[Congressional Record Volume 143, Number 149 (Thursday, October 30, 1997)]
[Senate]
[Pages S11466-S11485]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                          AMENDMENTS SUBMITTED

                                 ______
                                 

        THE EDUCATION SAVINGS ACT FOR PUBLIC AND PRIVATE SCHOOLS

                                 ______
                                 

                        KOHL AMENDMENT NO. 1528

  (Ordered to lie on the table.)
  Mr. KOHL submitted an amendment intended to be proposed by him to the 
bill (H.R. 2646) to amend the Internal Revenue Code of 1986 to allow 
tax-free expenditures from education individual retirement accounts for 
elementary and secondary school expenses, to increase the maximum 
annual amount of contributions to such accounts, and for other 
purposes; as follows:

       At the appropriate place in the bill, insert the following:

     SEC. __. ALLOWANCE OF CREDIT FOR EMPLOYER EXPENSES FOR CHILD 
                   CARE ASSISTANCE; FOREIGN TAX CREDIT CARRYOVERS.

       (a) Allowance of Credit.--
       (1) In general.--Subpart D of part IV of subchapter A of 
     chapter 1 of the Internal Revenue Code of 1986 (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, 
     or
       ``(D) under a contract to provide child care resource and 
     referral services to employees of the taxpayer.
       ``(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.''
       (2) Conforming amendments.--

[[Page S11467]]

       (A) Section 38(b) of the Internal Revenue Code of 1986 is 
     amended--
       (i) by striking out ``plus'' at the end of paragraph (11),
       (ii) by striking out the period at the end of paragraph 
     (12), and inserting a comma and ``plus'', and
       (iii) by adding at the end the following new paragraph:
       ``(13) the employer-provided child care credit determined 
     under section 45D.''
       (B) 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.''

       (3) Effective date.--The amendments made by this subsection 
     shall apply to taxable years beginning after December 31, 
     1996.
       (b) Modification to Foreign Tax Credit Carryback and 
     Carryover Periods.--
       (1) In general.--Subsection (c) of section 904 of the 
     Internal Revenue Code of 1986 (relating to limitation on 
     credit) is amended--
       (A) by striking ``in the second preceding taxable year,'', 
     and
       (B) by striking ``or fifth'' and inserting ``fifth, sixth, 
     or seventh''.
       (2) Effective date.--The amendment made by this subsection 
     shall apply to credits arising in taxable years beginning 
     after December 31, 1997.
                                 ______
                                 

                       DURBIN AMENDMENT NO. 1529

  (Ordered to lie on the table.)
  Mr. DURBIN submitted an amendment intended to be proposed by him to 
the bill, H.R. 2646, surpa; as follows:

       Strike section 2 and insert:

     SEC. 2. INCREASE IN DEDUCTION FOR HEALTH INSURANCE COSTS OF 
                   SELF-EMPLOYED INDIVIDUALS.

       (a) In General.--Paragraph (1) of section 162(l) of the 
     Internal Revenue Code of 1986 is amended to read as follows:
       ``(1) Allowance of deduction.--
       ``(A) In general.--In the case of an individual who is an 
     employee within the meaning of section 401(c)(1), there shall 
     be allowed as a deduction under this section an amount equal 
     to the applicable percentage of the amount paid during the 
     taxable year for insurance which constitutes medical care for 
     the taxpayer, his spouse, and dependents.
       ``(B) Applicable percentage.--For purposes of subparagraph 
     (A), the applicable percentage shall be determined under the 
     following table:

``For taxable years beginning                             the applicable
  in calendar year--                                     percentage is--
      1998............................................                75
      1999............................................                75
      2000............................................                75
      2001............................................                80
      2002............................................                80
      2003............................................                80
      2004............................................                80
      2005............................................                80
      2006 and thereafter.............................            100.''
 

       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1997.
                                 ______
                                 

                      MOYNIHAN AMENDMENT NO. 1530

  (Ordered to lie on the table.)
  Mr. MOYNIHAN submitted an amendment intended to be proposed by him to 
the bill, H.R. 2646, supra; as follows:

       Strike section 2 and insert:

     SEC. 2. EXCLUSION FOR EDUCATIONAL ASSISTANCE TO GRADUATE 
                   STUDENTS.

       (A) In General.--The last sentence of section 127(c)(1) of 
     the Internal Revenue Code of 1986 (defining educational 
     assistance) 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''.
       (b) Effective Date.--The amendment made by subsection (a) 
     small apply with respect to expenses relating to courses 
     beginning after July 31, 1997.
                                 ______
                                 

                       GRAHAM AMENDMENT NO. 1531

  (Ordered to lie on the table.)
  Mr GRAHAM submitted an amendment intended to be proposed by him to 
the bill, H.R. 2646, supra; as follows:

       On page 3, between lines 9 and 10, insert:
       ``(C) Dependent care employment-related expenses.--Such 
     term shall include employment-related expenses (as defined in 
     section 21(b)(2)) for the care of a designated beneficiary 
     who is a qualifying individual under section 21(b)(1)(A) with 
     respect to the individual incurring such expenses. No credit 
     shall be allowed under section 21 with respect to employment-
     related expenses paid out of the account to the extent such 
     payment is not included in gross income by reason of 
     subsection (d)(2).''
                                 ______
                                 

                MOSELEY-BRAUN AMENDMENTS NOS. 1532-1533

  (Ordered to lie on the table.)
  Ms. MOSELEY-BRAUN submitted two amendments intended to be proposed by 
her to the bill, H.R. 2646, supra; as follows:

                           Amendment No. 1532

       Beginning on page 2, strike line 3 and all that follows 
     through page 6, line 10, and insert the following:

     SECTION 1. PROVISION OF ASSISTANCE FOR CONSTRUCTION AND 
                   RENOVATION OF EDUCATIONAL FACILITIES.

       (a) Short Title.--This section may be cited as the 
     ``Educational Facilities Improvement Act''.
       (b) Amendment.--Title XII of the Elementary and Secondary 
     Education Act of 1965 (20 U.S.C. 8501 et seq.) is amended--
       (1) by repealing sections 12002 and 12003;
       (2) by redesignating sections 12001 and 12004 through 
     12013, as sections 12101 and 12102 through 12111, 
     respectively;
       (3) by inserting after the title heading the following:

     ``SEC. 12001. FINDINGS.

       ``The Congress finds the following:
       ``(1) The General Accounting Office performed a 
     comprehensive survey of the Nation's public elementary and 
     secondary school facilities, and found severe levels of 
     disrepair in all areas of the United States.
       ``(2) The General Accounting Office concluded more than 
     14,000,000 children attend schools in need of extensive 
     repair or replacement. Seven million children attend schools 
     with life safety code violations. Twelve million children 
     attend schools with leaky roofs.
       ``(3) The General Accounting Office found the problem of 
     crumbling schools transcends demographic and geographic 
     boundaries. At 38 percent of urban schools, 30 percent of 
     rural schools, and 29 percent of suburban schools, at least 
     one building is in need of extensive repair or should be 
     completely replaced.
       ``(4) The condition of school facilities has a direct 
     affect on the safety of students and teachers, and on the 
     ability of students to learn.
       ``(5) Academic research has proven a direct correlation 
     between the condition of school facilities and student 
     achievement. At Georgetown University, researchers found 
     students assigned to schools in poor condition can be 
     expected to fall 10.9 percentage points below those in 
     buildings in excellent condition. Similar studies have 
     demonstrated up to a 20 percent improvement in test scores 
     when students were moved from a poor facility to a new 
     facility.
       ``(6) The General Accounting Office found most schools are 
     not prepared to incorporate modern technology into the 
     classroom. Forty-six percent of schools lack adequate 
     electrical wiring to support the full-scale use of 
     technology. More than a third of schools lack the requisite 
     electrical power. Fifty-six percent of schools have 
     insufficient phone lines for modems.
       ``(7) The Department of Education reported that elementary 
     and secondary school enrollment, already at a record high 
     level, will continue to grow during the period between 1996 
     and 2000, and that in order to accommodate this growth, the 
     United States will need to build an additional 6,000 schools 
     over this time period.
       ``(8) The General Accounting Office found it will cost 
     $112,000,000,000 just to bring schools up to good, overall 
     condition, not including the cost of modernizing schools so 
     the schools can utilize 21st century technology, nor 
     including the cost of expansion to meet record enrollment 
     levels.
       ``(9) State and local financing mechanisms have proven 
     inadequate to meet the challenges facing today's aging school 
     facilities. Large numbers of local educational agencies have 
     difficulties securing financing for school facility 
     improvement.
       ``(10) The Federal Government can support elementary and 
     secondary school facilities, and can leverage additional 
     funds for the improvement of elementary and secondary school 
     facilities.

     ``SEC. 12002. PURPOSE.

       ``The purpose of this title is to help State and local 
     authorities improve the quality of education at their public 
     schools through the provision of Federal funds to enable the 
     State and local authorities to meet the cost associated with 
     the improvement of school facilities within their 
     jurisdictions.

     ``PART A--GENERAL INFRASTRUCTURE IMPROVEMENT GRANT PROGRAM'';

     and
       (4) by adding at the end the following:

       ``PART B--CONSTRUCTION AND RENOVATION BOND SUBSIDY PROGRAM

     ``SEC. 12201. DEFINITIONS.

       ``As used in this part:
       ``(1) Educational facility.--The term `educational 
     facility' has the meaning given the term `school' in section 
     12110.
       ``(2) Local area.--The term `local area' means the 
     geographic area served by a local educational agency.
       ``(3) Local bond authority.--The term `local bond 
     authority' means--
       ``(A) a local educational agency with authority to issue a 
     bond for construction or renovation of educational facilities 
     in a local area; and
       ``(B) a political subdivision of a State with authority to 
     issue such a bond for an area including a local area.
       ``(4) Poverty line.--The term `poverty line' means the 
     official poverty line (as defined by the Office of Management 
     and Budget, and revised annually in accordance with

[[Page S11468]]

     section 673(2) of the Omnibus Budget Reconciliation Act of 
     1981 (42 U.S.C. 9902(2))) applicable to a family of the size 
     involved.
       ``(5) State.--The term `State' means each of the several 
     States of the United States, the District of Columbia, and 
     the Commonwealth of Puerto Rico.

     ``SEC. 12202. AUTHORIZATION OF PROGRAM.

       ``(a) Program Authority.--Of the amount appropriated under 
     section 12210 for a fiscal year and not reserved under 
     subsection (b), the Secretary shall use--
       ``(1) 33 percent of such amount to award grants to local 
     bond authorities for not more than 125 eligible local areas 
     as provided for under section 12203; and
       ``(2) 67 percent of such amount to award grants to States 
     as provided for under section 12204.
       ``(b) Special Rule.--The Secretary may reserve--
       ``(1) not more than 1.5 percent of the amount appropriated 
     under section 12210 to provide assistance to Indian schools 
     in accordance with the purpose of this title;
       ``(2) not more than 0.5 percent of the amount appropriated 
     under section 12210 to provide assistance to Guam, the United 
     States Virgin Islands, 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 to carry out the purpose of this title; and
       ``(3) not more than 0.1 percent of the amount appropriated 
     under section 12210 to carry out section 12209.

     ``SEC. 12203. DIRECT GRANTS TO LOCAL BOND AUTHORITIES.

       ``(a) In General.--The Secretary shall award a grant under 
     section 12202(a)(1) to eligible local bond authorities to 
     provide assistance for construction or renovation of 
     educational facilities in a local area.
       ``(b) Use of Funds.--The local bond authority shall use 
     amounts received through a grant made under section 
     12202(a)(1) to pay a portion of the interest costs applicable 
     to any local bond issued to finance an activity described in 
     section 12205 with respect to the local area.
       ``(c) Eligibility and Determination.--
       ``(1) Eligibility.--To be eligible to receive a grant under 
     section 12202(a)(1) for a local area, a local bond authority 
     shall demonstrate the capacity to issue a bond for an area 
     that includes 1 of the 125 local areas for which the 
     Secretary has made a determination under paragraph (2).
       ``(2) Determination.--
       ``(A) Mandatory.--The Secretary shall make a determination 
     of the 100 local areas that have the highest numbers of 
     children who are--
       ``(i) aged 5 to 17, inclusive; and
       ``(ii) members of families with incomes that do not exceed 
     100 percent of the poverty line.
       ``(B) Discretionary.--The Secretary may make a 
     determination of 25 local areas, for which the Secretary has 
     not made a determination under subparagraph (A), that have 
     extraordinary needs for construction or renovation of 
     educational facilities that the local bond authority serving 
     the local area is unable to meet.
       ``(d) Application.--To be eligible to receive a grant under 
     section 12202(a)(1), a local bond authority shall prepare and 
     submit to the Secretary an application at such time, in such 
     manner, and containing such information as the Secretary may 
     require, including--
       ``(1) an assurance that the application was developed in 
     consultation with parents and classroom teachers;
       ``(2) information sufficient to enable the Secretary to 
     make a determination under subsection (c)(2) with respect to 
     such local authority;
       ``(3) a description of the architectural, civil, 
     structural, mechanical, or electrical construction or 
     renovation to be supported with the assistance provided under 
     this part;
       ``(4) a cost estimate of the proposed construction or 
     renovation;
       ``(5) an identification of other resources, such as unused 
     bonding capacity, that are available to carry out the 
     activities for which assistance is requested under this part;
       ``(6) a description of how activities supported with funds 
     provided under this part will promote energy conservation; 
     and
       ``(7) such other information and assurances as the 
     Secretary may require.
       ``(e) Award of Grants.--
       ``(1) In general.--In awarding grants under section 
     12202(a)(1), the Secretary shall give preference to a local 
     bond authority based on--
       ``(A) the extent to which the local educational agency 
     serving the local area involved or the educational facility 
     for which the authority seeks a grant (as appropriate) meets 
     the criteria described in section 12103(a);
       ``(B) the extent to which the educational facility is 
     overcrowded; and
       ``(C) the extent to which assistance provided through the 
     grant will be used to fund construction or renovation that, 
     but for receipt of the grant, would not otherwise be possible 
     to undertake.
       ``(2) Amount of assistance.--
       ``(A) In general.--In determining the amount of assistance 
     for which local bond authorities are eligible under section 
     12202(a)(1), the Secretary shall--
       ``(i) give preference to a local bond authority based on 
     the criteria specified in paragraph (1); and
       ``(ii) consider--

       ``(I) the amount of the cost estimate contained in the 
     application of the local bond authority under subsection 
     (d)(4);
       ``(II) the relative size of the local area several by the 
     local bond authority; and
       ``(III) any other factors determined to be appropriate by 
     the Secretary.

       ``(B) Maximum amount of assistance.--A local bond authority 
     shall be eligible for assistance under section 12202(a)(1) in 
     an amount that does not exceed the appropriate percentage 
     under section 12204(f)(3) of the interest costs applicable to 
     any local bond issued to finance an activity described in 
     section 12205 with respect to the local area involved.

     ``SEC. 12204. GRANTS TO STATES.

       ``(a) In General.--The Secretary shall award a grant under 
     section 12202(a)(2) to each eligible State to provide 
     assistance to the State, or local bond authorities in the 
     State, for construction and renovation of educational 
     facilities in local areas.
       ``(b) Use of Funds.--The State shall use amounts received 
     through a grant made under section 12202(a)(2)--
       ``(1) to pay a portion of the interest costs applicable to 
     any State bond issued to finance an activity described in 
     section 12205 with respect to the local areas; or
       ``(2) to provide assistance to local bond authorities in 
     the State to pay a portion of the interest costs applicable 
     to any local bond issued to finance an activity described in 
     section 12205 with respect to the local areas.
       ``(c) Amount of Grant to State.--
       ``(1) In general.--From the amount available for grants 
     under section 12202(a)(2), the Secretary shall award a grant 
     to each eligible State that is equal to the total of--
       ``(A) a sum that bears the same relationship to 50 percent 
     of such amount as the total amount of funds made available 
     for all eligible local educational agencies in the State 
     under part A of title I for such year bears to the total 
     amount of funds made available for all eligible local 
     educational agencies in all States under such part for such 
     year; and
       ``(B) a sum that bears the same relationship to 50 percent 
     of such amount as the total amount of funds made available 
     for all eligible local educational agencies in the State 
     under title VI for such year bears to the total amount of 
     funds made available for all eligible local educational 
     agencies in all States under such title for such year.
       ``(2) Eligible local educational agencies.--For the purpose 
     of paragraph (1) the term `eligible local educational agency' 
     means a local educational agency that does not serve a local 
     area for which an eligible local bond authority received a 
     grant under section 12203.
       ``(d) State Applications Required.--To be eligible to 
     receive a grant under section 12202(a)(2), a State shall 
     prepare and submit to the Secretary an application at such 
     time, in such manner, and containing such information as the 
     Secretary may require. Such application shall contain--
       ``(1) a description of the process the State will use to 
     determine which local bond authorities will receive 
     assistance under subsection (b)(2).
       ``(2) an assurance that grant funds under this section will 
     be used to increase the amount of school construction or 
     renovation in the State for a fiscal year compared to such 
     amount in the State for the preceding fiscal years.
       ``(e) Administering Agency.--
       ``(1) In general.--The State agency with authority to issue 
     bonds for the construction or renovation of educational 
     facilities, or with the authority to otherwise finance such 
     construction or renovation, shall administer the amount 
     received through the grant.
       ``(2) Special rule.--If no agency described in paragraph 
     (1) exists, or if there is more than one such agency, then 
     the chief executive officer of the State and the chief State 
     school officer shall designate a State entity or individual 
     to administer the amounts received through the grant.
       ``(f) Assistance to Local Bond Authorities.--
       ``(1) In general.--To be eligible to receive assistance 
     from a State under this section, a local bond authority shall 
     prepare and submit to the State agency designated under 
     subsection (e) an application at such time, in such manner, 
     and containing such information as the State agency may 
     require, including the information described in section 
     12203(d).
       ``(2) Criteria.--In awarding grants under this section, the 
     State agency shall give preference to a local bond authority 
     based on--
       ``(A) the extent to which the local educational agency 
     serving the local area involved or the educational facility 
     for which the authority seeks the grant (as appropriate) 
     meets the criteria described in section 12103(a);
       ``(B) the extent to which the educational facility is 
     overcrowded; and
       ``(C) the extent to which assistance provided through the 
     grant will be used to fund construction or renovation that, 
     but for receipt of the grant, would not otherwise be possible 
     to undertake.
       ``(3) Amount of assistance.--A local bond authority seeking 
     assistance for a local area served by a local educational 
     agency described in--
       ``(A) clause (i)(I) or clause (ii)(I) of section 
     1125(c)(2)(A), shall be eligible for assistance

[[Page S11469]]

     in an amount that does not exceed 10 percent;
       ``(B) clause (i)(II) or clause (ii)(II) of section 
     1125(c)(2)(A), shall be eligible for assistance in an amount 
     that does not exceed 20 percent;
       ``(C) clause (i)(III) or clause (ii)(III) of section 
     1125(c)(2)(A), shall be eligible for assistance in an amount 
     that does not exceed 30 percent;
       ``(D) clause (i)(IV) or clause (ii)(IV) of section 
     1125(c)(2)(A), shall be eligible for assistance in an amount 
     that does not exceed 40 percent; and
       ``(E) clause (i)(V) or clause (ii)(V) of section 
     1125(c)(2)(A), shall be eligible for assistance in an amount 
     that does not exceed 50 percent;

     of the interest costs applicable to any local bond issued to 
     finance an activity described in section 12205 with respect 
     to the local area.
       ``(g) Assistance to State.--
       ``(1) In general.--If a State issues a bond to finance an 
     activity described in section 12205 with respect to local 
     areas, the State shall be eligible for assistance in an 
     amount that does not exceed the percentage calculated under 
     the formula described in paragraph (2) of the interest costs 
     applicable to the State bond with respect to the local areas.
       ``(2) Formula.--The Secretary shall develop a formula for 
     determining the percentage referred to in paragraph (1). The 
     formula shall specify that the percentage shall consist of a 
     weighted average of the percentages referred to in 
     subparagraphs (A) through (E) of subsection (f)(3) for the 
     local areas involved.

     ``SEC. 12205. AUTHORIZED ACTIVITIES.

       ``An activity described in this section is a project of 
     significant size and scope that consists of--
       ``(1) the repair or upgrading of classrooms or structures 
     related to academic learning, including the repair of leaking 
     roofs, crumbling walls, inadequate plumbing, poor ventilation 
     equipment, and inadequate heating or light equipment;
       ``(2) an activity to increase physical safety at the 
     educational facility involved;
       ``(3) an activity to enhance the educational facility 
     involved to provide access for students, teachers, and other 
     individuals with disabilities;
       ``(4) an activity to improve the energy efficiency of the 
     educational facility involved;
       ``(5) an activity to address environmental hazards at the 
     educational facility involved, such as poor ventilation, 
     indoor air quality, or lighting;
       ``(6) the provision of basic infrastructure that 
     facilitates educational technology, such as communications 
     outlets, electrical systems, power outlets, or a 
     communication closet;
       ``(7) the construction of new schools to meet the needs 
     imposed by enrollment growth; and
       ``(8) any other activity the Secretary determines achieves 
     the purpose of this title.

     ``SEC. 12206. STATE GRANT WAIVERS.

       ``(a) Waiver for State Issuance of Bond.--
       ``(1) In general.--A State that issues a bond described in 
     section 12204(b)(1) with respect to a local area may request 
     that the Secretary waive the limits described in section 
     12204(f)(3) for the local area, in calculating the amount of 
     assistance the State may receive under section 12204(g). The 
     State may request the waiver only if no local entity is able, 
     for one of the reasons described in subparagraphs (A) through 
     (F) of paragraph (2), to issue bonds on behalf of the local 
     area. Under such a waiver, the Secretary may permit the State 
     to use amounts received through a grant made under section 
     12202(a)(2) to pay for not more than 80 percent of the 
     interest costs applicable to the State bond with respect to 
     the local area.
       ``(2) Demonstration by state.--To be eligible to receive a 
     waiver under this subsection, a State shall demonstrate to 
     the satisfaction of the Secretary that--
       ``(A) the local bond authority serving the local area has 
     reached a limit on its borrowing authority as a result of a 
     debt ceiling or property tax cap;
       ``(B) the local area has a high percentage of low-income 
     residents, or an unusually high property tax rate;
       ``(C) the demographic composition of the local area will 
     not support additional school spending;
       ``(D) the local bond authority has a history of failed 
     attempts to pass bond referenda;
       ``(E) the local area contains a significant percentage of 
     Federally-owned land that is not subject to local taxation; 
     or
       ``(F) for another reason, no local entity is able to issue 
     bonds on behalf of the local area.
       ``(b) Waiver for Other Financing Sources.--
       ``(1) In general.--A State may request that the Secretary 
     waive the use requirements of section 12204(b) for a local 
     bond authority to permit the State to provide assistance to 
     the local bond authority to finance construction or 
     renovation by means other than through the issuance of bonds.
       ``(2) Use of funds.--A State that receives a waiver granted 
     under this subsection may provide assistance to a local bond 
     authority in accordance with the criteria described in 
     section 12204(f)(2) to enable the local bond authority to 
     repay the costs incurred by the local bond authority in 
     financing an activity described in section 12205. The local 
     bond authority shall be eligible to receive the amount of 
     such assistance that the Secretary estimates the local bond 
     authority would be eligible to receive under section 
     12204(f)(3) if the construction or renovation were financed 
     through the issuance of a bond.
       ``(3) Matching requirement.--The State shall make available 
     to the local bond authority (directly or through donations 
     from public or private entities) non-Federal contributions in 
     an amount equal to not less than $1 for every $1 of Federal 
     funds provided to the local bond authority through the grant.
       ``(c) Waiver for Other Uses.--
       ``(1) In general.--A State may request that the Secretary 
     waive the use requirements of section 12204(b) for a State to 
     permit the State to carry out activities that achieve the 
     purpose of this title.
       ``(2) Demonstration by state.--To be eligible to receive a 
     waiver under this subsection, a State shall demonstrate to 
     the satisfaction of the Secretary that the use of assistance 
     provided under the waiver--
       ``(A) will result in an equal or greater amount of 
     construction or renovation of educational facilities than the 
     provision of assistance to defray the interest costs 
     applicable to a bond for such construction or renovation; and
       ``(B) will be used to fund activities that are effective in 
     carrying out the activities described in section 12205, such 
     as--
       ``(i) the capitalization of a revolving loan fund for such 
     construction or renovation;
       ``(ii) the use of funds for reinsurance or guarantees with 
     respect to the financing of such construction or renovation;
       ``(iii) the creation of a mechanism to leverage private 
     sector resources for such construction or renovation;
       ``(iv) the capitalization of authorities similar to State 
     Infrastructure Banks to leverage additional funds for such 
     construction or renovation; or
       ``(v) any other activity the Secretary determines achieves 
     the purpose of this title.
       ``(d) Local Bond Authority Waiver.--
       ``(1) In general.--A local bond authority may request the 
     Secretary waive the use requirements of section 12203(b) for 
     a local head authority to permit the authority to finance 
     construction or renovation of educational facilities by means 
     other than through use of bonds.
       ``(2) Demonstration.--To be eligible to receive a waiver 
     under this subsection, a local bond authority shall 
     demonstrate that the amounts made available through a grant 
     under the waiver will result in an equal or greater amount of 
     construction or renovation of educational facilities than the 
     provision of assistance to defray the interest costs 
     applicable to a bond for such construction or renovation.
       ``(e) Request for Waiver.--A State or local bond authority 
     that desires a waiver under this section shall submit a 
     waiver request to the Secretary that--
       ``(1) identifies the type of waiver requested;
       ``(2) with respect to a waiver described in subsection (a), 
     (c), or (d), makes the demonstration described in subsection 
     (a)(2), (c)(2), or (d)(2), respectively;
       ``(3) describes the manner in which the waiver will further 
     the purpose of this title; and
       ``(4) describes the use of assistance provided under such 
     waiver.
       ``(f) Action by Secretary.--The Secretary shall make a 
     determination with respect to a request submitted under 
     subsection (d) not later than 90 days after the date on which 
     such request was submitted.
       ``(g) General Requirements.--
       ``(1) States.--In the case of a waiver request submitted by 
     a State under this section, the State shall--
       ``(A) provide all interested local educational agencies in 
     the State with notice and a reasonable opportunity to comment 
     on the request;
       ``(B) submit the comments to the Secretary; and
       ``(C) provide notice and information to the public 
     regarding the waiver request in the manner that the applying 
     State customarily provides similar notices and information to 
     the public.
       ``(2) Local bond authorities.--In the case of a waiver 
     request submitted by a local bond authority under this 
     section, the local bond authority shall--
       ``(A) provide the affected local educational agency with 
     notice and a reasonable opportunity to comment on the 
     request;
       ``(B) submit the comments to the Secretary; and
       ``(C) provide notice and information to the public 
     regarding the waiver request in the manner that the applying 
     local bond authority customarily provides similar notices and 
     information to the public.

     ``SEC. 12207. GENERAL PROVISIONS.

       ``(a) Failure To Issue Bonds.--
       ``(1) States.--If a State that receives assistance under 
     this part fails to issue a bond for which the assistance is 
     provided, the amount of such assistance shall be made 
     available to the State as provided for under section 12204, 
     during the first fiscal year following the date of repayment.
       ``(2) Local bond authorities and local areas.--If a local 
     bond authority that receives assistance under this part fails 
     to issue a bond, or a local area that receives such 
     assistance fails to become the beneficiary of a bond, for 
     which the assistance is provided, the amount of such 
     assistance--
       ``(A) in the case of assistance received under section 
     12202(a)(1), shall be repaid to

[[Page S11470]]

     the Secretary and made available as provided for under 
     section 12203; and
       ``(B) in the case of assistance received under section 
     12202(a)(2), shall be repaid to the State and made available 
     as provided for under section 12204.
       ``(b) Liability of the Federal Government.--The Secretary 
     shall not be liable for any debt incurred by a State or local 
     bond authority for which assistance is provided under this 
     part. If such assistance is used by a local educational 
     agency to subsidize a debt other than the issuance of a bond, 
     the Secretary shall have no obligation to repay the lending 
     institution to whom the debt is owed if the local educational 
     agency defaults.

     ``SEC. 12208. FAIR WAGES.

       ``The provisions of section 12107 shall apply with respect 
     to all laborers and mechanics employed by contractors or 
     subcontractors in the performance of any contract and 
     subcontract for the repair, renovation, alteration, or 
     construction, including painting and decorating, of any 
     building or work that is financed in whole or in part using 
     assistance provided under this part.

     ``SEC. 12209. REPORT.

       ``From amounts reserved under section 12202(b)(3) for each 
     fiscal year the Secretary shall--
       ``(1) collect such data as the Secretary determines 
     necessary at the school, local, and State levels;
       ``(2) conduct studies and evaluations, including national 
     studies and evaluations, in order to--
       ``(A) monitor the progress of activities supported with 
     funds provided under this part; and
       ``(B) evaluate the state of United States educational 
     facilities; and
       ``(3) report to the appropriate committees of Congress 
     regarding the findings of the studies and evaluations 
     described in paragraph (2).

     ``SEC. 12210. FUNDING.

       ``(a) In General.--There are appropriated to carry out this 
     part $827,000,000 for fiscal year 1998, $1,388,000,000 for 
     fiscal year 1999, $608,000,000 for fiscal year 2000, 
     $141,000,000 for fiscal year 2001, and $148,000,000 for 
     fiscal year 2002.
       ``(b) Entitlement.--Subject to subsection (a), each State 
     or local bond authority awarded a grant under this part shall 
     be entitled to payments under the grant.
       ``(c) Availability.--Any amounts appropriated pursuant to 
     the authority of subsection (a) shall remain available until 
     expended.''.
       (c) Conforming Amendments.--
       (1) Cross references.--Part A of title XII of the 
     Elementary and Secondary Education Act of 1965 (as 
     redesignated by subsection (b)(3)) is amended--
       (A) in section 12102(a) (as redesignated by subsection 
     (b)(2))--
       (i) in paragraph (1)--

       (I) by striking ``12013'' and inserting ``12111'';
       (II) by striking ``12005'' and inserting ``12103''; and
       (III) by striking ``12007'' and inserting ``12105''; and

       (ii) in paragraph (2), by striking ``12013'' and inserting 
     ``12111''; and
       (B) in section 12110(3)(C) (as redesignated by subsection 
     (b)(2)), by striking ``12006'' and inserting ``12104''.
       (2) Conforming amendments.--Part A of title XII of the 
     Elementary and Secondary Education Act of 1965 (as 
     redesignated by subsection (b)(3)) (20 U.S.C. 8501 et seq.) 
     is further amended--
       (A) in section 12101 (as redesignated by subsection 
     (b)(2)), by striking ``This title'' and inserting ``This 
     part''; and
       (B) in sections 12102(a)(2), 12102(b)(1), 12103(a), 
     12103(b), 12103(b)(2), 12103(c), 12103(d), 12104(a), 
     12104(b)(2), 12104(b)(3), 12104(b)(4), 12104(b)(6), 
     12104(b)(7), 12105(a), 12105(b), 12106(a), 12106(b), 
     12106(c), 12106(c)(1), 12106(c)(7), 12106(e), 12107, 
     12108(a)(1), 12108(a)(2), 12108(b)(1), 12108(b)(2), 
     12108(b)(3), 12108(b)(4), 12109(2)(A), and 12110 (as 
     redesignated by subsection (b)(2)), by striking ``this 
     title'' each place it appears and inserting ``this part''.

     SEC. 2. OVERRULING OF SCHMIDT BAKING COMPANY CASE.
                                  ____


                           Amendment No. 1533

       Beginning on page 2, line 3, strike all through page 6, 
     line 9, and insert:

     SECTION 1. PURPOSE.

       It is the purpose of this Act to help school districts to 
     improve their crumbling and overcrowded school facilities 
     through the use of Federal tax credits.

     SEC. 2. TAX CREDIT FOR PUBLIC ELEMENTARY AND SECONDARY SCHOOL 
                   CONSTRUCTION.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 of the Internal Revenue Code of 1986 (relating to 
     general business credits) is amended by adding at the end the 
     following new section:

     ``SEC. 45D. 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.
       ``(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 
     fiscal year--
       ``(A) which in the aggregate exceed the amount of the State 
     school construction ceiling allocated to such agency for such 
     fiscal year under subsection (e), or
       ``(B) if such allocation is inconsistent 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 fiscal 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 fiscal year shall be an amount equal to 
     the State's

[[Page S11471]]

     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 for any fiscal year is the lesser 
     of--
       ``(i) in the case of--

       ``(I) fiscal year 1998, $827,000,000,
       ``(II) fiscal year 1999, $1,388,000,000, plus any amount 
     not allocated under this section in any preceding fiscal 
     year,
       ``(III) fiscal year 2000, $608,000,000, plus any such 
     amount,
       ``(IV) fiscal year 2001, $141,000,000, plus any such 
     amount, and
       ``(V) fiscal year 2002, $148,000,000, plus any such amount, 
     or

       ``(ii) the amount made available for such year under the 
     School Infrastructure Improvement Trust Fund established 
     under section 9512,

     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 fiscal 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 fiscal 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 fiscal 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 fiscal 
     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 fiscal 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) of the Internal Revenue Code 
     of 1986 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) of such Code 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) Establishment of School Infrastructure Improvement 
     Trust Fund.--
       (1) In general.--Subchapter A of chapter 98 of the Internal 
     Revenue Code of 1986 is amended by adding at the end the 
     following new section:

     ``SEC. 9512. SCHOOL INFRASTRUCTURE IMPROVEMENT TRUST FUND.

       ``(a) Creation of Trust Fund.--There is established in the 
     Treasury of the United States a trust fund to be known as the 
     `School Infrastructure Improvement Trust Fund', consisting of 
     such amounts as may be credited or paid to such Trust Fund as 
     provided in this section or section 9602(b).
       ``(b) Transfers to Trust Fund.--There is appropriated to 
     the Trust Fund for fiscal year--
       ``(1) 1998, $827,000,000,
       ``(2) 1999, $1,388,000,000,
       ``(3) 2000, $608,000,000,
       ``(4) 2001, $141,000,000, and
       ``(5) 2002, $148,000,000.
       ``(c) Expenditures From Trust Fund.--Amounts in the Trust 
     Fund shall be transferred to the general fund of the Treasury 
     at such times as the Secretary determines appropriate to 
     offset any decrease in Federal revenues by reason of credits 
     allowed under section 38 which are attributable to the school 
     construction credit determined under section 45D.''
       (2) Conforming amendment.--The table of section for 
     subchapter A of chapter 98 of such Code is amended by adding 
     at the end the following new item:

``Sec. 9512. School Infrastructure Improvement Trust Fund.

       (d) Conforming Amendment.--The table of sections for 
     subpart D of part IV of subchapter A of chapter 1 of the 
     Internal Revenue Code of 1986 is amended by adding at the end 
     the following new item:

``Sec. 45D. Credit for public elementary and secondary school 
              construction.''

       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1997.
                                 ______
                                 

                        LOTT AMENDMENT NO. 1534

  (Ordered to lie on the table.)
  Mr. LOTT submitted an amendment intended to be proposed by him to the 
bill, H.R. 2646, supra; as follows:


[[Page S11472]]


       Strike all after ``section'' and insert ``1. short title.
       This Act may be cited as the ``Education Savings Act for 
     Public and Private Schools''.

     SEC. 2. MODIFICATIONS TO EDUCATION INDIVIDUAL RETIREMENT 
                   ACCOUNTS.

       (a) Tax-Free Expenditures for Elementary and Secondary 
     School Expenses.--
       (1) In general.--Section 530(b)(2) of the Internal Revenue 
     Code of 1986 is amended to read as follows:
       ``(2) Qualified education expenses.--
       ``(A) In general.--The term `qualified education expenses' 
     means--
       ``(i) qualified higher education expenses (as defined in 
     section 529(e)(3)), and
       ``(ii) qualified elementary and secondary education 
     expenses (as defined in paragraph (4)) but only with respect 
     to amounts in the account which are attributable to 
     contributions for any taxable year ending before January 1, 
     2001, and earnings on such contributions.

     Such expenses shall be reduced as provided in section 
     25A(g)(2).
       ``(B) Qualified state 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 State tuition program (as defined in 
     section 529(b)) for the benefit of the beneficiary of the 
     account.''.
       (2) Qualified elementary and secondary education 
     expenses.--Section 530(b) of such Code is amended by adding 
     at the end the following new paragraph:
       ``(4) Qualified elementary and secondary education 
     expenses.--
       ``(A) In general.--The term `qualified elementary and 
     secondary education expenses' means tuition, fees, tutoring, 
     special needs services, books, supplies, computer equipment 
     (including related software and services) and other 
     equipment, transportation, and supplementary expenses 
     required for the enrollment or attendance of the designated 
     beneficiary of the trust at a public, private, or religious 
     school.
       ``(B) Special rule for home-
     schooling.--Such term shall include expenses described in 
     subparagraph (A) required for education provided for 
     homeschooling if the requirements of any applicable State or 
     local law are met with respect to such education.
       ``(C) School.--The term `school' means any school which 
     provides elementary education or secondary education (through 
     grade 12), as determined under State law.''.
       (3) Conforming amendments.--Subsections (b)(1) and (d)(2) 
     of section 530 of such Code are each amended by striking 
     ``higher'' each place it appears in the text and heading 
     thereof.
       (b) Temporary Increase in Maximum Annual Contributions.--
       (1) In general.--Section 530(b)(1)(A)(iii) of the Internal 
     Revenue Code of 1986 is amended by striking ``$500'' and 
     inserting ``the contribution limit for such taxable year''.
       (2) Contribution limit.--Section 530(b) of such Code is 
     amended by adding at the end the following new paragraph:
       ``(4) Contribution limit.--The term `contribution limit' 
     means $2,500 ($500 in the case of any taxable year ending 
     after December 31, 2000).''.
       (3) Conforming amendments.--
       (A) Section 530(d)(4)(C) of such Code is amended by 
     striking ``$500'' and inserting ``the contribution limit for 
     such taxable year''.
       (B) Section 4973(e)(1)(A) of such Code is amended by 
     striking ``$500'' and inserting ``the contribution limit (as 
     defined in section 530(b)(4)) for such taxable year''.
       (c) Waiver of Age Limitations for Children With Special 
     Needs.--Paragraph (1) of section 530(b) of the Internal 
     Revenue Code of 1986 is amended by adding at the end the 
     following flush sentence:

     ``The age limitations in the preceding sentence shall not 
     apply to any designated beneficiary with special needs (as 
     determined under regulations prescribed by the Secretary).''.
       (d) Corporations Permitted To Contribute to Accounts.--
     Paragraph (1) of section 530(c) of the Internal Revenue Code 
     of 1986 is amended by striking ``The maximum amount which a 
     contributor'' and inserting ``In the case of a contributor 
     who is an individual, the maximum amount the contributor''.
       (e) Effective Date; References.--
       (1) Effective date.--The amendments made by this section 
     shall take effect as if included in the amendments made by 
     section 213 of the Taxpayer Relief Act of 1997.
       (2) References.--Any reference in this section to any 
     section of the Internal Revenue Code of 1986 shall be a 
     reference to such section as added by the Taxpayer Relief Act 
     of 1997.

     SEC. 3. OVERRULING OF SCHMIDT BAKING COMPANY CASE.

       (a) In General.--The Internal Revenue Code of 1986 shall be 
     applied without regard to the result reached in the case of 
     Schmidt Baking Company, Inc. v. Commissioner of Internal 
     Revenue, 107 T.C. 271 (1996).
       (b) Regulations.--The Secretary of the Treasury or the 
     Secretary's delegate shall prescribe regulations to reflect 
     subsection (a).
       (c) Effective Date.--
       (1) In general.--Subsections (a) and (b) shall apply to 
     taxable years ending after October 8, 1997.
       (2) Change in method of accounting.--In the case of any 
     taxpayer required by this section to change its method of 
     accounting for its first taxable year ending after October 8, 
     1997--
       (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 of the Treasury, 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 in 
     such first taxable year.
                                 ______
                                 

               McCONNELL (AND GRAHAM) AMENDMENT NO. 1535

  (Ordered to lie on the table.)
  Mr. McCONNELL (for himself and Mr. Graham) submitted an amendment 
intended to be proposed by them to the bill, H.R. 2646, supra; as 
follows:

       At the appropriate place in the bill, insert the following 
     new sections:

     SEC. __. EXCLUSION FROM GROSS INCOME OF EDUCATION 
                   DISTRIBUTIONS FROM QUALIFIED STATE TUITION 
                   PROGRAMS.

       (a) Allowance of Exclusion.--
       (1) In general.--Subparagraph (B) of section 529(c)(3) of 
     the Internal Revenue Code of 1986 (relating to distributions) 
     is amended to read as follows:
       ``(B) Qualified higher education distributions.--In the 
     case of a qualified higher education distribution under 
     subsection (f)--
       ``(i) subparagraph (A) shall not apply, and
       ``(ii) no amount shall be includible in gross income with 
     respect to such distribution.''
       (2) Qualified higher education distribution defined.--
     Section 529 of such Code (relating to qualified State tuition 
     programs) is amended by adding at the end the following new 
     subsection:
       ``(f) Qualified Higher Education Distribution.--For 
     purposes of this section--
       ``(1) In general.--The term `qualified higher education 
     distribution' means any distribution (or portion thereof) 
     which constitutes a payment directly to an eligible 
     educational institution for qualified higher education 
     expenses of the designated beneficiary for enrollment or 
     attendance at such institution.
       ``(2) Room and board for students living off campus.--
       ``(A) In general.--The term `qualified higher education 
     distribution' includes distributions not described in 
     paragraph (1) to the extent that the amount of such 
     distributions for the taxable year does not exceed the amount 
     treated as qualified higher education expenses of the 
     designated beneficiary under subsection (e)(3)(B)(i)(II).
       ``(B) Restrictions.--Subparagraph (A) shall only apply with 
     respect to distributions for any academic period if--
       ``(i) distributions described in paragraph (1) are made for 
     such period for expenses other than room and board, and
       ``(ii) the designated beneficiary certifies to the 
     qualified State tuition program that the beneficiary resides 
     in a dwelling unit not operated or maintained by an eligible 
     educational institution.
       ``(3) Exclusion elective; limitation to one program.--
       ``(A) Election.--This subsection shall apply for a taxable 
     year only if the designated beneficiary elects its 
     application.
       ``(B) Limitation to one program.--This subsection shall 
     apply only to distributions from the qualified State tuition 
     program designated by the beneficiary in the first election 
     taking effect under subparagraph (A). Such designation, once 
     made, shall be irrevocable.
       ``(4) Aggregation.--All distributions from the qualified 
     State tuition program designated under paragraph (3)(B) shall 
     be treated as 1 distribution for purposes of this 
     subsection.''
       (3) Room and board.--Section 529(e)(3)(B) of such Code is 
     amended to read as follows:
       ``(B) Room and board included for students who are at least 
     half-time.--
       ``(i) In general.--In the case of a designated beneficiary 
     who is an eligible student (as defined in such section 
     25A(b)(3)) for any academic period, the term `qualified 
     higher education expenses' shall include--

       ``(I) amounts paid directly to an eligible educational 
     institution for room and board furnished to the beneficiary 
     during such academic period, or
       ``(II) if the beneficiary is not residing in a dwelling 
     unit operated or maintained by the eligible educational 
     institution, reasonable costs incurred by the beneficiary for 
     room and board during such academic period.

       ``(ii)  Limitations on off-campus room and board.--

       ``(I) Dollar limit.--The aggregate costs which may be taken 
     into account under clause (i)(II) for any taxable year shall 
     not exceed $4,500.
       ``(II) No more than 4 academic years taken into account.--
     Costs may be taken into account under clause (i)(II) only for 
     that number of academic periods as is equivalent to 4 
     academic years. Such number shall be reduced by the number of 
     academic periods for which amounts were previously taken into 
     account under clause (i)(I).''

       (b) Limit on Aggregate Contributions.--
       (1) In general.--Section 529(b)(7) of the Internal Revenue 
     Code of 1986 is amended to read as follows:
       ``(7) Aggregate limit on contributions.--A program shall 
     not be treated as a qualified State tuition program if it 
     allows aggregate contributions (including rollover 
     contributions) on behalf of a designated beneficiary to 
     exceed $35,200.''

[[Page S11473]]

       (2) Tax on excess contributions.--
       (A) In general.--Section 4973 of such Code is amended by 
     adding at the end the following new subsection:
       ``(g) Excess Contributions to Qualified State Tuition 
     Programs.--
       ``(1) In general.--In the case of a designated beneficiary 
     under 1 or more qualified State tuition programs (as defined 
     in section 529(b)), the amount by which the contributions on 
     behalf of such beneficiary for such taxable year, when added 
     to the aggregate contributions on behalf of such beneficiary 
     for all preceding taxable years, exceeds the dollar limit in 
     effect under section 529(b)(7) for calendar year in which the 
     taxable year begins.
       ``(2) 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 
     qualified State tuition program in a distribution to which 
     section 529(g)(2) applies.
       ``(B) Any rollover contribution.''
       (B) Conforming amendments.--Section 4973(a) is amended--
       (i) by striking ``or'' at the end of paragraph (3), by 
     inserting ``or'' at the end of paragraph (5), and by 
     inserting after paragraph (4) the following new paragraph:
       ``(5) a qualified State tuition program (as defined in 
     section 529),'',
       (ii) by striking ``accounts or annuities'' and inserting 
     ``accounts, annuities, or programs'', and
       (iii) by striking ``account or annuity'' and inserting 
     ``account, annuity, or program''.
       (c) Compliance Provisions.--
       (1) Additional tax on amounts not used for higher education 
     expenses.--
       (A) In general.--Section 529 of the Internal Revenue Code 
     of 1986 is amended by adding at the end the following new 
     subsection:
       ``(g) Additional Tax for Distributions Not Used for 
     Educational Expenses.--
       ``(1) In general.--The tax imposed by section 530(d)(4) 
     shall apply to payments and distributions from qualified 
     State tuition programs in the same manner as such tax applies 
     to education individual retirement accounts.
       ``(2) 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 qualified tuition program to the extent that such 
     contribution exceeds the limitation in section 4973(g) if 
     such distribution (and the net income with respect to such 
     excess contribution) meet requirements comparable to the 
     requirements of section 530(d)(4)(C).''
       (B) Conforming amendment.--Section 529(b)(3) of such Code 
     is repealed.
       (2) Withholding of tax on certain distributions.--Section 
     529(c) is amended by adding at the end the following new 
     paragraph:
       ``(6) Withholding of tax on certain distributions.--
       ``(A) In general.--A qualified State tuition program shall 
     withhold from any distribution an amount equal to 15 percent 
     of the portion of such distribution properly allocable to 
     income on the contract (as determined under section 72).
       ``(B) Exceptions.--Subparagraph (A) shall not apply to a 
     distribution which--
       ``(i) is a qualified higher education distribution under 
     subsection (f), or
       ``(ii) is exempt from the payment of the additional tax 
     imposed by subsection (g).''
       (3) Distributions required in certain cases.--Subsection 
     (b) of section 529 of such Code is amended by adding at the 
     end the following new paragraph:
       ``(8) Required distributions.--
       ``(A) In general.--A program shall be treated as a 
     qualified State tuition program only if any balance to the 
     credit of a designated beneficiary (if any) on the account 
     termination date is required to 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.''
       (d) Cost-of-Living Adjustments.--Section 529(e) of the 
     Internal Revenue Code of 1986 is amended by adding at the end 
     the following new paragraph:
       ``(6) Cost-of-living adjustments.--In the case of calendar 
     years beginning after December 31, 1998, the $32,500 amount 
     under subsection (b)(7) and the $4,500 amount under 
     subsection (e)(3)(B)(ii)(I) shall each 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, determined by 
     substituting `1997' for `1992' in subparagraph (B) thereof.

     If any dollar amount is not a multiple of $100 after being 
     increased under this paragraph, such amount shall be rounded 
     to the next lowest multiple of $100.''
       (e) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to distributions 
     in taxable years beginning after December 31, 1997.
       (2) Contract requirements.--The amendments made by 
     subsections (b)(1) and (c)(3) shall apply to contracts issued 
     after December 31, 1997.

     SEC. __. EXTENSION AND MODIFICATION OF SUBSIDIES FOR ALCOHOL 
                   FUELS.

       (a) Extension.--
       (1) The following provisions of the Internal Revenue Code 
     of 1986 are each amended by striking ``2000'' each place it 
     appears and inserting ``2007'':
       (A) Section 4041(b)(2)(C) (relating to termination).
       (B) Section 4041(k)(3) (relating to termination).
       (C) Section 4081(c)(8) (relating to termination).
       (D) Section 4091(c)(5) (relating to termination).
       (2) Section 4041(m)(1)(A) of such Code (relating to certain 
     alcohol fuels), as amended by section 907(b) of the Taxpayer 
     Relief Act of 1997, is amended by striking ``1999'' both 
     places it appears and inserting ``2005''.
       (3) Section 6427(f)(4) of such Code (relating to 
     termination) is amended by striking ``1999'' and inserting 
     ``2007''.
       (4) Section 40(e)(1) of such Code (relating to termination) 
     is amended--
       (A) by striking ``December 31, 2000'' and inserting 
     ``December 31, 2007'', and
       (B) by striking subparagraph (B) and inserting the 
     following:
       ``(B) of any fuel for any period before January 1, 2008, 
     during which the rate of tax under section 4081(a)(2)(A) is 
     4.3 cents per gallon.''.
       (5) Headings 9901.00.50 and 9901.00.52 of the Harmonized 
     Tariff Schedule of the United States (19 U.S.C. 3007) are 
     amended in the effective period column by striking ``10/1/
     2000'' each place it appears and inserting ``10/1/2007''.
       (b) Modification.--
       (1) In general.--Subsection (h) of section 40 of the 
     Internal Revenue Code of 1986 (relating to alcohol used as 
     fuel) is amended to read as follows:
       ``(h) Reduced Credit for Ethanol Blenders.--
       ``(1) In general.--In the case of any alcohol mixture 
     credit or alcohol credit with respect to any sale or use of 
     alcohol which is ethanol during calendar years 2001 through 
     2007--
       ``(A) subsections (b)(1)(A) and (b)(2)(A) shall be applied 
     by substituting `the blender amount' for `60 cents',
       ``(B) subsection (b)(3) shall be applied by substituting 
     `the low-proof blender amount' for `45 cents' and `the 
     blender amount' for `60 cents', and
       ``(C) subparagraphs (A) and (B) of subsection (d)(3) shall 
     be applied by substituting `the blender amount' for `60 
     cents' and `the low-proof blender amount' for `45 cents'.
       ``(2) Amounts.--For purposes of paragraph (1), the blender 
     amount and the low-proof blender amount shall be determined 
     in accordance with the following table:

 
 
 
In the case of any sale or use    The blender amount  The low-proof
 during calendar year:             is:.                blender amount
                                                       is:
    2001 or 2002................      53 cents......      39.26 cents
    2003 or 2004................      52 cents......      38.52 cents
    2005, 2006, or 2007.........      51 cents......      37.78
                                                       cents.''.
 

       (2) Conforming amendments.--
       (A) Section 4041(b)(2) of such Code is amended--
       (i) in subparagraph (A)(i), by striking ``5.4 cents'' and 
     inserting ``the applicable blender rate'', and
       (ii) by redesignating subparagraph (C), as amended by 
     subsection (a)(2)(A), as subparagraph (D) and by inserting 
     after subparagraph (B) the following:
       ``(C) Applicable blender rate.--For purposes of 
     subparagraph (A)(i), the applicable blender rate is--
       ``(i) except as provided in clause (ii), 5.4 cents, and
       ``(ii) for sales or uses during calendar years 2001 through 
     2007, \1/10\ of the blender amount applicable under section 
     40(h)(2) for the calendar year in which the sale or use 
     occurs.''.
       (B) Subparagraph (A) of section 4081(c)(4) of such Code is 
     amended to read as follows:
       ``(A) General rules.--
       ``(i) Mixtures containing ethanol.--Except as provided in 
     clause (ii), in the case of a qualified alcohol mixture which 
     contains gasoline, the alcohol mixture rate is the excess of 
     the rate which would (but for this paragraph) be determined 
     under subsection (a) over--

       ``(I) in the case of 10 percent gasohol, the applicable 
     blender rate (as defined in section 4041(b)(2)(A)) per 
     gallon,
       ``(II) in the case of 7.7 percent gasohol, the number of 
     cents per gallon equal to 77 percent of such applicable 
     blender rate, and
       ``(III) in the case of 5.7 percent gasohol, the number of 
     cents per gallon equal to 57 percent of such applicable 
     blender rate.

       ``(ii) Mixtures not containing ethanol.--In the case of a 
     qualified alcohol mixture

[[Page S11474]]

     which contains gasoline and none of the alcohol in which 
     consists of ethanol, the alcohol mixture rate is the excess 
     of the rate which would (but for this paragraph) be 
     determined under subsection (a) over--

       ``(I) in the case of 10 percent gasohol, 6 cents per 
     gallon,
       ``(II) in the case of 7.7 percent gasohol, 4.62 cents per 
     gallon, and
       ``(III) in the case of 5.7 percent gasohol, 3.42 cents per 
     gallon.''.

       (C) Section 4081(c)(5) of such Code is amended by striking 
     ``5.4 cents'' and inserting ``the applicable blender rate (as 
     defined in section 4041(b)(2)(C))''.
       (D) Section 4091(c)(1) of such Code is amended by striking 
     ``13.4 cents'' each place it appears and inserting ``the 
     applicable blender amount'' and by adding at the end the 
     following new sentence: ``For purposes of this paragraph, the 
     term `applicable blender amount' means 13.3 cents in the case 
     of any sale or use during 2001 or 2002, 13.2 cents in the 
     case of any sale or use during 2003 or 2004, 13.1 cents in 
     the case of any sale or use during 2005, 2006, or 2007, and 
     13.4 cents in the case of any sale or use during 2008 or 
     thereafter.''.
       (3) Effective date.--The amendments made by this subsection 
     shall take effect on January 1, 2001.
                                 ______
                                 

            DASCHLE (AND MOYNIHAN) AMENDMENTS NO. 1536-1537

  (Ordered to lie on the table.)
  Mr. DASCHLE (for himself and Mr. Moynihan) submitted two amendments 
intended to be proposed by them to the bill, H.R. 2646, supra; as 
follows:

                           Amendment No. 1526

       On page 6, line 5, strike ``1997.'' and insert ``1997, 
     except that such amendments shall only take effect to the 
     extent that--
       (A) contributions to education individual retirement 
     accounts for qualified elementary and secondary education 
     expenses are--
       (i) limited to accounts that, at the time the account is 
     created or organized, are designated as solely for the 
     payment of such expenses, and
       (ii) not allowed for contributors who have modified 
     adjusted gross income in excess of $75,000 and are ratably 
     reduced to zero for contributors who have modified adjusted 
     gross income between $60,000 and $75,000,
       (B) contributions to education individual retirement 
     accounts in excess of $500 for any taxable year may be made 
     only to accounts described in subparagraph (A)(i),
       (C) no contributions may be made to accounts described in 
     subparagraph (A)(i) for taxable years ending after December 
     31, 2002,
       (D) the modified adjusted gross income limitation shall 
     apply to all contributors but contributors made by a person 
     other than the taxpayer with respect to whom a deduction is 
     allowable under section 151(c)(1) for a designated 
     beneficiary shall be treated as having been made by such 
     taxpayer, and
       (E) expenses for computer and other equipment, 
     transportation, and supplementary items are allowed tax-free 
     only if required or provided by the school.''
                                  ____


                           Amendment No. 1537

       Strike section 2 and insert:

     SEC. 2. MODIFICATIONS TO EDUCATION INDIVIDUAL RETIREMENT 
                   ACCOUNTS.

       (a) Tax-Free Expenditures for Elementary and Secondary 
     School Expenses.--
       (1) In general.--Section 530(b)(2) of the Internal Revenue 
     Code of 1986 is amended to read as follows:
       ``(2) Qualified education expenses.--
       ``(A) In general.--The term `qualified education expenses' 
     means--
       ``(i) qualified higher education expenses (as defined in 
     section 529(e)(3)), and
       ``(ii) qualified elementary and secondary education 
     expenses (as defined in paragraph (4)), but only if the 
     account is, at the time the account is created or organized, 
     designated solely for payment of qualified elementary and 
     secondary education expenses of the designated beneficiary.

     Such expenses shall be reduced as provided in section 
     25A(g)(2).
       ``(B) Qualified state tuition programs.--Except in the case 
     of an account described in subparagraph (A)(ii), such term 
     shall include amounts paid or incurred to purchase tuition 
     credits or certificates, or to make contributions to an 
     account, under a qualified State tuition program (as defined 
     in section 529(b)) for the benefit of the beneficiary of the 
     account.''
       (2) Adjusted gross income limitation.--Section 530(c) of 
     such Code is amended by redesignating paragraph (2) as 
     paragraph (4) and by inserting after paragraph (1) the 
     following:
       ``(2) Special rule for elementary and secondary education 
     expenses.--Notwithstanding paragraph (1), in the case of an 
     account designated under subsection (b)(2)(A)(ii), the 
     maximum amount which a contributor could otherwise make to an 
     account under this section shall be reduced by an amount 
     which bears the same ratio to such maximum amount as--
       ``(A) the excess of--
       ``(i) the contributor's modified adjusted gross income for 
     such taxable year, over
       ``(ii) $60,000, bears to
       ``(B) $15,000.
       ``(3) Contributions treated as made by individual eligible 
     for dependency exemption.--For purposes of applying this 
     subsection, any contribution by a person other than the 
     taxpayer with respect to whom a deduction is allowable under 
     section 151(c)(1) for a designated beneficiary shall be 
     treated as having been made by such taxpayer.''
       (3) Qualified elementary and secondary education 
     expenses.--Section 530(b) of such Code is amended by adding 
     at the end the following new paragraph:
       ``(4) Qualified elementary and secondary education 
     expenses.--
       ``(A) In general.--The term `qualified elementary and 
     secondary education expenses' means--
       ``(i) tuition, fees, tutoring, special needs services, 
     books, or supplies in connection with the enrollment or 
     attendance of the designated beneficiary of the trust at a 
     public, private, or religious school, or
       ``(ii) computer equipment (including related software and 
     services) and other equipment, transportation, and 
     supplementary expenses required or provided by a public, 
     private, or religious school in connection with such 
     enrollment or attendance.
       ``(B) Special rule for home-schooling.--Such term shall 
     include expenses described in subparagraph (A) required for 
     education provided by homeschooling if the requirements of 
     any applicable State or local law are met with respect to 
     such education.
       ``(C) School.--The term `school' means any school which 
     provides elementary education or secondary education (through 
     grade 12), as determined under State law.''
       (4) No rollovers between college accounts and non-college 
     accounts.--Section 530(d)(5) of such Code is amended by 
     adding at the end the following: ``This paragraph shall not 
     apply to a transfer of an amount between an account not 
     described in subsection (b)(2)(A)(ii) and an account so 
     described.''
       (5) Conforming amendments.--Subsections (b)(1) and (d)(2) 
     of section 530 of such Code are each amended by striking 
     ``higher'' each place it appears in the text and heading 
     thereof.
       (b) Temporary Increase in Maximum Annual Contributions for 
     Elementary and Secondary School Expenses.--
       (1) In general.--Section 530(b)(1)(A)(iii) of the Internal 
     Revenue Code of 1986 is amended by striking ``$500'' and 
     inserting ``the contribution limit for such taxable year''.
       (2) Contribution limit.--Section 530(b) of such Code is 
     amended by adding at the end the following new paragraph:
       ``(4) Contribution limit.--The term `contribution limit' 
     means--
       ``(A) except as provided in subparagraph (B), $500, or
       ``(B) in the case of an account designated under paragraph 
     (2)(A)(ii)--
       ``(i) $2,500 for any taxable year ending before January 1, 
     2003, and
       ``(ii) zero for any taxable year ending on or after such 
     date.''
       (3) Conforming amendments.--
       (A) Section 530(d)(4)(C) of such Code is amended by 
     striking ``$500'' and inserting ``the contribution limit for 
     such taxable year''.
       (B) Section 4973(e)(1)(A) of such Code is amended by 
     striking ``$500'' and inserting ``the contribution limit (as 
     defined in section 530(b)(4)) for such taxable year''.
       (c) Waiver of Age Limitations for Children With Special 
     Needs.--Paragraph (1) of section 530(b) of the Internal 
     Revenue Code of 1986 is amended by adding at the end the 
     following flush sentence:

     ``The age limitations in the preceding sentence shall not 
     apply to any designated beneficiary with special needs (as 
     determined under regulations prescribed by the Secretary).''
       (d) Effective Date; References.--
       (1) Effective date.--The amendments made by this section 
     shall take effect as if included in the amendments made by 
     section 213 of the Taxpayer Relief Act of 1997.
       (2) References.--Any reference in this section to any 
     section of the Internal Revenue Code of 1986 shall be a 
     reference to such section as added by the Taxpayer Relief Act 
     of 1997.
                                 ______
                                 

                       KERREY AMENDMENT NO. 1538

  (Ordered to lie on the table.)
  Mr. KERREY submitted an amendment intended to be proposed by him to 
the bill, H.R. 2646, supra; as follows:

       Strike all after the enacting clause 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 ``Internal 
     Revenue Service Restructuring and Reform 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.

     SEC. 2. CONGRESSIONAL FINDINGS AND DECLARATION OF PURPOSES.

       (a) The Congress finds the following:
       (1) The structure of the Internal Revenue Service should be 
     strengthened to ensure focus and better target its budgeting, 
     staffing, and technology to serve the American taxpayer and 
     collect the Federal revenue.
       (2) The American public expects timely, accurate, and 
     respectful service from the Internal Revenue Service.
       (3) The job of the Internal Revenue Service is to operate 
     as an efficient financial management organization.

[[Page S11475]]

       (4) The bulk of the Federal revenue is generated through 
     voluntary compliance. Taxpayer service and education, as well 
     as targeted compliance and enforcement initiatives, increase 
     voluntary compliance.
       (5) While the Internal Revenue Service must maintain a 
     strong enforcement presence, its core and the core of the 
     Federal revenue stream lie in a revamped, modern, 
     technologically advanced organization that can track 
     finances, send out clear notices, and assist taxpayers 
     promptly and efficiently.
       (6) The Internal Revenue Service governance, management, 
     and oversight structures must: develop and maintain a shared 
     vision with continuity; set and maintain priorities and 
     strategic direction; impose accountability on senior 
     management; provide oversight through a credible board, 
     including members who bring private sector expertise to the 
     Internal Revenue Service; develop appropriate measures of 
     success; align budget and technology with priorities and 
     strategic direction; and coordinate oversight and identify 
     problems at an early stage.
       (7) The Internal Revenue Service must use information 
     technology as an enabler of its strategic objectives.
       (8) Electronic filing can increase cost savings and 
     compliance.
       (9) In order to ensure that fewer taxpayers are subject to 
     improper treatment by the Internal Revenue Service, Congress 
     and the agency need to focus on preventing problems before 
     they occur.
       (10) There currently is no mechanism in place to ensure 
     that Members of Congress have a complete understanding of how 
     tax legislation will affect taxpayers and the Internal 
     Revenue Service and to create incentives to simplify the tax 
     law, and to ensure that Congress hears directly from the 
     Internal Revenue Service during the legislative process.
       (b) The purposes of this Act are as follows:
       (1) To restructure the Internal Revenue Service, 
     transforming it into a world class service organization.
       (2) To establish taxpayer satisfaction as the goal of the 
     Internal Revenue Service, such that the Internal Revenue 
     Service should only initiate contact with a taxpayer if the 
     agency is prepared to devote the resources necessary for a 
     proper and timely resolution of the matter.
       (3) To provide for direct accountability to the President 
     for tax administration, an Internal Revenue Service Oversight 
     Board, a strengthened Commissioner of Internal Revenue, and 
     coordinated congressional oversight to ensure that there are 
     clear lines of accountability and that the leadership of the 
     Internal Revenue Service has the continuity and expertise to 
     guide the agency.
       (4) To enable the Internal Revenue Service to recruit and 
     train a first-class workforce that will be rewarded for 
     performance and held accountable for working with taxpayers 
     to solve problems.
       (5) To establish paperless filing as the preferred and most 
     convenient means of filing tax returns for the vast majority 
     of taxpayers within 10 years of enactment of this Act.
       (6) To provide additional taxpayer protections and rights 
     and to ensure that taxpayers receive fair, impartial, timely, 
     and courteous treatment from the Internal Revenue Service.
       (7) To establish the resolution of the century date change 
     problem as the highest technology priority of the Internal 
     Revenue Service.
       (8) To establish procedures to minimize complexity in the 
     tax law and simplify tax administration, and provide Congress 
     with an independent view of tax administration from the 
     Internal Revenue Service.

   TITLE I--EXECUTIVE BRANCH GOVERNANCE AND SENIOR MANAGEMENT OF THE 
                        INTERNAL REVENUE SERVICE

     Subtitle A--Executive Branch Governance and Senior Management

     SEC. 101. INTERNAL REVENUE SERVICE OVERSIGHT BOARD.

       (a) In General.--Section 7802 (relating to the Commissioner 
     of Internal Revenue) is amended to read as follows:

     ``SEC. 7802. INTERNAL REVENUE SERVICE OVERSIGHT BOARD.

       ``(a) Establishment.--There is established within the 
     Department of the Treasury the Internal Revenue Service 
     Oversight Board (in this subchapter referred to as the 
     `Board').
       ``(b) Membership.--
       ``(1) Composition.--The Board shall be composed of 9 
     members, of whom--
       ``(A) 7 shall be individuals who are not full-time Federal 
     officers or employees, who are appointed by the President, by 
     and with the advice and consent of the Senate, and who 
     shall be considered special government employees pursuant 
     to paragraph (2),
       ``(B) 1 shall be the Secretary of the Treasury or, if the 
     Secretary so designates, the Deputy Secretary of the 
     Treasury, and
       ``(C) 1 shall be a representative of an organization that 
     represents a substantial number of Internal Revenue Service 
     employees who is appointed by the President, by and with the 
     advice and consent of the Senate.
       ``(2) Special government employees.--
       ``(A) Qualifications.--Members of the Board described in 
     paragraph (1)(A) shall be appointed solely on the basis of 
     their professional experience and expertise in the following 
     areas:
       ``(i) Management of large service organizations.
       ``(ii) Customer service.
       ``(iii) Compliance.
       ``(iv) Information technology.
       ``(v) Organization development.
       ``(vi) The needs and concerns of taxpayers.
       In the aggregate, the members of the Board described in 
     paragraph (1)(A) should collectively bring to bear expertise 
     in these enumerated areas.
       ``(B) Terms.--Each member who is described in paragraph 
     (1)(A) shall be appointed for a term of 5 years, except that 
     of the members first appointed--
       ``(i) 1 member shall be appointed for a term of 1 year,
       ``(ii) 1 member shall be appointed for a term of 2 years,
       ``(iii) 2 members shall be appointed for a term of 3 years, 
     and
       ``(iv) 1 member shall be appointed for a term of 4 years.
       ``(C) Reappointment.--An individual who is described in 
     paragraph (1)(A) may be appointed to no more than two 5-year 
     terms on the Board.
       ``(D) Special government employees.--During such periods as 
     they are performing services for the Board, members who are 
     not Federal officers or employees shall be treated as special 
     government employees (as defined in section 202 of title 18, 
     United States Code).
       ``(E) Claims.--
       ``(i) In general.--Members of the Board who are described 
     in paragraph (1)(A) shall have no personal liability under 
     Federal law with respect to any claim arising out of or 
     resulting from an act or omission by such member within the 
     scope of service as a member. The preceding sentence shall 
     not be construed to limit personal liability for criminal 
     acts or omissions, willful or malicious conduct, acts or 
     omissions for private gain, or any other act or omission 
     outside the scope of the service of such member on the Board.
       ``(ii) Effect on other law.--This subparagraph shall not be 
     construed--
       ``(I) to affect any other immunities and protections that 
     may be available to such member under applicable law with 
     respect to such transactions,
       ``(II) to affect any other right or remedy against the 
     United States under applicable law, or
       ``(III) to limit or alter in any way the immunities that 
     are available under applicable law for Federal officers and 
     employees not described in this subparagraph.
       ``(3) Vacancy.--Any vacancy on the Board--
       ``(A) shall not affect the powers of the Board, and
       ``(B) shall be filled in the same manner as the original 
     appointment.
       ``(4) Removal.--
       ``(A) In general.--A member of the Board may be removed at 
     the will of the President.
       ``(B) Secretary or delegate.--An individual described in 
     subsection (b)(1)(B) shall be removed upon termination of 
     employment.
       ``(C) Representative of internal revenue service 
     employees.--A member who is from an organization that 
     represents a substantial number of Internal Revenue Service 
     employees shall be removed upon termination of employment, 
     membership, or other affiliation with such organization.
       ``(c) General Responsibilities.--
       ``(1) In general.--The Board shall oversee the Internal 
     Revenue Service in the administration, management, conduct, 
     direction, and supervision of the executive and application 
     of the Internal revenue laws or related statutes and tax 
     conventions to which the United States is a party.
       ``(2) Exceptions.--The Board shall have no responsibilities 
     or authority with respect to--
       ``(A) the development and formulation of Federal tax policy 
     relating to existing or proposed internal revenue laws, 
     related statutes, and tax conventions,
       ``(B) specific law enforcement activities of the Internal 
     Revenue Service, including compliance activities such as 
     criminal investigations, examinations, and collection 
     activities, or
       ``(C) specific activities of the Internal Revenue Service 
     delegated to employees of the Internal Revenue Service 
     pursuant to delegation orders in effect as of the date of the 
     enactment of this subsection, including delegation order 106 
     relating to procurement authority, except to the extent that 
     such delegation orders are modified subsequently by the 
     Secretary.
       ``(3) Restriction on disclosure of return information to 
     board members.--No return, return information, or taxpayer 
     return information (as defined in section 6103(b)) may be 
     disclosed to any member of the Board described in subsection 
     (b)(1)(A) or (C). Any request for information not permitted 
     to be disclosed under the preceding sentence, and any contact 
     relating to a specific taxpayer, made by a member of the 
     Board to an officer or employee of the Internal Revenue 
     Service shall be reported by such officer or employee to the 
     Secretary and the Joint Committee on Taxation.
       ``(d) Specific Responsibilities.--The Board shall have the 
     following specific responsibilities:
       ``(1) Strategic plans.--To review and approve strategic 
     plans of the Internal Revenue Service, including the 
     establishment of--
       ``(A) mission and objectives, and standards of performance 
     relative to either, and
       ``(B) annual and long-range strategic plans.
       ``(2) Operational plans.--To review the operational 
     functions of the Internal Revenue Service, including--
       ``(A) plans for modernization of the tax system,

[[Page S11476]]

       ``(B) plans for outsourcing or managed competition, and
       ``(C) plans for training and education.
       ``(3) Management.--To--
       ``(A) recommend to the President a list of at least 3 
     candidates for appointment as the Commissioner of Internal 
     Revenue and recommend to the President the removal of the 
     Commissioner,
       ``(B) review the Commissioner's selection, evaluation, and 
     compensation of senior managers,
       ``(C) review the Commissioner's plans for reorganization of 
     the Internal Revenue Service, and
       ``(D) review the performance of the office of Taxpayer 
     Advocate.
       ``(4) Budget.--To--
       ``(A) review and approve the budget request of the Internal 
     Revenue Service prepared by the Commissioner,
       ``(B) submit such budget request to the Secretary of the 
     Treasury,
       ``(C) ensure that the budget request supports the annual 
     and long-range strategic plans, and
       ``(D) ensure appropriate financial audits of the Internal 
     Revenue Service.

     The Secretary shall submit the advisory budget request 
     referred to in subparagraph (B) for any fiscal year to the 
     President who shall submit such advisory budget request, 
     without revision, to Congress together with the President's 
     official budget request for the Internal Revenue Service for 
     such fiscal year.
       ``(e) Board Personnel Matters.--
       ``(1) Compensation of members.--
       ``(A) In general.--Each member of the Board who is 
     described in subsection (b)(1)(A) shall be compensated at a 
     rate of $30,000 per year. All other members of the Board 
     shall serve without compensation for such service.
       ``(B) Chairperson.--In lieu of the amount specified in 
     subparagraph (A), the Chairperson of the Board shall be 
     compensated at a rate of $50,000 per year if such Chairperson 
     is described in subsection (b)(1)(A).
       ``(2) Travel expenses.--The members of the Board shall be 
     allowed travel expenses, including per diem in lieu of 
     subsistence, at rates authorized for employees of agencies 
     under subchapter I of chapter 57 of title 5, United States 
     Code, while away from their homes or regular places of 
     business in the performance of services for the Board.
       ``(3) Staff.--On the request of the Chairperson of the 
     Board, the Commissioner shall detail to the Board such 
     personnel as may be necessary to enable the Board to perform 
     its duties. Such detail shall be without interruption or loss 
     of civil service status or privilege.
       ``(4) Procurement of temporary and intermittent services.--
     The Chairperson of the Board may procure temporary and 
     intermittent services under section 3109(b) of title 5, 
     United States Code.
       ``(f) Administrative Matters.--
       ``(1) Chair.--The members of the Board shall elect a 
     chairperson for a 2-year term.
       ``(2) Committees.--The Board may establish such committees 
     as the Board determines appropriate.
       ``(3) Meetings.--The Board shall meet at least once each 
     month and at such other times as the Board determines 
     appropriate.
       ``(4) Reports.--The Board shall each year report to the 
     President and the Congress with respect to the conduct of its 
     responsibilities under this title.''.
       (b) Conforming Amendments.--
       (1) Section 4946(c) (relating to definitions and special 
     rules for chapter 42) is amended--
       (A) by striking ``or'' at the end of paragraph (5),
       (B) by striking the period at the end of paragraph (6) and 
     inserting ``, or'', and
       (C) by adding at the end the following new paragraph:
       ``(7) a member of the Internal Revenue Service Oversight 
     Board.''.
       (2) The table of sections for subchapter A of chapter 80 is 
     amended by striking the item relating to section 7802 and 
     inserting the following new item:

``Sec. 7802. Internal Revenue Service Oversight Board.''

       (c) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 102. COMMISSIONER OF INTERNAL REVENUE; CHIEF COUNSEL; 
                   OTHER OFFICIALS.

       (a) In General.--Section 7803 (relating to other personnel) 
     is amended to read as follows:

     ``SEC. 7803. COMMISSIONER OF INTERNAL REVENUE; CHIEF COUNSEL; 
                   OTHER OFFICIALS.

       ``(a) Commissioner of Internal Revenue.--
       ``(1) Appointment.--
       ``(A) In general.--There shall be in the Department of the 
     Treasury a Commissioner of Internal Revenue who shall be 
     appointed by the President, by and with the advice and 
     consent of the Senate, to a 5-year term. The appointment 
     shall be made without regard to political affiliation or 
     activity.
       ``(B) Recommendations.--The President shall select the 
     Commissioner from among the list of candidates submitted by 
     the Internal Revenue Service Oversight Board pursuant to 
     section 7802(3)(A). In the event that the President rejects 
     all of the candidates submitted by such Board, the Board 
     shall submit additional lists as necessary.
       ``(2) Duties.--The Commissioner shall have such duties and 
     powers as the Secretary may prescribe, including the power 
     to--
       ``(A) administer, manage, conduct, direct, and supervise 
     the execution and application of the internal revenue laws or 
     related statutes and tax conventions to which the United 
     States is a party; and
       ``(B) recommend to the President a candidate for 
     appointment as Chief Counsel for the Internal Revenue Service 
     when a vacancy occurs, and recommend to the President the 
     removal of such Chief Counsel.

     If the Secretary determines not to delegate a power specified 
     in subparagraph (A) or (B), such determination may not take 
     effect until 30 days after the Secretary notifies the 
     Committees on Ways and Means, Government Reform and 
     Oversight, and Appropriations of the House of 
     Representatives, the Committees on Finance, Government 
     Operations, and Appropriations of the Senate, and the Joint 
     Committee on Taxation.
       ``(3) Consultation with board.--The Commissioner shall 
     consult with the Board on all matters set forth in paragraphs 
     (2) and (3) (other than subparagraph (A)) of section 
     7802(d)(2).
       ``(4) Pay.--The Commissioner is authorized to be paid at an 
     annual rate of basic pay not to exceed the maximum rate of 
     basic pay of level II of the Executive Schedule under section 
     5311 of title 5, United States Code, including any applicable 
     locality-based comparability payment that may be authorized 
     under section 5304 of such title 5.
       ``(b) Chief Counsel for the Internal Revenue Service.--
       ``(1) Appointment.--There shall be in the Department of the 
     Treasury a Chief Counsel for the Internal Revenue Service who 
     shall be appointed by the President, by and with the advice 
     and consent of the Senate.
       ``(2) Duties.--The Chief Counsel shall be the chief law 
     officer for the Internal Revenue Service and shall perform 
     such duties as may be prescribed by the Secretary of the 
     Treasury. To the extent that the Chief Counsel performs 
     duties relating to the development of rules and regulations 
     promulgated under this title, final decision making authority 
     shall remain with the Secretary.
       ``(3) Pay.--The Chief Counsel is authorized to be paid at 
     an annual rate of basic pay not to exceed the maximum rate of 
     basic pay of level III of the Executive Schedule under 
     section 5311 of title 5, United States Code, including any 
     applicable locality-based comparability payment that may be 
     authorized under section 5304 of such title 5.
       ``(c) Assistant Commissioner for Employee Plans and Exempt 
     Organizations.--
       ``(1) Establishment of office.--There is established within 
     the Internal Revenue Service an office to be known as the 
     `Office of Employee Plans and Exempt Organizations' to be 
     under the supervision and direction of an Assistant 
     Commissioner of Internal Revenue. As head of the Office, the 
     Assistant Commissioner shall be responsible for carrying out 
     such functions as the Secretary may prescribe with respect to 
     organizations exempt from tax under section 501(a) and with 
     respect to plans to which part I of subchapter D of chapter 1 
     applies (and with respect to organizations designed to be 
     exempt under such section and plans designed to be plans to 
     which such part applies) and other nonqualified deferred 
     compensation arrangements. The Assistant Commissioner shall 
     report annually to the Commissioner with respect to the 
     Assistant Commissioner's responsibilities under this section.
       ``(2) Authorization of appropriations.--There is authorized 
     to be appropriated to the Internal Revenue Service solely to 
     carry out the functions of the Office an amount equal to the 
     sum of--
       ``(A) so much of the collection from taxes under section 
     4940 (relating to excise tax based on investment income) as 
     would have been collected if the rate of tax under such 
     section was 2 percent during the second preceding fiscal 
     year, and
       ``(B) the greater of--
       ``(i) an amount equal to the amount described in 
     subparagraph (A), or
       ``(ii) $30,000,000.
       ``(3) User fees.--All user fees collected by the Office 
     shall be dedicated to carry out the functions of the Office.
       ``(d) Office of Taxpayer Advocate.--
       ``(1) Establishment.--
       ``(A) In general.--There is established in the Internal 
     Revenue Service an office to be known as the `Office of the 
     Taxpayer Advocate'.
       ``(B) National taxpayer advocate.--
       ``(i) In general.--The Office of the Taxpayer Advocate 
     shall be under the supervision and direction of an official 
     to be known as the `National Taxpayer Advocate.' The National 
     Taxpayer Advocate shall report directly to the Commissioner 
     of Internal Revenue and shall be entitled to compensation at 
     the same rate as the highest level official reporting 
     directly to the Commissioner of the Internal Revenue Service.
       ``(ii) Appointment.--The National Taxpayer Advocate shall 
     be appointed by the President, upon recommendation of the 
     Internal Revenue Service Oversight Board, by and with the 
     advice and consent of the Senate, from among individuals with 
     a background in customer service, as well as tax law. No 
     officer or employee of the Internal Revenue Service may be 
     appointed to such position in order to ensure an independent 
     position to represent taxpayers' interests.''.
       ``(2) Functions of office.--
       ``(A) In general.--It shall be the function of the Office 
     of Taxpayer Advocate to--
       ``(i) assist taxpayers in resolving problems with the 
     Internal Revenue Service,

[[Page S11477]]

       ``(ii) identify areas in which taxpayers have problems in 
     dealings with the Internal Revenue Service,
       ``(iii) to the extent possible, propose changes in the 
     administrative practices of the Internal Revenue Service to 
     mitigate problems identified under clause (ii), and
       ``(iv) identify potential legislative changes which may be 
     appropriate to mitigate such problems.
       ``(B) Annual reports.--
       ``(i) Objectives.--Not later than June 30 of each calendar 
     year, the National Taxpayer Advocate shall report to the 
     Committee on Ways and Means of the House of Representatives 
     and the Committee on Finance of the Senate on the objectives 
     of the Office of the Taxpayer Advocate for the fiscal year 
     beginning in such calendar year. Any such report shall 
     contain full and substantive analysis, in addition to 
     statistical information.
       ``(ii) Activities.--Not later than December 31 of each 
     calendar year, the National Taxpayer Advocate shall report to 
     the Committee on Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate on 
     the activities of the Office of the Taxpayer Advocate during 
     the fiscal year ending during such calendar year. Any such 
     report shall contain full and substantive analysis, in 
     addition to statistical information, and shall--
       ``(I) identify the initiatives the Office of the Taxpayer 
     Advocate has taken on improving taxpayer services and 
     Internal Revenue Service responsiveness,
       ``(II) contain recommendations received from individuals 
     with the authority to issue Taxpayer Assistance Orders under 
     section 7811,
       ``(III) contain a summary of at least 20 of the most 
     serious problems encountered by taxpayers, including a 
     description of the nature of such problems,
       ``(IV) contain an inventory of the items described in 
     subclauses (I), (II), and (III) for which action has been 
     taken and the result of such action,
       ``(V) contain an inventory of the items described in 
     subclauses (I), (II), and (III) for which action remains to 
     be completed and the period during which each item has 
     remained on such inventory,
       ``(VI) contain an inventory of the items described in 
     subclauses (I), (II), and (III) for which no action has been 
     taken, the period during which each item has remained on such 
     inventory, the reasons for the inaction, and identify any 
     Internal Revenue Service official who is responsible for such 
     inaction,
       ``(VII) identify any Taxpayer Assistance Order which was 
     not honored by the Internal Revenue Service in a timely 
     manner, as specified under section 7811(b),
       ``(VIII) contain recommendations for such administrative 
     and legislative action as may be appropriate to resolve 
     problems encountered by taxpayers,
       ``(IX) identify areas of the tax law that impose 
     significant compliance burdens on taxpayers or the Internal 
     Revenue Service, including specific recommendations for 
     remedying these problems,
       ``(X) identify the 10 most litigated issues for each 
     category of taxpayers, including recommendations for 
     mitigating such disputes, and
       ``(XI) include such other information as the National 
     Taxpayer Advocate may deem advisable.
       ``(iii) Report to be submitted directly.--Each report 
     required under this subparagraph shall be provided directly 
     to the Committees described in clauses (i) and (ii) without 
     any prior review or comment from the Commissioner, the 
     Secretary of the Treasury, any other officer or employee of 
     the Department of the Treasury, or the Office of Management 
     and Budget.
       ``(C) Other responsibilities.--The National Taxpayer 
     Advocate shall--
       ``(i) monitor the coverage and geographic allocation of 
     local taxpayer advocates,
       ``(ii) develop guidance to be distributed to all Internal 
     Revenue Service officers and employees outlining the criteria 
     for referral of taxpayer inquiries to local taxpayer 
     advocates,
       ``(iii) ensure that the local telephone number for the 
     local taxpayer advocate in each Internal Revenue Service 
     district is published and available to taxpayers, and
       ``(iv) in conjunction with the Commissioner, develop career 
     paths for local taxpayer advocates choosing to make a career 
     in the Office of the Taxpayer Advocate.''.
       ``(D) Personnel actions.--
       ``(i) Heads of local offices.--The National Taxpayer 
     Advocate shall have the responsibility to--
       ``(I) appoint and dismiss the local taxpayer advocate 
     heading the office of the taxpayer advocate at each Internal 
     Revenue Service district office and service center, and
       ``(II) evaluate and take personnel actions with respect to 
     any employee of an office of the taxpayer advocate described 
     in subclause (I).
       ``(ii) Consultation.--The National Taxpayer Advocate may 
     consult with the head of any Internal Revenue Service 
     district office or service center in carrying out the 
     National Taxpayer Advocate's responsibilities under this 
     subparagraph.''.
       ``(3) Responsibilities of commissioner.--The Commissioner 
     shall establish procedures requiring a formal response to all 
     recommendations submitted to the Commissioner by the Taxpayer 
     Advocate within 3 months after submission to the 
     Commissioner.''.
       ``(4) Operation of local offices.--
       ``(A) In general.--Each local taxpayer advocate--
       ``(i) shall report directly to the National Taxpayer 
     Advocate,
       ``(ii) may consult with the head of the Internal Revenue 
     Service district office or service center which the local 
     taxpayer advocate serves regarding the daily operation of the 
     office of the taxpayer advocate,
       ``(iii) shall, at the initial meeting with any taxpayer 
     seeking the assistance of the office of the taxpayer 
     advocate, notify such taxpayer that the office operates 
     independently of any Internal Revenue Service district office 
     or service center and reports directly to Congress through 
     the National Taxpayer Advocate, and
       ``(iv) shall, at the taxpayer advocate's discretion, not 
     disclose to the Internal Revenue Service contact with, or 
     information provided by, such taxpayer.
       ``(B) Maintenance of independent communications.--Each 
     local office of the taxpayer advocate shall maintain separate 
     phone, facsimile, and other electronic communication access, 
     and a separate post office address from the Internal Revenue 
     Service district office or service center which it serves.''.
       (b) Amendment of President's Authority To Appoint Chief 
     Counsel for Internal Revenue Service.--
       (1) Paragraph (2) of section 7801(b) (relating to the 
     office of General Counsel for the Department) is amended to 
     read as follows:
       ``(2) Assistant general counsels.--The Secretary of the 
     Treasury may appoint, without regard to the provisions of the 
     civil service laws, and fix the duties of not to exceed five 
     assistant General Counsels.''.
       (2)(A) Subsection (f)(2) of section 301 of title 31, United 
     States Code, is amended by striking ``an Assistant General 
     Counsel who shall be the'' and inserting ``a''.
       (B) Section 301 of such title 31 is amended by adding at 
     the end the following new subsection:
       ``(h) Cross Reference.--For provisions relating to the 
     appointment of officers and employees of the Internal Revenue 
     Service, see subchapter A of chapter 80 of the Internal 
     Revenue Code of 1986.''.
       (c) Conforming Amendments.--
       (1) The table of sections for subchapter A of chapter 80 is 
     amended by striking the item relating to section 7803 and 
     inserting the following new item:

``Sec. 7803. Commissioner of Internal Revenue; Chief Counsel; other 
              officials.''

       (2) Subsection (b) of section 5109 of title 5, United 
     States Code, is amended by striking ``7802(b)'' and inserting 
     ``7803(c)''.
       (d) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     take effect on the date of the enactment of this Act.
       (2) Current officers.--
       (A) In the case of an individual serving as Commissioner of 
     Internal Revenue on the date of the enactment of this Act who 
     was appointed to such position before such date, the 5-year 
     term required by section 7803(a)(1) of the Internal Revenue 
     Code of 1986, as added by this section, shall begin as of the 
     date of such appointment.
       (B) The President shall nominate for appointment the 
     initial National Taxpayer Advocate to serve as head of the 
     Office of the Taxpayer Advocate established under section 
     7803(d) of the Internal Revenue Code of 1986, as added by 
     this section, not later than 120 days after the date of the 
     enactment of this Act.
       (C) Until an individual has taken office under section 
     7803(d) of the Internal Revenue Code of 1986, as added by 
     this section, the Taxpayer Advocate shall assume the 
     additional powers and duties of the National Taxpayer 
     Advocate under the amendments made by this section.

     SEC. 103. OTHER PERSONNEL.

       (a) In General.--Section 7804 (relating to the effect of 
     reorganization plans) is amended to read as follows:

     ``SEC. 7804. OTHER PERSONNEL.

       ``(a) Appointment and Supervision.--Unless otherwise 
     prescribed by the Secretary, the Commissioner of Internal 
     Revenue is authorized to employ such number of persons as the 
     Commissioner deems proper for the administration and 
     enforcement of the internal revenue laws, and the 
     Commissioner shall issue all necessary directions, 
     instructions, orders, and rules applicable to such persons.
       ``(b) Posts of Duty of Employees in Field Service or 
     Traveling.--Unless otherwise prescribed by the Secretary--
       ``(1) Designation of post of duty.--The Commissioner shall 
     determine and designate the posts of duty of all such persons 
     engaged in field work or traveling on official business 
     outside of the District of Columbia.
       ``(2) Detail of personnel from field service.--The 
     Commissioner may order any such person engaged in field work 
     to duty in the District of Columbia, for such periods as the 
     Commissioner may prescribe, and to any designated post of 
     duty outside the District of Columbia upon the completion of 
     such duty.
       ``(c) Delinquent Internal Revenue Officers and Employees.--
     If any officer or employee of the Treasury Department acting 
     in connection with the internal revenue laws fails to account 
     for and pay over any amount of money or property collected or 
     received by him in connection with the internal revenue laws, 
     the Secretary shall issue notice and demand to such officer 
     or employee for payment of the amount which he failed to 
     account for and pay over, and, upon failure to pay the amount 
     demanded within the

[[Page S11478]]

     time specified in such notice, the amount so demanded shall 
     be deemed imposed upon such officer or employee and assessed 
     upon the date of such notice and demand, and the provisions 
     of chapter 64 and all other provisions of law relating to the 
     collection of assessed taxes shall be applicable in respect 
     of such amount.''.
       (b) Conforming Amendments.--
       (1) Subsection (b) of section 6344 is amended by striking 
     ``section 7803(d)'' and inserting ``section 7804(c)''.
       (2) The table of sections for subchapter A of chapter 80 is 
     amended by striking the item relating to section 7804 and 
     inserting the following new item:

``Sec. 7804. Other personnel.''

       (c) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

                  Subtitle B--Personnel Flexibilities

     SEC. 111. PERSONNEL FLEXIBILITIES.

       (a) In General.--Part III of title 5, United States Code, 
     is amended by adding at the end the following new subpart:

                       ``Subpart I--Miscellaneous

``CHAPTER 93--PERSONNEL FLEXIBILITIES RELATING TO THE INTERNAL REVENUE 
                                SERVICE

     ``Sec.
     ``9301. General requirements.
     ``9302. Flexibilities relating to performance management.
     ``9303. Classification and pay flexibilities.
     ``9304. Staffing flexibilities.
     ``9305. Flexibilities relating to demonstration projects.

     ``Sec. 9301. General requirements

       ``(a) Conformance With Merit System Principles, Etc.--Any 
     flexibilities under this chapter shall be exercised in a 
     manner consistent with--
       ``(1) chapter 23, relating to merit system principles and 
     prohibited personnel practices; and
       ``(2) provisions of this title (outside of this subpart) 
     relating to preference eligibles.
       ``(b) Requirement Relating to Units Represented by Labor 
     Organizations.--
       ``(1) Written agreement required.--Employees within a unit 
     with respect to which a labor organization is accorded 
     exclusive recognition under chapter 71 shall not be subject 
     to the exercise of any flexibility under section 9302, 9303, 
     9304, or 9305, unless there is a written agreement between 
     the Internal Revenue Service and the organization permitting 
     such exercise.
       ``(2) Definition of a written agreement.--In order to 
     satisfy paragraph (1), a written agreement--
       ``(A) need not be a collective bargaining agreement within 
     the meaning of section 7103(8); and
       ``(B) may not be an agreement imposed by the Federal 
     Service Impasses Panel under section 7119.
       ``(c) Flexibilities for Which OPM Approval Is Required.--
       ``(1) In general.--Except as provided in paragraph (2), 
     flexibilities under this chapter may be exercised by the 
     Internal Revenue Service without prior approval of the Office 
     of Personnel Management.
       ``(2) Exceptions.--The flexibilities under subsections (c) 
     through (e) of section 9303 may be exercised by the Internal 
     Revenue Service only after a specific plan describing how 
     those flexibilities are to be exercised has been submitted to 
     and approved, in writing, by the Director of the Office of 
     Personnel Management.

     ``Sec. 9302. Flexibilities relating to performance management

       ``(a) In General.--The Commissioner of Internal Revenue 
     shall, within 180 days after the date of the enactment of 
     this chapter, establish a performance management system 
     which--
       ``(1) subject to section 9301(b), shall cover all employees 
     of the Internal Revenue Service other than--
       ``(A) the members of the Internal Revenue Service Oversight 
     Board;
       ``(B) the Commissioner of Internal Revenue; and
       ``(C) the Chief Counsel for the Internal Revenue Service;
       ``(2) shall maintain individual accountability by--
       ``(A) establishing retention standards which--
       ``(i) shall permit the accurate evaluation of each 
     employee's performance on the basis of criteria relating to 
     the duties and responsibilities of the position held by such 
     employee; and
       ``(ii) shall be communicated to an employee before the 
     start of any period with respect to which the performance of 
     such employee is to be evaluated using such standards;
       ``(B) providing for periodic performance evaluations to 
     determine whether retention standards are being met; and
       ``(C) with respect to any employee whose performance does 
     not meet retention standards, using the results of such 
     employee's performance evaluation as a basis for--
       ``(i) denying increases in basic pay, promotions, and 
     credit for performance under section 3502; and
       ``(ii) the taking of other appropriate action, such as a 
     reassignment or an action under chapter 43; and
       ``(3) shall provide for--
       ``(A) establishing goals or objectives for individual, 
     group, or organizational performance (or any combination 
     thereof), consistent with Internal Revenue Service 
     performance planning procedures, including those established 
     under the Government Performance and Results Act of 1993, the 
     Information Technology Management Reform Act of 1996, Revenue 
     Procedure 64-22 (as in effect on July 30, 1997), and taxpayer 
     service surveys, and communicating such goals or objectives 
     to employees;
       ``(B) using such goals and objectives to make performance 
     distinctions among employees or groups of employees; and
       ``(C) using assessments under this paragraph, in 
     combination with performance evaluations under paragraph (2), 
     as a basis for granting employee awards, adjusting an 
     employee's rate of basic pay, and taking such other personnel 
     action as may be appropriate.

     For purposes of this title, performance of an employee during 
     any period in which such employee is subject to retention 
     standards under paragraph (2) shall be considered to be 
     `unacceptable' if the performance of such employee during 
     such period fails to meet any of those standards.
       ``(b) Awards.--
       ``(1) For superior accomplishments.--In the case of an 
     employee of the Internal Revenue Service, section 4502(b) 
     shall be applied by substituting `with the approval of the 
     Commissioner of Internal Revenue' for `with the approval of 
     the Office'.
       ``(2) For employees who report directly to the 
     commissioner.--
       ``(A) In general.--In the case of an employee of the 
     Internal Revenue Service who reports directly to the 
     Commissioner of Internal Revenue, a cash award in an amount 
     up to 50 percent of such employee's annual rate of basic pay 
     may be made if the Commissioner finds such an award to be 
     warranted based on such employee's performance.
       ``(B) Nature of an award.--A cash award under this 
     paragraph shall not be considered to be part of basic pay.
       ``(C) Tax enforcement results.--A cash award under this 
     paragraph may not be based solely on tax enforcement results.
       ``(D) Eligible employees. Whether or not an employee is an 
     employee who reports directly to the Commissioner of Internal 
     Revenue shall, for purposes of this paragraph, be determined 
     under regulations which the Commissioner shall prescribe.
       ``(E) Limitation on compensation.--For purposes of applying 
     section 5307 to an employee in connection with any calendar 
     year to which an award made under this paragraph to such 
     employee is attributable, subsection (a)(1) of such section 
     shall be applied by substituting `to equal or exceed the 
     annual rate of compensation for the President for such 
     calendar year' for `to exceed the annual rate of basic pay 
     payable for level I of the Executive Schedule, as of the end 
     of such calendar year'.
       ``(3) Based on savings.--
       ``(A) In general.--The Commissioner of Internal Revenue may 
     authorize the payment of cash awards to employees based on 
     documented financial savings achieved by a group or 
     organization which such employees comprise, if such payments 
     are made pursuant to a plan which--
       ``(i) specifies minimum levels of service and quality to be 
     maintained while achieving such financial savings; and
       ``(ii) is in conformance with criteria prescribed by the 
     Office of Personnel Management.
       ``(B) Funding.--A cash award under this paragraph may be 
     paid from the fund or appropriation available to the activity 
     primarily benefiting or the various activities benefiting.
       ``(C) Tax enforcement results.--A cash award under this 
     paragraph may not be based solely on tax enforcement results.
       ``(c) Other Provisions.--
       ``(1) Notice provisions.--In applying sections 
     4303(b)(1)(A) and 7513(b)(1) to employees of the Internal 
     Revenue Service, `15 days' shall be substituted for `30 
     days'.
       ``(2) Appeals.--Notwithstanding the second sentence of 
     section 5335(c), an employee of the Internal Revenue Service 
     shall not have a right to appeal the denial of a periodic 
     step increase under section 5335 to the Merit Systems 
     Protection Board.

     ``Sec. 9303. Classification and pay flexibilities

       ``(a) Broad-Banded Systems.--
       ``(1) Definitions.--For purposes of this subsection--
       ``(A) the term `broad-banded system' means a system under 
     which positions are classified and pay for service in any 
     such position is fixed through the use of pay bands, rather 
     than under--
       ``(i) chapter 51 and subchapter III of chapter 53; or
       ``(ii) subchapter IV of chapter 53; and
       ``(B) the term `pay band' means, with respect to positions 
     in 1 or more occupational series, a pay range--
       ``(i) consisting of--
       ``(I) 2 or more consecutive grades of the General Schedule; 
     or
       ``(II) 2 or more consecutive pay ranges of such other pay 
     or wage schedule as would otherwise apply (but for this 
     section); and
       ``(ii) the minimum rate for which is the minimum rate for 
     the lower (or lowest) grade or range in the pay band and the 
     maximum rate for which is the maximum rate for the higher (or 
     highest) grade or range in the pay band, including any 
     locality-based and other similar comparability payments.
       ``(2) Authority.--The Commissioner of Internal Revenue may, 
     subject to criteria to be

[[Page S11479]]

     prescribed by the Office of Personnel Management, establish 
     one or more broad-banded systems covering all or any portion 
     of its workforce which would otherwise be subject to the 
     provisions of law cited in clause (i) or (ii) of subsection 
     (a)(1)(A), except for any position classified by statute.
       ``(3) Criteria.--The criteria to be prescribed by the 
     Office shall, at a minimum--
       ``(A) ensure that the structure of any broad-banded system 
     maintains the principle of equal pay for substantially equal 
     work;
       ``(B) establish the minimum (but not less than 2) and 
     maximum number of grades or pay ranges that may be combined 
     into pay bands;
       ``(C) establish requirements for adjusting the pay of an 
     employee within a pay band;
       ``(D) establish requirements for setting the pay of a 
     supervisory employee whose position is in a pay band or who 
     supervises employees whose positions are in pay bands; and
       ``(E) establish requirements and methodologies for setting 
     the pay of an employee upon conversion to a broad-banded 
     system, initial appointment, change of position or type of 
     appointment (including promotion, demotion, transfer, 
     reassignment, reinstatement, placement in another pay band, 
     or movement to a different geographic location), and movement 
     between a broad-banded system and another pay system.
       ``(4) Information.--The Commissioner of Internal Revenue 
     shall submit to the Office such information relating to its 
     broad-banded systems as the Office may require.
       ``(5) Review and revocation authority.--The Office may, 
     with respect to any broad-banded system under this 
     subsection, and in accordance with regulations which it shall 
     prescribe, exercise with respect to any broad-banded system 
     under this subsection authorities similar to those available 
     to it under sections 5110 and 5111 with respect to 
     classifications under chapter 51.
       ``(b) Single Pay-Band System.--
       ``(1) In general.--The Commissioner of Internal Revenue 
     may, with respect to employees who remain subject to chapter 
     51 and subchapter III of chapter 53 (or subchapter IV of 
     chapter 53), fix rates of pay under a single pay-band system.
       ``(2) Definition.--For purposes of this subsection, the 
     term `single pay-band system' means, for pay-setting 
     purposes, a system similar to the pay-setting aspects of a 
     broad-banded system under subsection (a), but consisting of 
     only a single grade or pay range, under which pay may be 
     fixed at any rate not less than the minimum and not more than 
     the maximum rate which (but for this section) would otherwise 
     apply with respect to the grade or pay range involved, 
     including any locality-based and other similar comparability 
     payments.
       ``(3) Special rules.--
       ``(A) Promotion or transfer.--An employee under this 
     subsection who is promoted or transferred to a position in a 
     higher grade shall be entitled to basic pay at a rate 
     determined under criteria prescribed by the Office of 
     Personnel Management based on section 5334(b).
       ``(B) Performance increases.--In lieu of periodic step-
     increases under section 5335, an employee under this 
     subsection who meets retention standards under section 
     9302(a)(2)(A) shall be entitled to performance increases 
     under criteria prescribed by the Office. An increase under 
     this subparagraph shall be equal to one-ninth of the 
     difference between the minimum and maximum rates of pay for 
     the applicable grade or pay range.
       ``(C) Increases for exceptional performance.--In lieu of 
     additional step-increases under section 5336, an employee 
     under this subsection who has demonstrated exceptional 
     performance shall be eligible for a pay increase under this 
     subparagraph under criteria prescribed by the Office. An 
     increase under this subparagraph may not exceed the amount of 
     an increase under subparagraph (B).
       ``(c) Alternative Classification Systems.--
       ``(1) In general.--Subject to section 9301(c), the 
     Commissioner of Internal Revenue may establish 1 or more 
     alternative classification systems that include any positions 
     or groups of positions that the Commissioner determines, for 
     reasons of effective administration--
       ``(A) should not be classified under chapter 51 or paid 
     under the General Schedule;
       ``(B) should not be classified or paid under subchapter IV 
     of chapter 53; or
       ``(C) should not be paid under section 5376.
       ``(2) Limitations.--An alternative classification system 
     under this subsection may not--
       ``(A) with respect to any position that (but for this 
     section) would otherwise be subject to the provisions of law 
     cited in subparagraph (A) or (B) of paragraph (1), establish 
     a rate of basic pay in excess of the maximum rate for grade 
     GS-15 of the General Schedule, including any locality-based 
     and other similar comparability payments; and
       ``(B) with respect to any position that (but for this 
     section) would otherwise be subject to the provision of law 
     cited in paragraph (1)(C), establish a rate of basic pay in 
     excess of the annual rate of basic pay of the Commissioner of 
     Internal Revenue.
       ``(d) Grade and Pay Retention.--Subject to section 9301(c), 
     the Commissioner of Internal Revenue may, with respect to 
     employees who are covered by a broadbanded system under 
     subsection (a) or an alternative classification system under 
     subsection (c), provide for variations from the provisions of 
     subchapter VI of chapter 53.
       ``(e) Recruitment and Retention Bonuses; Retention 
     Allowances.--Subject to section 9301(c), the Commissioner of 
     Internal Revenue may, with respect to its employees, provide 
     for variations from the provisions of sections 5753 and 5754.

     ``Sec. 9304. Staffing flexibilities

       ``(a) In General.--
       ``(1) Permanent appointment in the competitive service.--
     Except as otherwise provided by this subsection, an employee 
     of the Internal Revenue Service may be selected for a 
     permanent appointment in the competitive service in the 
     Internal Revenue Service through internal competitive 
     promotion procedures when the following conditions are met:
       ``(A) The employee has completed 2 years of current 
     continuous service in the competitive service under a term 
     appointment or any combination of term appointments.
       ``(B) Such term appointment or appointments were made under 
     competitive procedures prescribed for permanent appointments.
       ``(C) The employee's performance under such term 
     appointment or appointments met established retention 
     standards.
       ``(D) The vacancy announcement for the term appointment 
     from which the conversion is made stated that there was a 
     potential for subsequent conversion to a permanent 
     appointment.
       ``(2) Condition.--An appointment under this subsection may 
     be made only to a position the duties and responsibilities of 
     which are similar to those of the position held by the 
     employee at the time of conversion (referred to in paragraph 
     (1)(D)).
       ``(b) Rating Systems.--
       ``(1) In general.--Notwithstanding subchapter I of chapter 
     33, the Commissioner of Internal Revenue may establish 
     category rating systems for evaluating job applicants for 
     positions in the competitive service, under which qualified 
     candidates are divided into 2 or more quality categories on 
     the basis of relative degrees of merit, rather than assigned 
     individual numerical ratings. Each applicant who meets the 
     minimum qualification requirements for the position to be 
     filled shall be assigned to an appropriate category based on 
     an evaluation of the applicant's knowledge, skills, and 
     abilities relative to those needed for successful performance 
     in the job to be filled.
       ``(2) Treatment of preference eligibles.--Within each 
     quality category established under paragraph (1), preference 
     eligibles shall be listed ahead of individuals who are not 
     preference eligibles. For other than scientific and 
     professional positions at or higher than GS-9 (or 
     equivalent), preference eligibles who have a compensable 
     service-connected disability of 10 percent or more, and who 
     meet the minimum qualification standards, shall be listed in 
     the highest quality category.
       ``(3) Selection process.--An appointing authority may 
     select any applicant from the highest quality category or, if 
     fewer than 3 candidates have been assigned to the highest 
     quality category, from a merged category consisting of the 
     highest and second highest quality categories. 
     Notwithstanding the preceding sentence, the appointing 
     authority may not pass over a preference eligible in the same 
     or a higher category from which selection is made, unless the 
     requirements of section 3317(b) or 3318(b), as application, 
     are satisfied, except that in no event may certification of a 
     preference eligible under this subsection be discontinued by 
     the Internal Revenue Service under section 3317(b) before 
     the end of the 6-month period beginning on the date of 
     such employee's first certification.
       ``(c) Maximum Period for Which Employee May Be Detailed.--
     The 120-day limitation under section 3341(b)(1) for details 
     and renewals of details shall not apply with respect to the 
     Internal Revenue Service.
       ``(d) Involuntary Reassignments and Removals of Career 
     appointees in the Senior Executive Service.--Neither section 
     3395(e)(1) nor section 3592(b)(1) shall apply with respect to 
     the Internal Revenue Service.
       ``(e) Probationary Periods.--Notwithstanding any other 
     provision of law or regulation, the Commissioner of Internal 
     Revenue may establish a period of probation under section 
     3321 of up to 3 years for any position if, as determined by 
     the Commissioner, a shorter period would be insufficient for 
     the incumbent to demonstrate complete proficiency in such 
     position.
       ``(f) Provisions That Remain Applicable.--No provision of 
     this section exempts the Internal Revenue Service from--
       ``(1) any employment priorities established under direction 
     of the President for the placement of surplus or displaced 
     employees; or
       ``(2) its obligations under any court order or decree 
     relating to the employment practices of the Internal Revenue 
     Service.

     ``Sec. 9305. Flexibilities relating to demonstration projects

       ``(a) In general.--For purposes of applying section 4703 
     with respect to the Internal Revenue Service--
       ``(1) paragraph (1) of subsection (b) of such section shall 
     be deemed to read as follows:
       ```(1) develop a plan for such project which describes its 
     purpose, the employees to be covered, the project itself, its 
     anticipated outcomes, and the method of evaluating the 
     project;';
       ``(2) paragraph (3) of subsection (b) of such section shall 
     be disregarded;

[[Page S11480]]

       ``(3) paragraph (4) of subsection (b) of such section shall 
     be applied by substituting `30 days' for `180 days';
       ``(4) paragraph (6) of subsection (b) of such section shall 
     be deemed to read as follows:
       ```(6) provide each House of the Congress with the final 
     version of the plan.';
       ``(5) paragraph (1) of subsection (c) of such section shall 
     be deemed to read as follows:
       ```(1) subchapter V of chapter 63 or subpart G of part 
     III;'; and
       ``(6) subsection (d)(1) of such section shall be 
     disregarded.
       ``(b) Numerical Limitation.--For purposes of applying the 
     numerical limitation under subsection (d)(2) of section 4703, 
     a demonstration project shall not be counted if or to the 
     extend that it involves the Internal Revenue Service.''
       (b) Clerical Amendment.--The analysis for part III of title 
     5, United States Code, is amended by adding at the end the 
     following:

                       ``Subpart I--Miscellaneous

``93. Personnel Flexibilities Relating to the Internal Reven9301''.ice.

       (c) Effective Date.--this section shall take effect on the 
     date of the enactment of this Act.

                      TITLE II--ELECTRONIC FILING

     SEC. 201. ELECTRONIC FILING OF TAX AND INFORMATION RETURNS.

       (a) In general.--It is the policy of the Congress that 
     paperless filing should be the preferred and most convenient 
     means of filing tax and information returns, and that by the 
     year 2007, no more than 20 percent of all tax returns should 
     be filed on paper.
       (b) Strategic Plan.--
       (1) In general.--Not later than 180 days after the date of 
     the enactment of this Act, the Secretary of the Treasury or 
     the Secretary's delegate (hereinafter in this section 
     referred to as the ``Secretary'') shall implement a plan to 
     eliminate barriers, provide incentives, and use competitive 
     market forces to increase electronic filing gradually over 
     the next 10 years while maintaining processing times for 
     paper returns at 40 days.
       (2) Electronic commerce advisory group.--To ensure that the 
     Secretary receives input from the private sector in the 
     development and implementation of the plan required by 
     paragraph (1), the Secretary shall convene an electronic 
     commerce advisory group to include representatives from the 
     tax practitioner, preparer, and computerized tax processor 
     communities and other representatives from the electronic 
     filing industry.
       (c) Incentives.--
       (1) In general.--Not later than 180 days after the date of 
     the enactment of this Act, the Secretary shall implement 
     procedures to provide for the payment of incentives to 
     transmitters of qualified electronically filed returns, 
     based on the fair market value of costs to transmit 
     returns electronically.
       (2) Qualified electronically filed returns.--For purposes 
     of this section, the term ``qualified electronically filed 
     return'' means a return that--
       (A) is transmitted electronically to the Internal Revenue 
     Service,
       (B) for which the taxpayer was not charged for the cost of 
     such transmission, and
       (C) in the case of returns transmitted after December 31, 
     2004, was prepared by a paid preparer who does not submit any 
     return after such date to the Internal Revenue Service on 
     paper.
       (d) Annual Reports.--Not later than June 30 of each 
     calendar year after 1997, the Chairperson of the Internal 
     Revenue Service Oversight Board, the Secretary, and the 
     Chairperson of the electronic commerce advisory group 
     established under subsection (b)(2) shall report to the 
     Committees on Ways and Means, Appropriations, and Government 
     Reform and Oversight of the House of Representatives, the 
     Committees on Finance, Appropriations, and Government Affairs 
     of the Senate, and the Joint Committee on Taxation, on--
       (1) the progress of the Internal Revenue Service in meeting 
     the policy set forth in subsection (a);
       (2) the status of the plan required by subsection (b); and
       (3) the necessity of action by the Congress to assist the 
     Internal Revenue Service to satisfy the policy set forth in 
     subsection (a).

     SEC. 203. PAPERLESS ELECTRONIC FILING.

       (a) In General.--Section 6061 (relating to signing of 
     returns and other documents) is amended--
       (1) by striking ``Except as otherwise provided by'' and 
     inserting the following:
       ``(a) General Rule.--Except as otherwise provided by 
     subsection (b) and'', and
       (2) by adding at the end the following new subsection:
       ``(b) Electronic Signatures.--The Secretary shall develop 
     procedures for the acceptance of signatures in digital or 
     other electronic form. Until such time as such procedures are 
     in place, the Secretary shall accept electronically filed 
     returns and other documents on which the required 
     signature(s) appears in typewritten form, but filers of such 
     documents shall be required to retain a signed paper original 
     of all such filings, to be made available to the Secretary 
     for inspection, until the expiration of the applicable period 
     of limitations set forth in chapter 66.''.
       (b) Deadline for Establishing Procedures.--Not later than 
     December 31, 1998, the Secretary of the Treasury or the 
     Secretary's delegate shall establish procedures to accept, in 
     electronic form, any other information, statements, 
     elections, or schedules, from taxpayers filing returns 
     electronically, so that such taxpayers will not be required 
     to file any paper.
       (c) Procedures for Communications Between IRS and Preparer 
     of Electronically-Filed Returns.--Such Secretary shall 
     establish procedures for taxpayers to authorize, on 
     electronically filed returns, the preparer of such returns to 
     communicate with the Internal Revenue Service on matters 
     included on such returns.
       (d) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 304. REGULATION OF PREPARERS.

       (a) In General.--Subsection (a) of section 330 of title 31, 
     United States Code, is amended--
       (1) by striking ``Treasury; and'' in paragraph (1) and 
     inserting ``Treasury and all other persons engaged in the 
     business of preparing returns or otherwise accepting 
     compensation for advising in the preparation of returns,'',
       (2) by striking the period at the end of paragraph (2) and 
     inserting ``, and'', and
       (3) by adding at the end the following:
       ``(3) establish uniform procedures for regulating preparers 
     of paper and electronic tax and information returns.

     No demonstration shall be required under paragraph (2) for 
     persons solely engaged in the business of preparing returns 
     or otherwise accepting compensation for advising in the 
     preparation of returns.''
       (b) Director of Practice.--Such section 330 is amended by 
     adding at the end the following new subsection:
       ``(d) Director of Practice.--There is established within 
     the Department of the Treasury an office to be known as the 
     `Office of the Director of Practice' to be under the 
     supervision and direction of an official to be known as the 
     `Director of Practice'. The Director of Practice shall be 
     responsible for regulation of all practice before the 
     Department of the Treasury.''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 205. PAPERLESS PAYMENT.

       (a) In General.--Section 6311 (relating to payment by check 
     or money order) is amended to read as follows:

     ``SEC. 6311. PAYMENT OF TAX BY COMMERCIALLY ACCEPTABLE MEANS.

       ``(a) Authority To Receive.--It shall be lawful for the 
     Secretary to receive for internal revenue taxes (or in 
     payment of internal revenue stamps) any commercially 
     acceptable means that the Secretary deems appropriate to the 
     extent and under the conditions provided in regulations 
     prescribed by the Secretary.
       ``(b) Ultimate Liability.--If a check, money order, or 
     other method of payment, including payment by credit card, 
     debit card, charge card, or electronic funds transfer so 
     received is not duly paid, or is paid and subsequently 
     charged back to the Secretary, the person by whom such check, 
     money order, or other method of payment has been tendered 
     shall remain liable for the payment of the tax or for the 
     stamps, and for all legal penalties and additions, to the 
     same extend as if such check, money order, or other method of 
     payment had not been tendered.
       ``(c) Liability of Banks and Others.--If any certified, 
     treasurer's or cashier's check (or other guaranteed draft), 
     or any money order, or any means of payment that has been 
     guaranteed by a financial institution (such as a credit card, 
     debit card, charge card, or electronic funds transfer 
     transaction which has been guaranteed expressly by a 
     financial institution) so received is not duly paid, the 
     United States shall, in addition to its right to exact 
     payment from the party originally indebted therefore, have a 
     lien for--
       ``(1) the amount of such check (or draft) upon all assets 
     of the financial institution on which drawn,
       ``(2) the amount of such money order upon all the assets of 
     the issuer therefor,
       ``(3) the guaranteed amount of any other transaction upon 
     all the assets of the institution making such guarantee,

     and such amount shall be paid out of such assets in 
     preference to any other claims whatsoever against such 
     financial institution, issuer, or guaranteeing institution, 
     except the necessary costs and expenses of administration and 
     the reimbursement of the United States for the amount 
     expended in the redemption of the circulating notes of such 
     financial institution.
       (d) Payment by Other Means.--
       ``(1) Authority to prescribe regulations.--The Secretary 
     shall prescribe such regulations as the Secretary deems 
     necessary to receive payment by commercially acceptable 
     means, including regulations that--
       ``(A) specify which methods of payment by commercially 
     acceptable means will be acceptable;
       ``(B) specify when payment by such means will be considered 
     received;
       ``(C) identify types of nontax matters related to payment 
     by such means that are to be resolved by persons ultimately 
     liable for payment and financial intermediaries, without the 
     involvement of the Secretary; and
       ``(D) ensure that tax matters will be resolved by the 
     Secretary, without the involvement of financial 
     intermediaries.
       ``(2) Authority to enter into contracts.--Notwithstanding 
     section 3718(f) of

[[Page S11481]]

     title 31, United States Code, the Secretary is authorized to 
     enter into contracts to obtain services relating to receiving 
     payment by other means when cost beneficial to the 
     Government.
       ``(3) Special provisions for use of credit cards.--If use 
     of credit cards is accepted as a method of payment of taxes 
     pursuant to subsection (a)--
       ``(A) a payment of internal revenue taxes (or a payment of 
     internal revenue stamps) by a person by use of a credit card 
     shall not be subject to section 161 of the Truth-in-Lending 
     Act (15 U.S.C. 1666), to any similar provisions of State law, 
     if the error alleged by the person is an error relating to 
     the underlying tax liability, rather than an error relating 
     to the credit card account such as a computational error or 
     numerical transportation in the credit card transaction or an 
     issue as to whether the person authorized payment by use of 
     the credit card;
       ``(B) a payment of internal revenue taxes (or a payment for 
     internal revenue stamps) shall not be subject to section 170 
     of the Truth in Lending Act (15 U.S.C. 1666i), or to any 
     similar provisions of State law;
       ``(C) a payment of internal revenue taxes (or a payment for 
     internal revenue stamps) by a person by use of a debit card 
     shall not be subject to section 908 of the Electronic Fund 
     Transfer Act (15 U.S.C. 1693f), or to any similar 
     provisions of State law, if the error alleged by the 
     person is an error relating to the underlying tax 
     liability, rather than an error relating to the debit card 
     account such as a computational error or numerical 
     transposition in the debit card transaction or an issue as 
     to whether the person authorized payment by use of the 
     debit card;
       ``(D) the term `creditor' under section 103(f) of the Truth 
     in Lending Act (15 U.S.C. 1602(f)) shall not include the 
     Secretary with respect to credit card transactions in payment 
     of internal revenue taxes (or payment for internal revenue 
     stamps); and
       ``(E) notwithstanding any other provision of law to the 
     contrary, in the case of payment made by credit card or debit 
     card transaction in an amount owed to a person as a result of 
     the correction of an error under section 161 of the Truth in 
     Lending Act (15 U.S.C. 1666) or section 908 of the Electronic 
     Fund Transfer Act (15 U.S.C. 1693(f)), the Secretary is 
     authorized to provide such amount to such person as a credit 
     to that person's credit card or debit card account through 
     the applicable credit card or debit card system.
       ``(e) Confidentiality of Information.--
       ``(1) In general.--Except as otherwise authorized by this 
     subsection, no person may use or disclose any information 
     relating to credit or debit card transactions obtained 
     pursuant to section 6103(k)(8) other than for purposes 
     directly related to the processing of such transactions, or 
     the billing or collection of amounts charged or debited 
     pursuant thereto.
       ``(2) Exceptions.--
       ``(A) Debit or credit card issuers or others acting on 
     behalf of such issuers may also use and disclose such 
     information for purposes directly related to servicing an 
     issuer's accounts.
       ``(B) Debit or credit card issuers or others directly 
     involved in the processing of credit or debit card 
     transactions or the billing or collection of amounts charged 
     or debited thereto may also use and disclose such information 
     for purposes directly related to--
       ``(i) statistical risk and profitability assessment,
       ``(ii) transferring receivables, accounts, or interest 
     therein,
       ``(iii) auditing the account information,
       ``(iv) complying with Federal, State, or local law, and
       ``(v) properly authorized civil, criminal, or regulatory 
     investigation by Federal, State, or local authorities.
       ``(3) Procedures.--Use and disclosure of information under 
     this paragraph shall be made only to the extent authorized by 
     written procedures promulgated by the Secretary.
       ``(4) Cross reference.--
``For provision providing for civil damages for violation of paragraph 
(1), see section 7431.''
       (b) Separate Appropriation Required for Payment of Credit 
     Card Fees.--No amount may be paid by the United States to a 
     credit card issuer for the right to receive payments of 
     internal revenue taxes by credit card without a separate 
     appropriation therefor.
       (c) Clerical Amendment.--The table of sections for 
     subchapter B of chapter 64 is amended by striking the item 
     relating to section 6311 and inserting the following:

``Sec. 6311. Payment of tax by commercially acceptable means.''

       (d) Amendments to Section 6103 and 7431 With Respect to 
     Disclosure Authorization.--
       (1) Subsection (k) of section 6103 (relating to 
     confidentiality and disclosure of returns and return 
     information) is amended by adding at the end the following 
     new paragraph--
       ``(8) Disclosure of information to administer section 
     6311.--The Secretary may disclose returns or return 
     information to financial institutions and others to the 
     extent the Secretary deems necessary for the administration 
     of section 6311. Disclosures of information for purposes 
     other than to accept payments by check or money orders shall 
     be made only to the extent authorized by written procedures 
     promulgated by the Secretary.''.
       (2) Section 7431 (relating to civil damages for 
     unauthorized disclosure of returns and return information) is 
     amended by adding at the end the following new subsection:
       ``(g) Special Rule for Information Obtained Under Section 
     6103(k)(8).--For purposes of this section, any reference to 
     section 6103 shall be treated as including a reference to 
     section 6311(e).''.
       (3) Section 6103(p)(3)(A) is amended by striking ``or (6)'' 
     and inserting ``(6), or (8)''.
       (e) Effective Date.--The amendments made by this section 
     shall take effect on the day which is 9 months after the date 
     of the enactment of this Act.

     SEC. 206. RETURN-FREE TAX SYSTEM.

       (a) In General.--The Secretary of the Treasury or the 
     Secretary's delegate shall develop procedures for the 
     implementation of a return-free tax system under which 
     individuals would be permitted to comply with the Internal 
     Revenue Code of 1986 without making the return required under 
     section 6012 of such Code for taxable years beginning after 
     2007.
       (b) Report.--Not later than June 30 of each calendar year 
     after 1999, such Secretary shall report to the Committee on 
     Ways and Means of the House of Representatives, the Committee 
     on Finance of the Senate, and the Joint Committee on Taxation 
     on--
       (1) the procedures developed pursuant to subsection (a),
       (2) the number and classes of taxpayers that would be 
     permitted to use the procedures developed pursuant to 
     subsection (a),
       (3) the changes to the Internal Revenue Code of 1986 that 
     could enhance the use of such a system, and
       (4) what additional resources the Internal Revenue Service 
     would need to implement such a system.

     SEC. 207. ACCESS TO ACCOUNT INFORMATION.

       Not later than December 31, 2006, the Secretary of the 
     Treasury or the Secretary's delegate shall develop procedures 
     under which a taxpayer filing returns electronically would be 
     able to review the taxpayer's account electronically, 
     including all necessary safeguards to ensure the privacy of 
     such account information.

               TITLE III--TAXPAYER PROTECTION AND RIGHTS

     SEC. 301. EXPANSION OF AUTHORITY TO ISSUE TAXPAYER ASSISTANCE 
                   ORDERS.

       (a) In General.--Section 7811(a) (relating to taxpayer 
     assistance orders) is amended--
       (1) by striking ``Upon application'' and inserting the 
     following:
       ``(1) In general.--Upon application'',
       (2) by moving the text 2 ems to the right, and
       (3) by adding at the end the following new paragraph:
       ``(2) Determination of hardship.--For purposes of 
     determining whether a taxpayer is suffering or about to 
     suffer a significant hardship, the Taxpayer Advocate should 
     consider--
       ``(A) whether the Internal Revenue Service employee to 
     which such order would issue is following applicable 
     published administrative guidance, including the Internal 
     Revenue Manual,
       ``(B) whether there is an immediate threat of adverse 
     action,
       ``(C) whether there has been a delay of more than 30 days 
     in resolving taxpayer account problems, and
       ``(D) the prospect that the taxpayer will have to pay 
     significant professional fees for representation.''.
       (b) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 302. EXPANSION OF AUTHORITY TO AWARD COSTS AND CERTAIN 
                   FEES.

       (a) Authority to Award Higher Attorney's Fees Based on 
     Complexity of Issues.--Clause (iii) of section 7430(c)(1)(B) 
     (relating to the award of costs and certain fees) is amended 
     by inserting ``, or the difficulty of the issues presented in 
     the case or the local availability of tax expertise,'' before 
     ``justifies a higher rate''.
       (b) Award of Administrative Costs Incurred After 30-Day 
     Letter.--
       (1) Paragraph (2) of section 7430(c) is amended by striking 
     the last sentence and insert the following:

     ``Such term shall only include costs incurred on or after 
     whichever of the following is the earliest: (i) the date of 
     the receipt by the taxpayer of the notice of the decision of 
     the Internal Revenue Service Office of Appeals, (ii) the date 
     of the notice of deficiency, or (iii) the date on which the 
     1st letter of proposed deficiency which allows the taxpayer 
     an opportunity for administrative review in the Internal 
     Revenue Service Office of Appeals is sent.''
       (2) Subparagraph (B) of section 7430(c)(7) is amended by 
     striking ``or'' at the end of clause (i), by striking the 
     period at the end of clause (ii) and inserting ``, or'', and 
     by adding at the end the following new clause:
       ``(iii) the date on which the 1st letter of proposed 
     deficiency which allows the taxpayer an opportunity for 
     administrative review in the Internal Revenue Service Office 
     of Appeals is sent.''
       (c) Award of Fees for Certain Additional Services.--
     Paragraph (3) of section 7430(c) is amended by adding at the 
     end the following new sentence: ``Such term also includes 
     such amounts as the court calculates, based on hours worked 
     and costs expended, for services of an individual (whether or 
     not an attorney) who is authorized to practice before the Tax 
     Court or before the Internal Revenue Service and who 
     represents the taxpayer for no more than a nominal fee.''

[[Page S11482]]

       (d) Determination of Prevailing Party.--Paragraph (4) of 
     section 7430(c) is amended--
       (A) by inserting at the end of subparagraph (A) the 
     following new flush sentence:

     ``For purposes of this section, such section 2412(d)(2)(B) 
     shall be applied by substituting `$5,000,000' for the amount 
     otherwise applicable to individuals, and `$35,000,000' for 
     the amount otherwise applicable to businesses.'', and
       (B) by adding at the end the following new subparagraph:
       ``(D) Safe Harbor.--The position of the United States was 
     not substantially justified if the United States has not 
     prevailed on the same issue in at least 3 United States 
     Courts of Appeal.''
       (e) Effective Date.--The amendments made by this section 
     shall apply to proceedings beginning after the date of the 
     enactment of this Act.

     SEC. 303. CIVIL DAMAGES FOR NEGLIGENCE IN COLLECTION ACTIONS.

       (a) In General.--Section 7433 (relating to civil damages 
     for certain unauthorized collection actions) is amended--
       (1) in subsection (a), by inserting ``, or by reason of 
     negligence,'' after ``recklessly or intentionally'', and
       (2) in subsection (b)--
       (A) in the matter preceding paragraph (1), by inserting 
     ``($100,000, in the case of negligence)'' after 
     ``$1,000,000'', and
       (B) in paragraph (1), by inserting ``or negligent'' after 
     ``reckless or intentional''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to actions of officers or employees of the 
     Internal Revenue Service after the date of the enactment of 
     this Act.

     SEC. 304. DISCLOSURE OF CRITERIA FOR EXAMINATION SELECTION.

       (a) In General.--The Secretary of the Treasury or the 
     Secretary's delegate shall, as soon as practicable, but not 
     later than 180 days after the date of the enactment of this 
     Act, incorporate into the statement required by section 6227 
     of the Omnibus Taxpayer Bill of Rights (Internal Revenue 
     Service Publication No. 1) a statement which sets forth in 
     simple and nontechnical terms the criteria and procedures for 
     selecting taxpayers for examination. Such statement shall not 
     include any information the disclosure of which would be 
     detrimental to law enforcement, but shall specify the general 
     procedures used by the Internal Revenue Service, including 
     the extent to which taxpayers are selected for examination on 
     the basis of information available in the media or on the 
     basis of information provided to the Internal Revenue Service 
     by informants.
       (b) Transmission to Committees of Congress.--Such Secretary 
     shall transmit drafts of the statement required under 
     subsection (a) (or proposed revisions to any such statement) 
     to the Committee on Ways and Means of the House of 
     Representatives, the Committee on Finance of the Senate, and 
     the Joint Committee on Taxation on the same day.

     SEC. 305. ARCHIVAL OF RECORDS OF INTERNAL REVENUE SERVICE.

       (a) In General.--Subsection (l) of section 6103 (relating 
     to confidentiality and disclosure of returns and return 
     information) is amended by adding at the end the following 
     new paragraph:
       ``(16) Disclosure to national archives and records 
     administration.--The Secretary shall, upon written request 
     from the Archivist of the United States, disclose to the 
     Archivist all records of the Internal Revenue Service for 
     purposes of scheduling such records for destruction or for 
     retention in the National Archives. Any such information that 
     is retained in the National Archives shall not be disclosed 
     without the express written approval of the Secretary.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to requests made by the Archivist after the date 
     of the enactment of this Act.

     SEC. 306. TAX RETURN INFORMATION.

       The Joint Committee on Taxation shall convene a study of 
     the scope and use of provisions regarding taxpayer 
     confidentiality, and shall report the findings of such study, 
     together with such recommendations as it deems appropriate, 
     to the Congress no later than one year after the date of the 
     enactment of this Act. Such study shall be led by a panel of 
     experts, to be appointed by the Joint Committee on Taxation, 
     which shall examine the present protections for taxpayer 
     privacy, the need for third parties to use tax return 
     information, and the ability to achieve greater levels of 
     voluntary compliance by allowing the public to know who is 
     legally required to do so, but does not file tax returns.

     SEC. 307. FREEDOM OF INFORMATION.

       (a) In General.--The Secretary of the Treasury or the 
     Secretary's delegate shall, as soon as practicable, but not 
     later than 180 days after the date of the enactment of this 
     Act, develop procedures under which expedited access will be 
     granted to requests under section 551 of title 5, United 
     States Code, when--
       (1) there exists widespread and exceptional media interest 
     in the requested information, and
       (2) expedited processing is warranted because the 
     information sought involves possible questions about the 
     government's integrity which affect public confidence.

     In addition, such procedures shall require the Internal 
     Revenue Service to provide an explanation to the person 
     making the request if the request is not satisfied within 30 
     days, including a summary of actions taken to date and the 
     expected completion date. Finally, to the extent that any 
     such request is not satisfied in full within 60 days, such 
     person may seek a determination of whether such request 
     should be granted by the appropriate Federal district court.
       (b) Transmission to Committees of Congress.--Such Secretary 
     shall transmit drafts of the procedures required under 
     subsection (a) (or proposed revisions to any such procedures) 
     to the Committee on Ways and Means of the House of 
     Representatives, the Committee on Finance of the Senate, and 
     the Joint Committee on Taxation on the same day.

     SEC. 308. OFFERS-IN-COMPROMISE.

       (a) In General.--Section 7122 (relating to offers-in-
     compromise) is amended by adding at the end the following new 
     subsection:
       ``(c) Allowances.--The Secretary shall develop and publish 
     schedules of national and local allowances to ensure that 
     taxpayers entering into a compromise have an adequate means 
     to provide for basic living expenses.''
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 309. ELIMINATION OF INTEREST DIFFERENTIAL ON 
                   OVERPAYMENTS AND UNDERPAYMENTS.

       (a) In General.--Subsection (a) of section 6621 (relating 
     to the determination of rate of interest) is amended to read 
     as follows:
       ``(a) General Rule.--
       ``(1) Rate.--The rate established under this section shall 
     be the sum of--
       ``(A) the Federal short-term rate determined under 
     subsection (b), plus
       ``(B) the number of percentage points specified by the 
     Secretary.
       ``(2) Determination of percentage points.--The number of 
     percentage points specified by the Secretary for purposes of 
     paragraph (1)(B) shall be the number which the Secretary 
     estimates will result in the same net revenue to the Treasury 
     as would have resulted without regard to the amendments made 
     by section 309 of the Internal Revenue Service Restructuring 
     and Reform Act of 1997.''
       (b) Conforming Amendments.--
       (1) Section 6621 is amended by striking subsection (c).
       (2) The following provisions are each amended by striking 
     ``overpayment rate'' and inserting ``rate'': Sections 
     42(j)(2)(B), 167(g)(2)(C), 460(b)(2)(C), 6343(c), 
     6427(i)(3)(B), 6611(a), and 7426(g).
       (3) The following provisions are each amended by striking 
     ``underpayment rate'' and inserting ``rate'': Sections 
     42(k)(4)(A)(ii), 148(f)(4)(C)(x)(II), 148(f)(7)(C)(ii), 
     453A(c)(2)(B), 644(a)(2)(B), 852(e)(3)(A), 4497(c)(2), 
     6332(d)(1), 6601(a), 6602, 6654(a)(1), 6655(a)(1), and 
     6655(h)(1).
       (c) Effective Date.--The amendments made by this section 
     shall apply for purposes of determining interests for periods 
     after the date of the enactment of this Act.

     SEC. 310. ELIMINATION OF APPLICATION OF FAILURE TO PAY 
                   PENALTY DURING PERIOD OF INSTALLMENT AGREEMENT.

       (a) In General.--Subsection (c) of section 6651 (relating 
     to the penalty for failure to file tax return or to pay tax) 
     is amended by adding at the end the following new paragraph:
       ``(3) Tolling during period of installment agreement.--If 
     the amount required to be paid is the subject of an agreement 
     for payment of tax liability in installments made pursuant to 
     section 6159, the additions imposed under subsection (a) 
     shall not apply so long as such agreement remains in 
     effect.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to agreements entered into after the date of the 
     enactment of this Act.

     SEC. 311. SAFE HARBOR FOR QUALIFICATION FOR INSTALLMENT 
                   AGREEMENTS.

       (a) In General.--Subsection (a) of section 6159 (relating 
     to agreements for payment of tax liability in installments) 
     is amended--
       (1) by striking ``The Secretary is'' and inserting the 
     following:
       ``(1) In general.--The Secretary is'',
       (2) by moving the test 2 ems to the right, and
       (3) by adding at the end the following new paragraph:
       ``(2) Safe harbor.--The Secretary shall enter into an 
     agreement to accept the payment of a tax liability in 
     installments if--
       ``(A) the amount of such liability does not exceed $10,000,
       ``(B) the taxpayer has not failed to file any tax return or 
     pay any tax required to be shown thereon during the 
     immediately preceding 5 years, and
       ``(C) the taxpayer has not entered into any prior 
     installment agreement under this paragraph.''
       (b) Effective Date.--The amendments made by this section 
     shall apply to agreements entered into after the date of the 
     enactment of this Act.

     SEC. 312. PAYMENT OF TAXES.

       (a) In General.--The Secretary of the Treasury or his 
     delegate shall establish such rules, regulations, and 
     procedures as are necessary to require payment of taxes by 
     check or money order to be made payable to the Treasurer, 
     United States of America.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

[[Page S11483]]

     SEC. 313. LOW INCOME TAXPAYER CLINICS.

       (a) In General.--Chapter 77 (relating to miscellaneous 
     provisions) is amended by adding at the end thereof the 
     following new section:

     ``SEC. 7525. LOW INCOME TAXPAYER CLINICS.

       ``(a) In General.--The Secretary shall make grants to 
     provide matching funds for the development, expansion, or 
     continuation of qualified low income taxpayer clinics.
       ``(b) Definitions.--For purposes of this section--
       ``(1) Qualified low income taxpayer clinic.--
       ``(A) In general.--The term `qualified low income taxpayer 
     clinic' means a clinic that--
       ``(i) represents low income taxpayers in controversies with 
     the Internal Revenue Service,
       ``(ii) operates programs to inform individuals for whom 
     English is a second language about their rights and 
     responsibilities under this title, and
       ``(iii) does not charge more than a nominal fee for its 
     services except for reimbursement of actual costs incurred.
       ``(B) Representation of low income taxpayers.--A clinic 
     meets the requirements of subparagraph (A)(i) if--
       ``(i) at least 90 percent of the taxpayers represented by 
     the clinic have income which does not exceed 250 percent of 
     the poverty level, as determined in accordance with criteria 
     established by the Director of the Office of Management and 
     Budget, and
       ``(ii) the amount in controversy for any taxable year 
     generally does not exceed the amount specified in section 
     7463.
       ``(2) Clinic.--The term `clinic' includes--
       ``(A) a clinical program at an accredited law school in 
     which students represent low income taxpayers in 
     controversies arising under this title, and
       ``(B) an organization exempt from tax under section 501(c) 
     which satisfies the requirements of paragraph (1) through 
     representation of taxpayers or referral of taxpayers to 
     qualified representatives.
       ``(3) Qualified representative.--The term `qualified 
     representative' means any individual (whether or not an 
     attorney) who is authorized to practice before the Internal 
     Revenue Service or the applicable court.
       ``(c) Special Rules and Limitations.--
       ``(1) Aggregate limitation.--Unless otherwise provided by 
     specific appropriation, the Secretary shall not allocate more 
     than $3,000,000 per year (exclusive of costs of administering 
     the program) to grants under this section.
       ``(2) Limitation on individual grants.--A grant under this 
     section shall not exceed $100,000 per year.
       ``(3) Multi-year grants.--Upon application of a qualified 
     low income taxpayer clinic, the Secretary is authorized to 
     award a multi-year grant not to exceed 3 years.
       ``(4) Criteria for awards.--In determining whether to make 
     a grant under this section, the Secretary shall consider--
       ``(A) the numbers of taxpayers who will be served by the 
     clinic, including the number of taxpayers in the geographical 
     area for whom English is a second language,
       ``(B) the existence of other low income taxpayer clinics 
     serving the same population,
       ``(C) the quality of the program offered by the low income 
     taxpayer clinic, including the qualifications of its 
     administrators and qualified representatives, and its track 
     record, if any, in providing service to low income taxpayers, 
     and
       ``(D) alternative funding sources available to the clinic, 
     including amounts received from other grants and 
     contributions, and the endowment and resources of the 
     educational institution sponsoring the clinic.
       ``(5) Requirement of matching funds.--A low income taxpayer 
     clinic must provide matching funds on a dollar for dollar 
     basis for all grants provided under this section. Matching 
     funds may include--
       ``(A) the salary (including fringe benefits) of a faculty 
     member at an educational institution who is teaching in the 
     clinic;
       ``(B) the salaries of administrative personnel employed in 
     the clinic; and
       ``(C) the cost of equipment used in the clinic.

     Indirect expenses, including general overhead of the 
     educational institution sponsoring the clinic, shall not be 
     counted as matching funds.''.
       (b) Clerical Amendment.--The table of sections for chapter 
     77 is amended by adding at the end the following new section:

``Sec. 7525. Low income taxpayer clinics.''

       (c) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 314. JURISDICTION OF THE TAX COURT.

       (a) Interest Determinations.--Subsection (c) of section 
     7481 (relating to the date when Tax Court decisions become 
     final) is amended--
       (1) by inserting ``or underpayment'' after ``overpayment'' 
     each place it appears, and
       (2) by striking ``petition'' in paragraph (3) and inserting 
     ``motion''.
       (b) Extension of Time for Payment of Estate Tax.--Section 
     6166 (relating to the extension of time for payment of estate 
     tax) is amended--
       (1) by redesignating subsection (k) as subsection (l), and
       (2) by inserting after subsection (j) the following new 
     subsection:
       ``(k) Judicial Review.--The Tax Court shall have 
     jurisdiction to review disputes regarding initial or 
     continuing eligibility for extensions of time for payment 
     under this section, including disputes regarding the proper 
     amount of installment payments required herein.''
       (c) Small Case Calendar.--
       (1) Subsection (a) of section 7463 (relating to disputes 
     involving $10,000 or less) is amended by striking ``$10,000'' 
     each place it appears and inserting ``$25,000''.
       (2) The section hearing for section 7463 is amended by 
     striking ``$10,000'' and inserting ``$25,000''.
       (3) The item relating to section 7463 in the table of 
     sections for part II of subchapter C of chapter 76 is amended 
     by striking ``$10,000'' and inserting ``$25,000''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to proceedings commencing after the date of the 
     enactment of this Act.

     SEC. 315. CATALOGING COMPLAINTS.

       (a) In General.--The Commissioner of Internal Revenue 
     shall, as soon as practicable, but not later than 180 days 
     after the date of the enactment of this Act, develop 
     procedures to catalog and review taxpayer complaints of 
     misconduct by Internal Revenue Service employees. Such 
     procedures should include guidelines for internal review and 
     discipline of employees, as warranted by the scope of such 
     complaints.
       (b) Hotline.--The Commissioner for Internal Revenue shall, 
     as soon as practicable, but not later than 180 days after the 
     date of the enactment of this Act, establish a toll-free 
     telephone number for taxpayers to register complaints of 
     misconduct by Internal Revenue Service employees, and shall 
     publish such number in Publication 1.

     SEC. 316. PROCEDURES INVOLVING TAXPAYER INTERVIEWS.

       (a) In General.--Paragraph (1) of section 7521(b) (relating 
     to procedures involving taxpayer interviews) is amended to 
     read as follows:
       ``(1) Explanation of processes.--An officer or employee of 
     the Internal Revenue Service shall--
       ``(A) before or at an initial interview, provide to the 
     taxpayer--
       ``(i) in the case of an in-person interview with the 
     taxpayer relating to the determination of any tax, an 
     explanation of the audit process and the taxpayer's rights 
     under such process, or
       ``(ii) in the case of an in-person interview with the 
     taxpayer relating to the collection of any tax, an 
     explanation of the collection process and the taxpayer's 
     rights under such process, and
       ``(B) before an in-person initial interview with the 
     taxpayer relating to the determination of any tax--
       ``(i) inquire whether the taxpayer is represented by an 
     individual described in subsection (c),
       ``(2) explain that the taxpayer has the right to have the 
     interview take place in a reasonable place and that such 
     place does not have to be the taxpayer's home,
       ``(iii) explain the reasons for the selection of the 
     taxpayer's return for examination, and
       ``(iv) provide the taxpayer with a written explanation of 
     the applicable burdens of proof on taxpayers and the Internal 
     Revenue Service.

     If the taxpayer is represented by an individual described in 
     subsection (c), the interview may not proceed without the 
     presence of such individual unless the taxpayer consents.''
       (b) Effective Date.--The amendments made by this section 
     shall apply to interviews and examinations taking place after 
     the date of the enactment of this Act.

     SEC. 317. EXPLANATION OF JOINT AND SEVERAL LIABILITY.

       (a) In General.--The Secretary of the Treasury or the 
     Secretary's delegate shall, as soon as practicable, but not 
     later than 180 days after the date of the enactment of this 
     Act, establish procedures to clearly alert taxpayers of their 
     joint and several liabilities on all tax forms, publications, 
     and instructions. Such procedures shall include explanations 
     of the possible consequences of joint and several liability.
       (b) Transmission to Committees of Congress.--Such Secretary 
     shall transmit drafts of the procedures required under 
     subsection (a) (or proposed revisions to any such procedures) 
     to the Committee on Ways and Means of the House of 
     Representatives, the Committee on Finance of the Senate, and 
     the Joint Committee on Taxation on the same day.

     SEC. 318. PROCEDURES RELATING TO EXTENSIONS OF STATUTE OF 
                   LIMITATIONS BY AGREEMENT.

       (a) In General.--Paragraph (4) of section 6501(c) (relating 
     to the period for limitations on assessment and collection) 
     is amended--
       (1) by striking ``Where'' and inserting the following:
       ``(A) In general.--Where'',
       (2) by moving the text 2 ems to the right, and
       (3) by adding at the end the following new subparagraph:
       ``(B) Notice to taxpayer of right to refuse or limit 
     extension.--The Secretary shall notify the taxpayer of the 
     taxpayer's right to refuse to extend the period of 
     limitations, or to limit such extension to particular issues, 
     on each occasion when the taxpayer is requested to provide 
     such consent.''
       (b) Effective Date.--The amendments made by this section 
     shall apply to requests to extend the period of limitations 
     made after the date of the enactment of this Act.

[[Page S11484]]

     SEC. 319. REVIEW OF PENALTY ADMINISTRATION.

       The Taxpayer Advocate shall prepare a study and provide an 
     independent report to the Committee on Ways and Means of the 
     House of Representatives, the Committee on Finance of the 
     Senate, and the Joint Committee on Taxation, no later than 
     July 30, 1998, reviewing the administration and 
     implementation by the Internal Revenue Service of the penalty 
     reform recommendations made in the Omnibus Budget 
     Reconciliation Act of 1989, including legislative and 
     administrative recommendations to simplify penalty 
     administration and reduce taxpayer burden.

     SEC. 320. STUDY OF TREATMENT OF ALL TAXPAYERS AS SEPARATE 
                   FILING UNITS.

       The Secretary of the Treasury or his delegate and the 
     Comptroller General of the United States shall each conduct 
     separate studies on the feasibility of treating each 
     individual separately for purposes of the Internal Revenue 
     Code of 1986, including recommendations for eliminating the 
     marriage penalty, addressing community property issues, and 
     reducing burden for divorced and separated taxpayers. The 
     reports of each study shall be delivered to the Committee on 
     Ways and Means of the House of Representatives, the Committee 
     on Finance of the Senate, and the Joint Committee on Taxation 
     no later than 180 days after the date of the enactment of 
     this Act.

     SEC. 321. STUDY OF BURDEN OF PROOF.

       The Comptroller General of the United States shall prepare 
     a report on the burdens of proof for taxpayers and the 
     Internal Revenue Service for controversies arising under the 
     Internal Revenue Code of 1986, which shall be delivered to 
     the Committee on Ways and Means of the House of 
     Representatives, the Committee on Finance of the Senate, and 
     the Joint Committee on Taxation no later than 180 days after 
     the date of the enactment of this Act. Such report shall 
     highlight the differences between these burdens and the 
     burdens imposed in other disputes with the Federal 
     Government, and should comment on the impact of changing 
     these burdens on tax administration and taxpayer rights.

     SEC. 322. NOTICE OF DEFICIENCY TO SPECIFY RIGHT TO CONTACT 
                   TAXPAYER ADVOCATE

       (a) In General.--Section 6212(a) (relating to notice of 
     deficiency) is amended by adding at the end the following: 
     ``Such notice shall include a notice to the taxpayer of the 
     taxpayer's right to contact a local office of the taxpayer 
     advocate and the location and telephone number of the nearest 
     such office.''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect 180 days after the date of the enactment of 
     this act.

TITLE IV--CONGRESSIONAL ACCOUNTABILITY FOR THE INTERNAL REVENUE SERVICE

                         Subtitle A--Oversight

     SEC. 401. COORDINATED OVERSIGHT HEARINGS.

       (a) Subchapter A of chapter 80 (relating to application of 
     internal revenue laws) is amended by adding after section 
     7811 the following new section:

     ``SEC. 7821. COORDINATED OVERSIGHT HEARINGS.

       ``(a) Joint Hearings.--On or before April 1 of each 
     calendar year after 1997, there shall be a joint hearing of 
     two members of the majority and one member of the minority 
     from each of the Committees on Finance, Appropriations, and 
     Government Affairs of the Senate, and the Committees on Ways 
     and Means, Appropriations, and Government Reform and 
     Oversight of the House of Representatives, to review the 
     strategic plans and budget for the Internal Revenue Service. 
     After the conclusion of the annual filing season, there shall 
     be a second annual joint hearing to review other matters 
     outlined in subsection (b).
       ``(b) In preparation for the annual joint hearings provided 
     for under subsection (a), the staffs of the Committee on 
     Finance of the Senate and the Committee on Ways and Means of 
     the House of Representatives, shall, on an annual rotating 
     basis, prepare reports with respect to--
       (1) strategic and business plans for the Internal Revenue 
     Service;
       (2) progress of the Internal Revenue Service in meeting its 
     objectives;
       (3) the budget for the Internal Revenue Service and whether 
     it supports its strategic objectives;
       (4) progress of the Internal Revenue Service in improving 
     taxpayer service and compliance;
       (5) progress of the Internal Revenue Service on technology 
     modernization; and
       (6) the annual filing season.''.
       (b) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

                           Subtitle B--Budget

     SEC. 412. FUNDING FOR CENTURY DATE CHANGE.

       it is the sense of Congress that funding for the Internal 
     Revenue Service efforts to resolve the century date change 
     computing problems should be funded fully to provide for 
     certain resolution of such problems.

     SEC. 413. FINANCIAL MANAGEMENT ADVISORY GROUP.

       The Commissioner shall convene a financial management 
     advisory group consisting of individuals with expertise in 
     governmental accounting and auditing from both the private 
     sector and the Government to advise the Commissioner on 
     financial management issues, including--
       (1) the continued partnership between the Internal Revenue 
     Service and the General Accounting Office;
       (2) the financial accounting aspects of the Internal 
     Revenue Service's system modernization;
       (3) the necessity and utility of year-round auditing; and
       (4) the Commissioner's plans for improving its financial 
     management system.

                     Subtitle C--Tax Law Complexity

     SEC. 421. ROLE OF THE INTERNAL REVENUE SERVICE.

       It is the sense of Congress that the Internal Revenue 
     Service should provide the Congress with an independent view 
     of tax administration, and that during the legislative 
     process, the tax writing committees of the Congress should 
     hear from front-line technical experts at the Internal 
     Revenue Service with respect to the administrability of 
     pending amendments to the Internal Revenue Code of 1986.

     SEC. 422. TAX COMPLEXITY ANALYSIS.

       (a) In General.--Chapter 92 (relating to powers and duties 
     of the Joint Committee on Taxation) is amended by adding at 
     the end the following new section:

     ``SEC. 8024. TAX COMPLEXITY ANALYSIS.

       ``(a) In General.--
       ``(1) Reported bills and resolutions.--When a committee of 
     the Senate or House of Representatives reports a bill or 
     joint resolution that includes any provision amending the 
     Internal Revenue Code of 1986, the report for such bill or 
     joint resolution shall contain a Tax Complexity Analysis 
     prepared by the Joint Committee on Taxation for each 
     provision therein.
       ``(2) Amended bills and joint resolutions; conference 
     reports.--If a bill or joint resolution is passed in an 
     amended form (including if passed by one House as an 
     amendment in the nature of a substitute for the text of a 
     bill or joint resolution from the other House) or is reported 
     by a committee of conference in amended form, and the amended 
     form contains an amendment to the Internal Revenue Code of 
     1986 not previously considered by either House, then the 
     committee of conference shall ensure that the Joint Committee 
     on Taxation prepares a Tax Complexity Analysis for each 
     provision therein.
       ``(b) Content of Complexity Analysis.--Each Tax Complexity 
     Analysis must address--
       ``(1) whether the provision is new, modifies or replaces 
     existing law, and whether hearings were held to discuss the 
     proposal and whether the Internal Revenue Service provided 
     input as to its administrability;
       ``(2) when the provision becomes effective, and 
     corresponding compliance requirements on taxpayers (e.g., 
     effective on date of enactment, phased in, or retroactive);
       ``(3) whether new Internal Revenue Service forms or 
     worksheets are needed, whether existing forms or worksheets 
     must be modified, and whether the effective date allows 
     sufficient time for the Internal Revenue Service to prepare 
     such forms and educate taxpayers;
       ``(4) necessity of additional interpretive guidance (e.g., 
     regulations, rulings, and notices);
       ``(5) the extent to which the proposal relies on concepts 
     contained in existing law, including definitions;
       ``(6) effect on existing record keeping requirements and 
     the activities of taxpayers, complexity of calculations and 
     likely behavioral responses, and standard business practices 
     and resource requirements;
       ``(7) number, type, and sophistication of affected 
     taxpayers; and
       ``(8) whether the proposal requires the Internal Revenue 
     Service to assume responsibilities not directly related to 
     raising revenue which could be handled through another 
     Federal agency.
       ``(c) Legislation Subject to Point of Order.--
       ``(1) In general.--It shall not be in order in the Senate 
     or the House of Representatives to consider any bill, joint 
     resolution, amendment, motion, or conference report that is 
     not accompanied by a Tax Complexity Analysis for each 
     provision therein.
       ``(2) In the senate.--Upon a point of order being made by 
     any Senator against any provision under this section, and the 
     point of order being sustained by the Chair, such specific 
     provision shall be deemed stricken from the bill, resolution, 
     amendment, amendment in disagreement, or conference report, 
     and may not be offered as an amendment from the floor.
       ``(3) In the house of representatives.--
       ``(A) It shall not be in order in the House of 
     Representatives to consider a rule or order that waives the 
     application of paragraph (1).
       ``(B) In order to be cognizable by the Chair, a point of 
     order under this section must specify the precise language on 
     which it is premised.
       ``(C) As disposition of points of order under this section, 
     the Chair shall put the question of consideration with 
     respect to the proposition that is the subject of the points 
     of order.
       ``(D) A question of consideration under this section shall 
     be debatable for 10 minutes by each Member initiating a point 
     of order and for 10 minutes by an opponent on each point of 
     order, but shall otherwise be decided without intervening 
     motion except one that the House adjourn or that the 
     Committee of the Whole rise, as the case may be.
       ``(E) The disposition of the question of consideration 
     under this subsection with respect

[[Page S11485]]

     to a bill or joint resolution shall be considered also to 
     determine the question of consideration under this subsection 
     with respect to an amendment made in order as original text.
       ``(d) Responsibilities of the Commissioner.--The 
     Commissioner shall provide the Joint Committee on Taxation 
     with such information as is necessary to prepare a Tax 
     Complexity Analysis on each instance in which such an 
     analysis is required.''
       (b) Clerical Amendment.--The table of sections for chapter 
     92 is amended by adding at the end the following new item:

``Sec. 8024. Tax complexity analysis.''

       (c) Effective Date.--The amendments made by this section 
     shall apply to legislation considered on or after the earlier 
     of January 1, 1998, or the 90th day after the date of the 
     enactment of an additional appropriation to carry out section 
     8024 of the Internal Revenue Code of 1986, as added by 
     this section.

     SEC. 423. SIMPLIFIED TAX AND WAGE REPORTING SYSTEM.

       (a) Policy.--It is the policy of the Congress that 
     employers should have a single point of filing tax and wage 
     reporting information.
       (b) Electronic Filing of Information Returns.--The Social 
     Security Administration shall establish procedures no later 
     than December 31, 1998, to accept electronic submissions of 
     tax and wage reporting information from employers, and to 
     forward such information to the Internal Revenue Service, and 
     to the tax administrators of the States, upon request and 
     reimbursement of expenses. For purposes of this paragraph, 
     recipients of tax and wage reporting information from the 
     Social Security Administration shall reimburse the Social 
     Security Administration for its incremental expenses 
     associated with accepting and furnishing such information.

     SEC. 424. COMPLIANCE BURDEN ESTIMATES.

       The Joint Committee on Taxation shall prepare a study of 
     the feasibility of developing a baseline estimate of 
     taxpayers' compliance burdens against which future 
     legislative proposals could be measured.

     TITLE V--CLARIFICATION OF DEDUCTION FOR DEFERRED COMPENSATION

     SEC. 501. CLARIFICATION OF DEDUCTION FOR DEFERRED 
                   COMPENSATION.

       (a) In General.--Subsection (a) of section 404 is amended 
     by adding at the end the following new paragraph:
       ``(11) Determinations relating to deferred compensation.--
       ``(A) In general.--For purposes of determining under this 
     section--
       ``(i) whether compensation of an employee is deferred 
     compensation, and
       ``(ii) when deferred compensation is paid,

     no amount shall be treated as received by the employee, or 
     paid, until it is actually received by the employee.
       ``(B) Exception.--Subparagraph (A) shall not apply to 
     severance pay.''
       (b) Sick Leave Pay Treated Like Vacation Pay.--Paragraph 
     (5) of section 404(a) is amended by inserting ``or sick leave 
     pay'' after ``vacation pay''.
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to taxable years ending after October 8, 1997.
       (2) Change in method of accounting.--In the case of any 
     taxpayer required by this section to change its method of 
     accounting for its first taxable year ending after October 8, 
     1997--
       (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 of the Treasury, 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 in 
     such first taxable year.
                                 ______
                                 

                    BOXER AMENDMENTS NOS. 1539-1540

  (Ordered to lie on the table.)
  Mrs. BOXER submitted two amendments intended to be proposed by her to 
the bill, H.R. 2646, supra; as follows:

                           Amendment No. 1539

       At the end of the bill, add the following:

     SEC. 4. INCENTIVES FOR AFTERSCHOOL PROGRAMS.

       Section 226(d)(5) of Public Law 105-34 (The Taxpayer Relief 
     Act of 1997) is amended by adding the following:
       ``(E) providing productive activities during after school 
     hours, including, but not limited to, mentoring programs, 
     tutoring, recreational activities, and technology training.''
                                  ____


                           Amendment No. 1540

       Strike all after the enacting clause and insert the 
     following:

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``After School Education and 
     Safety Act of 1997''.

     SEC. 2. PURPOSE.

       The purpose of this Act is to improve academic and social 
     outcomes for students by providing productive activities 
     during after school hours.

     SEC. 3. FINDINGS.

       Congress makes the following findings:
       (1) Today's youth face far greater social risks than did 
     their parents and grandparents.
       (2) Students spend more of their waking hours along, 
     without supervision, companionship, or activity than the 
     students spend in school.
       (3) Law enforcement statistics show that youth who are ages 
     12 through 17 are most at risk of committing violent acts and 
     being victims of violent acts between 3 p.m. and 6 p.m.
       (4) Greater numbers of students are failing in school and 
     the consequences of academic failure are more dire in 1997 
     than ever before.

     SEC. 4. GOALS.

       The goals of this Act are as follows:
       (1) To increase the academic success of students.
       (2) To improve the intellectual, social, physical, and 
     cultural skills of students.
       (3) To promote safe and healthy environments for students.
       (4) To prepare students for workforce participation.
       (5) To provide alternatives to drug, alcohol, tobacco, and 
     gang activity.

     SEC. 5. DEFINITIONS.

       In this Act:
       (1) School.--The term ``school'' means a public 
     kindergarten, or a public elementary school or secondary 
     school, as defined in section 14101 of the Elementary and 
     Secondary Education Act of 1965 (20 U.S.C. 8801).
       (2) Secretary.--The term ``Secretary'' means the Secretary 
     of Education.

     SEC. 6. PROGRAM AUTHORIZED.

       The Secretary is authorized to carry out a program under 
     which the Secretary awards grants to schools to enable the 
     schools to carry out the activities described in section 
     7(a).

     SEC. 7. AUTHORIZED ACTIVITIES; REQUIREMENTS.

       (a) Authorized Activities.--
       (1) Required.--Each school receiving a grant under this Act 
     shall carry out at least 2 of the following activities:
       (A) Mentoring programs.
       (B) Academic assistance.
       (C) Recreational activities.
       (D) Technology training.
       (2) Permissive.--Each school receiving a grant under this 
     Act may carry out any of the following activities:
       (A) Drug, alcohol, and gang, prevention activities.
       (B) Health and nutrition counseling.
       (C) Job skills preparation activities.
       (b) Time.--A school shall provide the activities described 
     in subsection (a) only after regular school hours during the 
     school year.
       (c) Special Rule.--Each school receiving a grant under this 
     Act shall carry out activities described in subsection (a) in 
     a manner that reflects the specific needs of the population, 
     students, and community to be served.
       (d) Location.--A school shall carry out the activities 
     described in subsection (a) in a school building or other 
     public facility designated by the school.
       (e) Administration.--In carrying out the activities 
     described in subsection (a), a school is encouraged--
       (1) to request volunteers from the business and academic 
     communities to serve as mentors or to assist in other ways;
       (2) to request donations of computer equipment; and
       (3) to work with State and local park and recreation 
     agencies so that activities that are described in subsection 
     (a) and carried out prior to the date of enactment of this 
     Act are not duplicated by activities assisted under this Act.

     SEC. 8. APPLICATIONS.

       Each school desiring a grant under this Act shall submit an 
     application to the Secretary at such time, in such manner, 
     and accompanied by such information as the Secretary may 
     require. Each such application shall--
       (1) identify how the goals set forth in section 4 shall be 
     met by the activities assisted under this Act;
       (2) provide evidence of collaborative efforts by students, 
     parents, teachers, site administrators, and community members 
     in the planning and administration of the activities;
       (3) contain a description of how the activities will be 
     administered;
       (4) demonstrate how the activities will utilize or 
     cooperate with publicly or privately funded programs in order 
     to avoid duplication of activities in the community to be 
     served;
       (5) contain a description of the funding sources and in-
     kind contributions that will support the activities; and
       (6) contain a plan for obtaining non-Federal funding for 
     the activities.

     SEC. 9. AUTHORIZATION OF APPROPRIATIONS.

       There is authorized to be appropriated to carry out this 
     Act $50,000,000 for each of the fiscal years 1998 through 
     2002.

                          ____________________