excess (if any) of--
``(i) the sum of--
``(I) the taxpayer's liability for the taxable year under
sections 3101 and 3201,
``(II) the amount of tax paid on behalf of such taxpayer
for the taxable year under sections 3111 and 3221, plus
``(III) the taxpayer's liability for such year under
sections 1401 and 3211, over
``(ii) the credit allowed for the taxable year under
section 32.
``(c) Qualifying Child.--For purposes of this section--
``(1) In general.--The term `qualifying child' means any
individual if--
``(A) the taxpayer is allowed a deduction under section 151
with respect to such individual for the taxable year,
``(B) such individual has not attained the applicable age
as of the close of the calendar year in which the taxable
year of the taxpayer begins, and
``(C) such individual bears a relationship to the taxpayer
described in section 32(c)(3)(B).
``(2) Applicable age.--For purposes of paragraph (1), the
applicable age is 13 in calendar year 1997, and increased by
1 year for each of the next 4 succeeding calendar years.
``(3) Exception for certain noncitizens.--The term
`qualifying child' shall not include any individual who would
not be a dependent if the first sentence of section 152(b)(3)
were applied without regard to all that follows `resident of
the United States.'
(d) Taxable Year Must Be Full Taxable Year.--Except in the
case of a taxable year closed by reason of the death of the
taxpayer, no credit shall be allowable under this section in
the case of a taxable year covering a period of less than 12
months.
``(e) Recapture of Credit.--
``(1) In general.--If--
``(A) during any taxable year any amount is withdrawn from
a qualified tuition program or an education individual
retirement account maintained for the benefit of a
beneficiary and such amount is subject to tax under section
529(f) or 530(c)(3), and
``(B) the amount of the credit allowed under this section
for the prior taxable year was contingent on a contribution
being made to such a program or account for the benefit of
such beneficiary,
the taxpayer's tax imposed by this chapter for the taxable
year shall be increased by the lesser of the amount described
in subparagraph (A) or the credit described in subparagraph
(B).
``(2) No credits against tax, etc.--Any increase in tax
under this subsection shall not be treated as a tax imposed
by this chapter for purposes of determining--
``(A) the amount of any credit under this subpart or
subpart B or D of this part, and
``(B) the amount of the minimum tax imposed by section 55.
``(f) Other Definitions.--For purposes of this section, the
terms `qualified tuition program' and `education individual
retirement account' have the meanings given such terms by
section 529 and 530, respectively.
``(g) Phasein of Credit.--In the case of taxable years
beginning in 1997, subsection (a)(1) shall be applied by
substituting `$250' for `$500'.''
______
JEFFORDS (AND OTHERS) AMENDMENT NO. 555
(Ordered to lie on the table.)
Mr. JEFFORDS (for himself, Mr. Dodd, Mr. Roberts, Mr. Johnson, Mr.
Kohl, Ms. Snowe, and Ms. Landrieu) submitted an amendment intended to
be proposed by them to the bill, S. 949, supra; as follows:
At the end of the bill insert the following:
TITLE __--INCENTIVES FOR QUALITY CHILD CARE
SEC. __01. EXPANSION OF DEPENDENT CARE TAX CREDIT.
(a) Percentage of Employment-Related Expenses Determined by
Status of Care Giver.--Section 21(a)(2) (defining applicable
percentage) is amended to read as follows:
``(2) Applicable percentage defined.--
``(A) In general.--For purposes of paragraph (1), the term
`applicable percentage' means--
``(i) in the case of employment-related expenses described
in subsection (b)(2)(A)(ii) incurred for the care of a
qualifying individual described in subsection (b)(1)(A) by an
accredited child care center or a credentialed child care
professional, the initial percentage reduced (but not below
12.5 percent) ratably for each $2,500 (or fraction thereof)
by which the taxpayers's adjusted gross income for the
taxable year exceeds $20,000, and
``(ii) in any other case, 30 percent reduced (but not below
10 percent) ratably for each $2,500 (or fraction thereof) by
which the taxpayers's adjusted gross income for the taxable
year exceeds $20,000 but does not exceed $70,000.
``(B) Initial percentage for expenses incurred for
accredited or credentialed providers.--For purposes of
subparagraph (A)(i), the initial percentage shall be
determined in accordance with the following table:
The initial percentage is--e year beginning in--
1998........................................................31.5 ....
1999..........................................................33 ....
2000........................................................34.5 ....
2001..........................................................36 ....
2002 and thereafter.......................................37.5.''....
(b) Definitions.--Section 21(b)(2) (relating to definitions
of qualifying individual and employment-related expenses) is
amended by adding at the end the following:
``(E) Accredited child care center.--The term `accredited
child care center' means--
``(i) a center that is accredited, by a child care
credentialing or accreditation entity recognized by a State,
to provide child care to children in the State (except
children who
[[Page S6545]]
a tribal organization elects to serve through a center
described in clause (ii));
``(ii) a center that is accredited, by a child care
credentialing or accreditation entity recognized by a tribal
organization, to provide child care for children served by
the tribal organization; or
``(iii) a center that is used as a Head Start center under
the Head Start Act (42 U.S.C. 9831 et seq.) and is in
compliance with any applicable performance standards
established by regulation under such Act for Head Start
programs.
``(F) Child care credentialing or accreditation entity.--
The term `child care credentialing or accreditation entity'
means a nonprofit private organization or public agency
that--
``(i) is recognized by a State agency or tribal
organization; and
``(ii) accredits a center or credentials an individual to
provide child care on the basis of--
``(I) an accreditation or credentialing instrument based on
peer-validated research;
``(II) compliance with applicable State and local licensing
requirements, or standards described in section
658E(c)(2)(E)(ii) of the Child Care and Development Block
Grant Act (42 U.S.C. 9858c(c)(2)(E)(ii)), as appropriate, for
the center or individual;
``(III) outside monitoring of the center or individual; and
``(IV) criteria that provide assurances of--
``(aa) compliance with age-appropriate health and safety
standards at the center or by the individual;
``(bb) use of age-appropriate developmental and educational
activities, as an integral part of the child care program
carried out at the center or by the individual; and
``(cc) use of ongoing staff development or training
activities for the staff of the center or the individual,
including related skills-based testing.
``(G) Credentialed child care professional.--The term
`credentialed child care professional' means--
``(i) an individual who is credentialed, by a child care
credentialing or accreditation entity recognized by a State,
to provide child care to children in the State (except
children who a tribal organization elects to serve through an
individual described in clause (i)); or
``(ii) an individual who is credentialed, by a child care
credentialing or accreditation entity recognized by a tribal
organization, to provide child care for children served by
the tribal organization.
``(H) Tribal organization.--The term `tribal organization'
has the meaning given the term in section 658P of the Child
Care and Development Block Grant Act (42 U.S.C. 9858n).''
(c) Credit Made Refundable for Low Income Taxpayers.--
(1) In general.--Section 21 (relating to credit for
household and dependent care services) is amended by
redesignating subsection (f) as subsection (g) and by
inserting after subsection (e) the following:
``(f) Credit Made Refundable for Low Income Taxpayers.--
``(1) In general.--For purposes of this subtitle, in the
case of an applicable taxpayer individual, the credit
allowable under subsection (a) for any taxable year shall be
treated as a credit allowable under subpart C of this part.
``(2) Applicable taxpayer.--For purposes of this
subsection, the term `applicable taxpayer' means a taxpayer
with respect to whom the credit under section 32 is allowable
for the taxable year.
``(3) Coordination with advance payments and minimum tax.--
Rules similar to the rules of subsections (g) and (h) of
section 32 shall apply with respect to the portion of any
credit to which this subsection applies.''.
(2) Advance payment of credit.--
(A) In general.--Chapter 25 (relating to general provisions
relating to employment taxes) is amended by inserting after
section 3507 the following:
``SEC. 3507A. ADVANCE PAYMENT OF DEPENDENT CARE CREDIT.
``(a) General Rule.--Except as otherwise provided in this
section, every employer making payment of wages with respect
to whom a dependent care eligibility certificate is in effect
shall, at the time of paying such wages, make an additional
payment equal to such employee's dependent care advance
amount.
``(b) Dependent Care Eligibility Certificate.--For purposes
of this title, a dependent care eligibility certificate is a
statement furnished by an employee to the employer which--
``(1) certifies that the employee will be eligible to
receive the credit provided by section 21 for the taxable
year,
``(2) certifies that the employee reasonably expects to be
an applicable taxpayer for the taxable year,
``(3) certifies that the employee does not have a dependent
care eligibility certificate in effect for the calendar year
with respect to the payment of wages by another employer,
``(4) states whether or not the employee's spouse has a
dependent care eligibility certificate in effect,
``(5) states the number of qualifying individuals in the
household maintained by the employee,
``(6) states whether a qualifying individual will be cared
for by an accredited child care center or a credentialed
child care professional, and
``(7) estimates the amount of employment-related expenses
for the calendar year.
``(c) Dependent Care Advance Amount.--
``(1) In general.--For purposes of this title, the term
`dependent care advance amount' means, with respect to any
payroll period, the amount determined--
``(A) on the basis of the employee's wages from the
employer for such period,
``(B) on the basis of the employee's estimated employment-
related expenses included in the dependent care eligibility
certificate, and
``(C) in accordance with tables provided by the Secretary.
``(2) Advance amount tables.--The tables referred to in
paragraph (1)(C) shall be similar in form to the tables
prescribed under section 3402 and, to the maximum extent
feasible, shall be coordinated with such tables and the
tables prescribed under section 3507(c).
``(d) Other Rules.--For purposes of this section, rules
similar to the rules of subsections (d) and (e) of section
3507 shall apply.
``(e) Definitions.--For purposes of this section, terms
used in this section which are defined in section 21 shall
have the respective meanings given such terms by section
21.''.
(2) Conforming amendment.--The table of sections for
chapter 25 is amended by adding after the item relating to
section 3507 the following:
``Sec. 3507A. Advance payment of dependent care credit.''.
(d) Effective Dates.--
(1) Applicable percentage.--The amendments made by
subsection (a) and (b) shall apply to taxable years beginning
after December 31, 1997.
(2) Credit made refundable.--The amendments made by
subsection (c) shall apply to taxable years beginning after
December 31, 2001.
SEC. __02. EXPANSION OF DEPENDENT CARE ASSISTANCE PROGRAM.
(a) In General.--Section 129(a)(2)(A) (relating to
limitation of exclusion) is amended to read as follows:
``(A) Dollar limitation.--
``(i) In general.--The amount which may be excluded under
paragraph (1) for dependent care assistance with respect to
dependent care services provided during a taxable year shall
not exceed--
``(I) in the case of dependent care services provided by an
accredited child care center or a credentialed child care
professional for a qualifying individual described in section
21(b)(1)(A), an amount determined in accordance with the
following table:
For 2 or more
``In the case of taxable years For 1 qualifying qualifying
beginning in: individual, the individuals, the
amount is: amount is:
1998.............................. $5,200 $6,700
1999.............................. $5,400 $6,900
2000.............................. $5,600 $7,100
2001.............................. $5,800 $7,300
2002 and thereafter............... $6,000 $7,500,
``(II) in the case of other dependent care services for a
qualifying individual described in section 21(b)(1)(A) or
payments described in subsection (e)(1)(B), an amount
determined in accordance with the following table:
For 2 or more
``In the case of taxable years For 1 qualifying qualifying
beginning in: individual, the individuals, the
amount is: amount is:
1998.............................. $4,800 $6,300
1999.............................. $4,600 $6,100
2000.............................. $4,400 $5,900
2001.............................. $4,200 $5,700
2002 and thereafter............... $4,000 $5,500,
and
``(III) in the case of other dependent care services for a
qualifying individual described in subparagraph (B) or (C) of
section 21(b)(1), $5,000.
``(ii) Amounts for married individuals filing separate
returns.--In the case of a separate return by a married
individual, clause (i) shall be applied by using one-half of
any amount specified in such clause.
``(iii) Providers.--For purposes of clause (i)(I), the
terms `accredited child care center' and `credentialed child
care professional' have the meaning given such terms by
subparagraphs (E) and (G) of section 21(c)(2), respectively.
(b) Payments for Stay-at-Home Care Allowed.--
(1) In general.--Section 129(e)(1) (relating to definitions
and special rules) is amended to read as follows:
``(1) Dependent care assistance.--The term `dependent care
assistance' means--
``(A) the payment of, or provision of, those services which
if paid for by the employee would be considered employment-
related expenses under section 21(b)(2) (relating to expenses
for household and dependent care services necessary for
gainful employment), and
``(B) any payment to the employee from amounts contributed
to the employee's account during the pregnancy of the
employee paid within 1 year after such contribution and
during the period in which--
``(i) the employee,
``(ii) the employee's spouse, or
``(iii) a parent of the employee or the employee's spouse,
stays at home to care for a qualifying individual described
in section 21(b)(1)(A).''.
[[Page S6546]]
(2) Conforming amendments.--
(A) Section 129(c) (relating to payments to related
individuals) is amended by striking ``No amount'' and
inserting ``Except in the case of payments described in
subsection (e)(1)(B), no amount.''.
(B) Section 129(e)(9) (relating to identifying information
required with respect to service provider) is amended by
striking ``No amount'' and inserting ``Except in the case of
payments described in paragraph (1)(B)(i), no amount.''.
(c) Dependent Care Assistance Program for Federal
Employees.--Subpart G of part III of title 5, United States
Code, is amended by inserting after chapter 87 the following:
``CHAPTER 88--DEPENDENT CARE ASSISTANCE PROGRAM
``Sec. 8801. Definitions
``(a) For the purpose of this chapter, `employee' means--
``(1) an employee as defined by section 2105 of this title;
``(2) a Member of Congress as defined by section 2106 of
this title;
``(3) a Congressional employee as defined by section 2107
of this title;
``(4) the President;
``(5) a justice or judge of the United States appointed to
hold office during good behavior (i) who is in regular active
judicial service, or (ii) who is retired from regular active
service under section 371(b) or 372(a) of title 28, United
States Code, or (iii) who has resigned the judicial office
under section 371(a) of title 28 with the continued right
during the remainder of his lifetime to receive the salary of
the office at the time of his resignation;
``(6) an individual first employed by the government of the
District of Columbia before October 1, 1987;
``(7) an individual employed by Gallaudet College;
``(8) an individual employed by a county committee
established under section 590h(b) of title 16;
``(9) an individual appointed to a position on the office
staff of a former President under section 1(b) of the Act of
August 25, 1958 (72 Stat. 838); and
``(10) an individual appointed to a position on the office
staff of a former President, or a former Vice President under
section 4 of the Presidential Transition Act of 1963, as
amended (78 Stat. 153), who immediately before the date of
such appointment was an employee as defined under any other
paragraph of this subsection;
but does not include--
``(A) an employee of a corporation supervised by the Farm
Credit Administration if private interests elect or appoint a
member of the board of directors;
``(B) an individual who is not a citizen or national of the
United States and whose permanent duty station is outside the
United States, unless the individual was an employee for the
purpose of this chapter on September 30, 1979, by reason of
service in an Executive agency, the United States Postal
Service, or the Smithsonian Institution in the area which was
then known as the Canal Zone; or
``(C) an employee excluded by regulation of the Office of
Personnel Management under section 8716(b) of this title.
``(b) For the purpose of this chapter, `dependent care
assistance program' has the meaning given such term by
section 129(d) of the Internal Revenue Code of 1986.
``Sec. 8802. Dependent care assistance program
``The Office of Personnel Management shall establish and
maintain a dependent care assistance program for the benefit
of employees.''.
(d) Effective Date.--The amendments made by this section
apply to taxable years beginning after December 31, 1997.
SEC. __03. ALLOWANCE OF CREDIT FOR EMPLOYER EXPENSES FOR
CHILD CARE ASSISTANCE.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 (relating to business related credits) is amended
by adding at the end the following new section:
``SEC. 45D. EMPLOYER-PROVIDED CHILD CARE CREDIT.
``(a) Allowance of Credit.--
``(1) In General.--For purposes of section 38, the
employer-provided child care credit determined under this
section for the taxable year is an amount equal to the
applicable percentage of the qualified child care
expenditures of the taxpayer for such taxable year.
``(2) Applicable percentage.--For purposes of paragraph
(1), the applicable percentage for any taxable year is equal
to 50%.
``(b) Dollar Limitation.--The credit allowable under
subsection (a) for any taxable year shall not exceed
$150,000.
``(c) Definitions.--For purposes of this section--
``(1) Qualified child care expenditure.--The term
`qualified child care expenditure' means any amount paid or
incurred--
``(A) to acquire, construct, rehabilitate, or expand
property--
``(i) which is to be used as part of a qualified child care
facility of the taxpayer,
``(ii) with respect to which a deduction for depreciation
(or amortization in lieu of depreciation) is allowable, and
``(iii) which does not constitute part of the principal
residence (within the meaning of section 1034) of the
taxpayer or any employee of the taxpayer,
``(B) for the operating costs of a qualified child care
facility of the taxpayer, including costs related to the
training of employees, to scholarship programs, and to the
providing of increased compensation to employees with higher
levels of child care training,
``(C) under a contract with a qualified child care facility
to provide child care services to employees of the taxpayer,
``(D) under a contract to provide child care resource and
referral services to employees of the taxpayer, or
``(E) for the costs of seeking accreditation from a child
care credentialing or accreditation entity (as defined in
section 21(b)(2)(F) with respect to a qualified child care
facility.
``(2) Qualified child care facility.--
``(A) In general.--The term `qualified child care facility'
means a facility--
``(i) the principal use of which is to provide child care
assistance, and
``(ii) which meets the requirements of all applicable laws
and regulations of the State or local government in which it
is located, including, but not limited to, the licensing of
the facility as a child care facility.
Clause (i) shall not apply to a facility which is the
principal residence (within the meaning of section 1034) of
the operator of the facility.
``(B) Special rules with respect to a taxpayer.--A facility
shall not be treated as a qualified child care facility with
respect to a taxpayer unless--
``(i) enrollment in the facility is open to employees of
the taxpayer during the taxable year,
``(ii) the facility is not the principal trade or business
of the taxpayer unless at least 30 percent of the enrollees
of such facility are dependents of employees of the taxpayer,
and
``(iii) the use of such facility (or the eligibility to use
such facility) does not discriminate in favor of employees of
the taxpayer who are highly compensated employees (within the
meaning of section 414(q)).
``(d) Recapture of Acquisition and Construction Credit.--
``(1) In general.--If, as of the close of any taxable year,
there is a recapture event with respect to any qualified
child care facility of the taxpayer, then the tax of the
taxpayer under this chapter for such taxable year shall be
increased by an amount equal to the product of--
``(A) the applicable recapture percentage, and
``(B) the aggregate decrease in the credits allowed under
section 38 for all prior taxable years which would have
resulted if the qualified child care expenditures of the
taxpayer described in subsection (c)(1)(A) with respect to
such facility had been zero.
``(2) Applicable recapture percentage.--
``(A) In general.--For purposes of this subsection, the
applicable recapture percentage shall be determined from the
following table:
The applicable
recapture
``If the recapture evpercentage is:
Years 1-3....................................................100
Year 4........................................................85
Year 5........................................................70
Year 6........................................................55
Year 7........................................................40
Year 8........................................................25
Years 9 and 10................................................10
Years 11 and thereafter........................................0.
``(B) Years.--For purposes of subparagraph (A), year 1
shall begin on the first day of the taxable year in which the
qualified child care facility is placed in service by the
taxpayer.
``(3) Recapture event defined.--For purposes of this
subsection, the term `recapture event' means--
``(A) Cessation of operation.--The cessation of the
operation of the facility as a qualified child care facility.
``(B) Change in ownership.--
``(i) In general.--Except as provided in clause (ii), the
disposition of a taxpayer's interest in a qualified child
care facility with respect to which the credit described in
subsection (a) was allowable.
``(ii) Agreement to assume recapture liability.--Clause (i)
shall not apply if the person acquiring such interest in the
facility agrees in writing to assume the recapture liability
of the person disposing of such interest in effect
immediately before such disposition. In the event of such an
assumption, the person acquiring the interest in the facility
shall be treated as the taxpayer for purposes of assessing
any recapture liability (computed as if there had been no
change in ownership).
``(4) Special rules.--
``(A) Tax benefit rule.--The tax for the taxable year shall
be increased under paragraph (1) only with respect to credits
allowed by reason of this section which were used to reduce
tax liability. In the case of credits not so used to reduce
tax liability, the carryforwards and carrybacks under section
39 shall be appropriately adjusted.
``(B) No credits against tax.--Any increase in tax under
this subsection shall not be treated as a tax imposed by this
chapter for purposes of determining the amount of any credit
under subpart A, B, or D of this part.
``(C) No recapture by reason of casualty loss.--The
increase in tax under this subsection shall not apply to a
cessation of operation of the facility as a qualified child
care facility by reason of a casualty loss to the extent such
loss is restored by reconstruction or replacement within a
reasonable period established by the Secretary.
``(e) Special Rules.--For purposes of this section--
[[Page S6547]]
``(1) Aggregation rules.--All persons which are treated as
a single employer under subsections (a) and (b) of section 52
shall be treated as a single taxpayer.
``(2) Pass-thru in the case of estates and trusts.--Under
regulations prescribed by the Secretary, rules similar to the
rules of subsection (d) of section 52 shall apply.
``(3) Allocation in the case of partnerships.--In the case
of partnerships, the credit shall be allocated among partners
under regulations prescribed by the Secretary.
``(f) No Double Benefit.--
``(1) Reduction in basis.--For purposes of this subtitle--
``(A) In general.--If a credit is determined under this
section with respect to any property by reason of
expenditures described in subsection (c)(1)(A), the basis of
such property shall be reduced by the amount of the credit so
determined.
``(B) Certain dispositions.--If during any taxable year
there is a recapture amount determined with respect to any
property the basis of which was reduced under subparagraph
(A), the basis of such property (immediately before the event
resulting in such recapture) shall be increased by an amount
equal to such recapture amount. For purposes of the preceding
sentence, the term `recapture amount' means any increase in
tax (or adjustment in carrybacks or carryovers) determined
under subsection (d).
``(2) Other deductions and credits.--No deduction or credit
shall be allowed under any other provision of this chapter
with respect to the amount of the credit determined under
this section.
``(g) Termination.--This section shall not apply to taxable
years beginning after December 31, 1999.''
(b) Conforming Amendments.--
(1) Section 38(b) is amended--
(A) by striking out ``plus'' at the end of paragraph (11),
(B) by striking out the period at the end of paragraph
(12), and inserting a comma and ``plus'', and
(C) by adding at the end the following new paragraph:
``(13) the employer-provided child care credit determined
under section 45D.''
(2) The table of sections for subpart D of part IV of
subchapter A of chapter 1 is amended by adding at the end the
following new item:
``Sec. 45D. Employer-provided child care credit.''
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
1997.
SEC. __04. CHARITABLE CONTRIBUTIONS OF SCIENTIFIC EQUIPMENT
TO ACCREDITED AND CREDENTIALED CHILD CARE
PROVIDERS AND TO ELEMENTARY AND SECONDARY
SCHOOLS.
(a) In General.--Subparagraph (B) of section 170(e)(4)
(relating to special rule for contributions of scientific
property used for research) is amended to read as follows:
``(B) Qualified research, child care, or education
contribution.--For purposes of this paragraph, the term
`qualified research, child care, or education contribution'
means a charitable contribution by a corporation of tangible
personal property (including computer software), but only
if--
``(i) the contribution is to--
``(I) an accredited child care center (as defined in
section 21(c)(2)(E)) which is an organization described in
section 501(c)(3) and exempt from taxation under section
501(a),
``(II) an organization described in section 501(c)(3) and
exempt from taxation under section 501(a) which is a
professional or educational support entity for accredited
child care centers or credentialed child care professionals
(as defined in subparagraphs (E) and (G) of section 21(c)(2),
respectively),
``(III) an educational organization described in subsection
(b)(1)(A)(ii),
``(IV) a governmental unit described in subsection (c)(1),
or
``(V) an organization described in section 41(e)(6)(B),
``(ii) the contribution is made not later than 3 years
after the date the taxpayer acquired the property (or in the
case of property constructed by the taxpayer, the date the
construction of the property is substantially completed),
``(iii) the property is scientific equipment or apparatus
substantially all of the use of which by the donee is for--
``(I) research or experimentation (within the meaning of
section 174), or for research training, in the United States
in physical or biological sciences, or
``(II) in the case of an organization described in
subclause (I), (II), (III), or (IV) of clause (i), use within
the United States for educational purposes related to the
purpose or function of the organization,
``(iv) the original use of the property began with the
taxpayer (or in the case of property constructed by the
taxpayer, with the donee),
``(v) the property is not transferred by the donee in
exchange for money, other property, or services, and
``(vi) the taxpayer receives from the donee a written
statement representing that its use and disposition of the
property will be in accordance with the provisions of clauses
(iv) and (v).''.
(b) Donations to Charity for Refurbishing.--Section
170(e)(4) is amended by adding at the end the following:
``(D) Donations to charity for refurbishing.--For purposes
of this paragraph, a charitable contribution by a corporation
shall be treated as a qualified research, child care, or
education contribution if--
``(i) such contribution is a contribution of property
described in subparagraph (B)(iii) to an organization
described in section 501(c)(3) and exempt from taxation under
section 501(a),
``(ii) such organization repairs and refurbishes the
property and donates the property to an organization
described in subparagraph (B)(i), and
``(iii) the taxpayer receives from the organization to whom
the taxpayer contributed the property a written statement
representing that its use of the property (and any use by the
organization to which it donates the property) meets the
requirements of this paragraph.''.
(c) Conforming Amendments.--
(1) Paragraph (4)(A) of section 170(e) is amended by
striking ``qualified research contribution'' each place it
appears and inserting ``qualified research, child care, or
education contribution''.
(2) The heading for section 170(e)(4) is amended by
inserting ``, child care, or education'' after ``research''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
1997.
SEC. __05. 2-PERCENT FLOOR ON MISCELLANEOUS ITEMIZED
DEDUCTIONS NOT APPLICABLE TO ACCREDITATION AND
CREDENTIALING EXPENSES OF INDIVIDUAL CHILD CARE
PROVIDERS.
(a) In General.--Section 67(b) (relating to miscellaneous
itemized deductions) is amended by striking ``and'' at the
end of paragraph (11), by striking the period at the end of
paragraph (12) and inserting ``, and'', and by adding at the
end the following:
``(13) the deduction allowable for accreditation and
credentialing expenses of child care providers.''.
(b) Definition.--Section 67 (relating to 2-percent floor on
miscellaneous itemized deductions) is amended by
redesignating subsections (e) and (f) as subsections (f) and
(g), respectively, and by inserting after subsection (d) the
following:
``(e) Accreditation and credentialing expenses of child
care providers.--For purposes of this section--
``(1) In general.--The term `accreditation and
credentialing expenses of child care providers' means direct
professional costs and educational and training expenses paid
or incurred by an eligible individual in order to achieve and
remain qualified for service as an employee of an accredited
child care center or as a credentialed child care
professional (as defined in subparagraphs (E) and (G) of
section 21(c)(2), respectively).
``(2) Eligible individual.--The term `eligible individual'
means an individual 60 percent of the taxable income of whom
for any taxable year is derived from service described in
paragraph (1).''.
(c) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
1997.
SEC. __06. EXPANSION OF HOME OFFICE DEDUCTION TO INCLUDE USE
OF OFFICE FOR DEPENDENT CARE.
(a) In General.--Section 280A(c)(1) (relating to certain
business use) is amended by adding at the end the following:
``A portion of a dwelling unit and the exclusive use of such
portion otherwise described in this paragraph shall not fail
to be so described if such portion is also used by the
taxpayer during such exclusive use to care for a dependent of
the taxpayer.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
1997.
SEC. __07. EXPANSION OF COORDINATED ENFORCEMENT EFFORTS OF
INTERNAL REVENUE SERVICE AND HHS OFFICE OF
CHILD SUPPORT ENFORCEMENT.
(a) State Reporting of Custodial Data.--Section
454A(e)(4)(D) of the Social Security Act (42 U.S.C.
654(e)(4)(D)) is amended by striking ``the birth date of any
child'' and inserting ``the birth date and custodial status
of any child''.
(b) Matching Program by IRS of Custodial Data and Tax
Status Information.--
(1) National directory of new hires.--Section 453(i)(3) of
the Social Security Act (42 U.S.C. 653(i)(3)) is amended by
striking ``a claim with respect to employment in a tax
return'' and inserting ``information which is required on a
tax return''.
(2) Federal case registry of child support orders.--Section
453(h) of the such Act (42 U.S.C. 653(h)) is amended by
adding at the end the following:
``(3) Administration of federal tax laws.--The Secretary of
the Treasury shall have access to the information described
in paragraph (2), consisting of the names and social security
numbers of the custodial parents linked with the children in
the custody of such parents, for the purpose of administering
those sections of the Internal Revenue Code of 1986 which
grant tax benefits based on support and residence provided
dependent children.''
(c) Minimum Past-Due Support Threshold for Use of Offset
Procedure.--
(1) Part d families.--Section 464(b)(1) of the Social
Security Act (42 U.S.C. 664(b)(1)) is amended by inserting
``(not to exceed $150)'' after ``minimum amount''.
(2) Other families.--Section 464(b)(2)(A) of such Act (42
U.S.C. 664(b)(2)(A)) is amended by striking ``$500'' both
places it appears and inserting ``$150''.
[[Page S6548]]
(d) Effective Date.--The amendments made by this section
shall take effect on October 1, 1997.
Mr. JEFFORDS. Mr. President, tomorrow I will introduce my amendment
on child care.
Today, there are more than 12 million children under the age of
five--including half of all infants under one year of age--who spend at
least part of their day being cared for by someone other than their
parents. The past two decades have seen a dramatic rise in the number
of women in the paid labor force. More than 60 percent of women with
preschool aged children, are employed full- or part-time. For most of
these families, child care is a requirement, not an option.
Women now constitute 46 percent of our Nation's labor force. Most
women are not working just to achieve a degree of personal growth
outside the home, but to meet their family's basic needs. Their
employment is not a choice, but an essential part of their family's
economic survival.
Similarly, child care that is affordable and convenient is necessary
for most women working outside the home. Many of the traditional
sources of child care are no longer available--as many of the friends,
neighbors, grandparents, and other relatives who used to be available
to provide child care are also working. Research has repeatedly
demonstrated that for parents who must work, child care services that
are dependable and of high quality make it easier to find and keep a
job. Good child care helps parents reach and maintain economic self-
sufficiency. There is a clear connection between child care and the
production of income. Congress acknowledged this when is passed welfare
reform last year.
Since 1990, the costs of child care have risen about 6 percent
annually. This is almost triple the annual increase in the cost of
living. At the same time, there are strong indicators that the quality
of child care has significantly decreased during that same period of
time. Parents are paying more but getting less.
The costs of child care are almost wholly dependent upon the
geographic area, the type of child care, and the age of the child. For
example, a family purchasing full-time child care services for a 4-year
old in rural New York using a family child care home may pay as little
as $60 a week. In contrast, a family with an infant using a child care
center in New York City may pay more than $250 a week.
I think that few of us know how much child care costs. The Senate
Employee's Child Care Center costs between $150 and $175 a week--$7,800
to $9,100 a year. That puts it in the high-middle range in terms of
costs for the Washington, DC area. The younger the child, the higher
the costs--and Senate Employee's Child Care Center does not accept
children under 18 months old.
For a 3- to 4-year-old, which is the least expensive age group, the
national average for center-based child care is $4,600 a year. The
average cost for high quality care, such as that provided by the Senate
Employee's Child Care Center, is between $8,500 and $9,100 a year.
A family normally spends about 20 percent of its income on housing
and 10 percent on food. The costs of child care for a low- or middle-
income family can rival the cost of housing and be double the cost of
food. Even though most of us recognize the critical part that child
care plays in the economic survival of families, we often fail to
recognize it as a basic cost which consumes a significant portion of a
family's income.
Parents can only purchase child care they can afford. While the
supply of child care has increased over the past 10 years, shortages
are still the norm for those in rural areas, those with school-aged
children, and for lower-income families. Those who do find care that is
affordable and convenient are often unsatisfied with the quality of the
care their child receives. In fact, one quarter of all parents would
change their child care arrangement if they could find and afford
something better.
The quality of child care in America is very troubling. A recent
nationwide study found that 40 percent of the child care provided to
infants in child care centers was potentially injurious. Fifteen-
percent of center-based child care providers for all preschoolers are
so bad that a child's health and safety are threatened; 70 percent are
mediocre--not hurting or helping children; and 15 percent actively
promote a child's development. Center-based child care, the object of
this study, is the most heavily regulated and frequently monitored type
of child care. Children in less regulated settings are predicted to be
far worse.
Combining the research on the quality of child care with the
breakthroughs on the development of the human brain produces a very
disturbing situation. Many children enter child care by 11 weeks of
age, are in care for close to 30 hours a week, and often stay in some
form of child care until they enter school. During that same period of
life, a child's brain is undergoing a series of extraordinary changes.
In the first 3 years of life, the brain either makes the connections
it needs for learning or it atrophies, making later efforts at
remediation in learning, behavior, and thinking difficult, at best. The
experiences and stimulation that a caretaker provide to a child are the
foundations upon which all future learning is built. The brain's
greatest and most critical growth spurt is between birth and 10 years
of age--precisely the time when non-parental child care is most
frequently utilized. A Time magazine special report on ``How a Child's
Brain Develops'' (February 3, 1997) said it best, ``. . . Good,
affordable day care is not a luxury or a fringe benefit for welfare
mothers and working parents but essential brain food for the next
generation.'' While bad child care can seriously impair a child's
development, high-quality child care significantly increases the
chances of good developmental outcomes for children.
Think about it. At the most important time in the development of a
child's brain, 12 million children are being cared for by people who
are paid less than the person who picks up your garbage each week, and
are required to have less training and less skills-based testing than
the person who cuts your hair. Child care providers play an important
role in a child's development, for they help fine-tune the child's
capacity to think and process information, social skills, emotional
health, and acquisition of language.
Last year, our goal in child care was to streamline Federal
assistance by creating a cohesive structure for Federal assistance and
to provide sufficient Government funds to subsidize child care for
welfare recipients who were transitioning into work. This year our goal
must be to promote the healthy development of children in child care. I
am worried that the pressure of the need to accommodate the increasing
demand for child care will force many into forgoing quality just to
increase the number of child care slots available.
This amendment, then, incorporates modifications to five different
sections of the Tax Code. Each of the provisions has been included to
solve a specific problem in an effort to improve the quality of child
care. Taken as a whole, these provisions represent a comprehensive
effort to increase the supply while simultaneously creating a demand
for high-quality child care, and making it affordable for low- and
middle-income families.
To offset the cost of these changes, my amendment reduces, but does
not eliminate, the dependent care tax credit for upper-income taxpayers
and the amount that an employee can place in a dependent care
assistance plan used to reimburse non-accredited or non-credential
child care is gradually decreased. In addition, the amendment expands
the coordinated enforcement efforts of the Internal Revenue Service and
the HHS Office of Child Support Enforcement, which will significantly
reduce the amount of fraud related to illegal tax deduction and credit
claims by non-custodial parents.
The first provision in the amendment makes several changes in the
Child and Dependent Care Tax Credit [CDCTC]. This tax credit is the
largest tax-based subsidy for child care. My amendment raises the
income level for the receipt of the highest percentage of employment-
related child care costs from $10,000 to $20,000. The percentage is
decreased at a rate of 1 percent for each additional $2,500 in adjusted
gross income and sets a minimum percentage of 10 percent for incomes of
$70,000 and above.
This change represents a more equitable distribution of limited
resources
[[Page S6549]]
based on the percentage of income a family must use to meet child care
expenses. For families qualifying for the EITC, my amendment makes the
child care tax credit refundable, on a quarterly basis. This will
enable many low-income working families to move from part-time to full-
time employment, by easing the burden of child care costs and having
the money available at regular intervals throughout the year.
Finally, the amendment establishes, over a 5-year period, different
rates for the tax credit, dependent on whether the child care is
provided in an accredited child care facility or by a credentialed
professional. This will reward parents who choose high-quality child
care and help defray the additional costs of that care.
I am sensitive to the concerns of colleagues who object to reducing
the child care tax credit. But before you judge this reduction too
harshly, let's put it into perspective. The tax credit remains at or
above the current rate of 20 percent for parents with adjusted gross
incomes of $45,000 or less, regardless of the type of child care. The
median income of families with children nationally is $37,000. While
there are wide differences in between States, there are only four
States where the median exceeds $45,000 AGI triggering a reduction in
the current rate of 20 percent. Most States are significantly below
this trigger.
At the end of the 5-year phase in period, the tax credit remains at
or above the current 20 percent rate for families with an AGI of
$55,000. No States have median incomes of families with children which
exceed the $55,000 AGI level for high quality child care which triggers
a reduction below current child care tax rate. Families with incomes at
or above $70,000 will still receive a tax credit of 10 percent,
increased to 12.5 percent if high quality care is used.
In terms of money, a 1 percent decrease in the child care tax credit
equals $24 when care for one child is claimed, and $48 for two or more
children. Families making $70,000 or more are the hardest hit by my
amendment. Yet their maximum financial cost is $240 a year for one
child, or $480 a year for two or more children--about half of one
percent of their adjusted gross income.
The second area of changes occurs in the Dependent Care Assistance
Plan [DCAP]. The amendment increases the amount that an employee can
contribute to a DCAP account, if the funds are used to pay for the care
of two or more eligible persons. In addition, the amount of DCAP
contributions is increased for high-quality care and decreased for care
that is provided by an unaccredited child care facility or a person who
has not received a professional credential. These differential rates
are phased in over a 5-year period in order for child care providers to
achieve accreditation or become credentialed in child care.
Current law prohibits DCAP from being used to pay relatives for care.
While I support needed controls on the use of DCAP accounts in most
cases, my amendment would make a very limited exception to this
prohibition. DCAP payments could be made to pay a parent or grandparent
to care for a newborn child. The DCAP account could be joined at
anytime during a pregnancy. The funds would be available for up to 12
months from the date of deposit into the employee's DCAP account--
because babies have a timetable all their own when it comes time to be
born.
The last change my amendment makes in DCAP is through the addition of
a requirement that Federal employees have the opportunity to contribute
to Dependent Care Assistance Plans. Private employees, as well as many
State and local governments, have had DCAP available for their
employees since 1981. Consistent with the intent of the Congressional
Accountability Act, I want to make this child care subsidy available to
Federal workers, including legislative branch employees.
Child care is a growing concern to businesses big and small.
Employers are coming to the realization that affordable, convenient
high-quality child care is a critical element in hiring and retaining
skilled employees. Many companies, such as Johnson & Johnson, IBM, and
others have been very innovative in providing child care assistance for
their employees. Small businesses in particular are finding it
difficult to meet the child care needs of their employees, but
recognize the importance of that help.
I am defering to my colleague from Wisconsin, Senator Kohl, who has
an excellent amendment providing a tax credit to businesses who provide
child care services and support for their employees. My amendment
included a similar provision, but because Senator Kohl has been working
on this aspect of child care for so long, I dropped my provision and
urge my colleagues to vote for his amendment as well as this one.
Current law prohibits businesses from receiving a charitable
deduction for donations made to public entities, such as schools and
child care services. My amendment will extend eligibility for a
business charitable deduction to the donation of educational equipment
and supplies donated to public schools, public child care providers and
public child care support entities, such as resource and referral
services. If child care is to improve and meet the developmental needs
of our Nation's children, every available resource must be made
available. Computers which are discarded because they are too slow or
have insufficient hard drive capacity, can be the first step into the
computer-age for a small child or the link to professional training for
a child care provider.
A critical part of improving the quality of child care is
professional development for child care providers. Since the 1970's
there has been a decline in child care teacher salaries. In 1990,
teachers in child care centers earned an average of $11,500 a year.
Assistant teachers, the largest growing segment of child care
professionals, were paid 10 to 20 percent less than child care
teachers. The 1990 annual income of regulated family child care
providers was $10,944 which translates to about $4 an hour.
Nonregulated family child care, generally comprised of providers taking
care of a smaller number of children, earned an average of $4,275 a
year--substantially less than minimum wage. With these wages, it is
easy to understand why more child care providers do not participate in
professional training or attend college classes to improve their
skills. The costs of applying for and receiving certification as a
qualified child care professional are minimal, but understandably out
of reach for many child care providers.
My amendment will exempt expenses directly related to child care
accreditation or becoming credentialed from the 2 percent floor that is
applied to miscellaneous itemized deductions. This will at least permit
child care providers to receive a full deduction for the expenses
associated with improving the child care services which they provide.
This incentive for professional growth and the development of new
skills is a small but critical part of my overall effort to support
high-quality child care.
The last provision in my amendment creates a very limited exception
to the executive use rule governing the tax deduction for home office
expenses. The amendment will permit the mixed use of home office space
for business and personal purposes to allow a person to care for his or
her child. In some ways, the need for this exception comes down to
fundamental fairness. How many school days, snow days and other times
do children accompany their parents into work? I can always tell when
the schools are unexpectedly closed, by the increased number of little
people I see in Senate offices and eateries. I have been in Senate
offices and other workplaces when a crib or playpen is clearly in
evidence. Yet, none of us question whether our offices are exclusively
for business use. One of the big incentives for telecommuting and home-
based business is to allow parents to have more time with their
families, yet existing law would keep a new mother from legitimately
claiming a home office deduction if she has her child read a book or
play in a corner of the room where she is working.
The need for high-quality child care is compelling. Having
affordable, convenient child care is tied directly to a family's
ability to produce income. Good child care can be an effective way to
support the healthy development of children, particularly in the
acquisition of social and language skills. For the millions of children
who spend much of their pre-school lives being cared for by someone
other than their parents, child care provides the foundation upon which
all future education
[[Page S6550]]
will be built--and determines to a large extent whether that foundation
will be strong or weak.
As we all know, quality child care costs money. It costs money to
parents who bear the biggest burden for the cost of child care. It
costs businesses both through the direct assistance that they provide
to employees to help with the costs of child care, and through their
ability to hire and retain a skilled work force. It costs Government
through existing tax provisions, direct spending, and discretionary
spending targeted at child care. But the costs of not making this
investment are even higher. Those costs can be measured in the cost of
remedial education, the increase of an unskilled labor force, the
increase in prison populations, and most importantly, the blunted
potential of millions of children.
I urge my colleagues to support my amendment to the budget
reconciliation act.
Mr. President, I ask unanimous consent that additional material be
printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
An Amendment To Be Proposed by Senator Jeffords on the Budget
Reconciliation Act of 1997 To Improve the Quality of Child Care
Changes to the Tax Code to encourage improvements in child
care services and options for meeting employment-related
child care needs--multiple provisions.
Proposed Amendment: To amend the Internal Revenue Code to
encourage the demand for and supply of high quality child
care by:
(1) Making the following changes in the Dependent Care Tax
Credit--
(a) Increasing the percentage of child care expenses to 30
percent for families with incomes at or below $20,000 AGI;
decreased at the rate of 1 percent for every $2,500 AGI over
$20,000 to a minimum of 10 percent for AGI over $70,000
(b) Phasing in a differential percentage (over 5 years) if
the child care is provided in an accredited center or by a
credentialed professional; At the end of the phase in period,
there is a 25 percent differential in the percentage of the
tax credit between high-quality child care and other child
care
(c) Making the Dependent Care Tax Credit refundable
beginning in 2002, for taxpayers eligible for the EITC,
including the differential percentage (see b above) for high
quality child care.
(2) Making the following changes in the Dependent Care
Assistance Program--
(a) The amount of money that can be placed in a Dependent
Care Assistance Program by an employee is increased for
accredited or credentialed child care, increased if there is
more than one qualified dependent, and decreased if child
care is provided in non-accredited child care or with a non-
credentialed child care professional--phased in over 5 years
(b) An exception in the calendar year spending requirement
and prohibition against its use to pay relatives for
providing care is made to make it possible for a parent or
grandparent to provide care for a newborn child
(c) Federal employees are provided the opportunity of
enrolling in a dependent care assistance plan
(3) Extending the eligibility for businesses to take a
qualified charitable deduction for the donation of
educational equipment and material to public schools and
accredited or credentialed non-profit child care providers
and child care support entities.
(4) Exempting the expenses related to achieving and
maintaining child care accreditation and credentialing from
the 2 percent floor applicable to miscellaneous itemized
deductions.
(5) Excepting the mixed use of home office space for
business and personal purposes to allow for the care of a
dependent from the exclusive use rule governing home office
deductions.
Reasons for Change: The increase in the number or employed
women with young children, combined with recent reforms in
the welfare system, has placed tremendous pressures on states
and communities to dramatically expand the amount of
available child care. Studies on the relationship between
quality child care and job retention, employment absenteeism,
and job acquisition clearly identifies that the quality and
safety of child care is as important as the existence of
child care services. In addition, the recent research on the
development of the human brain underscores how child care
affects the development of the tomorrow's workers and
citizens. The Committee for Economic Development recently
issued a report which identified changes in federal tax
policies, training of child care workers, incentives for
certification, educational resources, and increased business
involvement as critical to efforts to improve the quality of
child care. The tax code changes included in this amendment
address each of these issues.
Summary of each provision:
i. changes to the dependent care tax credit
A. Percent of the current $2,400 work related child care
expenses ($4,800 for 2 or more dependents):
Initial percentage reduced by 1 percent for each $2,500 by
which the taxpayer's AGI exceeds $20,000 but does not exceed
$70,000--rate does not reduce below 12.5 percent for
accredited/credentialed child care, 10 percent for non-
accredited/non-credentialed child care.
A 25 percent rate differential for accredited or
credentialed child care (as defined in the bill) is phased in
over 5 years.
For child care provided in non-accredited facilities or by
non-credentialed providers, the initial percentage is 30
percent and the phase out percentage is 10 percent,
regardless of the year.
Initial and phase out percentage for accredited/
credentialied child care:
------------------------------------------------------------------------
Initial Phaseout
Taxable year beginning in-- percent percent
------------------------------------------------------------------------
1998............................................ 31.5 12.5
1999............................................ 33.0 12.5
2000............................................ 34.5 12.5
2001............................................ 36.0 12.5
2002............................................ 37.5 12.5
------------------------------------------------------------------------
B: Credit made refundable for Low Income Tax Payers:
Applicable taxpayers are those for whom credit under
section 32 of the tax code (EITC) is allowable for the
taxable year.
Coordinated with advance payments and minimum tax rules,
including eligibility certification and advance payment
table.
Applies to taxable years beginning December 31, 2001.
II. Expansion of Dependent Care Assistance Program
A. Change in Dollar Limitation:
Applies to child care only--not elder or other dependent
care.
Change in rates for child in accredited/credentialed child
care:
------------------------------------------------------------------------
For 1 2 or more
Taxable years beginning in: qualifying qualifying
child child
------------------------------------------------------------------------
1998.......................................... $5,200 $6,700
1999.......................................... 5,400 6,900
2000.......................................... 5,600 7,100
2001.......................................... 5,800 7,300
2002 and thereafter........................... 6,000 7,500
------------------------------------------------------------------------
Change in rates for child NOT in accredited/credentialed child care:
------------------------------------------------------------------------
For 1 2 or more
Taxable years beginning in-- qualifying qualifying
child child
------------------------------------------------------------------------
1998.......................................... $4,800 $6,300
1999.......................................... 4,600 6,100
2000.......................................... 4,400 5,900
2001.......................................... 4,200 5,700
2002 and thereafter........................... 4,000 5,500
------------------------------------------------------------------------
B. Changes in eligibility for Dependent Care Assistance
Program:
Exception in calendar year spending requirement and
prohibition against using Dependent Care Assistance Program
to pay relative providing care.
During pregnancy, parent may elect to join the employer's
Dependent Care Assistance Program at any time during
pregnancy.
If parent signs up during a pregnancy, each deposit into
the individual's Dependent Care Assistance Account may be
available for use for a 12 month period.
If parent signs up during a pregnancy, the funds may be
used to reimburse a parent or spouse to remain at home with
the newborn child as an alternative to placing the child in
child care in order to return to work.
Federal employees must be provided with the opportunity to
enroll in a Dependent Care Assistance Program.
iii. charitable deduction for donating educational equipment &
materials
Extending eligibility for qualified charitable deduction
for business donation of educational equipment and materials
to public schools, accredited or credentialed non-profit
child care providers, and public or non-profit child care
support entities.
iv. tax deduction for specific educational expenses for individual
child care providers
Exemption from the 2% floor on applicable to miscellaneous
itemized deductions is provided for educational expenses
directly related to achieving or maintaining child care
accreditation or professional child care credentials for
individuals deriving at least 60% of their taxable income
through the provision of child care services.
v. change in home office deduction
Limited exception to the exclusive use rule permitting
mixed use of space for business and personal purposes in the
case of taxpayers who conduct home-based business while
caring for dependents.
Revenue Estimate: 4.11 Billion over 10 years.
Revenue Offset: To offset these increases, the dependent
care tax credit is reduced (not eliminated) for upper-income
taxpayers and the amount that an employee can place in a
dependent care assistance plan used to reimburse non-
accredited or non-credential child care is decreased. In
addition, the amendment expands the coordinated enforcement
efforts of the Internal Revenue Service and the HHS Office of
Child Support Enforcement, which will significantly reduce
the amount of fraud related to illegal tax deduction and
credit claims by non-custodial parents.
For the Purpose of this Amendment:
The terms credential and accreditation are used to refer to
formal credentialing and accreditation processes by a private
non-profit or public entity that is state recognized
[[Page S6551]]
(minimum requirements: age-appropriate health and safety
standards, age-appropriate developmental and educational
activities as an integral part of the program, outside
monitoring of the program/individual, accreditation/
credentialing instruments based on peer-validated research,
programs/facilities meet any applicable state and local
licensing requirements, and on-going staff development-
training which includes related skills testing). There are
several organizations and a few states that currently provide
accreditation and/or credentialing for early childhood
development programs, child care and child care providers.
______
LEVIN (AND McCAIN) AMENDMENT NO. 556
Mr. ROTH (for Mr. Levin for himself and Mr. McCain) proposed an
amendment to the bill, S. 949, supra; as follows:
On page 267, between lines 15 and 16, insert the following:
SEC. . SENSE OF THE SENATE REGARDING TAX TREATMENT OF STOCK
OPTIONS.
(a) Findings.--The Senate finds that--
(1) currently businesses can deduct the value of stock
options as business expense on their income tax returns, even
though the stock options are not treated as an expense on the
books of these same businesses; and
(2) stock options are the only form of compensation that is
treated in this way.
(b) Sense of the Senate.--It is the sense of the Senate
that the Committee on Finance of the Senate should hold
hearings on the tax treatment of stock options.
______
ENZI (AND OTHERS) AMENDMENT NO. 557
Mr. ROTH (for Mr. Enzi for himself, Mr. Hagel, Mr. Hutchinson, Mr.
Grams, Mr. Roberts, Mr. Inhofe, Mr. Thomas, Mr. Allard, Mr. Lugar, Mr.
Santorum, Mr. Frist, Mr. Burns, and Mr. Sessions) proposed an amendment
to the bill, S. 949, supra; as follows:
At the appropriate place in the bill, insert the following:
SEC. . SENSE OF THE SENATE ON ESTATE TAXES.
(a) The Senate finds that whereas--
(1) The Federal estate tax punishes hard working small
business owners and discourages savings and growth; and
(2) The Federal estate tax imposes an unfair economic
burden on small businesses and reduces their ability to
survive and compete with large corporations; and
(3) A reduction in Federal estate taxes for family-owned
farms and enterprises will help to prevent the liquidation of
small businesses that strengthen American communities by
providing jobs and security;
(b) It is the Sense of the Senate that--
(1) The estate tax relief provided in this bill is an
important step that will enable more family-owned farms and
small businesses to survive and continue to provide economic
security and job creation in American communities; and
(2) Congress should eliminate the Federal estate tax
liability for family-owned businesses by the end of 2002 on a
deficit-neutral basis.
______
DODD AMENDMENT NO. 558
Mr. ROTH (for Mr. Dodd) proposed an amendment to the bill, S. 949,
supra; as follows:
On page 77, between lines 11 and 12, insert the following:
SEC. . TREATMENT OF CANCELLATION OF CERTAIN STUDENT LOANS.
(a) Certain Loans by Exempt Organizations.--
(1) In general.--Paragraph (2) of section 108(f) (defining
student loan) is amended by striking ``or'' at the end of
subparagraph (B) and by striking subparagraph (D) and
inserting the following:
``(D) any educational organization described in section
170(b)(1)(A)(ii) if such loan is made--
``(i) pursuant to an agreement with any entity described in
subparagraph (A), (B), or (C) under which the funds from
which the loan was made were provided to such educational
organization, or
``(ii) pursuant to a program of such educational
organization which is designed to encourage its students to
serve in occupations with unmet needs or in areas with unmet
needs and under which the services provided by the students
(or former students) are for or under the direction of a
governmental unit or an organization described in section
501(c)(3) and exempt from tax under section 501(a).
The term `student loan' includes any loan made by an
educational organization so described or by an organization
exempt from tax under section 501(a) to refinance a loan
meeting the requirements of the preceding sentence.''
(2) Exception for discharges on account of services
performed for certain lenders.--Subsection (f) of section 108
is amended by adding at the end the following new paragraph:
``(3) Exception for discharges on account of services
performed for certain lenders.--Paragraph (1) shall not apply
to the discharge of a loan made by an organization described
in paragraph (2)(D) (or by an organization described in
paragraph (2)(E) from funds provided by an organization
described in paragraph (2)(D)) if the discharge is on account
of services performed for either such organization.''
(b) Certain Student Loans the Repayment of Which Is Income
Contingent.--Paragraph (1) of section 108(f) is amended by
striking ``any student loan if'' and all that follows and
inserting ``any student loan if--
``(A) such discharge was pursuant to a provision of such
loan under which all or part of the indebtedness of the
individual would be discharged if the individual worked for a
certain period of time in certain professions for any of a
broad class of employers, or
``(B) in the case of a loan made under part D of title IV
of the Higher Education Act of 1965 which has a repayment
schedule established under section 455(e)(4) of such Act
(relating to income contingent repayments), such discharge is
after the maximum repayment period under such loan (as
prescribed under such part).''
(c) Effective Date.--The amendments made by this section
shall apply to discharges of indebtedness after the date of
the enactment of this Act.
______
GRAMS AMENDMENT NO. 559
Mr. ROTH (for Mr. Grams) proposed an amendment to the bill, S. 949,
supra; as follows:
``(j) Qualified Games of Chance.--
(1) In general.--The term `unrelated trade or business'
does not include the activity of qualified games of chance.
(2) Qualified games of chance.--For purposes of this
subsection, the term `qualified games of chance means any
game of chance, other than provided in subsection (f),
conducted by an organization if--
``(A) such organization is licensed pursuant to State law
to conduct such game,
``(B) only organizations which are organized as nonprofit
corporations or are exempt from tax under section 501(a) may
be so licensed to conduct such game within the State, and
``(C) the conduct of such game does not violate State or
local law.''
______
DORGAN AMENDMENTS NOS. 560-561
Mr. ROTH (for Mr. Dorgan) proposed two amendments to the bill, S.
949, supra; as follows:
Amendment No. 560
On page 211, between lines 5 and 6, insert the following:
SEC. 724. DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT ACCOUNTS
MAY BE USED WITHOUT PENALTY TO REPLACE OR
REPAIR PROPERTY DAMAGED IN PRESIDENTIALLY
DECLARED DISASTER AREAS.
(a) In General.--Section 72(t)(2) (relating to exceptions
to 10-percent additional tax on early distributions), as
amended by sections 203 and 303, is amended by adding at the
end the following new subparagraph:
``(G) Distributions for disaster-related expenses.--
Distributions from an individual retirement plan which are
qualified disaster-related distributions.''
(b) Qualified Disaster-Related Distributions.--Section
72(t), as amended by sections 203 and 303, is amended by
adding at the end the following new paragraph:
``(9) Qualified disaster-related distributions.--For
purposes of paragraph (2)(E)--
``(A) In general.--The term `qualified disaster-related
distribution' means any payment or distribution received by
an individual to the extent that the payment or distribution
is used by such individual within 60 days of the payment or
distribution to pay for the repair or replacement of tangible
property which is disaster-damaged property.
``(B) Limitations.--
``(i) Only distributions within 2 years.--The term
`qualified disaster-related distribution' shall only include
any payment or distribution which is made during the 2-year
period beginning on the date of the determination referred to
in subparagraph (D).
``(ii) Dollar limitation.--Such term shall not include
distributions to the extent the amount of such distributions
exceeds $10,000 during the 2-year period described in clause
(i).
``(C) Disaster-damaged property.--The term `disaster-
damaged property' means property--
``(i) which was located in a disaster area on the date of
the determination referred to in subparagraph (C), and
``(ii) which was destroyed or substantially damaged as a
result of the disaster occurring in such area.
``(D) Disaster area.--The term `disaster area' means an
area determined by the President during 1997 to warrant
assistance by the Federal Government under the Robert T.
Stafford Disaster Relief and Emergency Assistance Act.''
(c) Effective Date.--The amendments made by this section
shall apply to payments and distributions after December 31,
1996, with respect to disasters occurring after such date.
SEC. 725. ELIMINATION OF 10 PERCENT FLOOR FOR DISASTER
LOSSES.
(a) General Rule.--Section 165(h)(2)(A) (relating to net
casualty loss allowed only to the extent it exceeds 10
percent of adjusted gross income) is amended by striking
clauses (i) and (ii) and inserting the following new clauses:
[[Page S6552]]
``(i) the amount of the personal casualty gains for the
taxable year,
``(ii) the amount of the federally declared disaster losses
for the taxable year (or, if lesser, the net casualty loss),
plus
``(iii) the portion of the net casualty loss which is not
deductible under clause (ii) but only to the extent such
portion exceeds 10 percent of the adjusted gross income of
the individual.
For purposes of the preceding sentence, the term `net
casualty loss' means the excess of personal casualty losses
for the taxable year over personal casualty gains.''
(b) Federally Declared Disaster Loss Defined.--Section
165(h)(3) (relating to treatment of casualty gains and
losses) is amended by adding at the end the following new
subparagraph:
``(C) Federally declared disaster loss.--
``(i) In general.--The term `federally declared disaster
loss' means any personal casualty loss attributable to a
disaster occurring during 1997 in an area subsequently
determined by the President of the United States to warrant
assistance by the Federal Government under the Robert T.
Stafford Disaster Relief and Emergency Assistance Act.
``(ii) Dollar limitation.--Such term shall not include
personal casualty losses to the extent such losses exceed
$10,000 for the taxable year.''
(c) Conforming Amendment.--The heading for section
165(h)(2) is amended by striking ``Net casualty loss'' and
inserting ``Net nondisaster casualty loss''.
(d) Effective Date.--The amendments made by this section
shall apply to losses attributable to disasters occurring
after December 31, 1996, including for purposes of
determining the portion of such losses allowable in taxable
years ending before such date pursuant to an election under
section 165(i) of the Internal Revenue Code of 1986.
____
On page 211, between lines 5 and 6, insert the following:
SECTION 724. ABATEMENT OF INTEREST ON UNDERPAYMENTS BY
TAXPAYERS IN PRESIDENTIALLY DECLARED DISASTER
AREAS.
(a) In General.--Section 6404 (relating to abatements) is
amended by adding at the end the following:
``(h) Abatement of Interest on Underpayments by Taxpayers
in Presidentially Declared Disaster Areas.--
``(1) In general.--If the Secretary extends for any period
the time for filing income tax returns under section 6081 and
the time for paying income tax with respect to such returns
under section 6161 (and waives any penalties relating to the
failure to so file or so pay) for any individual located in a
Presidentially declared disaster area, the Secretary shall
abate for such period the assessment of any interest
prescribed under section 6601 on such income tax.
``(2) Presidentially declared disaster area.--For purposes
of paragraph (1), the term `Presidentially declared disaster
area' means, with respect to any individual, any area which
the President has determined during 1997 warrants assistance
for the Federal Government under the Robert T. Stafford
Disaster Relief and Emergency Assistance.
``(3) Individual.--For purposes of this subsection, the
term `individual' shall not include any estate or trust.''
(b) Effective Date.--The amendment made by this section
shall apply to disasters declared after December 31, 1996.
______
BIDEN AMENDMENT NO. 562
Mr. ROTH (for Mr. Biden) proposed an amendment to the bill, S. 949,
supra; as follows:
At the appropriate place, insert the following:
SEC. . SURVIVOR BENEFITS FOR PUBLIC SAFETY OFFICERS KILLED
IN THE LINE OF DUTY.
In General.--Part III of subchapter B of chapter 1
(relating to items specifically excluded from gross income)
is amended by redesignating section 138 as section 139 and by
inserting after section 137 the following new section:
``SEC. 138. SURVIVOR BENEFITS ATTRIBUTABLE TO SERVICE BY A
PUBLIC SAFETY OFFICER WHO IS KILLED IN THE LINE
OF DUTY.
``(a) In General.--Gross income shall not include any
amount paid as a survivor annuity on account of the death of
a public safety officer (as such term is defined in section
1204 of the Omnibus Crime Control and Safe Streets Act of
1968) killed in the line of duty--
``(1) if such annuity is provided under a governmental plan
which meets the requirements of section 401(1) to the spouse
(or a former spouse) of the public safety officer or to a
child of such officer; and
``(2) to the extent such annuity is attributable to such
officer's service as a public safety officer.
``(b) Exceptions.--
``(1) In general.--Subsection (a) shall not apply with
respect to the death of any public safety officer if--
``(A) the death was caused by the international misconduct
of the officer or by such officer's intention to bring about
such officer's death;
``(B) the officer was voluntarily intoxicated (as defined
in section 1204 of the Omnibus Crime Control and Safe Streets
Act of 1968) at the time of death; or
``(C) the officer was performing such officer's duties in a
grossly negligent manner at the time of death.
``(2) Exception for benefits paid to certain individuals.--
Subsection (a) shall not apply to any payment to an
individual whose actions were a substantial contributing
factor at the death of the officer.
(b) Effective Date.--The amendments made by this subsection
shall apply to amounts received in taxable years beginning
after December 31, 1996, with respect to individuals dying
after such date.
______
DODD (AND D'AMATO) AMENDMENT NO. 563
Mr. ROTH (for Mr. Dodd for himself and Mr. D'Amato) proposed an
amendment to the bill, S. 949, supra; as follows:
On page 267, between lines 15 and 16, insert the following:
SEC. . TREATMENT OF CERTAIN DISABILITY BENEFITS RECEIVED BY
FORMER POLICE OFFICERS OR FIREFIGHTERS.
(a) General Rule.--For purposes of determining whether any
amount to which this section applies is excludable from gross
income under section 104(a)(1) of the Internal Revenue Code
of 1986, the following conditions shall be treated as
personal injuries or sickness in the course of employment:
(1) Heart disease.
(2) Hypertension.
(b) Amounts To Which Section Applies.--his section shall
apply to any amount--
(1) which is payable--
(A) to an individual (or to the survivors of an individual)
who was a full-time employee of any police department or fire
department which is organized and operated by a State, by any
political subdivision thereof, or by any agency or
instrumentality of a State or political subdivision thereof,
and
(B) under a State law (as in existence on July 1, 1992)
which irrebuttably presumed that heart disease and
hypertension are work-related illnesses but only for
employees separating from service before such date; and
(2) which is received in calendar year 1989, 1990, or 1991.
For purposes of the preceding sentence, the term ``State''
includes the District of Columbia.
(c) Waiver of Statute of Limitations.--If, on the date of
the enactment of this Act (or at any time within the 1-year
period beginning on such date of enactment) credit or refund
of any overpayment of tax resulting from the provisions of
this section is barred by any law or rule of law, credit or
refund of such overpayment shall, nevertheless, be allowed or
made if claim therefore is filed before the date 1 year after
such date of enactment.
SECTION . REMOVAL OF DOLLAR LIMITATION ON BENEFIT PAYMENTS
FROM A DEFINED BENEFIT PLAN MAINTAINED FOR
CERTAIN POLICE AND FIRE EMPLOYEES.
(a) In General.--Subparagraph (G) of section 415(b)(2) of
the Internal Revenue Code of 1986 is amended by striking
``participant--'' and all that follows and inserting
``participant, subparagraphs (C) and (D) of this paragraph
and subparagraph (B) of paragraph (1) shall not apply.''
(b) Effective Date.--The amendment made by subsection (a)
shall apply to years beginning after December 31, 1996.
______
BOXER AMENDMENT NO. 564
Mr. ROTH (for Mrs. Boxer) proposed an amendment to the bill, S. 949,
supra; as follows:
On page 208, between lines 16 and 17, insert the following:
SEC. . DIVERSIFICATION IN SECTION 401(K) PLAN INVESTMENTS.
(a) Limitations on Investment in Employer Securities and
Employer Real Property by Cash or Deferred Arrangements.--
Section 407(d)(3) of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1107(d)(3)) is amended by adding at
the end the following:
``(D)(i) The term `eligible individual account plan' does
not include that portion of an individual account plan that
consists of elective deferrals (as defined in section
402(g)(3) of the Internal Revenue Code of 1986) pursuant to a
qualified cash or deferred arrangement as defined in section
401(k) of the Internal Revenue Code of 1986 (and earnings
allocable thereto) are required to be invested in qualifying
employer securities or qualifying employer real property or
both pursuant to the documents and instruments governing the
plan or at the direction of a person other than the
participant on whose behalf such elective deferrals are made
to the plan (or the participant's beneficiary).
``(ii) For purposes of subsection (a), such portion shall
be treated as a separate plan.
``(iii) This subparagraph shall not apply to an individual
account plan if the fair market value of the assets of all
individual account plans maintained by the employer equals
not more than 10 percent of the fair market value of the
assets of all pension plans maintained by the employer.
``(iv) This subparagraph shall not apply to an individual
account plan that is an employee stock ownership plan as
defined in
[[Page S6553]]
section 409(a) or 4975(e)(7) of the Internal Revenue Code.''.
(v) This subparagraph shall not apply to an individual
account plan if not more than 1 percent of an employees
eligible compensation deposited to the plan as an elective
deferral (as so defined) is required to be invested in the
qualifying employer securities.
(b) Effective Date.--(1) In general.--The amendments made
by this section shall apply to employer securities and
employer real property acquired after the beginning of the
first plan year beginning after the 90th day after the date
of enactment of this Act.
(2) Special rule for certain acquisitions.--Employer
securities and employer real property acquired pursuant to a
binding written contract to acquire such securities and real
property in effect on the date of enactment of this Act and
at all times thereafter, shall be treated as acquired
immediately before such date.
______
DASCHLE AMENDMENT NO. 565
Mr. ROTH (for Mr. Daschle) proposed an amendment to the bill, S. 949,
supra; as follows:
Beginning on page 189, line 24, strike ``and'' and all that
follows through page 190, line 1, and insert the following:
``(III) capital expenditures related to rail operations for
Class II or Class III rail carriers in the State,
``(IV) any project that is eligible to receive funding
under section 5309, 5310, or 5311 of title 49, United States
Code,
``(V) any project that is eligible to receive funding under
section 130 of title 23, United States Code, and
``(VI) the payment of interest.
Mr. DASCHLE. Mr. President, I ask unanimous consent that additional
material be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Daschle Amendment to S. 949 to Expand Uses of Intercity Passenger Rail
Fund for Non-Amtrak States
limitations proposed by s. 949
The Finance Committee bill creates an Intercity Passenger
Rail Fund financed by 0.5 cent per gallon of the federal fuel
excise taxes primarily to finance Amtrak. The bill also sets
aside 1% of annual program funds per year for each state with
no Amtrak service. The six states currently lacking Amtrak
service are South Dakota, Wyoming, Oklahoma, Maine, Alaska
and Hawaii. However, the bill limits the use of those funds
by non-Amtrak States to: (1) intercity passenger rail or bus
service capital improvements and maintenance, or (2) The
purchase of inter-city passenger rail services from the
National Railroad Passenger Corporation.
problems posed to non-amtrak states
South Dakota and some of the other non-Amtrak states have
no passenger rail service and only limited intercity bus
service. This type of funding would not significantly benefit
these states, nor could they wisely invest funds in such
service.
amendment allows non-amtrak states to use funds productively
The amendment would expand the use of funding provided to
non-Amtrak states under this provision to include the
expenditure of such funds for:
1. Rural and public transportation projects that are
eligible for funding under Sections 5309 (discretionary
transit-urban areas), 5310 (transit capital for the elderly
and handicapped), and 5311 (rural transit capital and
operations) of Title 49 USC. Rural public transportation (a
portion of which is intercity in nature in transporting
elderly and disabled from small towns to larger cities for
medical care, shopping and other purposes, as well as
providing local nutritional needs and mobility) is extremely
important and needed in South Dakota in order to deal with
the vast aging population in a sparsely populated area.
During FY 1996 in the State, rural public transportation
operators provided 1,114,672 rides and traveled 2,102,414
miles transporting the elderly and disabled of which over 50%
of the rides were for medical, employment and nutritional
needs. However, only about two-thirds of the State currently
has access to limited Public Transportation, and over half of
the existing transit vehicles in the providers' fleets are
older than 7 years or have over 1000,000 miles. Therefore
this funding would address significant public transit needs.
2. Rail/highway crossing safety projects that are eligible
for funding under Section 130 of Title 23, USC. Only 219 out
of 2025 of South Dakota's rail/highway crossings are
signalized, and there is a tremendous unmet need to improve
the safety of rail/highway crossings in the state.
3. Capital expenditures related to rail operations for
Class II and Class III railroads within the state. Only
railroads that are primarily regional carriers-not large
railroads would be eligible for assistance. This is extremely
important for states like South Dakota which depends on
regional carriers and has made a major investment on its own
and currently owns approximately 50% of the rail lines
operating in the state in order to provide a core rail
transportation system to benefit the state's agricultural
economy.
____________________