[Congressional Record Volume 144, Number 31 (Thursday, March 19, 1998)]
[Senate]
[Pages S2309-S2344]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                          AMENDMENTS SUBMITTED

                                 ______
                                 

        THE EDUCATION SAVINGS ACT FOR PUBLIC AND PRIVATE SCHOOLS

                                 ______
                                 

                        COATS AMENDMENT NO. 2024

  (Ordered to lie on the table.)
  Mr. COATS 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 end of title I, add the following:

     SEC. ____. ADDITIONAL INCENTIVE TO MAKE DONATIONS TO SCHOOLS 
                   OR ORGANIZATIONS WHICH OFFER SCHOLARSHIPS.

       (a) In General.--Section 170 (relating to charitable, etc., 
     contributions and gifts) is amended by redesignating 
     subsection (m) as subsection (n) and by inserting after 
     subsection (l) the following:
       ``(m) Treatment of Amounts Paid to Certain Educational 
     Organizations.--
       ``(1) In general.--For purposes of this section, 110 
     percent of any amount described in paragraph (2) shall be 
     treated as a charitable contribution.
       ``(2) Amount described.--For purposes of paragraph (1), an 
     amount is described in this paragraph if the amount--
       ``(A) is paid in cash by the taxpayer to or for the benefit 
     of a qualified organization, and
       ``(B) is used by such organization to provide qualified 
     scholarships (as defined in section 117(b)) to any individual 
     attending kindergarten through grade 12 whose family income 
     does not exceed 185 percent of the poverty line for a family 
     of the size involved.
       ``(3) Definitions.--For purposes of this subsection--
       ``(A) Qualified organization.--The term `qualified 
     organization' means--
       ``(i) an educational organization--

       ``(I) which is described in subsection (b)(1)(A)(ii), and
       ``(II) which provides elementary education or secondary 
     education (kindergarten through grade 12), as determined 
     under State law, or

       ``(ii) an organization which is described in section 
     501(c)(3) and exempt from taxation under section 501(a).
       ``(B) Poverty line.--The term `poverty line' means the 
     income official poverty line (as defined by the Office of 
     Management and Budget, and revised annually in accordance 
     with section 673(2) of the Omnibus Budget Reconciliation Act 
     of 1981) applicable to a family of the size involved.''
       (b) Prohibition on any Deduction for Gambling Losses.--
     Section 165(d) (relating to wagering losses) is amended to 
     read as follows:
       ``(d) No Deduction for Wagering Losses.--No deduction shall 
     be allowed for losses from wagering transactions.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1998.
                                 ______
                                 

                      JEFFORDS AMENDMENT NO. 2025

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

       Strike section 101 and insert:

     SEC. 101. TRUST FUND FOR DC SCHOOLS.

       (a) In General.--Subchapter W of chapter 1 (relating to 
     District of Columbia Enterprise Zone) is amended by adding at 
     the end the following:

     ``SEC. 1400D. TRUST FUND FOR DC SCHOOLS.

       ``(a) Creation of Fund.--There is established in the 
     Treasury of the United States a trust fund to be known as the 
     `Trust Fund for DC Schools', consisting of such amounts as 
     may be appropriated or credited to the Fund as provided in 
     this section.
       ``(b) Transfer to Trust Fund of Amounts Equivalent to 
     Certain Taxes.--
       ``(1) In general.--There are hereby appropriated to the 
     Trust Fund for DC Schools amounts equivalent to 50 percent of 
     the revenues received in the Treasury resulting from the 
     amendment made by section 201 of the Parent and Student 
     Savings Account PLUS Act.
       ``(2) Transfer of amounts.--The amounts appropriated by 
     paragraph (1) shall be transferred at least monthly from the 
     general fund of the Treasury to the Trust Fund for DC Schools 
     on the basis of estimates made by the Secretary of the 
     amounts referred to in such paragraph. Proper adjustments 
     shall be made in the amounts subsequently transferred to the 
     extent prior estimates were in excess of or less than the 
     amounts required to be transferred.
       ``(c) Expenditures From Fund.--
       ``(1) In general.--Amounts in the Trust Fund for DC Schools 
     shall be available, without fiscal year limitation, in an 
     amount not to exceed $2,000,000,000 for the period beginning 
     after December 31, 1998, and ending before January 1, 2009, 
     for qualified service expenses with respect to State or local 
     bonds issued by the District of Columbia to finance the 
     construction, rehabilitation, and repair of schools under the 
     jurisdiction of the government of the District of Columbia.
       ``(2) Qualified service expenses.--The term `qualified 
     service expenses' means expenses incurred after December 31, 
     1998, and certified by the District of Columbia Control Board 
     as meeting the requirements of paragraph (1) after giving 
     notice of any proposed certification to the Subcommittees on 
     the District of Columbia of the Committees on Appropriations 
     of the House of Representatives and the Senate.
       ``(d) Report.--It shall be the duty of the Secretary to 
     hold the Trust Fund for DC Schools and to report to the 
     Congress each year on the financial condition and the results 
     of the operations of such Fund during the preceding fiscal 
     year and on its expected condition and operations during the 
     next fiscal year. Such report shall be printed as a House 
     document of the session of the Congress to which the report 
     is made.
       ``(e) Investment.--
       ``(1) In general.--It shall be the duty of the Secretary to 
     invest such portion of the Trust Fund for DC Schools as is 
     not, in the Secretary's judgment, required to meet current 
     withdrawals. Such investments may be made only in interest-
     bearing obligations of the United States. For such purpose, 
     such obligations may be acquired--
       ``(A) on original issue at the issue price, or
       ``(B) by purchase of outstanding obligations at the market 
     price.
       ``(2) Sale of obligations.--Any obligation acquired by the 
     Trust Fund for DC Schools may be sold by the Secretary at the 
     market price.
       ``(3) Interest on certain proceeds.--The interest on, and 
     the proceeds from the sale or redemption of, any obligations 
     held in the Trust Fund for DC Schools shall be credited to 
     and form a part of the Trust Fund for DC Schools.''
       (b) Conforming Amendment.--The table of sections for 
     subchapter W of chapter 1 is amended by adding after the item 
     relating to section 1400C the following:

  ``Sec. 1400D. Trust Fund for DC Schools.''

       In section 103(a), strike ``December 31, 2002'' and insert 
     ``June 30, 2002''.

[[Page S2310]]

                                 ______
                                 

                       CONRAD AMENDMENT NO. 2026

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

       Strike section 101 and insert the following:

     SEC. 101. MODIFICATIONS TO EDUCATION INDIVIDUAL RETIREMENT 
                   ACCOUNTS.

       (a) Tax-Free Expenditures for Elementary and Secondary 
     School Expenses.--
       (1) In general.--Section 530(b)(2) 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) 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) 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) 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 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) is amended by 
     striking ``$500'' and inserting ``the contribution limit for 
     such taxable year''.
       (2) Contribution limit.--Section 530(b) 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) is amended by striking ``$500'' 
     and inserting ``the contribution limit for such taxable 
     year''.
       (B) Section 4973(e)(1)(A) 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) 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.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1998.
                                 ______
                                 

                        BIDEN AMENDMENT NO. 2027

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

       At the appropriate place, add the following:
       Sec. .
       (a) In General.--Paragraph (2) of section 135(b) of the 
     Internal Revenue Code 1986 is amended to read as follows:
       ``(2) Limitation based on modified adjusted gross income.--
     If the modified adjusted gross income of the taxpayer for the 
     taxable year exceeds $95,000 ($150,000 in the case of a joint 
     return), the amount which would (but for this paragraph) be 
     excludable from gross income under subsection (a) shall be 
     reduced (but not below zero) by the amount which bears the 
     same ratio to the amount which would be so excludable as such 
     excess bears to $15,000 ($10,000 in the case of a joint 
     return).
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1997.
                                 ______
                                 

                        REED AMENDMENT NO. 2028

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

       Strike section 101, and insert the following:

     SEC. 101. TEACHER EXCELLENCE IN AMERICA CHALLENGE.

       (a) Amendment.--Part A of title V of the Higher Education 
     Act of 1965 (20 U.S.C. 1102 et seq.) is amended to read as 
     follows:

           ``PART A--TEACHER EXCELLENCE IN AMERICA CHALLENGE

     ``SEC. 501. SHORT TITLE.

       ``This part may be cited as the `Teacher Excellence in 
     America Challenge Act of 1997'.

     ``SEC. 502. PURPOSE.

       ``The purpose of this part is to improve the preparation 
     and professional development of teachers and the academic 
     achievement of students by encouraging partnerships among 
     institutions of higher education, elementary schools or 
     secondary schools, local educational agencies, State 
     educational agencies, teacher organizations, and nonprofit 
     organizations.

     ``SEC. 503. GOALS.

       ``The goals of this part are as follows:
       ``(1) To support and improve the education of students and 
     the achievement of higher academic standards by students, 
     through the enhanced professional development of teachers.
       ``(2) To ensure a strong and steady supply of new teachers 
     who are qualified, well-trained, and knowledgeable and 
     experienced in effective means of instruction, and who 
     represent the diversity of the American people, in order to 
     meet the challenges of working with students by strengthening 
     preservice education and induction of individuals into the 
     teaching profession.
       ``(3) To provide for the continuing development and 
     professional growth of veteran teachers.
       ``(4) To provide a research-based context for reinventing 
     schools, teacher preparation programs, and professional 
     development programs, for the purpose of building and 
     sustaining best educational practices and raising student 
     academic achievement.

     ``SEC. 504. DEFINITIONS.

       ``In this part:
       ``(1) Elementary school.--The term `elementary school' 
     means a public elementary school.
       ``(2) Institution of higher education.--The term 
     `institution of higher education' means an institution of 
     higher education that--
       ``(A) has a school, college, or department of education 
     that is accredited by an agency recognized by the Secretary 
     for that purpose; or
       ``(B) the Secretary determines has a school, college, or 
     department of education of a quality equal to or exceeding 
     the quality of schools, colleges, or departments so 
     accredited.
       ``(3) Poverty line.--The term `poverty line' means the 
     poverty line (as defined by the Office of Management and 
     Budget, and revised annually in accordance with section 
     673(2) of the Community Services Block Grant Act (42 U.S.C. 
     9902(2)) applicable to a family of the size involved.
       ``(4) Professional development partnership.--The term 
     `professional development partnership' means a partnership 
     among 1 or more institutions of higher education, 1 or more 
     elementary schools or secondary schools, and 1 or more local 
     educational agency based on a mutual commitment to improve 
     teaching and learning. The partnership may include a State 
     educational agency, a teacher organization, or a nonprofit 
     organization whose primary purpose is education research and 
     development.

[[Page S2311]]

       ``(5) Professional development school.--The term 
     `professional development school' means an elementary school 
     or secondary school that collaborates with an institution of 
     higher education for the purpose of--
       ``(A) providing high quality instruction to students and 
     educating students to higher academic standards;
       ``(B) providing high quality student teaching and 
     internship experiences at the school for prospective and 
     beginning teachers; and
       ``(C) supporting and enabling the professional development 
     of veteran teachers at the school, and of faculty at the 
     institution of higher education.
       ``(6) Secondary school.--The term `secondary school' means 
     a public secondary school.
       ``(7) Teacher.--The term `teacher' means an elementary 
     school or secondary school teacher.''

     ``SEC. 505. PROGRAM AUTHORIZED.

       ``(a) In General.--From the amount appropriated under 
     section 511 and not reserved under section 509 for a fiscal 
     year, the Secretary may award grants, on a competitive basis, 
     to professional development partnerships to enable the 
     partnerships to pay the Federal share of the cost of 
     providing teacher preparation, induction, classroom 
     experience, and professional development opportunities to 
     prospective, beginning, and veteran teachers while improving 
     the education of students in the classroom.
       ``(b) Duration; Planning.--The Secretary shall award grants 
     under this part for a period of 5 years, the first year of 
     which may be used for planning to conduct the activities 
     described in section 506.
       ``(c) Payments; Federal Share; Non-Federal Share.--
       ``(1) Payments.--The Secretary shall make annual payments 
     pursuant to a grant awarded under this part.
       ``(2) Federal share.--The Federal share of the costs 
     described in subsection (a)(1) shall be 80 percent.
       ``(3) Non-federal share.--The non-Federal share of the 
     costs described in subsection (a)(1) may be in cash or in-
     kind, fairly evaluated.
       ``(d) Continuing Eligibility.--
       ``(1) 2nd and 3d years.--The Secretary may make a grant 
     payment under this section for each of the 2 fiscal years 
     after the first fiscal year a professional development 
     partnership receives such a payment, only if the Secretary 
     determines that the partnership, through the activities 
     assisted under this part, has made reasonable progress toward 
     meeting the criteria described in paragraph (3).
       ``(2) 4th and 5th years.--The Secretary may make a grant 
     payment under this section for each of the 2 fiscal years 
     after the third fiscal year a professional development 
     partnership receives such a payment, only if the Secretary 
     determines that the partnership, through the activities 
     assisted under this part, has met the criteria described in 
     paragraph (3).
       ``(3) Criteria.--The criteria referred to in paragraphs (1) 
     and (2) are as follows:
       ``(A) Increased student achievement as determined by 
     increased graduation rates, decreased dropout rates, or 
     higher scores on local, State, or national assessments for a 
     year compared to student achievement as determined by the 
     rates or scores, as the case may be, for the year prior to 
     the year for which a grant under this part is received.
       ``(B) Improved teacher preparation and development 
     programs, and student educational programs.
       ``(C) Increased opportunities for enhanced and ongoing 
     professional development of teachers.
       ``(D) An increased number of well-prepared individuals 
     graduating from a school, college, or department of education 
     within an institution of higher education and entering the 
     teaching profession.
       ``(E) Increased recruitment to, and graduation from, a 
     school, college, or department of education within an 
     institution of higher education with respect to minority 
     individuals.
       ``(F) Increased placement of qualified and well-prepared 
     teachers in elementary schools or secondary schools, and 
     increased assignment of such teachers to teach the subject 
     matter in which the teachers received a degree or specialized 
     training.
       ``(G) Increased dissemination of teaching strategies and 
     best practices by teachers associated with the professional 
     development school and faculty at the institution of higher 
     education.
       ``(e) Priority.--In awarding grants under this part, the 
     Secretary shall give priority to professional development 
     partnerships serving elementary schools, secondary schools, 
     or local educational agencies, that serve high percentages of 
     children from families below the poverty line.

     ``SEC. 506. AUTHORIZED ACTIVITIES.

       ``(a) In General.--Each professional development 
     partnership receiving a grant under this part shall use the 
     grant funds for--
       ``(1) creating, restructuring, or supporting professional 
     development schools;
       ``(2) enhancing and restructuring the teacher preparation 
     program at the school, college, or department of education 
     within the institution of higher education, including--
       ``(A) coordinating with, and obtaining the participation 
     of, schools, colleges, or departments of arts and science;
       ``(B) preparing teachers to work with diverse student 
     populations; and
       ``(C) preparing teachers to implement research-based, 
     demonstrably successful, and replicable, instructional 
     programs and practices that increase student achievement;
       ``(3) incorporating clinical learning in the coursework for 
     prospective teachers, and in the induction activities for 
     beginning teachers;
       ``(4) mentoring of prospective and beginning teachers by 
     veteran teachers in instructional skills, classroom 
     management skills, and strategies to effectively assess 
     student progress and achievement;
       ``(5) providing high quality professional development to 
     veteran teachers, including the rotation, for varying periods 
     of time, of veteran teachers--
       ``(A) who are associated with the partnership to elementary 
     schools or secondary schools not associated with the 
     partnership in order to enable such veteran teachers to act 
     as a resource for all teachers in the local educational 
     agency or State; and
       ``(B) who are not associated with the partnership to 
     elementary schools or secondary schools associated with the 
     partnership in order to enable such veteran teachers to 
     observe how teaching and professional development occurs in 
     professional development schools;
       ``(6) preparation time for teachers in the professional 
     development school and faculty of the institution of higher 
     education to jointly design and implement the teacher 
     preparation curriculum, classroom experiences, and ongoing 
     professional development opportunities;
       ``(7) preparing teachers to use technology to teach 
     students to high academic standards;
       ``(8) developing and instituting ongoing performance-based 
     review procedures to assist and support teachers' learning;
       ``(9) activities designed to involve parents in the 
     partnership;
       ``(10) research to improve teaching and learning by 
     teachers in the professional development school and faculty 
     at the institution of higher education; and
       ``(11) activities designed to disseminate information, 
     regarding the teaching strategies and best practices 
     implemented by the professional development school, to--
       ``(A) teachers in elementary schools or secondary schools, 
     which are served by the local educational agency or located 
     in the State, that are not associated with the professional 
     development partnership; and
       ``(B) institutions of higher education in the State.
       ``(b) Construction Prohibited.--No grant funds provided 
     under this part may be used for the construction, renovation, 
     or repair of any school or facility.

     ``SEC. 507. APPLICATIONS.

       ``Each professional development partnership desiring a 
     grant under this part 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) describe the composition of the partnership;
       ``(2) describe how the partnership will include the 
     participation of the schools, colleges, or departments of 
     arts and sciences within the institution of higher education 
     to ensure the integration of pedagogy and content in teacher 
     preparation;
       ``(3) identify how the goals described in section 503 will 
     be met and the criteria that will be used to evaluate and 
     measure whether the partnership is meeting the goals;
       ``(4) describe how the partnership will restructure and 
     improve teaching, teacher preparation, and development 
     programs at the institution of higher education and the 
     professional development school, and how such systemic 
     changes will contribute to increased student achievement;
       ``(5) describe how the partnership will prepare teachers to 
     implement research-based, demonstrably successful, and 
     replicable, instructional programs and practices that 
     increase student achievement;
       ``(6) describe how the teacher preparation program in the 
     institution of higher education, and the induction activities 
     and ongoing professional development opportunities in the 
     professional development school, incorporate--
       ``(A) an understanding of core concepts, structure, and 
     tools of inquiry as a foundation for subject matter pedagogy; 
     and
       ``(B) knowledge of curriculum and assessment design as a 
     basis for analyzing and responding to student learning;
       ``(7) describe how the partnership will prepare teachers to 
     work with diverse student populations, including minority 
     individuals and individuals with disabilities;
       ``(8) describe how the partnership will prepare teachers to 
     use technology to teach students to high academic standards;
       ``(9) describe how the research and knowledge generated by 
     the partnership will be disseminated to and implemented in--
       ``(A) elementary schools or secondary schools served by the 
     local educational agency or located in the State; and
       ``(B) institutions of higher education in the State;
       ``(10)(A) describe how the partnership will coordinate the 
     activities assisted under this part with other professional 
     development activities for teachers, including activities 
     assisted under titles I and II of the Elementary and 
     Secondary Education Act of 1965 (20 U.S.C. 6301 et seq., 
     6601 et seq.), the Goals 2000: Educate America Act (20 
     U.S.C. 5801 et

[[Page S2312]]

     seq.), the Individuals with Disabilities Education Act (20 
     U.S.C. 1400 et seq.), and the Carl D. Perkins Vocational 
     and Applied Technology Education Act (20 U.S.C. 2301 et 
     seq.); and
       ``(B) describe how the activities assisted under this part 
     are consistent with Federal and State educational reform 
     activities that promote student achievement of higher 
     academic standards;
       ``(11) describe which member of the partnership will act as 
     the fiscal agent for the partnership and be responsible for 
     the receipt and disbursement of grant funds under this part;
       ``(12) describe how the grant funds will be divided among 
     the institution of higher education, the elementary school or 
     secondary school, the local educational agency, and any other 
     members of the partnership to support activities described in 
     section 506;
       ``(13) provide a description of the commitment of the 
     resources of the partnership to the activities assisted under 
     this part, including financial support, faculty 
     participation, and time commitments; and
       ``(14) describe the commitment of the partnership to 
     continue the activities assisted under this part without 
     grant funds provided under this part.

     ``SEC. 508. ASSURANCES.

       ``Each application submitted under this part shall contain 
     an assurance that the professional development partnership--
       ``(1) will enter into an agreement that commits the members 
     of the partnership to the support of students' learning, the 
     preparation of prospective and beginning teachers, the 
     continuing professional development of veteran teachers, the 
     periodic review of teachers, standards-based teaching and 
     learning, practice-based inquiry, and collaboration among 
     members of the partnership;
       ``(2) will use teachers of excellence, who have mastered 
     teaching techniques and subject areas, including teachers 
     certified by the National Board for Professional Teaching 
     Standards, to assist prospective and beginning teachers;
       ``(3) will provide for adequate preparation time to be made 
     available to teachers in the professional development school 
     and faculty at the institution of higher education to allow 
     the teachers and faculty time to jointly develop programs and 
     curricula for prospective and beginning teachers, ongoing 
     professional development opportunities, and the other 
     authorized activities described in section 506; and
       ``(4) will develop organizational structures that allow 
     principals and key administrators to devote sufficient time 
     to adequately participate in the professional development of 
     their staffs, including frequent observation and critique of 
     classroom instruction.

     ``SEC. 509. NATIONAL ACTIVITIES.

       ``(a) In General.--The Secretary shall reserve a total of 
     not more than 10 percent of the amount appropriated under 
     section 511 for each fiscal year for evaluation activities 
     under subsection (b), and the dissemination of information 
     under subsection (c).
       ``(b) National Evaluation.--The Secretary, by grant or 
     contract, shall provide for an annual, independent, national 
     evaluation of the activities of the professional development 
     partnerships assisted under this part. The evaluation shall 
     be conducted not later than 3 years after the date of 
     enactment of the Teacher Excellence in America Challenge Act 
     of 1997 and each succeeding year thereafter. The Secretary 
     shall report to Congress and the public the results of such 
     evaluation. The evaluation, at a minimum, shall assess the 
     short-term and long-term impacts and outcomes of the 
     activities assisted under this part, including--
       ``(1) the extent to which professional development 
     partnerships enhance student achievement;
       ``(2) how, and the extent to which, professional 
     development partnerships lead to improvements in the quality 
     of teachers;
       ``(3) the extent to which professional development 
     partnerships improve recruitment and retention rates among 
     beginning teachers, including beginning minority teachers; 
     and
       ``(4) the extent to which professional development 
     partnerships lead to the assignment of beginning teachers to 
     public elementary or secondary schools that have a shortage 
     of teachers who teach the subject matter in which the teacher 
     received a degree or specialized training.
       ``(c) Dissemination of Information.--The Secretary shall 
     disseminate information (including creating and maintaining a 
     national database) regarding outstanding professional 
     development schools, practices, and programs.

     ``SEC. 510. SUPPLEMENT NOT SUPPLANT.

       ``Funds appropriated under section 511 shall be used to 
     supplement and not supplant other Federal, State, and local 
     public funds expended for the professional development of 
     elementary school and secondary school teachers.

     ``SEC. 511. AUTHORIZATION OF APPROPRIATIONS.

       ``There is authorized to be appropriated to carry out this 
     part $100,000,000 for fiscal year 1999, and such sums as may 
     be necessary for each of the fiscal years 2000 through 
     2003.''.
       (b) Repeals.--Part B of title V of the Higher Education Act 
     of 1965 (20 U.S.C. 1103 et seq.), subparts 1 and 3 of part C 
     of such title (20 U.S.C. 1104 et seq., 1106 et seq.), 
     subparts 3 and 4 of part D of such title (20 U.S.C. 1109 et 
     seq., 1110 et seq.), subpart 1 of part E of such title (20 
     U.S.C. 1111 et seq.), and part F of such title (20 U.S.C. 
     1113 et seq.), are repealed.
                                 ______
                                 

                       KERREY AMENDMENT NO. 2029

  (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.
       (c) Table of Contents.--

Sec. 1. Short title; amendment of 1986 Code; table of contents.

   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.
Sec. 102. Commissioner of Internal Revenue; other officials.
Sec. 103. Other personnel.
Sec. 104. Prohibition on executive branch influence over taxpayer 
              audits and other investigations.

                  Subtitle B--Personnel Flexibilities

Sec. 111. Personnel flexibilities.

                      TITLE II--ELECTRONIC FILING

Sec. 201. Electronic filing of tax and information returns.
Sec. 202. Due date for certain information returns filed 
              electronically.
Sec. 203. Paperless electronic filing.
Sec. 204. Return-free tax system.
Sec. 205. Access to account information.

               TITLE III--TAXPAYER PROTECTION AND RIGHTS

Sec. 300. Short title.

                      Subtitle A--Burden of Proof

Sec. 301. Burden of proof.

                  Subtitle B--Proceedings by Taxpayers

Sec. 311. Expansion of authority to award costs and certain fees.
Sec. 312. Civil damages for negligence in collection actions.
Sec. 313. Increase in size of cases permitted on small case calendar.

  Subtitle C--Relief for Innocent Spouses and for Taxpayers Unable To 
           Manage Their Financial Affairs Due to Disabilities

Sec. 321. Spouse relieved in whole or in part of liability in certain 
              cases.
Sec. 322. Suspension of statute of limitations on filing refund claims 
              during periods of disability.

              Subtitle D--Provisions Relating to Interest

Sec. 331. Elimination of interest rate differential on overlapping 
              periods of interest on income tax overpayments and 
              underpayments.
Sec. 332. Increase in overpayment rate payable to taxpayers other than 
              corporations.

 Subtitle E--Protections for Taxpayers Subject to Audit or Collection 
                               Activities

Sec. 341. Privilege of confidentiality extended to taxpayer's dealings 
              with non-attorneys authorized to practice before Internal 
              Revenue Service.
Sec. 342. Expansion of authority to issue taxpayer assistance orders.
Sec. 343. Limitation on financial status audit techniques.
Sec. 344. Limitation on authority to require production of computer 
              source code.
Sec. 345. Procedures relating to extensions of statute of limitations 
              by agreement.
Sec. 346. Offers-in-compromise.
Sec. 347. Notice of deficiency to specify deadlines for filing Tax 
              Court petition.
Sec. 348. Refund or credit of overpayments before final determination.
Sec. 349. Threat of audit prohibited to coerce Tip Reporting 
              Alternative Commitment Agreements.

                  Subtitle F--Disclosures to Taxpayers

Sec. 351. Explanation of joint and several liability.
Sec. 352. Explanation of taxpayers' rights in interviews with the 
              Internal Revenue Service.
Sec. 353. Disclosure of criteria for examination selection.
Sec. 354. Explanations of appeals and collection process.

                Subtitle G--Low Income Taxpayer Clinics

Sec. 361. Low income taxpayer clinics.

                       Subtitle H--Other Matters

Sec. 371. Actions for refund with respect to certain estates which have 
              elected the installment method of payment.
Sec. 372. Cataloging complaints.
Sec. 373. Archive of records of Internal Revenue Service.
Sec. 374. Payment of taxes.

[[Page S2313]]

Sec. 375. Clarification of authority of Secretary relating to the 
              making of elections.
Sec. 376. Limitation on penalty on individual's failure to pay for 
              months during period of installment agreement.

                          Subtitle I--Studies

Sec. 381. Penalty administration.
Sec. 382. Confidentiality of tax return information.

TITLE IV--CONGRESSIONAL ACCOUNTABILITY FOR THE INTERNAL REVENUE SERVICE

                         Subtitle A--Oversight

Sec. 401. Expansion of duties of the Joint Committee on Taxation.
Sec. 402. Coordinated oversight reports.

                           Subtitle B--Budget

Sec. 411. Funding for century date change.
Sec. 412. Financial Management Advisory Group.

                     Subtitle C--Tax Law Complexity

Sec. 421. Role of the Internal Revenue Service.
Sec. 422. Tax complexity analysis.

     TITLE V--CLARIFICATION OF DEDUCTION FOR DEFERRED COMPENSATION

Sec. 501. Clarification of deduction for deferred compensation.

TITLE VI--CONGRESSIONAL ACCOUNTABILITY FOR THE INTERNAL REVENUE SERVICE

Sec. 601. Short title.
Sec. 602. Definitions.
Sec. 603. Amendments related to title I of 1997 Act.
Sec. 604. Amendments related to title II of 1997 Act.
Sec. 605. Amendments related to title III of 1997 Act.
Sec. 606. Amendments related to title V of 1997 Act.
Sec. 607. Amendments related to title VII of 1997 Act.
Sec. 608. Amendments related to title IX of 1997 Act.
Sec. 609. Amendments related to title X of 1997 Act.
Sec. 610. Amendments related to title XI of 1997 Act.
Sec. 611. Amendments related to title XII of 1997 Act.
Sec. 612. Amendments related to title XIII of 1997 Act.
Sec. 613. Amendments related to title XIV of 1997 Act.
Sec. 614. Amendments related to title XV of 1997 Act.
Sec. 615. Amendments related to title XVI of 1997 Act.
Sec. 616. Amendments related to Omibus Budget Reconciliation Act of 
              1993.
Sec. 617. Amendments related to Tax Reform Act of 1984.
Sec. 618. Amendments related to Tax Reform Act of 1986.
Sec. 619. Miscellaneous clerical and deadwood changes.
Sec. 620. Effective date.
   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 (hereafter in this subchapter referred to as 
     the `Oversight Board').
       ``(b) Membership.--
       ``(1) Composition.--The Oversight Board shall be composed 
     of 11 members, as follows:
       ``(A) 8 members shall be individuals who are not Federal 
     officers or employees and who are appointed by the President, 
     by and with the advice and consent of the Senate.
       ``(B) 1 member shall be the Secretary of the Treasury or, 
     if the Secretary so designates, the Deputy Secretary of the 
     Treasury.
       ``(C) 1 member shall be the Commissioner of Internal 
     Revenue.
       ``(D) 1 member shall be an individual who is a 
     representative of an organization that represents a 
     substantial number of Internal Revenue Service employees and 
     who is appointed by the President, by and with the advice and 
     consent of the Senate.
       ``(2) Qualifications and terms.--
       ``(A) Qualifications.--Members of the Oversight Board 
     described in paragraph (1)(A) shall be appointed solely on 
     the basis of their professional experience and expertise in 1 
     or more of the following areas:
       ``(i) Management of large service organizations.
       ``(ii) Customer service.
       ``(iii) Federal tax laws, including tax administration and 
     compliance.
       ``(iv) Information technology.
       ``(v) Organization development.
       ``(vi) The needs and concerns of taxpayers.
     In the aggregate, the members of the Oversight Board 
     described in paragraph (1)(A) should collectively bring to 
     bear expertise in all of the areas described in the preceding 
     sentence.
       ``(B) Terms.--Each member who is described in paragraph 
     (1)(A) or (D) shall be appointed for a term of 5 years, 
     except that of the members first appointed under paragraph 
     (1)(A)--
       ``(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) 2 members shall be appointed for a term of 4 years.

     Such terms shall begin on the date of appointment.
       ``(C) Reappointment.--An individual who is described in 
     paragraph (1)(A) may be appointed to no more than two 5-year 
     terms on the Oversight Board.
       ``(D) Vacancy.--Any vacancy on the Oversight Board shall be 
     filled in the same manner as the original appointment. Any 
     member appointed to fill a vacancy occurring before the 
     expiration of the term for which the member's predecessor was 
     appointed shall be appointed for the remainder of that term.
       ``(E) Special government employees.--During the entire 
     period that an individual appointed under paragraph (1)(A) is 
     a member of the Oversight Board, such individual shall be 
     treated as--
       ``(i) serving as a special government employee (as defined 
     in section 202 of title 18, United States Code) and as 
     described in section 207(c)(2) of such title 18, and
       ``(ii) serving as an officer or employee referred to in 
     section 101(f) of the Ethics in Government Act of 1978 for 
     purposes of title I of such Act.
       ``(3) Quorum.--6 members of the Oversight Board shall 
     constitute a quorum. A majority of members present and voting 
     shall be required for the Oversight Board to take action.
       ``(4) Removal.--
       ``(A) In general.--Any member of the Oversight Board may be 
     removed at the will of the President.
       ``(B) Secretary and commissioner.--An individual described 
     in subparagraph (B) or (C) of paragraph (1) shall be removed 
     upon termination of employment.
       ``(C) Representative of internal revenue service 
     employees.--The member described in paragraph (1)(D) shall be 
     removed upon termination of employment, membership, or other 
     affiliation with the organization described in such 
     paragraph.
       ``(5) Claims.--
       ``(A) In general.--Members of the Oversight Board who are 
     described in paragraph (1)(A) or (D) 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 Oversight Board.
       ``(B) Effect on other law.--This paragraph 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.
       ``(c) General Responsibilities.--
       ``(1) In general.--The Oversight Board shall oversee the 
     Internal Revenue Service in its administration, management, 
     conduct, direction, and supervision of the execution and 
     application of the internal revenue laws or related statutes 
     and tax conventions to which the United States is a party.
       ``(2) Exceptions.--The Oversight 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) law enforcement activities of the Internal Revenue 
     Service, including compliance activities such as criminal 
     investigations, examinations, and collection activities, or
       ``(C) specific procurement activities of the Internal 
     Revenue Service.
       ``(3) Restriction on disclosure of return information to 
     oversight board members.--No return, return information, or 
     taxpayer return information (as defined in section 6103(b)) 
     may be disclosed to any member of the Oversight Board 
     described in subsection (b)(1)(A) or (D). 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 Oversight Board so described 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 Oversight 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--

[[Page S2314]]

       ``(A) plans for modernization of the tax system,
       ``(B) plans for outsourcing or managed competition, and
       ``(C) plans for training and education.
       ``(3) Management.--To--
       ``(A) recommend to the President 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, and
       ``(C) review and approve the Commissioner's plans for any 
     major reorganization of the Internal Revenue Service.
       ``(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, and
       ``(C) ensure that the budget request supports the annual 
     and long-range strategic plans.

     The Secretary shall submit the budget request referred to in 
     paragraph (4)(B) for any fiscal year to the President who 
     shall submit such request, without revision, to Congress 
     together with the President's annual 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 Oversight Board who 
     is described in subsection (b)(1)(A) shall be compensated at 
     a rate not to exceed $30,000 per year. All other members of 
     the Oversight Board shall serve without compensation for such 
     service.
       ``(B) Chairperson.--In lieu of the amount specified in 
     subparagraph (A), the Chairperson of the Oversight Board 
     shall be compensated at a rate not to exceed $50,000.
       ``(2) Travel expenses.--The members of the Oversight 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 for purposes of attending meetings of the Oversight 
     Board.
       ``(3) Staff.--At the request of the Chairperson of the 
     Oversight Board, the Commissioner shall detail to the 
     Oversight Board such personnel as may be necessary to enable 
     the Oversight 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 Oversight 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 Oversight Board shall 
     elect for a 2-year term a chairperson from among the members 
     appointed under subsection (b)(1)(A).
       ``(2) Committees.--The Oversight Board may establish such 
     committees as the Oversight Board determines appropriate.
       ``(3) Meetings.--The Oversight Board shall meet at least 
     once each month and at such other times as the Oversight 
     Board determines appropriate.
       ``(4) Reports.--The Oversight 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.--
       (1) In general.--The amendments made by this section shall 
     take effect on the date of the enactment of this Act.
       (2) Nominations to internal revenue service oversight 
     board.--The President shall submit nominations under section 
     7802 of the Internal Revenue Code of 1986, as added by this 
     section, to the Senate not later than 6 months after the date 
     of the enactment of this Act.

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

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

     ``SEC. 7803. COMMISSIONER OF INTERNAL REVENUE; 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) Vacancy.--Any individual appointed to fill a vacancy 
     in the position of Commissioner occurring before the 
     expiration of the term for which such individual's 
     predecessor was appointed shall be appointed only for the 
     remainder of that term.
       ``(C) Removal.--The Commissioner may be removed at the will 
     of the President.
       ``(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 ax 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 Oversight Board on all matters set forth in 
     paragraphs (2) and (3) (other than paragraph (3)(A)) of 
     section 7802(d).
       ``(b) Assistant Commissioner for Employee Plans and Exempt 
     Organizations.--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.
       ``(c) Office of Taxpayer Advocate.--
       ``(1) In general.--
       ``(A) Establishment.--There is established in the Internal 
     Revenue Service an office to be known as the `Office of the 
     Taxpayer Advocate'. Such office shall be under the 
     supervision and direction of an official to be known as the 
     `Taxpayer Advocate' who shall be appointed with the approval 
     of the Oversight Board by the Commissioner of Internal 
     Revenue and shall report directly to the Commissioner. The 
     Taxpayer Advocate shall be entitled to compensation at the 
     same rate as the highest level official reporting directly to 
     the Commissioner of Internal Revenue.
       ``(B) Restriction on subsequent employment.--An individual 
     who is an officer or employee of the Internal Revenue Service 
     may be appointed as Taxpayer Advocate only if such individual 
     agrees not to accept any employment with the Internal Revenue 
     Service for at least 5 years after ceasing to be the Taxpayer 
     Advocate.
       ``(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,
       ``(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 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 
     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 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 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 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,

[[Page S2315]]

       ``(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) in conjunction with the National Director of Appeals, 
     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 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 Oversight Board, 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 Taxpayer Advocate 
     shall--
       ``(i) monitor the coverage and geographic allocation of 
     problem resolution officers, and
       ``(ii) develop guidance to be distributed to all Internal 
     Revenue Service officers and employees outlining the criteria 
     for referral of taxpayer inquiries to problem resolution 
     officers.
       ``(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.''.
       (b) 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; other officials.''.
       (2) Subsection (b) of section 5109 of title 5, United 
     States Code, is amended by striking ``7802(b)'' and inserting 
     ``7803(b)''.
       (c) 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) Section 7803(c)(1)(B) of such Code, as added by this 
     section, shall not apply to the individual serving as 
     Taxpayer Advocate on the date of the enactment of this Act.

     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 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.

     SEC. 104. PROHIBITION ON EXECUTIVE BRANCH INFLUENCE OVER 
                   TAXPAYER AUDITS AND OTHER INVESTIGATIONS.

       (a) In General.--Part I of subchapter A of chapter 75 
     (relating to crimes, other offenses, and forfeitures) is 
     amended by adding after section 7216 the following new 
     section:

     ``SEC. 7217. PROHIBITION ON EXECUTIVE BRANCH INFLUENCE OVER 
                   TAXPAYER AUDITS AND OTHER INVESTIGATIONS.

       ``(a) Prohibition.--It shall be unlawful for any applicable 
     person to request any officer or employee of the Internal 
     Revenue Service to conduct or terminate an audit or other 
     investigation of any particular taxpayer with respect to the 
     tax liability of such taxpayer.
       ``(b) Reporting Requirement.--Any officer or employee of 
     the Internal Revenue Service receiving any request prohibited 
     by subsection (a) shall report the receipt of such request to 
     the Chief Inspector of the Internal Revenue Service.
       ``(c) Exceptions.--Subsection (a) shall not apply to--
       ``(1) any request made to an applicable person by the 
     taxpayer or a representative of the taxpayer and forwarded by 
     such applicable person to the Internal Revenue Service,
       ``(2) any request by an applicable person for disclosure of 
     return or return information under section 6103 if such 
     request is made in accordance with the requirements of such 
     section, or
       ``(3) any request by the Secretary of the Treasury as a 
     consequence of the implementation of a change in tax policy.
       ``(d) Penalty.--Any person who willfully violates 
     subsection (a) or fails to report under subsection (b) shall 
     be punished upon conviction by a fine in any amount not 
     exceeding $5,000, or imprisonment of not more than 5 years, 
     or both, together with the costs of prosecution.
       ``(e) Applicable Person.--For purposes of this section, the 
     term `applicable person' means--
       ``(1) the President, the Vice President, any employee of 
     the executive office of the President, and any employee of 
     the executive office of the Vice President, and
       ``(2) any individual (other than the Attorney General of 
     the United States) serving in a position specified in section 
     5312 of title 5, United States Code.''.
       (b) Clerical Amendment.--The table of sections for part I 
     of subchapter A of chapter 75 is amended by adding after the 
     item relating to section 7216 the following new item:

``Sec. 7217. Prohibition on executive branch influence over taxpayer 
              audits and other investigations.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to requests made after 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. Staffing flexibilities.
``9304. 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, 
     or 9304, 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.

[[Page S2316]]

       ``(3) Includible matters.--The written agreement may 
     address any flexibilities under section 9302, 9303, or 9304, 
     including any matter proposed to be included in a 
     demonstration project under section 9304.

     ``Sec. 9302. Flexibilities relating to performance management

       ``(a) In General.--The Commissioner of Internal Revenue 
     shall, within a year 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 standards of performance which--
       ``(i) shall permit the accurate evaluation of each 
     employee's performance on the basis of the individual and 
     organizational performance requirements applicable with 
     respect to the evaluation period involved, taking into 
     account individual contributions toward the attainment of any 
     goals or objectives under paragraph (3);
       ``(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; and
       ``(iii) shall include at least 2 standards of performance, 
     the lowest of which shall denote the retention standard and 
     shall be equivalent to fully successful performance;
       ``(B) providing for periodic performance evaluations to 
     determine whether employees are meeting all applicable 
     retention standards; and
       ``(C) using the results of such employee's performance 
     evaluation as a basis for adjustments in pay and other 
     appropriate personnel actions; 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, (B) 
     communicating such goals or objectives to employees, and (C) 
     using such goals or objectives to make performance 
     distinctions among employees or groups of employees.

     For purposes of this title, performance of an employee during 
     any period in which such employee is subject to standards of 
     performance under paragraph (2) shall be considered to be 
     `unacceptable' if the performance of such employee during 
     such period fails to meet any retention standard.
       ``(b) Awards.--
       ``(1) For superior accomplishments.--In the case of a 
     proposed award based on the efforts of an employee or former 
     employee of the Internal Revenue Service, any approval 
     required under the provisions of section 4502(b) shall be 
     considered to have been granted if the Office of Personnel 
     Management does not disapprove the proposed award within 60 
     days after receiving the appropriate certification described 
     in such provisions.
       ``(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, 
     except that in no event shall more than 8 employees be 
     eligible for a cash award under this paragraph in any 
     calendar year.
       ``(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 Vice 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'.
       ``(F) Approval required.--An award under this paragraph may 
     not be made unless--
       ``(i) the Commissioner of Internal Revenue certifies to the 
     Office of Personnel Management that such award is warranted; 
     and
       ``(ii) the Office approves, or does not disapprove, the 
     proposed award within 60 days after the date on which it is 
     so certified.
       ``(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. Staffing flexibilities

       ``(a) Eligibility To Compete for A Permanent Appointment in 
     the Competitive Service.--
       ``(1) Eligibility of qualified veterans.--
       ``(A) In general.--No veteran described in subparagraph (B) 
     shall be denied the opportunity to compete for an announced 
     vacant competitive service position within the Internal 
     Revenue Service by reason of--
       ``(i) not having acquired competitive status; or
       ``(ii) not being an employee of that agency.
       ``(B) Description.--An individual shall, for purposes of a 
     position for which such individual is applying, be considered 
     a veteran described in this subparagraph if such individual--
       ``(i) is either a preference eligible, or an individual 
     (other than a preference eligible) who has been separated 
     from the armed forces under honorable conditions after at 
     least 3 years of active service; and
       ``(ii) meets the minimum qualification requirements for the 
     position sought.
       ``(2) Eligibility of certain temporary employees.--
       ``(A) In general.--No temporary employee described in 
     subparagraph (B) shall be denied the opportunity to compete 
     for an announced vacant competitive service position within 
     the Internal Revenue Service by reason of not having acquired 
     competitive status.
       ``(B) Description.--An individual shall, for purposes of a 
     position for which such individual is applying, be considered 
     a temporary employee described in this subparagraph if--
       ``(i) such individual is then currently serving as a 
     temporary employee in the Internal Revenue Service;
       ``(ii) such individual has completed at least 2 years of 
     current continuous service in the competitive service under 1 
     or more term appointments, each of which was made under 
     competitive procedures prescribed for permanent appointments;
       ``(iii) such individual's performance under each term 
     appointment referred to in clause (ii) met all applicable 
     retention standards; and
       ``(iv) such individual meets the minimum qualification 
     requirements for the position sought.
       ``(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 applicable, 
     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

[[Page S2317]]

     the date of such employee's first certification.
       ``(c) 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.
       ``(d) 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.
       ``(e) 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. 9304. Flexibilities relating to demonstration projects

       ``(a) Authority To Conduct.--The Commissioner of Internal 
     Revenue may, in accordance with this section, conduct 1 or 
     more demonstration projects to improve personnel management; 
     provide increased individual accountability; eliminate 
     obstacles to the removal of or imposing any disciplinary 
     action with respect to poor performers, subject to the 
     requirements of due process; expedite appeals from adverse 
     actions or performance-based actions; and promote pay based 
     on performance.
       ``(b) General Requirements.--Except as provided in 
     subsection (c), each demonstration project under this section 
     shall comply with the provisions of section 4703.
       ``(c) Special Rules.--For purposes of any demonstration 
     project under this section--
       ``(1) Authority of commissioner.--The Commissioner of 
     Internal Revenue shall exercise the authority provided to the 
     Office of Personnel Management under section 4703.
       ``(2) Provisions not applicable.--The following provisions 
     of section 4703 shall not apply:
       ``(A) Paragraphs (3) through (6) of subsection (b).
       ``(B) Paragraphs (1), (2)(B)(ii), and (4) of subsection 
     (c).
       ``(C) Subsections (d) through (g).
       ``(d) Notification Required To Be Given.--
       ``(1) To employees.--The Commissioner of Internal Revenue 
     shall notify employees likely to be affected by a project 
     proposed under this section at least 90 days in advance of 
     the date such project is to take effect.
       ``(2) To congress and opm.--The Commissioner of Internal 
     Revenue shall, with respect to each demonstration project 
     under this section, provide each House of Congress and the 
     Office of Personnel Management with a report, at least 30 
     days in advance of the date such project is to take effect, 
     setting forth the final version of the plan for such project. 
     Such report shall, with respect to the project to which it 
     relates, include the information specified in section 
     4703(b)(1).
       ``(e) Limitations.--No demonstration project under this 
     section may--
       ``(1) provide for a waiver of any regulation prescribed 
     under any provision of law referred to in paragraph (2)(B)(i) 
     or (3) of section 4703(c);
       ``(2) provide for a waiver of subchapter V of chapter 63 or 
     subpart G of part III (or any regulations prescribed under 
     such subchapter or subpart);
       ``(3) provide for a waiver of any law or regulation 
     relating to preference eligibles as defined in section 2108 
     or subchapter II or III of chapter 73 (or any regulations 
     prescribed thereunder);
       ``(4) permit collective bargaining over pay or benefits, or 
     require collective bargaining over any matter which would not 
     be required under section 7106; or
       ``(5) include a system for measuring performance that 
     provides for only 1 level of performance at or above the 
     level of fully successful or better.
       ``(f) Permissible Projects.--Notwithstanding any other 
     provision of law, a demonstration project under this 
     section--
       ``(1) may establish alternative means of resolving any 
     dispute within the jurisdiction of the Equal Employment 
     Opportunity Commission, the Merit Systems Protection Board, 
     the Federal Labor Relations Authority, or the Federal Service 
     Impasses Panel; and
       ``(2) may permit the Internal Revenue Service to adopt any 
     alternative dispute resolution procedure that a private 
     entity may lawfully adopt.
       ``(g) Consultation and Coordination.--The Commissioner of 
     Internal Revenue shall consult with the Director of the 
     Office of Personnel Management in the development and 
     implementation of each demonstration project under this 
     section and shall submit such reports to the Director as the 
     Director may require. The Director or the Commissioner of 
     Internal Revenue may terminate a demonstration project under 
     this section if either of them determines that the project 
     creates a substantial hardship on, or is not in the best 
     interests of, the public, the Federal Government, employees, 
     or qualified applicants for employment with the Internal 
     Revenue Service.
       ``(h) Termination.--Each demonstration project under this 
     section shall terminate before the end of the 5-year period 
     beginning on the date on which the project takes effect, 
     except that any such project may continue beyond the end of 
     such period, for not to exceed 2 years, if the Commissioner 
     of Internal Revenue, with the concurrence of the Director, 
     determines such extension is necessary to validate the 
     results of the project. Not later than 6 months before the 
     end of the 5-year period and any extension under the 
     preceding sentence, the Commissioner of Internal Revenue 
     shall, with respect to the demonstration project involved, 
     submit a legislative proposal to the Congress if the 
     Commissioner determines that such project should be made 
     permanent, in whole or in part.''.
       (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 Revenue 
  Service.......................................................9301''.
       (c) Effective Date.--This section shall take effect on the 
     date of 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 such 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 (hereafter in this section referred 
     to as the ``Secretary'') shall establish 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. To the extent practicable, such plan shall 
     provide that all returns prepared electronically for taxable 
     years beginning after 2001 shall be filed electronically.
       (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 
     small business community and from the tax practitioner, 
     preparer, and computerized tax processor communities and 
     other representatives from the electronic filing industry.
       (c) Promotion of Electronic Filing and Incentives.--Section 
     6011 is amended by redesignating subsection (f) as subsection 
     (g) and by inserting after subsection (e) the following new 
     subsection:
       ``(f) Promotion of Electronic Filing.--
       ``(1) In general.--The Secretary is authorized to promote 
     the benefits of and encourage the use of electronic tax 
     administration programs, as they become available, through 
     the use of mass communications and other means.
       ``(2) Incentives.--The Secretary may implement procedures 
     to provide for the payment of appropriate incentives for 
     electronically filed returns.''.
       (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 goal of receiving electronically 80 percent of tax and 
     information returns by 2007;
       (2) the status of the plan required by subsection (b); and
       (3) the legislative changes necessary to assist the 
     Internal Revenue Service in meeting such goal.

     SEC. 202. DUE DATE FOR CERTAIN INFORMATION RETURNS FILED 
                   ELECTRONICALLY.

       (a) In General.--Section 6071 (relating to time for filing 
     returns and other documents) is amended by redesignating 
     subsection (b) as subsection (c) and by inserting after 
     subsection (a) the following new subsection:
       ``(b) Electronically Filed Information Returns.--Returns 
     made under subparts B and C of part III of this subchapter 
     which are filed electronically shall be filed on or before 
     March 31 of the year following the calendar year to which 
     such returns relate.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to returns required to be filed after December 
     31, 1999.

     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.--
       ``(1) In general.--The Secretary shall develop procedures 
     for the acceptance of signatures in digital or other 
     electronic form.

[[Page S2318]]

     Until such time as such procedures are in place, the 
     Secretary may waive the requirement of a signature for all 
     returns or classes of returns, or may provide for alternative 
     methods of subscribing all returns, declarations, statements, 
     or other documents required or permitted to be made or 
     written under internal revenue laws and regulations.
       ``(2) Treatment of alternative methods.--Notwithstanding 
     any other provision of law, any return, declaration, 
     statement or other document filed without signature under the 
     authority of this subsection or verified, signed or 
     subscribed under any method adopted under paragraph (1) shall 
     be treated for all purposes (both civil and criminal, 
     including penalties for perjury) in the same manner as though 
     signed and subscribed. Any such return, declaration, 
     statement or other document shall be presumed to have been 
     actually submitted and subscribed by the person on whose 
     behalf it was submitted.
       ``(3) Published guidance.--The Secretary shall publish 
     guidance as appropriate to define and implement any waiver of 
     the signature requirements.''.
       (b) Acknowledgment of Electronic Filing.--Section 7502(c) 
     is amended to read as follows:
       ``(c) Registered and Certified Mailing; Electronic 
     Filing.--
       ``(1) Registered mail.--For purposes of this section, if 
     any return, claim, statement, or other document, or payment, 
     is sent by United States registered mail--
       ``(A) such registration shall be prima facie evidence that 
     the return, claim, statement, or other document was delivered 
     to the agency, officer, or office to which addressed, and
       ``(B) the date of registration shall be deemed the postmark 
     date.
       ``(2) Certified mail; electronic filing.--The Secretary is 
     authorized to provide by regulations the extent to which the 
     provisions of paragraph (1) with respect to prima facie 
     evidence of delivery and the postmark date shall apply to 
     certified mail and electronic filing.''.
       (c) Establishment of Procedures for Other Information.--In 
     the case of taxable periods beginning after December 31, 
     1998, the Secretary of the Treasury or the Secretary's 
     delegate shall, to the extent practicable, 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.
       (d) Procedures for Communications Between IRS and Preparer 
     of Electronically Filed Returns.--The 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.
       (e) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 204. 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 
     appropriate 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) what additional resources the Internal Revenue Service 
     would need to implement such a system,
       (2) the changes to the Internal Revenue Code of 1986 that 
     could enhance the use of such a system,
       (3) the procedures developed pursuant to subsection (a), 
     and
       (4) the number and classes of taxpayers that would be 
     permitted to use the procedures developed pursuant to 
     subsection (a).

     SEC. 205. 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, but 
     only if all necessary safeguards to ensure the privacy of 
     such account information are in place.
               TITLE III--TAXPAYER PROTECTION AND RIGHTS

     SEC. 300. SHORT TITLE.

       This title may be cited as the ``Taxpayer Bill of Rights 
     3''.
                      Subtitle A--Burden of Proof

     SEC. 301. BURDEN OF PROOF.

       (a) In General.--Chapter 76 (relating to judicial 
     proceedings) is amended by adding at the end the following 
     new subchapter:

                    ``Subchapter E--Burden of Proof

``Sec. 7491. Burden of proof.

     ``SEC. 7491. BURDEN OF PROOF.

       ``(a) General Rule.--The Secretary shall have the burden of 
     proof in any court proceeding with respect to any factual 
     issue relevant to ascertaining the income tax liability of a 
     taxpayer.
       ``(b) Limitations.--Subsection (a) shall only apply with 
     respect to an issue if--
       ``(1) the taxpayer asserts a reasonable dispute with 
     respect to such issue,
       ``(2) the taxpayer has fully cooperated with the Secretary 
     with respect to such issue, including providing, within a 
     reasonable period of time, access to and inspection of all 
     witnesses, information, and documents within the control of 
     the taxpayer, as reasonably requested by the Secretary, and
       ``(3) in the case of a partnership, corporation, or trust, 
     the taxpayer is described in section 7430(c)(4)(A)(ii).
       ``(c) Substantiation.--Nothing in this section shall be 
     construed to override any requirement of this title to 
     substantiate any item.''.
       (b) Conforming Amendments.--
       (1) Section 6201 is amended by striking subsection (d) and 
     redesignating subsection (e) as subsection (d).
       (2) The table of subchapters for chapter 76 is amended by 
     adding at the end the following new item:

``Subchapter E. Burden of proof.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to court proceedings arising in connection with 
     examinations commencing after the date of the enactment of 
     this Act.
                  Subtitle B--Proceedings by Taxpayers

     SEC. 311. EXPANSION OF AUTHORITY TO AWARD COSTS AND CERTAIN 
                   FEES.

       (a) Award of 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 
     ``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.--Paragraph (2) of section 7430(c) is amended by 
     striking the last sentence and inserting 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.''.
       (c) Award of Fees for Certain Additional Services.--
     Paragraph (3) of section 7430(c) is amended to read as 
     follows:
       ``(3) Attorney's fees.--
       ``(A) In general.--For purposes of paragraphs (1) and (2), 
     fees for the services of an individual (whether or not an 
     attorney) who is authorized to practice before the Tax Court 
     or before the Internal Revenue Service shall be treated as 
     fees for the services of an attorney.
       ``(B) Pro bono services.--In any case in which the court 
     could have awarded attorney's fees under subsection (a) but 
     for the fact that an individual is representing the 
     prevailing party for no fee or for a fee which (taking into 
     account all the facts and circumstances) is no more than a 
     nominal fee, the court may also award a judgment or 
     settlement for such amounts as the court determines to be 
     appropriate (based on hours worked and costs expended) for 
     services of such individual but only if such award is paid to 
     such individual or such individual's employer.''.
       (d) Determination of Whether Position of United States is 
     Substantially Justified.--Subparagraph (B) of section 
     7430(c)(4) is amended by redesignating clause (iii) as clause 
     (iv) and by inserting after clause (ii) the following new 
     clause:
       ``(iii) Effect of losing on substantially similar issues.--
     In determining for purposes of clause (i) whether the 
     position of the United States was substantially justified, 
     the court shall take into account whether the United States 
     has lost in courts of appeal for other circuits on 
     substantially similar issues.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to costs incurred (and, in the case of the 
     amendment made by subsection (c), services performed) more 
     than 180 days after the date of the enactment of this Act.

     SEC. 312. 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) Requirement That Administrative Remedies Be 
     Exhausted.--Paragraph (1) of section 7433(d) is amended to 
     read as follows:
       ``(1) Requirement that administrative remedies be 
     exhausted.--A judgment for damages shall not be awarded under 
     subsection (b) unless the court determines that the plaintiff 
     has exhausted the administrative remedies available to such 
     plaintiff within the Internal Revenue Service.''.
       (c) 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. 313. INCREASE IN SIZE OF CASES PERMITTED ON SMALL CASE 
                   CALENDAR.

       (a) In General.--Subsection (a) of section 7463 (relating 
     to disputes involving $10,000 or

[[Page S2319]]

     less) is amended by striking ``$10,000'' each place it 
     appears and inserting ``$25,000''.
       (b) Conforming Amendments.--
       (1) The section heading for section 7463 is amended by 
     striking ``$10,000'' and inserting ``$25,000''.
       (2) 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''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to proceedings commencing after the date of the 
     enactment of this Act.
  Subtitle C--Relief for Innocent Spouses and for Taxpayers Unable To 
           Manage Their Financial Affairs Due to Disabilities

     SEC. 321. SPOUSE RELIEVED IN WHOLE OR IN PART OF LIABILITY IN 
                   CERTAIN CASES.

       (a) In General.--Subpart B of part II of subchapter A of 
     chapter 61 is amended by inserting after section 6014 the 
     following new section:

     ``SEC. 6015. INNOCENT SPOUSE RELIEF; PETITION TO TAX COURT.

       ``(a) Spouse Relieved of Liability in Certain Cases.--
       ``(1) In general.--Under procedures prescribed by the 
     Secretary, if--
       ``(A) a joint return has been made under section 6013 for a 
     taxable year,
       ``(B) on such return there is an understatement of tax 
     attributable to erroneous items of 1 spouse,
       ``(C) the other spouse establishes that in signing the 
     return he or she did not know, and had no reason to know, 
     that there was such understatement,
       ``(D) taking into account all the facts and circumstances, 
     it is inequitable to hold the other spouse liable for the 
     deficiency in tax for such taxable year attributable to such 
     understatement, and
       ``(E) the other spouse claims (in such form as the 
     Secretary may prescribe) the benefits of this subsection not 
     later than the date which is 2 years after the date of the 
     assessment of such deficiency,
     then the other spouse shall be relieved of liability for tax 
     (including interest, penalties, and other amounts) for such 
     taxable year to the extent such liability is attributable to 
     such understatement.
       ``(2) Apportionment of relief.--If a spouse who, but for 
     paragraph (1)(C), would be relieved of liability under 
     paragraph (1), establishes that in signing the return such 
     spouse did not know, and had no reason to know, the extent of 
     such understatement, then such spouse shall be relieved of 
     liability for tax (including interest, penalties, and other 
     amounts) for such taxable year to the extent that such 
     liability is attributable to the portion of such 
     understatement of which such spouse did not know and had no 
     reason to know.
       ``(3) Understatement.--For purposes of this subsection, the 
     term `understatement' has the meaning given to such term by 
     section 6662(d)(2)(A).
       ``(4) Special rule for community property income.--For 
     purposes of this subsection, the determination of the spouse 
     to whom items of gross income (other than gross income from 
     property) are attributable shall be made without regard to 
     community property laws.
       ``(b) Petition for Review by Tax Court.--In the case of an 
     individual who has filed a claim under subsection (a) within 
     the period specified in subsection (a)(1)(E)--
       ``(1) In general.--Such individual may petition the Tax 
     Court (and the Tax Court shall have jurisdiction) to 
     determine such claim if such petition is filed during the 90-
     day period beginning on the earlier of--
       ``(A) the date which is 6 months after the date such claim 
     is filed with the Secretary, or
       ``(B) the date on which the Secretary mails by certified or 
     registered mail a notice to such individual denying such 
     claim.
     Such 90-day period shall be determined by not counting 
     Saturday, Sunday, or a legal holiday in the District of 
     Columbia as the last day of such period.
       ``(2) Restrictions applicable to collection of 
     assessment.--
       ``(A) In general.--Except as otherwise provided in section 
     6851 or 6861, no levy or proceeding in court for collection 
     of any assessment to which such claim relates shall be made, 
     begun, or prosecuted, until the expiration of the 90-day 
     period described in paragraph (1), nor, if a petition has 
     been filed with the Tax Court, until the decision of the Tax 
     Court has become final. Rules similar to the rules of section 
     7485 shall apply with respect to the collection of such 
     assessment.
       ``(B) Authority to enjoin collection actions.--
     Notwithstanding the provisions of section 7421(a), the 
     beginning of such proceeding or levy during the time the 
     prohibition under subparagraph (A) is in force may be 
     enjoined by a proceeding in the proper court, including the 
     Tax Court. The Tax Court shall have no jurisdiction under 
     this paragraph to enjoin any action or proceeding unless a 
     timely petition for a determination of such claim has been 
     filed and then only in respect of the amount of the 
     assessment to which such claim relates.
       ``(C) Jeopardy collection.--If the Secretary makes a 
     finding that the collection of the tax is in jeopardy, 
     nothing in this subsection shall prevent the immediate 
     collection of such tax.
       ``(c) Suspension of Running of Period of Limitations.--The 
     running of the period of limitations in section 6502 on the 
     collection of the assessment to which the petition under 
     subsection (b) relates shall be suspended for the period 
     during which the Secretary is prohibited by subsection (b) 
     from collecting by levy or a proceeding in court and for 60 
     days thereafter.
       ``(d) Applicable Rules.--
       ``(1) Allowance of application.--Except as provided in 
     paragraph (2), notwithstanding any other law or rule of law 
     (other than section 6512(b), 7121, or 7122), credit or refund 
     shall be allowed or made to the extent attributable to the 
     application of this section.
       ``(2) Res judicata.--In the case of any claim under 
     subsection (a), the determination of the Tax Court in any 
     prior proceeding for the same taxable periods in which the 
     decision has become final, shall be conclusive except with 
     respect to the qualification of the spouse for relief which 
     was not an issue in such proceeding. The preceding sentence 
     shall not apply if the Tax Court determines that the spouse 
     participated meaningfully in such prior proceeding.
       ``(3) Limitation on tax court jurisdiction.--If a suit for 
     refund is begun by either spouse pursuant to section 6532, 
     the Tax Court shall lose jurisdiction of the spouse's action 
     under this section to whatever extent jurisdiction is 
     acquired by the district court or the United States Court of 
     Federal Claims over the taxable years that are the subject of 
     the suit for refund.''.
       (b) Separate Form for Applying for Spousal Relief.--Not 
     later than 180 days after the date of the enactment of this 
     Act, the Secretary of the Treasury shall develop a separate 
     form with instructions for use by taxpayers in applying for 
     relief under section 6015(a) of the Internal Revenue Code of 
     1986, as added by this section.
       (c) Conforming Amendments.--
       (1) Section 6013 is amended by striking subsection (e).
       (2) Subparagraph (A) of section 6230(c)(5) is amended by 
     striking ``section 6013(e)'' and inserting ``section 6015''.
       (d) Clerical Amendment.--The table of sections for subpart 
     B of part II of subchapter A of chapter 61 is amended by 
     inserting after the item relating to section 6014 the 
     following new item:

``Sec. 6015. Innocent spouse relief; petition to Tax Court.''.

       (e) Effective Date.--The amendments made by this section 
     shall apply to understatements for taxable years beginning 
     after the date of the enactment of this Act.

     SEC. 322. SUSPENSION OF STATUTE OF LIMITATIONS ON FILING 
                   REFUND CLAIMS DURING PERIODS OF DISABILITY.

       (a) In General.--Section 6511 (relating to limitations on 
     credit or refund) is amended by redesignating subsection (h) 
     as subsection (i) and by inserting after subsection (g) the 
     following new subsection:
       ``(h) Running of Periods of Limitation Suspended While 
     Taxpayer Is Unable To Manage Financial Affairs Due to 
     Disability.--
       ``(1) In general.--In the case of an individual, the 
     running of the periods specified in subsections (a), (b), and 
     (c) shall be suspended during any period of such individual's 
     life that such individual is financially disabled.
       ``(2) Financially disabled.--
       ``(A) In general.--For purposes of paragraph (1), an 
     individual is financially disabled if such individual is 
     unable to manage his financial affairs by reason of his 
     medically determinable physical or mental impairment which 
     can be expected to result in death or which has lasted or can 
     be expected to last for a continuous period of not less than 
     12 months. An individual shall not be considered to have such 
     an impairment unless proof of the existence thereof is 
     furnished in such form and manner as the Secretary may 
     require.
       ``(B) Exception where individual has guardian, etc.--An 
     individual shall not be treated as financially disabled 
     during any period that such individual's spouse or any other 
     person is authorized to act on behalf of such individual in 
     financial matters.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to periods of disability before, on, or after the 
     date of the enactment of this Act but shall not apply to any 
     claim for credit or refund which (without regard to such 
     amendment) is barred by the operation of any law or rule of 
     law (including res judicata) as of January 1, 1998.
              Subtitle D--Provisions Relating to Interest

     SEC. 331. ELIMINATION OF INTEREST RATE DIFFERENTIAL ON 
                   OVERLAPPING PERIODS OF INTEREST ON INCOME TAX 
                   OVERPAYMENTS AND UNDERPAYMENTS.

       (a) In General.--Section 6621 (relating to determination of 
     rate of interest) is amended by adding at the end the 
     following new subsection:
       ``(d) Elimination of Interest on Overlapping Periods of 
     Income Tax Overpayments and Underpayments.--To the extent 
     that, for any period, interest is payable under subchapter A 
     and allowable under subchapter B on equivalent underpayments 
     and overpayments by the same taxpayer of tax imposed by 
     chapters 1 and 2, the net rate of interest under this section 
     on such amounts shall be zero for such period.''.
       (b) Conforming Amendment.--Subsection (f) of section 6601 
     (relating to satisfaction by credits) is amended by adding at 
     the end the following new sentence: ``The preceding sentence 
     shall not apply to the extent that section 6621(d) 
     applies.''.

[[Page S2320]]

       (c) Effective Date.--The amendments made by this section 
     shall apply to interest for calendar quarters beginning after 
     the date of the enactment of this Act.

     SEC. 332. INCREASE IN OVERPAYMENT RATE PAYABLE TO TAXPAYERS 
                   OTHER THAN CORPORATIONS.

       (a) In General.--Subparagraph (B) of section 6621(a)(1) 
     (defining overpayment rate) is amended to read as follows:
       ``(B) 3 percentage points (2 percentage points in the case 
     of a corporation).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to interest for calendar quarters beginning after 
     the date of the enactment of this Act.
 Subtitle E--Protections for Taxpayers Subject to Audit or Collection 
                               Activities

     SEC. 341. PRIVILEGE OF CONFIDENTIALITY EXTENDED TO TAXPAYER'S 
                   DEALINGS WITH NON-ATTORNEYS AUTHORIZED TO 
                   PRACTICE BEFORE INTERNAL REVENUE SERVICE.

       Section 7602 (relating to examination of books and 
     witnesses) is amended by adding at the end the following new 
     subsection:
       ``(d) Privilege of Confidentiality Extended to Taxpayer's 
     Dealings With Non-Attorneys Authorized To Practice Before 
     Internal Revenue Service.--
       ``(1) In general.--In any noncriminal proceeding before the 
     Internal Revenue Service, the taxpayer shall be entitled to 
     the same common law protections of confidentiality with 
     respect to tax advice furnished by any qualified individual 
     (in a manner consistent with State law for such individual's 
     profession) as the taxpayer would have if such individual 
     were an attorney.
       ``(2) Qualified individual.--For purposes of paragraph (1), 
     the term `qualified individual' means any individual (other 
     than an attorney) who is authorized to practice before the 
     Internal Revenue Service.''.

     SEC. 342. EXPANSION OF AUTHORITY TO ISSUE TAXPAYER ASSISTANCE 
                   ORDERS.

       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 paragraphs:
       ``(2) Issuance of taxpayer assistance orders.--For purposes 
     of determining whether to issue a taxpayer assistance order, 
     the Taxpayer Advocate shall consider the following factors, 
     among others:
       ``(A) Whether there is an immediate threat of adverse 
     action.
       ``(B) Whether there has been an unreasonable delay in 
     resolving taxpayer account problems.
       ``(C) Whether the taxpayer will have to pay significant 
     costs (including fees for professional representation) if 
     relief is not granted.
       ``(D) Whether the taxpayer will suffer irreparable injury, 
     or a long-term adverse impact, if relief is not granted.
       ``(3) Standard where administrative guidance not 
     followed.--In cases where any Internal Revenue Service 
     employee is not following applicable published administrative 
     guidance (including the Internal Revenue Manual), the 
     Taxpayer Advocate shall construe the factors taken into 
     account in determining whether to issue a taxpayer assistance 
     order in the manner most favorable to the taxpayer.''.

     SEC. 343. LIMITATION ON FINANCIAL STATUS AUDIT TECHNIQUES.

       Section 7602 is amended by adding at the end the following 
     new subsection:
       ``(e) Limitation on Examination on Unreported Income.--The 
     Secretary shall not use financial status or economic reality 
     examination techniques to determine the existence of 
     unreported income of any taxpayer unless the Secretary has a 
     reasonable indication that there is a likelihood of such 
     unreported income.''.

     SEC. 344. LIMITATION ON AUTHORITY TO REQUIRE PRODUCTION OF 
                   COMPUTER SOURCE CODE.

       (a) In General.--Section 7602 is amended by adding at the 
     end the following new subsection:
       ``(f) Limitation on Authority To Require Production of 
     Computer Source Code.--
       ``(1) In general.--No summons may be issued under this 
     title, and the Secretary may not begin any action under 
     section 7604 to enforce any summons, to produce or examine 
     any tax-related computer source code.
       ``(2) Exception where information not otherwise available 
     to verify correctness of item on return.--Paragraph (1) shall 
     not apply to any portion of a tax-related computer source 
     code if--
       ``(A) the Secretary is unable to otherwise reasonably 
     ascertain the correctness of any item on a return from--
       ``(i) the taxpayer's books, papers, records, or other data, 
     or
       ``(ii) the computer software program and the associated 
     data which, when executed, produces the output to prepare the 
     return for the period involved, and
       ``(B) the Secretary identifies with reasonable specificity 
     such portion as to be used to verify the correctness of such 
     item.
     The Secretary shall be treated as meeting the requirements of 
     subparagraphs (A) and (B) after the 90th day after the 
     Secretary makes a formal request to the taxpayer and the 
     owner or developer of the computer software program for the 
     material described in subparagraph (A)(ii) if such material 
     is not provided before the close of such 90th day.
       ``(3) Other exceptions.--Paragraph (1) shall not apply to--
       ``(A) any inquiry into any offense connected with the 
     administration or enforcement of the internal revenue laws, 
     and
       ``(B) any tax-related computer source code developed by (or 
     primarily for the benefit of) the taxpayer or a related 
     person (within the meaning of section 267 or 707(b)) for 
     internal use by the taxpayer or such person and not for 
     commercial distribution.
       ``(4) Tax-related computer source code.--For purposes of 
     this subsection, the term `tax-related computer source code' 
     means--
       ``(A) the computer source code for any computer software 
     program for accounting, tax return preparation or compliance, 
     or tax planning, or
       ``(B) design and development materials related to such a 
     software program (including program notes and memoranda).
       ``(5) Right to contest summons.--The determination of 
     whether the requirements of subparagraphs (A) and (B) of 
     paragraph (2) are met or whether any exception under 
     paragraph (3) applies may be contested in any proceeding 
     under section 7604.
       ``(6) Protection of trade secrets and other confidential 
     information.--In any court proceeding to enforce a summons 
     for any portion of a tax-related computer source code, the 
     court may issue any order necessary to prevent the disclosure 
     of trade secrets or other confidential information with 
     respect to such source code, including providing that any 
     information be placed under seal to be opened only as 
     directed by the court.''.
       (b) Application of Special Procedures for Third-Party 
     Summonses.--Paragraph (3) of section 7609(a) (defining third-
     party recordkeeper) is amended by striking ``and'' at the end 
     of subparagraph (H), by striking a period at the end of 
     subparagraph (I) and inserting ``, and'', and by adding at 
     the end the following:
       ``(J) any owner or developer of a tax-related computer 
     source code (as defined in section 7602(f)(4)).
     Subparagraph (J) shall apply only with respect to a summons 
     requiring the production of the source code referred to in 
     subparagraph (J) or the program and data described in section 
     7602(f)(2)(A)(ii) to which such source code relates.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to summonses issued more than 90 days after the 
     date of the enactment of this Act.

     SEC. 345. 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.

     SEC. 346. OFFERS-IN-COMPROMISE.

       (a) Allowances For Basic Living Expenses.--Section 7122 
     (relating to offers-in-compromise) is amended by adding at 
     the end the following new subsection:
       ``(c) Allowances For Basic Living Expenses.--The Secretary 
     shall develop and publish schedules of national and local 
     allowances designed to provide that taxpayers entering into a 
     compromise have an adequate means to provide for basic living 
     expenses.''.
       (b) Preparation of Statement Relating to Offers-in-
     Compromise.--The Secretary of the Treasury shall prepare a 
     statement which sets forth in simple, nontechnical terms the 
     rights of a taxpayer and the obligations of the Internal 
     Revenue Service relating to offers-in-compromise. Such 
     statement shall--
       (1) advise taxpayers who have entered into a compromise 
     agreement of the advantages of promptly notifying the 
     Internal Revenue Service of any change of address or marital 
     status, and
       (2) provide notice to taxpayers that in the case of a 
     compromise agreement terminated due to the actions of 1 
     spouse or former spouse, the Internal Revenue Service will, 
     upon application, reinstate such agreement with the spouse or 
     former spouse who remains in compliance with such agreement.

     SEC. 347. NOTICE OF DEFICIENCY TO SPECIFY DEADLINES FOR 
                   FILING TAX COURT PETITION.

       (a) In General.--The Secretary of the Treasury or the 
     Secretary's delegate shall include on each notice of 
     deficiency under section 6212 of the Internal Revenue Code of 
     1986 the date determined by such Secretary (or delegate) as 
     the last day on which the taxpayer may file a petition with 
     the Tax Court.
       (b) Later Filing Deadlines Specified on Notice of 
     Deficiency To Be Binding.--Subsection (a) of section 6213 
     (relating to restrictions applicable to deficiencies; 
     petition to

[[Page S2321]]

     Tax Court) is amended by adding at the end the following new 
     sentence: ``Any petition filed with the Tax Court on or 
     before the last date specified for filing such petition by 
     the Secretary in the notice of deficiency shall be treated as 
     timely filed.''.
       (c) Effective Date.--Subsection (a) and the amendment made 
     by subsection (b) shall apply to notices mailed after 
     December 31, 1998.

     SEC. 348. REFUND OR CREDIT OF OVERPAYMENTS BEFORE FINAL 
                   DETERMINATION.

       (a) Tax Court Proceedings.--Subsection (a) of section 6213 
     is amended--
       (1) by striking ``, including the Tax Court.'' and 
     inserting ``, including the Tax Court, and a refund may be 
     ordered by such court of any amount collected within the 
     period during which the Secretary is prohibited from 
     collecting by levy or through a proceeding in court under the 
     provisions of this subsection.'', and
       (2) by striking ``to enjoin any action or proceeding'' and 
     inserting ``to enjoin any action or proceeding or order any 
     refund''.
       (b) Other Proceedings.--Subsection (a) of section 6512 is 
     amended by striking the period at the end of paragraph (4) 
     and inserting ``, and'', and by inserting after paragraph (4) 
     the following new paragraphs:
       ``(5) As to any amount collected within the period during 
     which the Secretary is prohibited from making the assessment 
     or from collecting by levy or through a proceeding in court 
     under the provisions of section 6213(a), and
       ``(6) As to overpayments the Secretary is authorized to 
     refund or credit pending appeal as provided in subsection 
     (b).''.
       (c) Refund or Credit Pending Appeal.--Paragraph (1) of 
     section 6512(b) is amended by adding at the end the following 
     new sentence: ``If a notice of appeal in respect of the 
     decision of the Tax Court is filed under section 7483, the 
     Secretary is authorized to refund or credit the overpayment 
     determined by the Tax Court to the extent the overpayment is 
     not contested on appeal.''.
       (d) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 349. THREAT OF AUDIT PROHIBITED TO COERCE TIP REPORTING 
                   ALTERNATIVE COMMITMENT AGREEMENTS.

       The Secretary of the Treasury or the Secretary's delegate 
     shall instruct employees of the Internal Revenue Service that 
     they may not threaten to audit any taxpayer in an attempt to 
     coerce the taxpayer into entering into a Tip Reporting 
     Alternative Commitment Agreement.
                  Subtitle F--Disclosures to Taxpayers

     SEC. 351. EXPLANATION OF JOINT AND SEVERAL LIABILITY.

       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 married taxpayers of their joint 
     and several liabilities on all appropriate publications and 
     instructions.

     SEC. 352. EXPLANATION OF TAXPAYERS' RIGHTS IN INTERVIEWS WITH 
                   THE INTERNAL REVENUE SERVICE.

       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, revise the 
     statement required by section 6227 of the Omnibus Taxpayer 
     Bill of Rights (Internal Revenue Service Publication No. 1) 
     to more clearly inform taxpayers of their rights--
       (1) to be represented at interviews with the Internal 
     Revenue Service by any person authorized to practice before 
     the Internal Revenue Service, and
       (2) to suspend an interview pursuant to section 7521(b)(2) 
     of the Internal Revenue Code of 1986.

     SEC. 353. 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 
     whether 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.--The 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. 354. EXPLANATIONS OF APPEALS AND COLLECTION PROCESS.

       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, include with any 
     1st letter of proposed deficiency which allows the taxpayer 
     an opportunity for administrative review in the Internal 
     Revenue Service Office of Appeals an explanation of the 
     appeals process and the collection process with respect to 
     such proposed deficiency.
                Subtitle G--Low Income Taxpayer Clinics

     SEC. 361. LOW INCOME TAXPAYER CLINICS.

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

     ``SEC. 7525. LOW INCOME TAXPAYER CLINICS.

       ``(a) In General.--The Secretary may, subject to the 
     availability of appropriated funds, 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) does not charge more than a nominal fee for its 
     services (except for reimbursement of actual costs incurred), 
     and
       ``(ii)(I) represents low income taxpayers in controversies 
     with the Internal Revenue Service, or
       ``(II) operates programs to inform individuals for whom 
     English is a second language about their rights and 
     responsibilities under this title.
       ``(B) Representation of low income taxpayers.--A clinic 
     meets the requirements of subparagraph (A)(ii)(I) if--
       ``(i) at least 90 percent of the taxpayers represented by 
     the clinic have incomes which do 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 described in section 501(c) and 
     exempt from tax under section 501(a) 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 annual grants to a clinic.--The 
     aggregate amount of grants which may be made under this 
     section to a clinic for a year shall not exceed $100,000.
       ``(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 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 
     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 individuals 
     performing services for the clinic, and
       ``(B) the cost of equipment used in the clinic.
     Indirect expenses, including general overhead of the 
     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.
                       Subtitle H--Other Matters

     SEC. 371. ACTIONS FOR REFUND WITH RESPECT TO CERTAIN ESTATES 
                   WHICH HAVE ELECTED THE INSTALLMENT METHOD OF 
                   PAYMENT.

       (a) In General.--Section 7422 is amended by redesignating 
     subsection (j) as subsection (k) and by inserting after 
     subsection (i) the following new subsection:
       ``(j) Special Rule for Actions With Respect to Estates for 
     Which an Election Under Section 6166 Is Made.--
       ``(1) In general.--The district courts of the United States 
     and the United States Court of Federal Claims shall have 
     jurisdiction over any action brought by the representative of

[[Page S2322]]

     an estate to which this subsection applies to determine the 
     correct amount of the estate tax liability of such estate (or 
     for any refund with respect thereto) even if the full amount 
     of such liability has not been paid.
       ``(2) Estates to which subsection applies.--This subsection 
     shall apply to any estate if, as of the date the action is 
     filed--
       ``(A) an election under section 6166 is in effect with 
     respect to such estate,
       ``(B) no portion of the installments payable under such 
     section have been accelerated, and
       ``(C) all installments the due date for which is on or 
     before the date the action is filed have been paid.
       ``(3) Prohibition on collection of disallowed liability.--
     If the court redetermines under paragraph (1) the estate tax 
     liability of an estate, no part of such liability which is 
     disallowed by a decision of such court which has become final 
     may be collected by the Secretary, and amounts paid in excess 
     of the installments determined by the court as currently due 
     and payable shall be refunded.''.
       (b) Extension of Time To File Refund Suit.--Section 7479 
     (relating to declaratory judgments relating to eligibility of 
     estate with respect to installment payments under section 
     6166) is amended by adding at the end the following new 
     subsection:
       ``(c) Extension of Time To File Refund Suit.--The 2-year 
     period in section 6532(a)(1) for filing suit for refund after 
     disallowance of a claim shall be suspended during the 90-day 
     period after the mailing of the notice referred to in 
     subsection (b)(3) and, if a pleading has been filed with the 
     Tax Court under this section, until the decision of the Tax 
     Court has become final.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to any claim for refund filed after the date of 
     the enactment of this Act.

     SEC. 372. CATALOGING COMPLAINTS.

       In collecting data for the report required under section 
     1211 of Taxpayer Bill of Rights 2 (Public Law 104-168), the 
     Secretary of the Treasury or the Secretary's delegate shall 
     maintain records of taxpayer complaints of misconduct by 
     Internal Revenue Service employees on an individual employee 
     basis.

     SEC. 373. ARCHIVE 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:
       ``(17) Disclosure to national archives and records 
     administration.--The Secretary shall, upon written request 
     from the Archivist of the United States, disclose or 
     authorize the disclosure of returns and return information to 
     officers and employees of the National Archives and Records 
     Administration for purposes of, and only to the extent 
     necessary in, the appraisal of records for destruction or 
     retention. No such officer or employee shall, except to the 
     extent authorized by subsections (f), (i)(7), or (p), 
     disclose any return or return information disclosed under the 
     preceding sentence to any person other than to the Secretary, 
     or to another officer or employee of the National Archives 
     and Records Administration whose official duties require such 
     disclosure for purposes of such appraisal.''.
       (b) Conforming Amendments.--Section 6103(p) is amended--
       (1) in paragraph (3)(A), by striking ``or (16)'' and 
     inserting ``(16), or (17)'',
       (2) in paragraph (4), by striking ``or (14)'' and inserting 
     ``, (14), or (17)'' in the matter preceding subparagraph (A), 
     and
       (3) in paragraph (4)(F)(ii), by striking ``or (15)'' and 
     inserting ``, (15), or (17)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to requests made by the Archivist of the United 
     States after the date of the enactment of this Act.

     SEC. 374. PAYMENT OF TAXES.

       The Secretary of the Treasury or the Secretary's delegate 
     shall establish such rules, regulations, and procedures as 
     are necessary to allow payment of taxes by check or money 
     order made payable to the United States Treasury.

     SEC. 375. CLARIFICATION OF AUTHORITY OF SECRETARY RELATING TO 
                   THE MAKING OF ELECTIONS.

       Subsection (d) of section 7805 is amended by striking ``by 
     regulations or forms''.

     SEC. 376. LIMITATION ON PENALTY ON INDIVIDUAL'S FAILURE TO 
                   PAY FOR MONTHS DURING PERIOD OF INSTALLMENT 
                   AGREEMENT.

       (a) In General.--Section 6651 (relating to failure to file 
     tax return or to pay tax) is amended by adding at the end the 
     following new subsection:
       ``(h) Limitation on Penalty on Individual's Failure To Pay 
     for Months During Period of Installment Agreement.--No 
     addition to the tax shall be imposed under paragraph (2) or 
     (3) of subsection (a) with respect to the tax liability of an 
     individual for any month during which an installment 
     agreement under section 6159 is in effect for the payment of 
     such tax to the extent that imposing an addition to the tax 
     under such paragraph for such month would result in the 
     aggregate number of percentage points of such addition to the 
     tax exceeding 9.5.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply for purposes of determining additions to the tax 
     for months beginning after the date of the enactment of this 
     Act.
                          Subtitle I--Studies

     SEC. 381. PENALTY ADMINISTRATION.

       The Joint Committee on Taxation shall conduct a study--
       (1) reviewing the administration and implementation by the 
     Internal Revenue Service of the penalty reform provisions of 
     the Omnibus Budget Reconciliation Act of 1989, and
       (2) making any legislative and administrative 
     recommendations it deems appropriate to simplify penalty 
     administration and reduce taxpayer burden.
     Such study shall be submitted to the Committee on Ways and 
     Means of the House of Representatives and the Committee on 
     Finance of the Senate not later than 9 months after the date 
     of enactment of this Act.

     SEC. 382. CONFIDENTIALITY OF TAX RETURN INFORMATION.

       The Joint Committee on Taxation shall conduct 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 not later than one year after the date of the 
     enactment of this Act. Such study 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 file tax returns, but does 
     not file tax returns.
TITLE IV--CONGRESSIONAL ACCOUNTABILITY FOR THE INTERNAL REVENUE SERVICE
                         Subtitle A--Oversight

     SEC. 401. EXPANSION OF DUTIES OF THE JOINT COMMITTEE ON 
                   TAXATION.

       (a) In General.--Section 8021 (relating to the powers of 
     the Joint Committee on Taxation) is amended by adding at the 
     end the following new subsections:
       ``(e) Investigations.--The Joint Committee shall review all 
     requests (other than requests by the chairman or ranking 
     member of a Committee or Subcommittee) for investigations of 
     the Internal Revenue Service by the General Accounting 
     Office, and approve such requests when appropriate, with a 
     view towards eliminating overlapping investigations, ensuring 
     that the General Accounting Office has the capacity to handle 
     the investigation, and ensuring that investigations focus on 
     areas of primary importance to tax administration.
       ``(f) Relating to Joint Hearings.--
       ``(1) In general.--The Chief of Staff, and such other staff 
     as are appointed pursuant to section 8004, shall provide such 
     assistance as is required for joint hearings described in 
     paragraph (2).
       ``(2) 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 the other matters 
     outlined in section 8022(3)(C).''.
       (b) Effective Dates.--
       (1) Subsection (e) of section 8021 of the Internal Revenue 
     Code of 1986, as added by subsection (a) of this section, 
     shall apply to requests made after the date of enactment of 
     this Act.
       (2) Subsection (f) of section 8021 of the Internal Revenue 
     Code of 1986, as added by subsection (a) of this section, 
     shall take effect on the date of the enactment of this Act.

     SEC. 402. COORDINATED OVERSIGHT REPORTS.

       (a) In General.--Paragraph (3) of section 8022 (relating to 
     the duties of the Joint Committee on Taxation) is amended to 
     read as follows:
       ``(3) Reports.--
       ``(A) To report, from time to time, to the Committee on 
     Finance and the Committee on Ways and Means, and, in its 
     discretion, to the Senate or House of Representatives, or 
     both, the results of its investigations, together with such 
     recommendations as it may deem advisable.
       ``(B) To report, annually, to the Committee on Finance and 
     the Committee on Ways and Means on the overall state of the 
     Federal tax system, together with recommendations with 
     respect to possible simplification proposals and other 
     matters relating to the administration of the Federal tax 
     system as it may deem advisable.
       ``(C) To report, annually, to the Committees on Finance, 
     Appropriations, and Government Affairs of the Senate, and to 
     the Committees on Ways and Means, Appropriations, and 
     Government Reform and Oversight of the House of 
     Representatives, with respect to--
       ``(i) strategic and business plans for the Internal Revenue 
     Service;
       ``(ii) progress of the Internal Revenue Service in meeting 
     its objectives;
       ``(iii) the budget for the Internal Revenue Service and 
     whether it supports its objectives;
       ``(iv) progress of the Internal Revenue Service in 
     improving taxpayer service and compliance;
       ``(v) progress of the Internal Revenue Service on 
     technology modernization; and
       ``(vi) the annual filing season.''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.

[[Page S2323]]

                           Subtitle B--Budget

     SEC. 411. FUNDING FOR CENTURY DATE CHANGE.

       It is the sense of Congress that 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. 412. 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) Requiring Analysis To Accompany Certain Legislation.--
       (1) 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.--If--
       ``(1) a bill or joint resolution is reported by the 
     Committee on Finance of the Senate, the Committee on Ways and 
     Means of the House of Representatives, or any committee of 
     conference, and
       ``(2) such legislation includes any provision amending the 
     Internal Revenue Code of 1986,
     the report for such legislation shall contain a Tax 
     Complexity Analysis unless the committee involved causes to 
     have the Tax Complexity Analysis printed in the Congressional 
     Record prior to the consideration of the legislation in the 
     House of Representatives or the Senate (as the case may be).
       ``(b) Legislation Subject to Point of Order.--It shall not 
     be in order in the Senate to consider any bill or joint 
     resolution described in subsection (a) required to be 
     accompanied by a Tax Complexity Analysis that does not 
     contain a Tax Complexity Analysis.
       ``(c) Responsibilities of the Commissioner.--The 
     Commissioner shall provide the Joint Committee on Taxation 
     with such information as is necessary to prepare Tax 
     Complexity Analyses.
       ``(d) Tax Complexity Analysis Defined.--For purposes of 
     this section, the term `Tax Complexity Analysis' means, with 
     respect to a bill or joint resolution, a report which is 
     prepared by the Joint Committee on Taxation and which 
     identifies the provisions of the legislation adding 
     significant complexity or providing significant 
     simplification (as determined by the Joint Committee) and 
     includes the basis for such determination.''.
       (2) 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.''.

       (b) Legislation Subject to Point of Order in House of 
     Representatives.--
       (1) Legislation reported by committee on ways and means.--
     Clause 2(l) of rule XI of the Rules of the House of 
     Representatives is amended by adding at the end the following 
     new subparagraph:
       ``(8) The report of the Committee on Ways and Means on any 
     bill or joint resolution containing any provision amending 
     the Internal Revenue Code of 1986 shall include a Tax 
     Complexity Analysis prepared by the Joint Committee on 
     Taxation in accordance with section 8024 of the Internal 
     Revenue Code of 1986 unless the Committee on Ways and Means 
     causes to have such Analysis printed in the Congressional 
     Record prior to the consideration of the bill or joint 
     resolution.''.
       (2) Conference reports.--Rule XXVIII of the Rules of the 
     House of Representatives is amended by adding at the end the 
     following new clause:
       ``7. It shall not be in order to consider the report of a 
     committee of conference which contains any provision amending 
     the Internal Revenue Code of 1986 unless--
       ``(a) the accompanying joint explanatory statement contains 
     a Tax Complexity Analysis prepared by the Joint Committee on 
     Taxation in accordance with section 8024 of the Internal 
     Revenue Code of 1986, or
       ``(b) such Analysis is printed in the Congressional Record 
     prior to the consideration of the report.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to legislation considered on or after January 1, 
     1998.
     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.
            TITLE VI--TAX TECHNICAL CORRECTIONS ACT OF 1997

     SEC. 601. SHORT TITLE.

       This title may be cited as the ``Tax Technical Corrections 
     Act of 1997''.

     SEC. 602. DEFINITIONS.

       For purposes of this title--
       (1) 1986 Code.--The term ``1986 Code'' means the Internal 
     Revenue Code of 1986.
       (2) 1997 Act.--The term ``1997 Act'' means the Taxpayer 
     Relief Act of 1997.

     SEC. 603. AMENDMENTS RELATED TO TITLE I OF 1997 ACT.

       (a) Amendments Related to Section 101(a) of 1997 Act.--
       (1) Subsection (d) of section 24 of the 1986 Code is 
     amended--
       (A) by striking paragraphs (3) and (4),
       (B) by redesignating paragraph (5) as paragraph (3), and
       (C) by striking paragraphs (1) and (2) and inserting the 
     following new paragraphs:
       ``(1) In general.--In the case of a taxpayer with 3 or more 
     qualifying children for any taxable year, the aggregate 
     credits allowed under subpart C shall be increased by the 
     lesser of--
       ``(A) the credit which would be allowed under this section 
     without regard to this subsection and the limitation under 
     section 26(a), or
       ``(B) the amount by which the aggregate amount of credits 
     allowed by this subpart (without regard to this subsection) 
     would increase if the limitation imposed by section 26(a) 
     were increased by the excess (if any) of--
       ``(i) the taxpayer's social security taxes for the taxable 
     year, over
       ``(ii) the credit allowed under section 32 (determined 
     without regard to subsection (n)) for the taxable year.

     The amount of the credit allowed under this subsection shall 
     not be treated as a credit allowed under this subpart and 
     shall reduce the amount of credit otherwise allowable under 
     subsection (a) without regard to section 26(a).
       ``(2) Reduction of credit to taxpayer subject to 
     alternative minimum tax.--The credit determined under this 
     subsection for the taxable year shall be reduced by the 
     excess (if any) of--
       ``(A) the amount of tax imposed by section 55 (relating to 
     alternative minimum tax) with respect to such taxpayer for 
     such taxable year, over
       ``(B) the amount of the reduction under section 32(h) with 
     respect to such taxpayer for such taxable year.''.
       (2) Paragraph (3) of section 24(d) of the 1986 Code (as 
     redesignated by paragraph (1)) is amended by striking 
     ``paragraph (3)'' and inserting ``paragraph (1)''.
       (b) Amendments Related to Section 101(b) of 1997 Act.--
       (1) The subsection (m) of section 32 of the 1986 Code added 
     by section 101(b) of the 1997 Act is amended to read as 
     follows:
       ``(n) Supplemental Child Credit.--
       ``(1) In general.--In the case of a taxpayer with respect 
     to whom a credit is allowed under section 24 for the taxable 
     year, the credit otherwise allowable under this section shall 
     be increased by the lesser of--
       ``(A) the credit which would be allowed under section 24 
     without regard to this subsection and the limitation under 
     section 26(a), or
       ``(B) the amount by which the aggregate amount of credits 
     allowed by subpart A (without regard to this subsection) 
     would be reduced if the limitation imposed by section 26(a) 
     were reduced by the excess (if any) of--
       ``(i) the credit allowed by this section (without regard to 
     this subsection) for the taxable year, over
       ``(ii) the taxpayer's social security taxes (as defined in 
     section 24(d)) for the taxable year.

     The credit determined under this subsection shall be allowed 
     without regard to any other provision of this section, 
     including subsection (d).

[[Page S2324]]

       ``(2) Coordination with other credits.--
       ``(A) In general.--The amount of the credit under this 
     subsection shall reduce the amount of the credit otherwise 
     allowable under section 24, but the amount of the credit 
     under this subsection (and such reduction) shall not 
     otherwise be taken into account in determining the amount of 
     any other credit allowable under this part.
       ``(B) Treatment of credit under section 24(d).--For 
     purposes of this subsection, the credit determined under 
     section 24(d) shall be treated as not allowed under section 
     24.''.

     SEC. 604. AMENDMENTS RELATED TO TITLE II OF 1997 ACT.

       (a) Amendments Related to Section 201 of 1997 Act.--
       (1) The item relating to section 25A in the table of 
     sections for subpart A of part IV of subchapter A of chapter 
     1 of the 1986 Code is amended to read as follows:

``Sec. 25A. Hope and Lifetime Learning credits.''.

       (2) Subsection (a) of section 6050S of the 1986 Code is 
     amended to read as follows:
       ``(a) In General.--Any person--
       ``(1) which is an eligible educational institution--
       ``(A) which receives payments for qualified tuition and 
     related expenses with respect to any individual for any 
     calendar year, or
       ``(B) which makes reimbursements or refunds (or similar 
     amounts) to any individual of qualified tuition and related 
     expenses,
       ``(2) which is engaged in a trade or business of making 
     payments to any individual under an insurance arrangement as 
     reimbursements or refunds (or similar amounts) of qualified 
     tuition and related expenses, or
       ``(3) except as provided in regulations, any person which 
     is engaged in a trade or business and, in the course of 
     which, receives from any individual interest aggregating $600 
     or more for any calendar year on 1 or more qualified 
     education loans,

     shall make the return described in subsection (b) with 
     respect to the individual at such time as the Secretary may 
     by regulations prescribe.''.
       (3) Subparagraph (A) of section 201(c)(2) of the 1997 Act 
     is amended to read as follows:
       ``(A) Subparagraph (B) of section 6724(d)(1) (relating to 
     definitions) is amended by redesignating clauses (x) through 
     (xv) as clauses (xi) through (xvi), respectively, and by 
     inserting after clause (ix) the following new clause:
       `` `(x) section 6050S (relating to returns relating to 
     payments for qualified tuition and related expenses),' ''.
       (b) Amendments Related to Section 211 of 1997 Act.--
       (1) Paragraph (3) of section 135(c) of the 1986 Code is 
     amended to read as follows:
       ``(3) Eligible educational institution.--The term `eligible 
     educational institution' has the meaning given such term by 
     section 529(e)(5).''.
       (2) Subparagraph (A) of section 529(c)(3) of the 1986 Code 
     is amended by striking ``section 72(b)'' and inserting 
     ``section 72''.
       (c) Amendments Related to Section 213 of 1997 Act.--
       (1)(A) Section 530(b)(1)(E) of the 1986 Code (defining 
     education individual retirement account) is amended to read 
     as follows:
       ``(E) Any balance to the credit of the designated 
     beneficiary on the date on which the beneficiary attains age 
     30 shall be distributed within 30 days after such date to the 
     beneficiary or, if the beneficiary dies before attaining age 
     30, shall be distributed within 30 days after the date of 
     death to the estate of such beneficiary.''.
       (B) Subsection (d) of section 530 of the 1986 Code is 
     amended by adding at the end the following new paragraph:
       ``(8) Deemed distribution on required distribution date.--
     In any case in which a distribution is required under 
     subsection (b)(1)(E), any balance to the credit of a 
     designated beneficiary as of the close of the 30-day period 
     referred to in such subsection for making such distribution 
     shall be deemed distributed at the close of such period.''.
       (2)(A) Paragraph (1) of section 530(d) of the 1986 Code is 
     amended by striking ``section 72(b)'' and inserting ``section 
     72''.
       (B) Subsection (e) of section 72 of the 1986 Code is 
     amended by inserting after paragraph (8) the following new 
     paragraph:
       ``(9) Extension of paragraph (2)(b) to qualified state 
     tuition programs and educational individual retirement 
     accounts.--Notwithstanding any other provision of this 
     subsection, paragraph (2)(B) shall apply to amounts received 
     under a qualified State tuition program (as defined in 
     section 529(b)) or under an education individual retirement 
     account (as defined in section 530(b)). The rule of paragraph 
     (8)(B) shall apply for purposes of this paragraph.''.
       (3) So much of section 530(d)(4)(C) of the 1986 Code as 
     precedes clause (ii) thereof is amended to read as follows:
       ``(C) Contributions returned before due date of return.--
     Subparagraph (A) shall not apply to the distribution of any 
     contribution made during a taxable year on behalf of the 
     designated beneficiary if--
       ``(i) such distribution is made on or before the day 
     prescribed by law (including extensions of time) for filing 
     the beneficiary's return of tax for the taxable year or, if 
     the beneficiary is not required to file such a return, the 
     15th day of the 4th month of the taxable year following the 
     taxable year, and''.
       (4) Subparagraph (C) of section 135(c)(2) of the 1986 Code 
     is amended--
       (A) by inserting ``and education individual retirement 
     accounts'' in the heading after ``program'', and
       (B) by striking ``section 529(c)(3)(A)'' and inserting 
     ``section 72''.
       (5) Subparagraph (A) of section 4973(e)(1) of the 1986 Code 
     is amended by inserting before the comma ``(or, if less, the 
     sum of the maximum amounts permitted to be contributed under 
     section 530(c) by the contributors to such accounts for such 
     year)''.
       (d) Amendment Related to Section 224 of 1997 Act.--Section 
     170(e)(6)(F) of the 1986 Code (relating to termination) is 
     amended by striking ``1999'' and inserting ``2000''.
       (e) Amendments Related to Section 225 of 1997 Act.--
       (1) The last sentence of section 108(f)(2) of the 1986 Code 
     is amended to read as follows:
     ``The term `student loan' includes any loan made by an 
     educational organization described in section 
     170(b)(1)(A)(ii) or by an organization exempt from tax under 
     section 501(a) to refinance a loan to an individual to assist 
     the individual in attending any such educational organization 
     but only if the refinancing loan is pursuant to a program of 
     the refinancing organization which is designed as described 
     in subparagraph (D)(ii).''.
       (2) Section 108(f)(3) of the 1986 Code is amended by 
     striking ``(or by an organization described in paragraph 
     (2)(E) from funds provided by an organization described in 
     paragraph (2)(D))''.
       (f) Amendments Related to Section 226 of 1997 Act.--
       (1) Section 226(a) of the 1997 Act is amended by striking 
     ``section 1397E'' and inserting ``section 1397D''.
       (2) Section 1397E(d)(4)(B) of the 1986 Code is amended by 
     striking ``local education agency as defined'' and inserting 
     ``local educational agency as defined''.

     SEC. 605. AMENDMENTS RELATED TO TITLE III OF 1997 ACT.

       (a) Amendments Related to Section 301 of 1997 Act.--Section 
     219(g) of the 1986 Code is amended--
       (1) by inserting ``or the individual's spouse'' after 
     ``individual'' in paragraph (1), and
       (2) by striking paragraph (7) and inserting:
       ``(7) Special rule for spouses who are not active 
     participants.--If this subsection applies to an individual 
     for any taxable year solely because their spouse is an active 
     participant, then, in applying this subsection to the 
     individual (but not their spouse)--
       ``(A) the applicable dollar amount under paragraph 
     (3)(B)(i) shall be $150,000, and
       ``(B) the amount applicable under paragraph (2)(A)(ii) 
     shall be $10,000.''.
       (b) Amendments Related to Section 302 of 1997 Act.--
       (1) Section 408A(c)(3)(A) of the 1986 Code is amended by 
     striking ``shall be reduced'' and inserting ``shall not 
     exceed an amount equal to the amount determined under 
     paragraph (2)(A) for such taxable year, reduced''.
       (2) Section 408A(c)(3) of the 1986 Code (relating to limits 
     based on modified adjusted gross income) is amended--
       (A) by inserting ``or a married individual filing a 
     separate return'' after ``joint return'' in subparagraph 
     (A)(ii), and
       (B) by striking ``and the deduction under section 219 shall 
     be taken into account'' in subparagraph (C)(i).
       (3) Section 408A(d)(2) of the 1986 Code (defining qualified 
     distribution) is amended by striking subparagraph (B) and 
     inserting the following:
       ``(B) Distributions within nonexclusion period.--A payment 
     or distribution from a Roth IRA shall not be treated as a 
     qualified distribution under subparagraph (A) if such payment 
     or distribution is made before the exclusion date for the 
     Roth IRA.
       ``(C) Exclusion date.--For purposes of this section, the 
     exclusion date for any Roth IRA is the first day of the 
     taxable year immediately following the 5-taxable year period 
     beginning with--
       ``(i) the first taxable year for which a contribution to 
     any Roth IRA maintained for the benefit of the individual was 
     made, or
       ``(ii) in the case of a Roth IRA to which 1 or more 
     qualified rollover contributions were made--

       ``(I) from an individual retirement plan other than a Roth 
     IRA, or
       ``(II) from another Roth IRA to the extent such 
     contributions are properly allocable to contributions 
     described in subclause (I),

     the most recent taxable year for which any such qualified 
     rollover contribution was made.''.
       (4) Section 408A(d)(3) of the 1986 Code (relating to 
     rollovers from IRAs other than Roth IRAs) is amended by 
     adding at the end the following:
       ``(F) Special rule for applying section 72.--
       ``(i) In general.--If--

       ``(I) any distribution from a Roth IRA is made before the 
     exclusion date, and
       ``(II) any portion of such distribution is properly 
     allocable to a qualified rollover contribution described in 
     paragraph (2)(C)(ii),

     then section 72(t) shall be applied as if such portion were 
     includible in gross income.
       ``(ii) Limitation.--Clause (i) shall apply only to the 
     extent of the amount includible in gross income under 
     subparagraph (A)(i) by reason of the qualified rollover 
     contribution.
       ``(G) Special rules for contributions to which 4-year 
     averaging applies.--In the case of a qualified rollover 
     contribution to a

[[Page S2325]]

     Roth IRA of a distribution to which subparagraph (A)(iii) 
     applied, the following rules shall apply:
       ``(i) Death of distributee.--

       ``(I) In general.--If the individual required to include 
     amounts in gross income under such subparagraph dies before 
     all of such amounts are included, all remaining amounts shall 
     be included in gross income for the taxable year which 
     includes the date of death.
       ``(II) Special rule for surviving spouse.--If the spouse of 
     the individual described in subclause (I) acquires the Roth 
     IRA to which such qualified rollover contribution is properly 
     allocable, the spouse may elect to include the remaining 
     amounts described in subclause (I) in the spouse's gross 
     income in the taxable years of the spouse ending with or 
     within the taxable years of such individual in which such 
     amounts would otherwise have been includible.

       ``(ii) Additional tax for early distribution.--

       ``(I) In general.--If any distribution from a Roth IRA is 
     made before the exclusion date, and any portion of such 
     distribution is properly allocable to such qualified rollover 
     contribution, the distributee's tax under this chapter for 
     the taxable year in which the amount is received shall be 
     increased by 10 percent of the amount of such portion not in 
     excess of the amount includible in gross income under 
     subparagraph (A)(i) by reason of such qualified rollover 
     contribution.
       ``(II) Treatment of tax.--For purposes of this title, any 
     tax imposed by subclause (I) shall be treated as a tax 
     imposed by section 72(t) and shall be in addition to any 
     other tax imposed by such section.''.

       (5)(A) Section 408A(d)(4) of the 1986 Code is amended to 
     read as follows:
       ``(4) Aggregation and ordering rules.--
       ``(A) Aggregation rules.--Section 408(d)(2) shall be 
     applied separately with respect to--
       ``(i) Roth IRAs and other individual retirement plans,
       ``(ii) Roth IRAs described in paragraph (2)(C)(ii) and Roth 
     IRAs not so described, and
       ``(iii) Roth IRAs described in paragraph (2)(C)(ii) with 
     different exclusion dates.
       ``(B) Ordering rules.--For purposes of applying section 72 
     to any distribution from a Roth IRA which is not a qualified 
     distribution, such distribution shall be treated as made--
       ``(i) from contributions to the extent that the amount of 
     such distribution, when added to all previous distributions 
     from the Roth IRA, does not exceed the aggregate 
     contributions to the Roth IRA, and
       ``(ii) from such contributions in the following order:

       ``(I) Qualified rollover contributions to the extent 
     includible in gross income in the manner described in 
     paragraph (3)(A)(iii).
       ``(II) Qualified rollover contributions not described in 
     subclause (I) to the extent includible in gross income under 
     paragraph (3)(A).
       ``(III) Contributions not described in subclause (I) or 
     (II).

     Such rules shall also apply in determining the character of 
     qualified rollover contributions from one Roth IRA to another 
     Roth IRA.''.
       (B) Section 408A(d)(1) of the 1986 Code is amended to read 
     as follows:
       ``(1) Exclusion.--Any qualified distribution from a Roth 
     IRA shall not be includible in gross income.''.
       (6)(A) Section 408A(d) of the 1986 Code (relating to 
     distribution rules) is amended by adding at the end the 
     following:
       ``(6) Taxpayer may make adjustments before due date.--
       ``(A) In general.--Except as provided by the Secretary, if, 
     on or before the due date for any taxable year, a taxpayer 
     transfers in a trustee-to-trustee transfer any contribution 
     to an individual retirement plan made during such taxable 
     year from such plan to any other individual retirement plan, 
     then, for purposes of this chapter, such contribution shall 
     be treated as having been made to the transferee plan (and 
     not the transferor plan).
       ``(B) Special rules.--
       ``(i) Transfer of earnings.--Subparagraph (A) shall not 
     apply to the transfer of any contribution unless such 
     transfer is accompanied by any net income allocable to such 
     contribution.
       ``(ii) No deduction.--Subparagraph (A) shall apply to the 
     transfer of any contribution only to the extent no deduction 
     was allowed with respect to the contribution to the 
     transferor plan.
       ``(C) Due date.--For purposes of this paragraph, the due 
     date for any taxable year is the last date for filing the 
     return of tax for such taxable year (including 
     extensions).''.
       (B) Section 408A(d)(3) of the 1986 Code, as amended by this 
     subsection, is amended by striking subparagraph (D) and by 
     redesignating subparagraphs (E), (F), and (G) as 
     subparagraphs (D), (E), and (F), respectively.
       (7) Section 302(b) of the 1997 Act is amended by striking 
     ``Section 4973(b)'' and inserting ``Section 4973''.
       (8) Section 408A of the 1986 Code is amended by adding at 
     the end the following new subsection:
       ``(f) Individual Retirement Plan.--For purposes of this 
     section, except as provided by the Secretary, the term 
     `individual retirement plan' shall not include a simplified 
     employee pension or a simple retirement account.''.
       (c) Amendments Related to Section 303 of 1997 Act.--
       (1) Section 72(t)(8)(E) of the 1986 Code is amended--
       (A) by striking ``120 days'' and inserting ``120th day'', 
     and
       (B) by striking ``60 days'' and inserting ``60th day''.
       (2)(A) Section 402(c) of the 1986 Code is amended by adding 
     at the end the following:
       ``(11) Denial of rollover treatment for transfers of 
     hardship distributions to individual retirement plans.--This 
     subsection shall not apply to the transfer of any hardship 
     distribution described in section 401(k)(2)(B)(i)(IV) from a 
     qualified cash or deferred arrangement to an eligible 
     retirement plan described in clause (i) or (ii) of paragraph 
     (8)(B).''.
       (B) The amendment made by this paragraph shall apply to 
     distributions made after December 31, 1997.
       (d) Amendments Related to Section 311 of 1997 Act.--
       (1) Subsection (h) of section 1 of the 1986 Code (relating 
     to maximum capital gains rate) is amended to read as follows:
       ``(h) Maximum Capital Gains Rate.--
       ``(1) In general.--If a taxpayer has a net capital gain for 
     any taxable year, the tax imposed by this section for such 
     taxable year shall not exceed the sum of--
       ``(A) a tax computed at the rates and in the same manner as 
     if this subsection had not been enacted on the greater of--
       ``(i) taxable income reduced by the net capital gain, or
       ``(ii) the lesser of--

       ``(I) the amount of taxable income taxed at a rate below 28 
     percent, or
       ``(II) taxable income reduced by the adjusted net capital 
     gain,

       ``(B) 10 percent of so much of the adjusted net capital 
     gain (or, if less, taxable income) as does not exceed the 
     excess (if any) of--
       ``(i) the amount of taxable income which would (without 
     regard to this paragraph) be taxed at a rate below 28 
     percent, over
       ``(ii) the taxable income reduced by the adjusted net 
     capital gain,
       ``(C) 20 percent of the adjusted net capital gain (or, if 
     less, taxable income) in excess of the amount on which a tax 
     is determined under subparagraph (B),
       ``(D) 25 percent of the excess (if any) of--
       ``(i) the unrecaptured section 1250 gain (or, if less, the 
     net capital gain), over
       ``(ii) the excess (if any) of--

       ``(I) the sum of the amount on which tax is determined 
     under subparagraph (A) plus the net capital gain, over
       ``(II) taxable income, and

       ``(E) 28 percent of the amount of taxable income in excess 
     of the sum of the amounts on which tax is determined under 
     the preceding subparagraphs of this paragraph.
       ``(2) Reduced capital gain rates for qualified 5-year 
     gain.--
       ``(A) Reduction in 10-percent rate.--In the case of any 
     taxable year beginning after December 31, 2000, the rate 
     under paragraph (1)(B) shall be 8 percent with respect to so 
     much of the amount to which the 10-percent rate would 
     otherwise apply as does not exceed qualified 5-year gain, and 
     10 percent with respect to the remainder of such amount.
       ``(B) Reduction in 20-percent rate.--The rate under 
     paragraph (1)(C) shall be 18 percent with respect to so much 
     of the amount to which the 20-percent rate would otherwise 
     apply as does not exceed the lesser of--
       ``(i) the excess of qualified 5-year gain over the amount 
     of such gain taken into account under subparagraph (A) of 
     this paragraph, or
       ``(ii) the amount of qualified 5-year gain (determined by 
     taking into account only property the holding period for 
     which begins after December 31, 2000),

     and 20 percent with respect to the remainder of such amount. 
     For purposes of determining under the preceding sentence 
     whether the holding period of property begins after December 
     31, 2000, the holding period of property acquired pursuant to 
     the exercise of an option (or other right or obligation to 
     acquire property) shall include the period such option (or 
     other right or obligation) was held.
       ``(3) Net capital gain taken into account as investment 
     income.--For purposes of this subsection, the net capital 
     gain for any taxable year shall be reduced (but not below 
     zero) by the amount which the taxpayer takes into account as 
     investment income under section 163(d)(4)(B)(iii).
       ``(4) Adjusted net capital gain.--For purposes of this 
     subsection, the term `adjusted net capital gain' means net 
     capital gain reduced (but not below zero) by the sum of--
       ``(A) unrecaptured section 1250 gain, and
       ``(B) 28 percent rate gain.
       ``(5) 28 percent rate gain.--For purposes of this 
     subsection--
       ``(A) In general.--The term `28 percent rate gain' means 
     the excess (if any) of--
       ``(i) the sum of--

       ``(I) the aggregate long-term capital gain from property 
     held for more than 1 year but not more than 18 months,
       ``(II) collectibles gain, and
       ``(III) section 1202 gain, over

       ``(ii) the sum of--

       ``(I) the aggregate long-term capital loss (not described 
     in subclause (IV)) from property referred to in clause 
     (i)(I),
       ``(II) collectibles loss,
       ``(III) the net short-term capital loss, and
       ``(IV) the amount of long-term capital loss carried under 
     section 1212(b)(1)(B) to the taxable year.

       ``(B) Special rules.--

[[Page S2326]]

       ``(i) Short sales and options.--Rules similar to the rules 
     of subsections (b) and (d) of section 1233 shall apply to 
     substantially identical property, and section 1092(f) with 
     respect to stock, held for more than 1 year but not more than 
     18 months.
       ``(ii) Section 1256 contracts.--Amounts treated as long-
     term capital gain or loss under section 1256(a)(3) shall be 
     treated as attributable to property held for more than 18 
     months.
       ``(6) Collectibles gain and loss.--For purposes of this 
     subsection--
       ``(A) In general.--The terms `collectibles gain' and 
     `collectibles loss' mean gain or loss (respectively) from the 
     sale or exchange of a collectible (as defined in section 
     408(m) without regard to paragraph (3) thereof) which is a 
     capital asset held for more than 18 months but only to the 
     extent such gain is taken into account in computing gross 
     income and such loss is taken into account in computing 
     taxable income.
       ``(B) Partnerships, etc.--For purposes of subparagraph (A), 
     any gain from the sale of an interest in a partnership, S 
     corporation, or trust which is attributable to unrealized 
     appreciation in the value of collectibles shall be treated as 
     gain from the sale or exchange of a collectible. Rules 
     similar to the rules of section 751 shall apply for purposes 
     of the preceding sentence.
       ``(7) Unrecaptured section 1250 gain.--For purposes of this 
     subsection--
       ``(A) In general.--The term `unrecaptured section 1250 
     gain' means the excess (if any) of--
       ``(i) the amount of long-term capital gain (not otherwise 
     treated as ordinary income) which would be treated as 
     ordinary income if--

       ``(I) section 1250(b)(1) included all depreciation and the 
     applicable percentage under section 1250(a) were 100 percent, 
     and
       ``(II) only gain from property held for more than 18 months 
     were taken into account, over

       ``(ii) the excess (if any) of--

       ``(I) the amount described in paragraph (5)(A)(ii), over
       ``(II) the amount described in paragraph (5)(A)(i).

       ``(B) Limitation with respect to section 1231 property.--
     The amount described in subparagraph (A)(i) from sales, 
     exchanges, and conversions described in section 1231(a)(3)(A) 
     for any taxable year shall not exceed the net section 1231 
     gain (as defined in section 1231(c)(3)) for such year.
       ``(8) Section 1202 gain.--For purposes of this subsection, 
     the term `section 1202 gain' means an amount equal to the 
     gain excluded from gross income under section 1202(a).
       ``(9) Qualified 5-year gain.--For purposes of this 
     subsection, the term `qualified 5-year gain' means the amount 
     of long-term capital gain which would be computed for the 
     taxable year if only gains from the sale or exchange of 
     property held by the taxpayer for more than 5 years were 
     taken into account. The determination under the preceding 
     sentence shall be made without regard to collectibles gain, 
     gain described in paragraph (7)(A)(i), and section 1202 gain.
       ``(10) Coordination with recapture of net ordinary losses 
     under section 1231.--If any amount is treated as ordinary 
     income under section 1231(c), such amount shall be allocated 
     among the separate categories of net section 1231 gain (as 
     defined in section 1231(c)(3)) in such manner as the 
     Secretary may by forms or regulations prescribe.
       ``(11) Regulations.--The Secretary may prescribe such 
     regulations as are appropriate (including regulations 
     requiring reporting) to apply this subsection in the case of 
     sales and exchanges by pass-thru entities and of interests in 
     such entities.
       ``(12) Pass-thru entity defined.--For purposes of this 
     subsection, the term `pass-thru entity' means--
       ``(A) a regulated investment company,
       ``(B) a real estate investment trust,
       ``(C) an S corporation,
       ``(D) a partnership,
       ``(E) an estate or trust,
       ``(F) a common trust fund,
       ``(G) a foreign investment company which is described in 
     section 1246(b)(1) and for which an election is in effect 
     under section 1247, and
       ``(H) a qualified electing fund (as defined in section 
     1295).
       ``(13) Special rules for periods during 1997.--
       ``(A) Determination of 28 percent rate gain.--In applying 
     paragraph (5)--
       ``(i) the amount determined under subclause (I) of 
     paragraph (5)(A)(i) shall include long-term capital gain (not 
     otherwise described in paragraph (5)(A)(i)) which is properly 
     taken into account for the portion of the taxable year before 
     May 7, 1997,
       ``(ii) the amounts determined under subclause (I) of 
     paragraph (5)(A)(ii) shall include long-term capital loss 
     (not otherwise described in paragraph (5)(A)(ii)) which is 
     properly taken into account for the portion of the taxable 
     year before May 7, 1997, and
       ``(iii) clauses (i)(I) and (ii)(I) of paragraph (5)(A) 
     shall be applied by not taking into account any gain and loss 
     on property held for more than 1 year but not more than 18 
     months which is properly taken into account for the portion 
     of the taxable year after May 6, 1997, and before July 29, 
     1997.
       ``(B) Other special rules.--
       ``(i) Determination of unrecaptured section 1250 gain not 
     to include pre-may 7, 1997 gain.--The amount determined under 
     paragraph (7)(A)(i) shall not include gain properly taken 
     into account for the portion of the taxable year before May 
     7, 1997.
       ``(ii) Other transitional rules for 18-month holding 
     period.--Paragraphs (6)(A) and (7)(A)(i)(II) shall be applied 
     by substituting `1 year' for `18 months' with respect to gain 
     properly taken into account for the portion of the taxable 
     year after May 6, 1997, and before July 29, 1997.
       ``(C) Special rules for pass-thru entities.--In applying 
     this paragraph with respect to any pass-thru entity, the 
     determination of when gains and loss are properly taken into 
     account shall be made at the entity level.''.
       (2) In general.--Paragraph (3) of section 55(b) of the 1986 
     Code is amended to read as follows:
       ``(3) Maximum rate of tax on net capital gain of 
     noncorporate taxpayers.--The amount determined under the 
     first sentence of paragraph (1)(A)(i) shall not exceed the 
     sum of--
       ``(A) the amount determined under such first sentence 
     computed at the rates and in the same manner as if this 
     paragraph had not been enacted on the taxable excess reduced 
     by the lesser of--
       ``(i) the net capital gain, or
       ``(ii) the sum of--

       ``(I) the adjusted net capital gain, plus
       ``(II) the unrecaptured section 1250 gain, plus

       ``(B) 10 percent of so much of the adjusted net capital 
     gain (or, if less, taxable excess) as does not exceed the 
     amount on which a tax is determined under section 1(h)(1)(B), 
     plus
       ``(C) 20 percent of the adjusted net capital gain (or, if 
     less, taxable excess) in excess of the amount on which tax is 
     determined under subparagraph (B), plus
       ``(D) 25 percent of the amount of taxable excess in excess 
     of the sum of the amounts on which tax is determined under 
     the preceding subparagraphs of this paragraph.

     In the case of taxable years beginning after December 31, 
     2000, rules similar to the rules of section 1(h)(2) shall 
     apply for purposes of subparagraphs (B) and (C). Terms used 
     in this paragraph which are also used in section 1(h) shall 
     have the respective meanings given such terms by section 1(h) 
     but computed with the adjustments under this part.''.
       (3) Section 57(a)(7) of the 1986 Code is amended by adding 
     at the end the following new sentence: ``In the case of stock 
     the holding period of which begins after December 31, 2000 
     (determined with the application of the last sentence of 
     section 1(h)(2)(B)), the preceding sentence shall be applied 
     by substituting `28 percent' for `42 percent'.''.
       (4) Paragraphs (11) and (12) of section 1223, and section 
     1235(a), of the 1986 Code are each amended by striking ``1 
     year'' each place it appears and inserting ``18 months''.
       (e) Amendments Related to Section 312 of 1997 Act.--
       (1) Section 121(c)(1) of the 1986 Code is amended to read 
     as follows:
       ``(1) In general.--In the case of a sale or exchange to 
     which this subsection applies, the ownership and use 
     requirements of subsection (a), and subsection (b)(3), shall 
     not apply; but the dollar limitation under paragraph (1) or 
     (2) of subsection (b), whichever is applicable, shall be 
     equal to--
       ``(A) the amount which bears the same ratio to such 
     limitation (determined without regard to this paragraph) as
       ``(B)(i) the shorter of--
       ``(I) the aggregate periods, during the 5-year period 
     ending on the date of such sale or exchange, such property 
     has been owned and used by the taxpayer as the taxpayer's 
     principal residence, or
       ``(II) the period after the date of the most recent prior 
     sale or exchange by the taxpayer to which subsection (a) 
     applied and before the date of such sale or exchange, bears 
     to
       ``(ii) 2 years.''.
       (2) Section 312(d)(2) of the 1997 Act (relating to sales 
     before date of enactment) is amended by inserting ``on or'' 
     before ``before'' each place it appears in the text and 
     heading.
       (f) Amendment Related to Section 313 of 1997 Act.--Section 
     1045 of the 1986 Code is amended by adding at the end the 
     following new subsection:
       ``(c) Limitation on Application to Partnerships and S 
     Corporations.--Subsection (a) shall apply to a partnership or 
     S corporation for a taxable year only if at all times during 
     such taxable year all of the partners in the partnership, or 
     all of the shareholders of the S corporation, are natural 
     persons or estates.''.

     SEC. 606. AMENDMENTS RELATED TO TITLE V OF 1997 ACT.

       (a) Amendments Related to Section 501 of 1997 Act.--
       (1) Subsection (c) of section 2631 of the 1986 Code is 
     amended by striking ``an individual who dies'' and inserting 
     ``a generation-skipping transfer''.
       (2) Subsection (f) of section 501 of the 1997 Act is 
     amended by inserting ``(other than the amendment made by 
     subsection (d))'' after ``this section''.
       (b) Amendments Related to Section 502 of 1997 Act.--
       (1) Subsection (a) of section 2033A of the 1986 Code is 
     amended to read as follows:
       ``(a) Exclusion.--
       ``(1) In general.--In the case of an estate of a decedent 
     to which this section applies, the value of the gross estate 
     shall not include the lesser of--

[[Page S2327]]

       ``(A) the adjusted value of the qualified family-owned 
     business interests of the decedent otherwise includible in 
     the estate, or
       ``(B) the exclusion limitation with respect to such estate.
       ``(2) Exclusion limitation.--
       ``(A) In general.--The exclusion limitation with respect to 
     any estate is the amount of reduction in the tentative tax 
     base with respect to such estate which would be required in 
     order to reduce the tax imposed by section 2001(b) 
     (determined without regard to this section) by an amount 
     equal to the maximum credit equivalent benefit.
       ``(B) Maximum credit equivalent benefit.--For purposes of 
     subparagraph (A), the term `maximum credit equivalent 
     benefit' means the excess of--
       ``(i) the amount by which the tentative tax imposed by 
     section 2001(b) (determined without regard to this section) 
     would be reduced if the tentative tax base were reduced by 
     $675,000, over
       ``(ii) the amount by which the applicable credit amount 
     under section 2010(c) with respect to such estate exceeds 
     such applicable credit amount in effect for 1998.
       ``(C) Tentative tax base.--For purposes of this paragraph, 
     the term `tentative tax base' means the amount with respect 
     to which the tax imposed by section 2001(b) would be computed 
     without regard to this section.''.
       (2) Section 2033A(b)(3) of the 1986 Code is amended to read 
     as follows:
       ``(3) Includible gifts of interests.--The amount of the 
     gifts of qualified family-owned business interests determined 
     under this paragraph is the sum of--
       ``(A) the amount of such gifts from the decedent to members 
     of the decedent's family taken into account under section 
     2001(b)(1)(B), plus
       ``(B) the amount of such gifts otherwise excluded under 
     section 2503(b),

     to the extent such interests are continuously held by members 
     of such family (other than the decedent's spouse) between the 
     date of the gift and the date of the decedent's death.''.
       (c) Amendments Related to Section 503 of the 1997 Act.--
       (1) Clause (iii) of section 6166(b)(7)(A) of the 1986 Code 
     is amended to read as follows:
       ``(iii) for purposes of applying section 6601(j), the 2-
     percent portion (as defined in such section) shall be treated 
     as being zero.''.
       (2) Clause (iii) of section 6166(b)(8)(A) of the 1986 Code 
     is amended to read as follows:
       ``(iii) 2-percent interest rate not to apply.--For purposes 
     of applying section 6601(j), the 2-percent portion (as 
     defined in such section) shall be treated as being zero.''.
       (d) Amendment Related to Section 505 of the 1997 Act.--
     Paragraphs (1) and (2) of section 7479(a) of the 1986 Code 
     are each amended by striking ``an estate,'' and inserting 
     ``an estate (or with respect to any property included 
     therein),''.
       (e) Amendments Related to Section 506 of the 1997 Act.--
       (1) Subsection (c) of section 2504 of the 1986 Code is 
     amended by striking ``was assessed or paid'' and inserting 
     ``was finally determined for purposes of this chapter''.
       (2) Paragraph (1) of section 506(e) of the 1997 Act is 
     amended by striking ``and (c)'' and inserting ``, (c), and 
     (d)''.

     SEC. 607. AMENDMENTS RELATED TO TITLE VII OF 1997 ACT.

       (a) Amendment Related to Section 1400 of 1986 Code.--
     Section 1400(b)(2)(B) of the 1986 Code is amended by 
     inserting ``as determined on the basis of the 1990 census'' 
     after ``percent''.
       (b) Amendments Related to Section 1400B of 1986 Code.--
       (1) Section 1400B(d)(2) of the 1986 Code is amended by 
     inserting ``as determined on the basis of the 1990 census'' 
     after ``percent''.
       (2) Section 1400B(b) of the 1986 Code is amended by 
     redesignating paragraphs (6) and (7) as paragraphs (5) and 
     (6), respectively.
       (c) Amendments Related to Section 1400C of 1986 Code.--
       (1) Paragraph (1) of section 1400C(c) of the 1986 Code is 
     amended to read as follows:
       ``(1) In general.--The term `first-time homebuyer' means 
     any individual if such individual (and if married, such 
     individual's spouse) had no present ownership interest in a 
     principal residence in the District of Columbia during the 1-
     year period ending on the date of the purchase of the 
     principal residence to which this section applies.''.
       (2) Subparagraph (B) of section 1400C(e)(2) of the 1986 
     Code is amended by inserting before the period ``on the date 
     the taxpayer first occupies such residence''.
       (3) Paragraph (3) of section 1400C(e) of the 1986 Code is 
     amended by striking all that follows ``principal residence'' 
     and inserting ``on the date such residence is purchased.''.
       (4) Subsection (i) of section 1400C of the 1986 Code is 
     amended to read as follows:
       ``(i) Application of Section.--This section shall apply to 
     property purchased after August 4, 1997, and before January 
     1, 2001.''.
       (5) Subsection (c) of section 23 of the 1986 Code is 
     amended by inserting ``and section 1400C'' after ``other than 
     this section''.
       (6) Subparagraph (C) of section 25(e)(1) of the 1986 Code 
     is amended by striking ``section 23'' and inserting 
     ``sections 23 and 1400C''.

     SEC. 608. AMENDMENTS RELATED TO TITLE IX OF 1997 ACT.

       (a) Amendment Related to Section 901 of 1997 Act.--Section 
     9503(c)(7) of the 1986 Code is amended--
       (1) by striking ``resulting from the amendments made by'' 
     and inserting ``(and transfers to the Mass Transit Account) 
     resulting from the amendments made by subsections (a) and (b) 
     of section 901 of'', and
       (2) by inserting before the period ``and deposits in the 
     Highway Trust Fund (and transfers to the Mass Transit 
     Account) shall be treated as made when they would have been 
     required to be made without regard to section 901(e) of the 
     Taxpayer Relief Act of 1997''.
       (b) Amendment Related to Section 907 of 1997 Act.--
     Paragraph (2) of section 9503(e) of the 1986 Code is amended 
     by striking the last sentence and inserting the following new 
     sentence: ``For purposes of the preceding sentence, the term 
     `mass transit portion' means, for any fuel with respect to 
     which tax was imposed under section 4041 or 4081 and 
     otherwise deposited into the Highway Trust Fund, the amount 
     determined at the rate of--
       ``(A) except as otherwise provided in this sentence, 2.86 
     cents per gallon,
       ``(B) 1.77 cents per gallon in the case of any partially 
     exempt methanol or ethanol fuel (as defined in section 
     4041(m)) none of the alcohol in which consists of ethanol,
       ``(C) 1.86 cents per gallon in the case of liquefied 
     natural gas,
       ``(D) 2.13 cents per gallon in the case of liquefied 
     petroleum gas, and
       ``(E) 9.71 cents per MCF (determined at standard 
     temperature and pressure) in the case of compressed natural 
     gas.''.
       (c) Amendment Related to Section 976 of 1997 Act.--Section 
     6103(d)(5) of the 1986 Code is amended by striking ``section 
     967 of the Taxpayer Relief Act of 1997.'' and inserting 
     ``section 976 of the Taxpayer Relief Act of 1997. Subsections 
     (a)(2) and (p)(4) and sections 7213 and 7213A shall not apply 
     with respect to disclosures or inspections made pursuant to 
     this paragraph.''.

     SEC. 609. AMENDMENTS RELATED TO TITLE X OF 1997 ACT.

       (a) Amendments Related to Section 1001 of 1997 Act.--
       (1) Paragraph (2) of section 1259(b) of the 1986 Code is 
     amended--
       (A) by striking ``debt'' each place it appears in clauses 
     (i) and (ii) of subparagraph (A) and inserting ``position'',
       (B) by striking ``and'' at the end of subparagraph (A), and
       (C) by redesignating subparagraph (B) as subparagraph (C) 
     and by inserting after subparagraph (A) the following new 
     subparagraph:
       ``(B) any hedge with respect to a position described in 
     subparagraph (A), and''.
       (2) Section 1259(d)(1) of the 1986 Code is amended by 
     inserting ``(including cash)'' after ``property''.
       (3) Subparagraph (D) of section 475(f)(1) of the 1986 Code 
     is amended by adding at the end the following new sentence: 
     ``Subsection (d)(3) shall not apply under the preceding 
     sentence for purposes of applying sections 1402 and 7704.''.
       (4) Subparagraph (C) of section 1001(d)(3) of the 1997 Act 
     is amended by striking ``within the 30-day period beginning 
     on'' and inserting ``before the close of the 30th day 
     after''.
       (b) Amendments Related to Section 1012 of 1997 Act.--
       (1) Paragraph (1) of section 1012(d) of the 1997 Act is 
     amended by striking ``1997, pursuant'' and inserting ``1997; 
     except that the amendment made by subsection (a) shall apply 
     to such distributions only if pursuant''.
       (2) Subparagraph (A) of section 355(e)(3) of the 1986 Code 
     is amended--
       (A) by striking ``shall not be treated as described in'' 
     and inserting ``shall not be taken into account in 
     applying'', and
       (B) by striking clause (iv) and inserting the following new 
     clause:
       ``(iv) The acquisition of stock in the distributing 
     corporation or any controlled corporation to the extent that 
     the percentage of stock owned directly or indirectly in such 
     corporation by each person owning stock in such corporation 
     immediately before the acquisition does not decrease.''.
       (c) Amendments Related to Section 1014 of 1997 Act.--
       (1) Paragraph (1) of section 351(g) of the 1986 Code is 
     amended by adding ``and'' at the end of subparagraph (A) and 
     by striking subparagraphs (B) and (C) and inserting the 
     following new subparagraph:
       ``(B) if (and only if) the transferor receives stock other 
     than nonqualified preferred stock--
       ``(i) subsection (b) shall apply to such transferor, and
       ``(ii) such nonqualified preferred stock shall be treated 
     as other property for purposes of applying subsection (b).''.
       (2) Clause (ii) of section 354(a)(2)(C) of 1986 Code is 
     amended by adding at the end the following new subclause:

       ``(III) Extension of statute of limitations.--The statutory 
     period for the assessment of any deficiency attributable to a 
     corporation failing to be a family-owned corporation shall 
     not expire before the expiration of 3 years after the date 
     the Secretary is notified by the corporation (in such manner 
     as the Secretary may prescribe) of such failure, and such 
     deficiency may be assessed before the expiration of such 3-
     year period notwithstanding the provisions of any other law 
     or rule of law which would otherwise prevent such 
     assessment.''.

       (d) Amendment Related to Section 1024 of 1997 Act.--Section 
     6331(h)(1) of the 1986 Code is amended by striking ``The 
     effect of a

[[Page S2328]]

     levy'' and inserting ``If the Secretary approves a levy under 
     this subsection, the effect of such levy''.
       (e) Amendments Related to Section 1031 of 1997 Act.--
       (1) Subsection (l) of section 4041 of the 1986 Code is 
     amended by striking ``subsection (e) or (f)'' and inserting 
     ``subsection (f) or (g)''.
       (2) Subsection (b) of section 9502 of the 1986 Code is 
     amended by moving the sentence added at the end of paragraph 
     (1) to the end of such subsection.
       (3) Subsection (c) of section 6421 of the 1986 Code is 
     amended--
       (A) by striking ``(2)(A)'' and inserting ``(2)'', and
       (B) by adding at the end the following sentence: 
     ``Subsection (a) shall not apply to gasoline to which this 
     subsection applies.''.
       (f) Amendments Related to Section 1032 of 1997 Act.--
       (1) Section 1032(a) of the 1997 Act is amended by striking 
     ``Subsection (a) of section 4083'' and inserting ``Paragraph 
     (1) of section 4083(a)''.
       (2) Section 1032(e)(12)(A) of the 1997 Act shall be applied 
     as if ``gasoline, diesel fuel,'' were the material proposed 
     to be stricken.
       (3) Paragraph (1) of section 4101(e) of the 1986 Code is 
     amended by striking ``dyed diesel fuel and kerosene'' and 
     inserting ``such fuel in a dyed form''.
       (g) Amendment Related to Section 1055 of 1997 Act.--Section 
     6611(g)(1) of the 1986 Code is amended by striking ``(e), and 
     (h)'' and inserting ``and (e)''.
       (h) Amendment Related to Section 1083 of 1997 Act.--Section 
     1083(a)(2) of the 1997 Act is amended--
       (1) by striking ``21'' and inserting ``20'', and
       (2) by striking ``22'' and inserting ``21''.
       (i) Amendment Related to Section 1084 of 1997 Act.--
       (1) Paragraph (3) of section 264(a) of the 1986 Code is 
     amended by striking ``subsection (c)'' and inserting 
     ``subsection (d)''.
       (2) Paragraph (4) of section 264(a) of the 1986 Code is 
     amended by striking ``subsection (d)'' and inserting 
     ``subsection (e)''.
       (3) Paragraph (4) of section 264(f) of the 1986 Code is 
     amended by adding at the end the following new subparagraph:
       ``(E) Master contracts.--If coverage for each insured under 
     a master contract is treated as a separate contract for 
     purposes of sections 817(h), 7702, and 7702A, coverage for 
     each such insured shall be treated as a separate contract for 
     purposes of subparagraph (A). For purposes of the preceding 
     sentence, the term `master contract' shall not include any 
     group life insurance contract (as defined in section 
     848(e)(2)).''.
       (4)(A) Clause (iv) of section 264(f)(5)(A) of the 1986 Code 
     is amended by striking the second sentence.
       (B) Subparagraph (B) of section 6724(d)(1) of the 1986 Code 
     is amended by striking ``or'' at the end of clause (xv), by 
     striking the period at the end of clause (xvi) and inserting 
     ``, or'', and by adding at the end the following new clause:
       ``(xvii) section 264(f)(5)(A)(iv) (relating to reporting 
     with respect to certain life insurance and annuity 
     contracts).''.
       (C) Paragraph (2) of section 6724(d) of the 1986 Code is 
     amended by striking ``or'' at the end of subparagraph (Y), by 
     striking the period at the end of subparagraph (Z) and 
     inserting ``or'', and by adding at the end the following new 
     subparagraph:
       ``(AA) section 264(f)(5)(A)(iv) (relating to reporting with 
     respect to certain life insurance and annuity contracts).''.
       (j) Amendment Related to Section 1085 of 1997 Act.--
     Paragraph (5) of section 32(c) of the 1986 Code is amended--
       (1) by inserting before the period at the end of 
     subparagraph (A) ``and increased by the amounts described in 
     subparagraph (C)'',
       (2) by adding ``or'' at the end of clause (iii) of 
     subparagraph (B), and
       (3) by striking all that follows subclause (II) of 
     subparagraph (B)(iv) and inserting the following:

       ``(III) other trades or businesses.

     For purposes of clause (iv), there shall not be taken into 
     account items which are attributable to a trade or business 
     which consists of the performance of services by the taxpayer 
     as an employee.
       ``(C) Certain amounts included.--An amount is described in 
     this subparagraph if it is--
       ``(i) interest received or accrued during the taxable year 
     which is exempt from tax imposed by this chapter, or
       ``(ii) amounts received as a pension or annuity, and any 
     distributions or payments received from an individual 
     retirement plan, by the taxpayer during the taxable year to 
     the extent not included in gross income.

     Clause (ii) shall not include any amount which is not 
     includible in gross income by reason of section 402(c), 
     403(a)(4), 403(b), 408(d) (3), (4), or (5), or 457(e)(10).''.
       (k) Amendment Related to Section 1088 of 1997 Act.--Section 
     1088(b)(2)(C) of the 1997 Act is amended by inserting ``more 
     than 1 year'' before ``after''.
       (l) Amendment Related to Section 1089 of 1997 Act.--
     Paragraphs (1)(C) and (2)(C) of section 664(d) of the 1986 
     Code are each amended by adding ``, and'' at the end.

     SEC. 610. AMENDMENTS RELATED TO TITLE XI OF 1997 ACT.

       (a) Amendment Related to Section 1103 of 1997 Act.--The 
     paragraph (3) of section 59(a) added by section 1103 of the 
     1997 Act is redesignated as paragraph (4).
       (b) Amendment Related to Section 1121 of 1997 Act.--Section 
     1298(a)(2)(B) of the 1986 Code is amended by adding at the 
     end the following new sentence: ``Section 1297(e) shall not 
     apply in determining whether a corporation is a passive 
     foreign investment company for purposes of this 
     subparagraph.''.
       (c) Amendment Related to Section 1122 of 1997 Act.--Section 
     672(f)(3)(B) of the 1986 Code is amended by striking 
     ``section 1296'' and inserting ``section 1297''.
       (d) Amendment Related to Section 1123 of 1997 Act.--The 
     subsection (e) of section 1297 of the 1986 Code added by 
     section 1123 of the 1997 Act is redesignated as subsection 
     (f).
       (e) Amendment Related to Section 1144 of 1997 Act.--
     Paragraphs (1) and (2) of section 1144(c) of the 1997 Act are 
     each amended by striking ``6038B(b)'' and inserting 
     ``6038B(c) (as redesignated by subsection (b))''.

     SEC. 611. AMENDMENTS RELATED TO TITLE XII OF 1997 ACT.

       (a) Amendment Related to Section 1204 of 1997 Act.--The 
     last sentence of section 162(a) of the 1986 Code is amended 
     by striking ``investigate'' and all that follows and 
     inserting ``investigate or prosecute, or provide support 
     services for the investigation or prosecution of, a Federal 
     crime.''.
       (b) Amendments Related to Section 1205 of 1997 Act.--
       (1) Section 6311(e)(1) of the 1986 Code is amended by 
     striking ``section 6103(k)(8)'' and inserting ``section 
     6103(k)(9)''.
       (2) Paragraph (8) of section 6103(k) of the 1986 Code (as 
     added by section 1205(c)(1) of the 1997 Act) is redesignated 
     as paragraph (9).
       (3) The heading for section 7431(g) of the 1986 Code is 
     amended by striking ``(8)'' and inserting ``(9)''.
       (4) Section 1205(c)(3) of the 1997 Act shall be applied as 
     if it read as follows:
       ``(3) Section 6103(p)(3)(A), as amended by section 
     1026(b)(1)(A), is amended by striking ``or (8)'' and 
     inserting ``(8), or (9)''.
       (5) Section 1213(b) of the 1997 Act is amended by striking 
     ``section 6724(d)(1)(A)'' and inserting ``section 
     6724(d)(1)''.
       (c) Amendment Related to Section 1226 of 1997 Act.--Section 
     1226 of the 1997 Act is amended by striking ``ending on or'' 
     and inserting ``beginning''.
       (d) Amendment Related to Section 1285 of 1997 Act.--Section 
     7430(b) of the 1986 Code is amended by redesignating 
     paragraph (5) as paragraph (4).

     SEC. 612. AMENDMENTS RELATED TO TITLE XIII OF 1997 ACT.

       (a) Section 646 of the 1986 Code is redesignated as section 
     645.
       (b) The item relating to section 646 in the table of 
     sections for subpart A of part I of subchapter J of chapter 1 
     of the 1986 Code is amended by striking ``Sec. 646'' and 
     inserting ``Sec. 645''.
       (c) Paragraph (1) of section 2652(b) of the 1986 Code is 
     amended by striking ``section 646'' and inserting ``section 
     645''.
       (d) Paragraph (3) of section 1(g) of the 1986 Code is 
     amended by striking subparagraph (C) and by redesignating 
     subparagraph (D) as subparagraph (C).
       (e) Section 641 of the 1986 Code is amended by striking 
     subsection (c) and by redesignating subsection (d) as 
     subsection (c).
       (f) Paragraph (4) of section 1361(e) of the 1986 Code is 
     amended by striking ``section 641(d)'' and inserting 
     ``section 641(c)''.
       (g) Subparagraph (A) of section 6103(e)(1) of the 1986 Code 
     is amended by striking clause (ii) and by redesignating 
     clauses (iii) and (iv) as clauses (ii) and (iii), 
     respectively.

     SEC. 613. AMENDMENTS RELATED TO TITLE XIV OF 1997 ACT.

       (a) Amendment Related to Section 1434 of 1997 Act.--
     Paragraph (2) of section 4052(f) of the 1986 Code is amended 
     by striking ``this section'' and inserting ``such section''.
       (b) Amendment Related to Section 1436 of 1997 Act.--
     Paragraph (2) of section 4091(a) of the 1986 Code is amended 
     by inserting ``or on which tax has been credited or 
     refunded'' after ``such paragraph''.

     SEC. 614. AMENDMENTS RELATED TO TITLE XV OF 1997 ACT.

       (a) Amendment Related to Section 1501 of 1997 Act.--The 
     paragraph (8) of section 408(p) of the 1986 Code added by 
     section 1501(b) of the 1997 Act is redesignated as paragraph 
     (9).
       (b) Amendment Related to Section 1505 of 1997 Act.--Section 
     1505(d)(2) of the 1997 Act is amended by striking ``(b)(12)'' 
     and inserting ``(b)(12)(A)(i)''.
       (c) Amendment Related to Section 1531 of 1997 Act.--
     Subsection (f) of section 9811 of the 1986 Code (as added by 
     section 1531 of the 1997 Act) is redesignated as subsection 
     (e).

     SEC. 615. AMENDMENTS RELATED TO TITLE XVI.

       (a) Amendments Related to Section 1601(d) of 1997 Act.--
       (1) Amendments related to section 1601(d)(1)--
       (A) Section 408(p)(2)(D)(i) of the 1986 Code is amended by 
     striking ``or (B)'' in the last sentence.
       (B) Section 408(p) of the 1986 Code is amended by adding at 
     the end the following:
       ``(10) Special rules for acquisitions, dispositions, and 
     similar transactions.--
       ``(A) In general.--An employer which fails to meet any 
     applicable requirement by reason of an acquisition, 
     disposition, or similar transaction shall not be treated as 
     failing to meet such requirement during the transition period 
     if--
       ``(i) the employer satisfies requirements similar to the 
     requirements of section 410(b)(6)(C)(i)(II), and
       ``(ii) the qualified salary reduction arrangement 
     maintained by the employer would satisfy the requirements of 
     this subsection after the transaction if the employer

[[Page S2329]]

     which maintained the arrangement before the transaction had 
     remained a separate employer.
       ``(B) Applicable requirement.--For purposes of this 
     paragraph, the term `applicable requirement' means--
       ``(i) the requirement under paragraph (2)(A)(i) that an 
     employer be an eligible employer,
       ``(ii) the requirement under paragraph (2)(D) that an 
     arrangement be the only plan of an employer, and
       ``(iii) the participation requirements under paragraph (4).
       ``(C) Transition period.--For purposes of this paragraph, 
     the term `transition period' means the period beginning on 
     the date of any transaction described in subparagraph (A) and 
     ending on the last day of the second calendar year following 
     the calendar year in which such transaction occurs.''.
       (C) Section 408(p)(2) of the 1986 Code is amended--
       (i) by striking ``the preceding sentence shall apply only 
     in accordance with rules similar to the rules of section 
     410(b)(6)(C)(i)'' in the last sentence of subparagraph 
     (C)(i)(II) and inserting ``the preceding sentence shall not 
     apply'', and
       (ii) by striking clause (iii) of subparagraph (D).
       (2) Amendment to section 1601(d)(4).--Section 1601(d)(4)(A) 
     of the 1997 Act is amended--
       (A) by striking ``Section 403(b)(11)'' and inserting 
     ``Paragraphs (7)(A)(ii) and (11) of section 403(b)'', and
       (B) by striking ``403(b)(1)'' in clause (ii) and inserting 
     ``403(b)(10)''.
       (b) Amendment Related to Section 1601(f)(4) of 1997 Act.--
     Subsection (d) of section 6427 of the 1986 Code is amended--
       (1) by striking ``Helicopters'' in the heading and 
     inserting ``Other Aircraft Uses'', and
       (2) by inserting ``or a fixed-wing aircraft'' after 
     ``helicopter''.

     SEC. 616. AMENDMENT RELATED TO OMNIBUS BUDGET RECONCILIATION 
                   ACT OF 1993.

       (a) In General.--Section 196(c) of the 1986 Code is amended 
     by striking ``and'' at the end of paragraph (6), by striking 
     the period at the end of paragraph (7), and insert ``, and'', 
     and by adding at the end the following new paragraph:
       ``(8) the employer social security credit determined under 
     section 45B(a).''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect as if included in the amendments made by 
     section 13443 of the Revenue Reconciliation Act of 1993.

     SEC. 617. AMENDMENT RELATED TO TAX REFORM ACT OF 1984.

       (a) In General.--Paragraph (3) of section 136(c) of the Tax 
     Reform Act of 1984 is amended by adding at the end the 
     following flush sentence:

     ``The treatment under the preceding sentence shall apply to 
     each period after June 30, 1983, during which such members 
     are stapled entities, whether or not such members are stapled 
     entities for all periods after June 30, 1983.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect as if included in the Tax Reform Act of 
     1984 as of the date of the enactment of such Act.

     SEC. 618. AMENDMENT RELATED TO TAX REFORM ACT OF 1986.

       (a) In General.--Section 6401(b)(1) of the 1986 Code is 
     amended by striking ``and D'' and inserting ``D, and G''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect as if included in the amendments made by 
     section 701(b) of the Tax Reform Act of 1986.

     SEC. 619. MISCELLANEOUS CLERICAL AND DEADWOOD CHANGES.

       (a)(1) Section 6421 of the 1986 Code is amended by 
     redesignating subsections (j) and (k) as subsections (i) and 
     (j), respectively.
       (2) Subsection (b) of section 34 of the 1986 Code is 
     amended by striking ``section 6421(j)'' and inserting 
     ``section 6421(i)''.
       (3) Subsections (a) and (b) of section 6421 of the 1986 
     Code are each amended by striking ``subsection (j)'' and 
     inserting ``subsection (i)''.
       (b) Sections 4092(b) and 6427(q)(2) of the 1986 Code are 
     each amended by striking ``section 4041(c)(4)'' and inserting 
     ``section 4041(c)(2)''.
       (c) Sections 4221(c) and 4222(d) of the 1986 Code are each 
     amended by striking ``4053(a)(6)'' and inserting ``4053(6)''.
       (d) Paragraph (5) of section 6416(b) of the 1986 Code is 
     amended by striking ``section 4216(e)(1)'' each place it 
     appears and inserting ``section 4216(d)(1)''.
       (e) Paragraph (3) of section 6427(f) of the 1986 Code is 
     amended by striking ``, (e),''.
       (f)(1) Section 6427 of the 1986 Code, as amended by 
     paragraph (2), is amended by redesignating subsections (n), 
     (p), (q), and (r) as subsections (m), (n), (o), and (p), 
     respectively.
       (2) Paragraphs (1) and (2)(A) of section 6427(i) of the 
     1986 Code are each amended by striking ``(q)'' and inserting 
     ``(o)''.
       (g) Subsection (e) of section 9502 of the 1986 Code is 
     amended to read as follows:
       ``(e) Certain Taxes on Alcohol Mixtures To Remain in 
     General Fund.--For purposes of this section, the amounts 
     which would (but for this subsection) be required to be 
     appropriated under subparagraphs (A), (C), and (D) of 
     subsection (b)(1) shall be reduced by--
       ``(1) 0.6 cent per gallon in the case of taxes imposed on 
     any mixture at least 10 percent of which is alcohol (as 
     defined in section 4081(c)(3)) if any portion of such alcohol 
     is ethanol, and
       ``(2) 0.67 cent per gallon in the case of fuel used in 
     producing a mixture described in paragraph (1).''.
       (h)(1) Clause (i) of section 9503(c)(2)(A) of the 1986 Code 
     is amended by adding ``and'' at the end of subclause (II), by 
     striking subclause (III), and by redesignating subclause (IV) 
     as subclause (III).
       (2) Clause (ii) of such section is amended by striking 
     ``gasoline, special fuels, and lubricating oil'' each place 
     it appears and inserting ``fuel''.
       (i) The amendments made by this section shall take effect 
     on the date of the enactment of this Act.

     SEC. 620. EFFECTIVE DATE.

       Except as otherwise provided in this title, the amendments 
     made by this title shall take effect as if included in the 
     provisions of the Taxpayer Relief Act of 1997 to which they 
     relate.
                                 ______
                                 

                     KEMPTHORNE AMENDMENT NO. 2030

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

       At the end, add the following:
        TITLE ____--STUDENT IMPROVEMENT INCENTIVE GRANT PROGRAM

     SEC. ____01. STUDENT IMPROVEMENT INCENTIVE GRANT PROGRAM.

       Title X of the Elementary and Secondary Education Act of 
     1965 (20 U.S.C. 8001 et seq.) is amended by adding at the end 
     the following:

         ``PART N--STUDENT IMPROVEMENT INCENTIVE GRANT PROGRAM

     ``SEC. 10997. STUDENT IMPROVEMENT INCENTIVE GRANT PROGRAM.

       ``(a) Short Title.--This part may be cited as the `Student 
     Improvement Incentive Grants Act'.
       ``(b) Grants Authorized.--
       ``(1) In general.--The Secretary may award a grant to a 
     State educational agency that carries out a statewide 
     assessment described in subsection (c) to enable the agency 
     to make awards to outstanding public secondary schools in the 
     State under subsection (d).
       ``(2) Amount.--The Secretary shall award a grant to a State 
     educational agency under this section for a fiscal year in 
     the amount of $50,000.
       ``(c) Statewide assessment.--In order to be eligible to 
     receive a grant under this section, a State educational 
     agency shall conduct a statewide assessment that--
       ``(1) determines the educational progress of students 
     attending public secondary schools within the State;
       ``(2) allows for an objective analysis of the assessment on 
     a school-by-school basis; and
       ``(3) may involve exit exams.
       ``(d) Public Secondary School Awards.--
       ``(1) In general.--Each State educational agency receiving 
     a grant under this section for a fiscal year shall use the 
     proceeds of the grant to make awards to public secondary 
     schools in the State as follows:
       ``(A) $25,000 shall be awarded to the public secondary 
     school in the State in which the educational progress of the 
     students attending the school is determined, pursuant to the 
     statewide assessment described in subsection (c), to be the 
     best in the State.
       ``(B) $15,000 shall be awarded to the public secondary 
     school in the State in which the educational progress of the 
     students attending the school is determined, pursuant to the 
     statewide assessment described in subsection (c), to be the 
     second best in the State.
       ``(C) $10,000 shall be awarded to the public secondary 
     school in the State in which the enrolled students have the 
     greatest increase in educational progress from one academic 
     year to the subsequent academic year as determined pursuant 
     to the statewide assessment described in subsection (c), 
     except that in the case of a State that did not conduct such 
     an assessment in the fiscal year preceding the fiscal year 
     for which the determination is made, the $10,000 shall be 
     awarded to the public secondary school in the State in which 
     the educational progress of students attending the school is 
     determined, pursuant to the statewide assessment described in 
     subsection (c), to be the third best in the State.
       ``(2) State authority to limit awards.--Each State 
     educational agency receiving a grant under this section may 
     limit the number of awards made to a public secondary school 
     in the State or the number of years for which such awards are 
     made.
       ``(e) Construction.--Nothing in this section shall be 
     construed to prohibit a State from using State funds to 
     increase the amount of awards made under subsection (d) or to 
     make awards to public secondary schools that are not 
     described in subsection (d).
       ``(f) Authorization of Appropriations.--There is authorized 
     to be appropriated to carry out this section $2,600,000 for 
     each of the fiscal years 1999 through 2003. Any funds 
     appropriated under the authority of the preceding sentence 
     for a fiscal year that remain available for obligation at the 
     end of the fiscal year shall be returned to the Treasury.''.
                                 ______
                                 

                  WELLSTONE AMENDMENTS NOS. 2031-2032

  (Ordered to lie on the table.)

[[Page S2330]]

  Mr. WELLSTONE submitted two amendments intended to be proposed by him 
to the bill, H.R. 2646, supra; as follows:

                           Amendment No. 2031

       At the end, insert the following:
                           TITLE ____--STUDY

     SEC. ____01. STUDY.

       (a) Previous Findings.--Congress finds that, with respect 
     to the connection between parental income and the educational 
     attainment of children, various organizations have made the 
     following findings:
       (1) More observed differences across potential access and 
     choice barriers occur by socioeconomic status, and the 
     differences occur from the outset. Of the 1988 eighth graders 
     studied, a smaller percentage of students in the lowest 
     socioeconomic quartile completed applications for 
     postsecondary education. And, from the outset, educational 
     expectations, in terms of the percentages of those who 
     indicated achievement of at least a bachelor's degree, vary 
     directly by socioeconomic ranking.
       (2) Enrollment rates in 4-year colleges and universities 
     were directly related to students' family income and the 
     level of their parents' education. The proportion of students 
     enrolled in 4-year institutions increased at every income 
     level, with \1/3\ of low-income students (33 percent), almost 
     half of middle-income students (47 percent), and about \3/4\ 
     of high-income students (77 percent) attending such 
     institutions.
       (3)(A) Between 1972 and 1995, the proportion of high school 
     graduates going directly to college increased from 49 to 62 
     percent.
       (B) Between 1972 and 1995, high school graduates from high-
     income families were more likely than high school graduates 
     from low-income families to go directly to college.
       (C) Between 1990 and 1995, the higher the education level 
     of a student's parents, the more likely the student was to 
     enroll in college the year after high school.
       (D) In 1995, black high school graduates were less likely 
     than their white counterparts to go directly to college (51 
     percent compared to 64 percent, respectively).
       (4) Between 1974 and 1994, postsecondary enrollment rates 
     of low socioeconomic status students increased at 2-year 
     institutions only, while postsecondary enrollment rates of 
     high socioeconomic status students increased at 4-year 
     institutions.
       (5) Children who grow up in a poor or low-income family 
     tend to have lower educational and labor market attainments 
     than children from more affluent families.
       (6) The financial pressures resulting from rising public 
     tuition, the failure of student aid programs to keep pace 
     with inflation in college costs, and the increase in Federal 
     loans relative to grants have had their strongest impact on 
     lower income students.
       (7) Students from less affluent families are facing a 
     college affordability crisis. While college enrollments have 
     continued to grow, the growth is not among students from less 
     affluent families. Access for students with below-median 
     incomes to 4-year colleges and universities apparently has 
     diminished since 1981. The gap in enrollment rates for 
     students from families in the lowest income quartile and 
     students from more affluent families grew by 12 percentage 
     points between 1980 and 1993.
       (b) Study.--The Secretary of Education shall conduct a 
     study of the connection between parental income and the 
     educational attainment of children. The study shall--
       (1) examine, replicate, or dispute the findings described 
     in subsection (a); and
       (2) examine factors that influence postsecondary education 
     decisions by sex, race or ethnicity, socioeconomic status, 
     and demonstrated academic achievement.
       (c) Timeline.--The Secretary shall conduct the study 
     described in subsection (b), and report to Congress regarding 
     the results of the study, not later than 6 months after the 
     date of enactment of this Act.

                           Amendment No. 2032

       Strike section 101 and insert the following:

     SEC. 101. HOPE AND LIFETIME LEARNING CREDITS MADE REFUNDABLE 
                   FOR CERTAIN TAXPAYERS.

       (a) In General.--Section 25A (relating to HOPE and lifetime 
     learning credits) is amended by redesignating subsection (i) 
     as subsection (j) and by inserting after subsection (h) the 
     following:
       ``(i) Credit Made Refundable for Low Income Taxpayers.--
       ``(1) In general.--In the case of an eligible taxpayer with 
     respect to any taxable year, the aggregate credits allowed 
     under subpart C shall be increased by the credit which would 
     be allowed under this section without regard to this 
     subsection and the limitation under section 26(a). The amount 
     of the credit allowed under this subsection shall not be 
     treated as a credit allowed under this subpart and shall 
     reduce the amount of the credit otherwise allowable under 
     subsection (a) without regard to section 26(a).
       ``(2) Eligible taxpayer.--For purposes of this subsection--
       ``(A) In general.--The term `eligible taxpayer' means a 
     taxpayer whose adjusted gross income for the taxable year 
     does not exceed the applicable adjusted gross income limit 
     for such year.
       ``(B) Applicable amount.--
       ``(i) In general.--Subject to clause (ii), the applicable 
     adjusted gross income limit for any taxable year is the 
     amount of adjusted gross income the Secretary determines will 
     result in an amount equal to the aggregate net reduction in 
     revenues to the Treasury that would have occurred during such 
     taxable year if the amendments made by section 101 of S. 
     1133, 105th Congress, as reported by the Committee on Finance 
     of the Senate, had been enacted.
       ``(ii) Subsequent adjustments.--Proper adjustments shall be 
     made in any determination made under clause (i) with respect 
     to any taxable year to the extent a determination for the 
     preceding taxable year resulted in an amount in excess of or 
     less than the amount of such reduction for such preceding 
     taxable year.''
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1998.
                                 ______
                                 

                WELLSTONE (AND FORD) AMENDMENT NO. 2033

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

       After title II add the following:
                       TITLE ____--MISCELLANEOUS

     SEC ____01. EXPANSION OF EDUCATIONAL OPPORTUNITIES FOR 
                   WELFARE RECIPIENTS.

       (a) 24 Months of Postsecondary Education and Vocational 
     Educational Training Made Permissible Work Activities.--
     Section 407(d)(8) of the Social Security Act (42 U.S.C. 
     607(d)(8)) is amended to read as follows:
       ``(8) postsecondary education and vocational educational 
     training (not to exceed 24 months with respect to any 
     individual);''.
       (b) Modifications To the Educational Cap.--
       (1) Removal of teen parents from 30 percent limitation.--
     Section 407(c)(2)(D) of the Social Security Act (42 U.S.C. 
     607(c)(2)(D)) is amended by striking ``, or (if the month is 
     in fiscal year 2000 or thereafter) deemed to be engaged in 
     work for the month by reason of subparagraph (C) of this 
     paragraph''.
       (2) Extension of cap to postsecondary education.--Section 
     407(c)(2)(D) of the Social Security Act (42 U.S.C. 
     607(c)(2)(D)) is amended by striking ``vocational educational 
     training'' and inserting ``training described in subsection 
     (d)(8)''.
       (c) Clarification That Participation in a Federal Work-
     Study Program Is a Permissible Work Activity Under the TANF 
     Program.--Paragraphs (2) and (3) of section 407(d) of the 
     Social Security Act (42 U.S.C. 607(d)) are each amended by 
     inserting ``(including participation in an activity under a 
     program established under part C of title IV of the Higher 
     Education Act of 1965)'' before the semicolon.
                                 ______
                                 

                       DURBIN AMENDMENT NO. 2034

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

       Strike section 101 and insert:

     SEC. 101. INCREASE IN DEDUCTION FOR HEALTH INSURANCE COSTS OF 
                   SELF-EMPLOYED INDIVIDUALS.

       (a) Increase in Deduction.--
       (1) In general.--Subparagraph (B) of section 162(l)(1) is 
     amended to read as follows:
       ``(B) Applicable percentage.--For purposes of subparagraph 
     (A), the applicable percentage shall be determined under the 
     following table:

``For taxable years                                                    
  beginning in                                           The applicable
  calendar year--                                       percentage is--
  1998........................................................____ ....

  1999........................................................____ ....

  2000........................................................____ ....

  2001........................................................____ ....

  2002........................................................____ ....

  2003........................................................____ ....

  2004........................................................____ ....

  2005........................................................____ ....

  2006 and thereafter.......................................____.''....

       (2) Effective date.--The amendment made by this subsection 
     shall apply to taxable years beginning after December 31, 
     1997.
       (b) Rules Relating to Foreign Oil and Gas Income.--
       (1) Separate basket for foreign tax credit.--
       (A) In general.--Paragraph (1) of section 904(d) (relating 
     to separate application of section with respect to certain 
     categories of income) is amended by striking ``and'' at the 
     end of subparagraph (H), by redesignating subparagraph (I) as 
     subparagraph (J), and by inserting after subparagraph (H) the 
     following new subparagraph:
       ``(I) foreign oil and gas income, and''.
       (B) Definition.--Paragraph (2) of section 904(d) is amended 
     by redesignating subparagraphs (H) and (I) as subparagraphs 
     (I) and (J), respectively, and by inserting after 
     subparagraph (G) the following new subparagraph:
       ``(H) Foreign oil and gas income.--The term `foreign oil 
     and gas income' has the meaning given such term by section 
     954(g).''
       (C) Conforming amendments.--
       (i) Section 904(d)(3)(F)(i) is amended by striking ``or 
     (E)'' and inserting ``(E), or (I)''.
       (ii) Section 907(a) is hereby repealed.
       (iii) Section 907(c)(4) is hereby repealed.
       (iv) Section 907(f) is hereby repealed.
       (D) Effective dates.--
       (i) In general.--The amendments made by this paragraph 
     shall apply to taxable years

[[Page S2331]]

     beginning after the date of the enactment of this Act.
       (ii) Transitional rules.--

       (I) Separate basket treatment.--Any taxes paid or accrued 
     in a taxable year beginning on or before the date of the 
     enactment of this Act, with respect to income which was 
     described in subparagraph (I) of section 904(d)(1) of such 
     Code (as in effect on the day before the date of the 
     enactment of this Act), shall be treated as taxes paid or 
     accrued with respect to foreign oil and gas income to the 
     extent the taxpayer establishes to the satisfaction of the 
     Secretary of the Treasury that such taxes were paid or 
     accrued with respect to foreign oil and gas income.
       (II) Carryovers.--Any unused oil and gas extraction taxes 
     which under section 907(f) of such Code (as so in effect) 
     would have been allowable as a carryover to the taxpayer's 
     first taxable year beginning after the date of the enactment 
     of this Act (without regard to the limitation of paragraph 
     (2) of such section 907(f) for first taxable year) shall be 
     allowed as carryovers under section 904(c) of such Code in 
     the same manner as if such taxes were unused taxes under such 
     section 904(c) with respect to foreign oil and gas extraction 
     income.
       (III) Losses.--The amendment made by subparagraph (C)(iii) 
     shall not apply to foreign oil and gas extraction losses 
     arising in taxable years beginning on or before the date of 
     the enactment of this Act.

       (2) Elimination of deferral for foreign oil and gas 
     extraction income.--
       (A) General rule.--Paragraph (1) of section 954(g) 
     (defining foreign base company oil related income) is amended 
     to read as follows:
       ``(1) In general.--Except as otherwise provided in this 
     subsection, the term `foreign oil and gas income' means any 
     income of a kind which would be taken into account in 
     determining the amount of--
       ``(A) foreign oil and gas extraction income (as defined in 
     section 907(c)), or
       ``(B) foreign oil related income (as defined in section 
     907(c)).''
       (B) Conforming amendments.--
       (i) Subsections (a)(5), (b)(5), and (b)(8) of section 954 
     are each amended by striking ``base company oil related 
     income'' each place it appears (including in the heading of 
     subsection (b)(8)) and inserting ``oil and gas income''.
       (ii) Subsection (b)(4) of section 954 is amended by 
     striking ``base company oil-related income'' and inserting 
     ``oil and gas income''.
       (iii) The subsection heading for subsection (g) of section 
     954 is amended by striking ``Foreign Base Company Oil Related 
     Income'' and inserting ``Foreign Oil and Gas Income''.
       (iv) Subparagraph (A) of section 954(g)(2) is amended by 
     striking ``foreign base company oil related income'' and 
     inserting ``foreign oil and gas income''.
       (C) Effective date.--The amendments made by this paragraph 
     shall apply to taxable years of foreign corporations 
     beginning after the date of the enactment of this Act, and to 
     taxable years of United States shareholders ending with or 
     within such taxable years of foreign corporations.
       (c) Valuation Rules for Transfers Involving Nonbusiness 
     Assets.--
       (1) In general.--Section 2031 (relating to definition of 
     gross estate) is amended by redesignating subsection (d) as 
     subsection (e) and by inserting after subsection (c) the 
     following new subsection:
       ``(d) Valuation Rules for Certain Transfers of Nonbusiness 
     Assets.--For purposes of this chapter and chapter 12--
       ``(1) In general.--In the case of the transfer of any 
     interest in an entity other than an interest which is 
     actively traded (within the meaning of section 1092)--
       ``(A) the value of any nonbusiness assets held by the 
     entity shall be determined as if the transferor had 
     transferred such assets directly to the transferee (and no 
     valuation discount shall be allowed with respect to such 
     nonbusiness assets), and
       ``(B) the nonbusiness assets shall not be taken into 
     account in determining the value of the interest in the 
     entity.
       ``(2) Nonbusiness assets.--For purposes of this 
     subsection--
       ``(A) In general.--The term `nonbusiness asset' means any 
     asset which is not used in the active conduct of 1 or more 
     trades or businesses.
       ``(B) Exception for certain passive assets.--Except as 
     provided in subparagraph (C), a passive asset shall not be 
     treated for purposes of subparagraph (A) as used in the 
     active conduct of a trade or business unless--
       ``(i) the asset is property described in paragraph (1) or 
     (4) of section 1221 or is a hedge with respect to such 
     property, or
       ``(ii) the asset is real property used in the active 
     conduct of 1 or more real property trades or businesses 
     (within the meaning of section 469(c)(7)(C)) in which the 
     transferor materially participates and with respect to which 
     the transferor meets the requirements of section 
     469(c)(7)(B)(ii).

     For purposes of clause (ii), material participation shall be 
     determined under the rules of section 469(h), except that 
     section 469(h)(3) shall be applied without regard to the 
     limitation to farming activity.
       ``(C) Exception for working capital.--Any asset (including 
     a passive asset) which is held as a part of the reasonably 
     required working capital needs of a trade or business shall 
     be treated as used in the active conduct of a trade or 
     business.
       ``(3) Passive asset.--For purposes of this subsection, the 
     term `passive asset' means any--
       ``(A) cash or cash equivalents,
       ``(B) except to the extent provided by the Secretary, stock 
     in a corporation or any other equity, profits, or capital 
     interest in any entity,
       ``(C) evidence of indebtedness, option, forward or futures 
     contract, notional principal contract, or derivative,
       ``(D) asset described in clause (iii), (iv), or (v) of 
     section 351(e)(1)(B),
       ``(E) annuity,
       ``(F) real property used in 1 or more real property trades 
     or businesses (as defined in section 469(c)(7)(C)),
       ``(G) asset (other than a patent, trademark, or copyright) 
     which produces royalty income,
       ``(H) commodity,
       ``(I) collectible (within the meaning of section 401(m)), 
     or
       ``(J) any other asset specified in regulations prescribed 
     by the Secretary.
       ``(4) Look-thru rules.--
       ``(A) In general.--If a nonbusiness asset of an entity 
     consists of a 10-percent interest in any other entity, this 
     subsection shall be applied by disregarding the 10-percent 
     interest and by treating the entity as holding directly its 
     ratable share of the assets of the other entity. This 
     subparagraph shall be applied successively to any 10-percent 
     interest of such other entity in any other entity.
       ``(B) 10-percent interest.--The term `10-percent interest' 
     means--
       ``(i) in the case of an interest in a corporation, 
     ownership of at least 10 percent (by vote or value) of the 
     stock in such corporation,
       ``(ii) in the case of an interest in a partnership, 
     ownership of at least 10 percent of the capital or profits 
     interest in the partnership, and
       ``(iii) in any other case, ownership of at least 10 percent 
     of the beneficial interests in the entity.
       ``(5) Coordination with subsection (b).--Subsection (b) 
     shall apply after the application of this subsection.''
       (2) Effective date.--The amendments made by this subsection 
     shall apply to transfers after the date of the enactment of 
     this Act.
                                 ______
                                 

                   NICKLES AMENDMENTS NOS. 2035-2037

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

                           Amendment No. 2035

       Strike section 106.
                                                                    ____


                           Amendment No. 2036

       Strike section 106 and insert:

     SEC. 106. INCREASE IN DEDUCTION FOR HEALTH INSURANCE FOR 
                   SELF-EMPLOYEDS.

       (a) In General.--The table contained in section 
     162(l)(1)(B) is amended--
       (1) by striking the item relating to years 1998 and 1999, 
     and
       (2) by striking ``2000 and 2001'' and inserting ``1998 
     through 2001''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1997.
                                                                    ____


                           Amendment No. 2037

       At the end of title I, insert:

     SEC. ____. INCOME TAXED AT LOWEST RATE INCREASED TO $35,000 
                   FOR UNMARRIED INDIVIDUALS, $70,000 FOR JOINT 
                   RETURNS AND SURVIVING SPOUSES, AND $52,600 FOR 
                   HEADS OF HOUSEHOLDS.

       (a) General Rule.--Section 1 (relating to tax imposed) is 
     amended by striking subsections (a) through (e) and inserting 
     the following:
       ``(a) Married Individuals Filing Joint Returns and 
     Surviving Spouses.--There is hereby imposed on the taxable 
     income of--
       ``(1) every married individual (as defined in section 7703) 
     who makes a single return jointly with his spouse under 
     section 6013, and
       ``(2) every surviving spouse (as defined in section 2(a)),

     a tax determined in accordance with the following table:

The tax is:e income is:
15% of taxable income..................................................
$10,500, plus 28% of the excess over $70,000...........................
$19,544, plus 31% of the excess over $102,300..........................
$36,175, plus 36% of the excess over $155,950..........................
$80,275, plus 39.6% of the excess over $278,450........................

       ``(b) Heads of Households.--There is hereby imposed on the 
     taxable income of every head of a household (as defined in 
     section 2(b)) a tax determined in accordance with the 
     following table:

The tax is:e income is:
15% of taxable income..................................................
$7,890, plus 28% of the excess over $52,600............................
$17,718, plus 31% of the excess over $87,700...........................
$34,551, plus 36% of the excess over $142,000..........................
$83,673 plus 39.6% of the excess over $278,450.........................

       ``(c) Unmarried Individuals (Other Than Surviving Spouses 
     and Heads of Households).--There is hereby imposed on the 
     taxable income of every individual (other than a

[[Page S2332]]

     surviving spouse as defined in section 2(a) or the head of a 
     household as defined in section 2(b)) who is not a married 
     individual (as defined in section 7703) a tax determined in 
     accordance with the following table:

The tax is:e income is:
15% of taxable income..................................................
$5,250, plus 28% of the excess over $35,000............................
$12,642, plus 31% of the excess over $61,400...........................
$33,319, plus 36% of the excess over $128,100..........................
$87,445, plus 39.6% of the excess over $278,450........................

       ``(d) Married Individuals Filing Separate Returns.--There 
     is hereby imposed on the taxable income of every married 
     individual (as defined in section 7703) who does not make a 
     single return jointly with his spouse under section 6013, a 
     tax determined in accordance with the following table:

The tax is:e income is:
15% of taxable income..................................................
$5,250, plus 28% of the excess over $35,000............................
$9,772, plus 31% of the excess over $51,150............................
$18,088, plus 36% of the excess over $77,975...........................
$40,138, plus 39.6% of the excess over $139,225........................

       ``(e) Estates and Trusts.--There is hereby imposed on the 
     taxable income of--
       ``(1) every estate, and
       ``(2) every trust,

     taxable under this subsection a tax determined in accordance 
     with the following table:

The tax is:e income is:
15% of taxable income..................................................
$255, plus 28% of the excess over $1,700...............................
$899, plus 31% of the excess over $4,000...............................
$1,550, plus 36% of the excess over $6,100.............................
$2,360, plus 39.6% of the excess over $8,350.''........................

       (b) Inflation Adjustment To Apply in Determining Rates for 
     1999.--Subsection (f) of section 1 is amended--
       (1) by striking ``1993'' in paragraph (1) and inserting 
     ``1998'',
       (2) by striking ``1992'' in paragraph (3)(B) and inserting 
     ``1997'', and
       (3) by striking paragraph (7).
       (c) Conforming Amendments.--
       (1) The following provisions are each amended by striking 
     ``1992'' and inserting ``1997'' each place it appears:
       (A) Section 25A(h).
       (B) Section 32(j)(1)(B).
       (C) Section 41(e)(5)(C).
       (D) Section 42(h)(6)(G)(i)(II).
       (E) Section 68(b)(2)(B).
       (F) Section 135(b)(2)(B)(ii).
       (G) Section 151(d)(4).
       (H) Section 221(g)(1)(B).
       (I) Section 512(d)(2)(B).
       (J) Section 513(h)(2)(C)(ii).
       (K) Section 877(a)(2).
       (L) Section 911(b)(2)(D)(ii)(II).
       (M) Section 4001(e)(1)(B).
       (N) Section 4261(e)(4)(A)(ii).
       (O) Section 6039F(d).
       (P) Section 6334(g)(1)(B).
       (Q) Section 7430(c)(1).
       (2) Subparagraph (B) of section 59(j)(2) is amended by 
     striking ``, determined by substituting `1997' for `1992' in 
     subparagraph (B) thereof''.
       (3) Subparagraph (B) of section 63(c)(4) is amended by 
     striking ``by substituting for'' and all that follows and 
     inserting ``by substituting for `calendar year 1997' in 
     subparagraph (B) thereof `calendar year 1987' in the case of 
     the dollar amounts contained in paragraph (2) or (5)(A) or 
     subsection (f).''
       (4) Subparagraph (B) of section 132(f)(6) is amended by 
     inserting before the period ``, determined by substituting 
     `calendar year 1992' for `calendar year 1997' in subparagraph 
     (B) thereof''.
       (5) Paragraph (2) of section 220(g) is amended by striking 
     `` by substituting `calendar year 1997' for `calendar year 
     1992' in subparagraph (B) thereof''.
       (6) Subparagraph (B) of section 685(c)(3) is amended by 
     striking ``, by substituting `calendar year 1997' for 
     `calendar year 1992' in subparagraph (B) thereof''.
       (7) Subparagraph (B) of section 2032A(a)(3) is amended by 
     striking ``by substituting `calendar year 1997' for `calendar 
     year 1992' in subparagraph (B) thereof''.
       (8) Subparagraph (B) of section 2503(b)(2) is amended by 
     striking ``by substituting `calendar year 1997' for `calendar 
     year 1992' in subparagraph (B) thereof''.
       (9) Paragraph (2) of section 2631(c) is amended by striking 
     ``by substituting `calendar year 1997' for `calendar year 
     1992' in subparagraph (B) thereof''.
       (10) Subparagraph (B) of 6601(j)(3) is amended by striking 
     ``by substituting `calendar year 1997' for `calendar year 
     1992' in subparagraph (B) thereof''.
       (d) Modification of Withholding Tables for Taxable Year 
     1998.--Notwithstanding the provisions of section 3402(a) of 
     the Internal Revenue Code of 1986, the Secretary of the 
     Treasury shall modify the tables and procedures under section 
     3402(a)(1) of such Code to reflect the amendment made by 
     subsection (a). Such modification shall--
       (1) take effect on July 1, 1998, and
       (2) reflect the entire reduction in taxes for calendar year 
     1998 made by such amendment during the 6-month period 
     beginning July 1, 1998.
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1997.
                                 ______
                                 

                        DODD AMENDMENT NO. 2038

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

       Strike section 101 and insert:

     SEC. 101. ALLOWANCE OF CREDIT FOR EMPLOYER EXPENSES FOR CHILD 
                   CARE ASSISTANCE.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits) is amended 
     by adding at the end the following:

     ``SEC. 45D. EMPLOYER-PROVIDED CHILD CARE CREDIT.

       ``(a) Allowance of Credit.--For purposes of section 38, the 
     employer-provided child care credit determined under this 
     section for the taxable year is an amount equal to 25 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.--
       ``(A) In general.--The term `qualified child care 
     expenditure' means any amount paid or incurred--
       ``(i) 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,

       ``(ii) for the operating costs of a qualified child care 
     facility of the taxpayer, including costs related to the 
     training of employees of the child care facility, to 
     scholarship programs, to the providing of differential 
     compensation to employees based on level of child care 
     training, and to expenses associated with achieving 
     accreditation,
       ``(iii) under a contract with a qualified child care 
     facility to provide child care services to employees of the 
     taxpayer, or
       ``(iv) under a contract to provide child care resource and 
     referral services to employees of the taxpayer.
       ``(B) Exclusion for amounts funded by grants, etc.--The 
     term `qualified child care expenditure' shall not include any 
     amount to the extent such amount is funded by any grant, 
     contract, or otherwise by another person (or any governmental 
     entity).
       ``(C) Limitation on allowable operating costs.--The term 
     `qualified child care expenditure' shall not include any 
     amount described in subparagraph (A)(ii) if such amount is 
     paid or incurred after the third taxable year in which a 
     credit under this section is taken by the taxpayer, unless 
     the qualified child care facility of the taxpayer has 
     received accreditation from a nationally recognized 
     accrediting body before the end of such third taxable year.
       ``(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 costs to employees of child care services at 
     such facility are determined on a sliding fee scale.
       ``(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   

[[Page S2333]]

    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.''.
       (b) Conforming Amendments.--
       (1) Section 38(b) is amended--
       (A) by striking out ``plus'' at the end of paragraph (11),
       (B) by striking out the period at the end of paragraph 
     (12), and inserting a comma and ``plus'', and
       (C) by adding at the end the following new paragraph:
       ``(13) the employer-provided child care credit determined 
     under section 45D.''.
       (2) The table of sections for subpart D of part IV of 
     subchapter A of chapter 1 is amended by adding at the end the 
     following new item:

``Sec. 45D. Employer-provided child care credit.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1998.
                                 ______
                                 

                 KOHL (AND JOHNSON) AMENDMENT NO. 2039

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

       At the appropriate place, insert:

     SEC. ____. GAIN OR LOSS FROM SALE OF LIVESTOCK DISREGARDED 
                   FOR PURPOSES OF EARNED INCOME CREDIT.

       (a) In General.--Section 32(i)(2)(D) (relating to 
     disqualified income) is amended by inserting ``determined 
     without regard to gain or loss from the sale of livestock 
     described in section 1231(b)(3),'' after ``taxable year,''.
       (b) Disallowance of Interest Deduction on Residences 
     Outside the United States.--Section 163(h)(4)(A)(i) (defining 
     qualified residence) is amended by adding at the end the 
     following new flush sentence:

     ``Such term shall not include a residence located outside the 
     United States.''
       (c) Effective Dates.--
       (1) Livestock.--The amendment made by subsection (a) shall 
     apply to taxable years beginning after December 31, 1995.
                                 ______
                                 

                   BINGAMAN AMENDMENTS NOS. 2040-2041

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

                           Amendment No. 2040

       Strike section 101, and insert the following:

     SEC. 101. DROPOUT PREVENTION AND STATE RESPONSIBILITIES.

       (a) Short Title.--This section may be cited as the 
     ``National Dropout Prevention Act of 1998''.
       (b) Dropout Prevention.--Part C of title V of the 
     Elementary and Secondary Education Act of 1965 (20 U.S.C. 
     7261 et seq.) is amended to read as follows:

        ``PART C--ASSISTANCE TO ADDRESS SCHOOL DROPOUT PROBLEMS

               ``Subpart 1--Coordinated National Strategy

     ``SEC. 5311. NATIONAL ACTIVITIES.

       ``(a) National Priority.--It shall be a national priority, 
     for the 5-year period beginning on the date of enactment of 
     the National Dropout Prevention Act of 1998, to lower the 
     school dropout rate, and increase school completion, for 
     middle school and secondary school students in accordance 
     with Federal law. As part of this priority, all Federal 
     agencies that carry out activities that serve students at 
     risk of dropping out of school or that are intended to help 
     address the school dropout problem shall make school dropout 
     prevention a top priority in the agencies' funding priorities 
     during the 5-year period.
       ``(b) Enhanced Data Collection.--The Secretary shall 
     collect systematic data on the participation of different 
     racial and ethnic groups (including migrant and limited 
     English proficient students) in all Federal programs.

     ``SEC. 5312. NATIONAL SCHOOL DROPOUT PREVENTION STRATEGY.

       ``(a) Plan.--The Director shall develop, implement, and 
     monitor an interagency plan (in this section referred to as 
     the ``plan'') to assess the coordination, use of resources, 
     and availability of funding under Federal law that can be 
     used to address school dropout prevention, or middle school 
     or secondary school reentry. The plan shall be completed and 
     transmitted to the Secretary and Congress not later than 180 
     days after the first Director is appointed.
       ``(b) Coordination.--The plan shall address inter- and 
     intra-agency program coordination issues at the Federal level 
     with respect to school dropout prevention and middle school 
     and secondary school reentry, assess the targeting of 
     existing Federal services to students who are most at risk of 
     dropping out of school, and the cost-effectiveness of various 
     programs and approaches used to address school dropout 
     prevention.
       ``(c) Available Resources.--The plan shall also describe 
     the ways in which State and local agencies can implement 
     effective school dropout prevention programs using funds from 
     a variety of Federal programs, including the programs under 
     title I of the Elementary and Secondary Education Act of 1965 
     (20 U.S.C. 6301 et seq.) and the School-to-Work Opportunities 
     Act of 1994 (20 U.S.C. 6101 et seq.).
       ``(d) Scope.--The plan will address all Federal programs 
     with school dropout prevention or school reentry elements or 
     objectives, programs under chapter 1 of subpart 2 of part A 
     of title IV of the Higher Education Act of 1965 (20 U.S.C. 
     1070a-11 et seq.), title I of the Elementary and Secondary 
     Education Act of 1965 (20 U.S.C. 6301 et seq.), the School-
     to-Work Opportunities Act of 1994 (20 U.S.C. 6101 et seq.), 
     and part B of title IV of the Job Training Partnership Act 
     (29 U.S.C. 1691 et seq.), and other programs.

     ``SEC. 5313. NATIONAL CLEARINGHOUSE.

       ``Not later than 6 months after the date of enactment of 
     the National Dropout Prevention Act of 1998, the Director 
     shall establish a national clearinghouse on effective school 
     dropout prevention, intervention and reentry programs. The 
     clearinghouse shall be established through a competitive 
     grant or contract awarded to an organization with a 
     demonstrated capacity to provide technical assistance and 
     disseminate information in the area of school dropout 
     prevention, intervention, and reentry programs. The 
     clearinghouse shall--
       ``(1) collect and disseminate to educators, parents, and 
     policymakers information on research, effective programs, 
     best practices, and available Federal resources with respect 
     to school dropout prevention, intervention, and reentry 
     programs, including dissemination by an electronically 
     accessible database, a worldwide Web site, and a national 
     journal; and

[[Page S2334]]

       ``(2) provide technical assistance regarding securing 
     resources with respect to, and designing and implementing, 
     effective and comprehensive school dropout prevention, 
     intervention, and reentry programs.

     ``SEC. 5314. NATIONAL RECOGNITION PROGRAM.

       ``(a) In General.--The Director shall carry out a national 
     recognition program that recognizes schools that have made 
     extraordinary progress in lowering school dropout rates under 
     which a public middle school or secondary school from each 
     State will be recognized. The Director shall use uniform 
     national guidelines that are developed by the Director for 
     the recognition program and shall recognize schools from 
     nominations submitted by State educational agencies.
       ``(b) Eligible Schools.--The Director may recognize any 
     public middle school or secondary school (including a charter 
     school) that has implemented comprehensive reforms regarding 
     the lowering of school dropout rates for all students at that 
     school.
       ``(c) Support.--The Director may make monetary awards to 
     schools recognized under this section, in amounts determined 
     by the Director. Amounts received under this section shall be 
     used for dissemination activities within the school district 
     or nationally.

       ``Subpart 2--National School Dropout Prevention Initiative

     ``SEC. 5321. FINDINGS.

       ``Congress finds that, in order to lower dropout rates and 
     raise academic achievement levels, improved and redesigned 
     schools must--
       ``(1) challenge all children to attain their highest 
     academic potential; and
       ``(2) ensure that all students have substantial and ongoing 
     opportunities to--
       ``(A) achieve high levels of academic and technical skills;
       ``(B) prepare for college and careers;
       ``(C) learn by doing;
       ``(D) work with teachers in small schools within schools;
       ``(E) receive ongoing support from adult mentors;
       ``(F) access a wide variety of information about careers 
     and postsecondary education and training;
       ``(G) use technology to enhance and motivate learning; and
       ``(H) benefit from strong links among middle schools, 
     secondary schools, and postsecondary institutions.

     ``SEC. 5322. PROGRAM AUTHORIZED.

       ``(a) Allotments to States.--
       ``(1) In general.--From the sum made available under 
     section 5332(b) for a fiscal year the Secretary shall make an 
     allotment to each State in an amount that bears the same 
     relation to the sum as the amount the State received under 
     title I of the Elementary and Secondary Education Act of 1965 
     (20 U.S.C. 6301 et seq.) for the preceding fiscal year bears 
     to the amount received by all States under such title for the 
     preceding fiscal year.
       ``(2) Definition of state.--In this subpart, the term 
     ``State'' means each of the several States of the United 
     States, the District of Columbia, the Commonwealth of Puerto 
     Rico, 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.
       ``(b) Grants.--From amounts made available to a State under 
     subsection (a), the State educational agency may award grants 
     to public middle schools or secondary schools, that have 
     school dropout rates which are in the highest \1/3\ of all 
     school dropout rates in the State, to enable the schools to 
     pay only the startup and implementation costs of effective, 
     sustainable, coordinated, and whole school dropout prevention 
     programs that involve activities such as--
       ``(1) professional development;
       ``(2) obtaining curricular materials;
       ``(3) release time for professional staff; and
       ``(4) planning and research.
       ``(b) Intent of Congress.--It is the intent of Congress 
     that the activities started or implemented under subsection 
     (a) shall be continued with funding provided under part A of 
     title I of the Elementary and Secondary Education Act of 1965 
     (20 U.S.C. 6311 et seq.).
       ``(c) Number.--The State educational agency shall award not 
     more than 1,000 grants under this subpart during the first 
     year that the State receives an allotment under this subpart, 
     not more than 1,500 grants during the second such year, and 
     not more than 2,000 grants during the third such year.
       ``(d) Amount.--
       ``(1) In general.--Subject to subsection (e) and except as 
     provided in paragraph (2), a grant under this subpart shall 
     be awarded--
       ``(A) in the first year that a school receives a grant 
     payment under this subpart, in an amount that is not less 
     than $50,000 and not more than $100,000, based on factors 
     such as--
       ``(i) school size;
       ``(ii) costs of the model being implemented; and
       ``(iii) local cost factors such as poverty rates;
       ``(B) in the second such year, in an amount that is not 
     less than 75 percent of the amount the school received under 
     this subpart in the first such year;
       ``(C) in the third year, in an amount that is not less than 
     50 percent of the amount the school received under this 
     subpart in the first such year; and
       ``(D) in each succeeding year in an amount that is not less 
     than 30 percent of the amount the school received under this 
     subpart in the first such year.
       ``(2) Increases.--The Director shall increase the amount 
     awarded to a school under this subpart by 10 percent if the 
     school creates smaller learning communities within the school 
     and the creation is certified by the State educational 
     agency.
       ``(e) Duration.--A grant under this subpart shall be 
     awarded for a period of 3 years, and may be continued for a 
     period of 2 additional years if the State educational agency 
     determines, based on the annual reports described in section 
     5328(a), that significant progress has been made in lowering 
     the school dropout rate for students participating in the 
     program assisted under this subpart compared to students at 
     similar schools who are not participating in the program.

     ``SEC. 5323. STRATEGIES AND ALLOWABLE MODELS.

       ``(a) Strategies.--Each school receiving a grant under this 
     subpart shall implement research-based, sustainable, and 
     widely replicated, strategies for school dropout prevention 
     and reentry that address the needs of an entire school 
     population rather than a subset of students. The strategies 
     may include--
       ``(1) specific strategies for targeted purposes; and
       ``(2) approaches such as breaking larger schools down into 
     smaller learning communities and other comprehensive reform 
     approaches, developing clear linkages to career skills and 
     employment, and addressing specific gatekeeper hurdles that 
     often limit student retention and academic success.
       ``(b) Allowable Models.--The Director shall annually 
     establish and publish in the Federal Register the principles, 
     criteria, models, and other parameters regarding the types of 
     effective, proven program models that are allowed to be used 
     under this subpart, based on existing research.
       ``(c) Capacity Building.--
       ``(1) In general.--The Director, through a contract with a 
     non-Federal entity, shall conduct a capacity building and 
     design initiative in order to increase the types of proven 
     strategies for dropout prevention on a schoolwide level.
       ``(2) Number and duration.--
       ``(A) Number.--The Director shall award not more than 5 
     contracts under this subsection.
       ``(B) Duration.--The Director shall award a contract under 
     this section for a period of not more than 5 years.
       ``(d) Support for Existing Reform Networks.--
       ``(1) In general.--The Director shall provide appropriate 
     support to eligible entities to enable the eligible entities 
     to provide training, materials, development, and staff 
     assistance to schools assisted under this subpart.
       ``(2) Definition of eligible entity.--The term `eligible 
     entity' means an entity that, prior to the date of enactment 
     of the National Dropout Prevention Act of 1998--
       ``(A) provided training, technical assistance, and 
     materials to 100 or more elementary schools or secondary 
     schools; and
       ``(B) developed and published a specific educational 
     program or design for use by the schools.

     ``SEC. 5324. SELECTION OF SCHOOLS.

       ``(a) School Application.--
       ``(1) In general.--Each school desiring a grant under this 
     subpart shall submit an application to the State educational 
     agency at such time, in such manner, and accompanied by such 
     information as the State educational agency may require.
       ``(2) Contents.--Each application submitted under paragraph 
     (1) shall--
       ``(A) contain a certification from the local educational 
     agency serving the school that--
       ``(i) the school has the highest number or rates of school 
     dropouts in the age group served by the local educational 
     agency;
       ``(ii) the local educational agency is committed to 
     providing ongoing operational support, for the school's 
     comprehensive reform plan to address the problem of school 
     dropouts, for a period of 5 years; and
       ``(iii) the local educational agency will support the plan, 
     including--

       ``(I) release time for teacher training;
       ``(II) efforts to coordinate activities for feeder schools; 
     and
       ``(III) encouraging other schools served by the local 
     educational agency to participate in the plan;

       ``(B) demonstrate that the faculty and administration of 
     the school have agreed to apply for assistance under this 
     subpart, and provide evidence of the school's willingness and 
     ability to use the funds under this subpart, including 
     providing an assurance of the support of 80 percent or more 
     of the professional staff at the school;
       ``(C) describe the instructional strategies to be 
     implemented, how the strategies will serve all students, and 
     the effectiveness of the strategies;
       ``(D) describe a budget and timeline for implementing the 
     strategies;
       ``(E) contain evidence of interaction with an eligible 
     entity described in section 5323(d)(2);
       ``(F) contain evidence of coordination with existing 
     resources;
       ``(G) provide an assurance that funds provided under this 
     subpart will supplement and not supplant other Federal, 
     State, and local funds;
       ``(H) describe how the activities to be assisted conform 
     with an allowable model described in section 5323(b); and

[[Page S2335]]

       ``(I) demonstrate that the school and local educational 
     agency have agreed to conduct a schoolwide program under 
     1114.
       ``(b) State Agency Review and Award.--The State educational 
     agency shall review applications and award grants to schools 
     under subsection (a) according to a review by a panel of 
     experts on school dropout prevention.
       ``(c) Criteria.--The Director shall establish clear and 
     specific selection criteria for awarding grants to schools 
     under this subpart. Such criteria shall be based on school 
     dropout rates and other relevant factors for State 
     educational agencies to use in determining the number of 
     grants to award and the type of schools to be awarded grants.
       ``(d) Eligibility.--
       ``(1) In general.--A school is eligible to receive a grant 
     under this subpart if the school is--
       ``(A) a public school--
       ``(i) that is eligible to receive assistance under part A 
     of title I of the Elementary and Secondary Education Act of 
     1965 (20 U.S.C. 6311 et seq.), including a comprehensive 
     secondary school, a vocational or technical secondary school, 
     and a charter school; and
       ``(ii)(I) that serves students 50 percent or more of whom 
     are low-income individuals; or
       ``(II) with respect to which the feeder schools that 
     provide the majority of the incoming students to the school 
     serve students 50 percent or more of whom are low-income 
     individuals; or
       ``(B) is participating in a schoolwide program under 
     section 1114 during the grant period.
       ``(2) Other schools.--A private or parochial school, an 
     alternative school, or a school within a school, is not 
     eligible to receive a grant under this subpart, but an 
     alternative school or school within a school may be served 
     under this subpart as part of a whole school reform effort 
     within an entire school building.
       ``(e) Community-Based Organizations.--A school that 
     receives a grant under this subpart may use the grant funds 
     to secure necessary services from a community-based 
     organization, including private sector entities, if--
       ``(1) the school approves the use;
       ``(2) the funds are used to provide school dropout 
     prevention and reentry activities related to schoolwide 
     efforts; and
       ``(3) the community-based organization has demonstrated the 
     organization's ability to provide effective services as 
     described in section 107(a) of the Job Training Partnership 
     Act (29 U.S.C. 1517(a)).
       ``(f) Coordination.--Each school that receives a grant 
     under this subpart shall coordinate the activities assisted 
     under this subpart with other Federal programs, such as 
     programs assisted under chapter 1 of subpart 2 of part A of 
     title IV of the Higher Education Act of 1965 (20 U.S.C. 
     1070a-11 et seq.) and the School-to-Work Opportunities Act of 
     1994 (20 U.S.C. 6101 et seq.).

     ``SEC. 5325. DISSEMINATION ACTIVITIES.

       ``Each school that receives a grant under this subpart 
     shall provide information and technical assistance to other 
     schools within the school district, including presentations, 
     document-sharing, and joint staff development.

     ``SEC. 5326. PROGRESS INCENTIVES.

       ``Notwithstanding any other provision of law, each local 
     educational agency that receives funds under title I of the 
     Elementary and Secondary Education Act of 1965 (20 U.S.C. 
     6301 et seq.) shall use such funding to provide assistance to 
     schools served by the agency that have not made progress 
     toward lowering school dropout rates after receiving 
     assistance under this subpart for 2 fiscal years.

     ``SEC. 5327. SCHOOL DROPOUT RATE CALCULATION.

       ``For purposes of calculating a school dropout rate under 
     this subpart, a school shall use--
       ``(1) the annual event school dropout rate for students 
     leaving a school in a single year determined in accordance 
     with the National Center for Education Statistics' Common 
     Core of Data, if available; or
       ``(2) in other cases, a standard method for calculating the 
     school dropout rate as determined by the State educational 
     agency.

     ``SEC. 5328. REPORTING AND ACCOUNTABILITY.

       ``(a) Reporting.--In order to receive funding under this 
     subpart for a fiscal year after the first fiscal year a 
     school receives funding under this subpart, the school shall 
     provide, on an annual basis, to the Director a report 
     regarding the status of the implementation of activities 
     funded under this subpart, the disaggregated outcome data for 
     students at schools assisted under this subpart such as 
     dropout rates, and certification of progress from the 
     eligible entity whose strategies the school is implementing.
       ``(b) Accountability.--On the basis of the reports 
     submitted under subsection (a), the Director shall evaluate 
     the effect of the activities assisted under this subpart on 
     school dropout prevention compared to a control group.

     ``SEC. 5329. PROHIBITION ON TRACKING.

       ``(a) In General.--A school shall be ineligible to receive 
     funding under this subpart for a fiscal year, if the school--
       ``(1) has in place a general education track;
       ``(2) provides courses with significantly different 
     material and requirements to students at the same grade 
     level; or
       ``(3) fails to encourage all students to take a core 
     curriculum of courses.
       ``(b) Regulations.--The Secretary shall promulgate 
     regulations implementing subsection (a).

       ``Subpart 3--Definitions; Authorization of Appropriations

     ``SEC. 5331. DEFINITIONS.

       ``In this Act:
       ``(1) Director.--The term ``Director'' means the Director 
     of the Office of Dropout Prevention and Program Completion 
     established under section 219 of the General Education 
     Provisions Act.
       ``(2) Low-income.--The term ``low-income'', used with 
     respect to an individual, means an individual determined to 
     be low-income in accordance with measures described in 
     section 1113(a)(5) of the Elementary and Secondary Education 
     Act of 1965 (20 U.S.C. 6313(a)(5)).
       ``(3) School dropout.--The term ``school dropout'' has the 
     meaning given the term in section 4(17) of the School-to-Work 
     Opportunities Act of 1994 (20 U.S.C. 6103(17)).

     ``SEC. 5332. AUTHORIZATION OF APPROPRIATIONS.

       ``(a) Subpart 1.--There are authorized to be appropriated 
     to carry out subpart 1, $5,000,000 for fiscal year 1999 and 
     such sums as may be necessary for each of the 4 succeeding 
     fiscal years.
       ``(b) Subpart 2.--There are authorized to be appropriated 
     to carry out subpart 2, $145,000,000 for fiscal year 1999 and 
     such sums as may be necessary for each of the 4 succeeding 
     fiscal years, of which--
       ``(1) $125,000,000 shall be available to carry out section 
     5322; and
       ``(2) $20,000,000 shall be available to carry out section 
     5323.''.
       (c) Office of Dropout Prevention and Program Completion.--
     Title II of the Department of Education Organization Act (20 
     U.S.C. 3411) is amended--
       (1) by redesignating section 216 (as added by Public Law 
     103-227) as section 218; and
       (2) by adding after section 218 (as redesignated by 
     paragraph (1)) the following:


         ``office of dropout prevention and program completion

       ``Sec. 219. (a) Establishment.--There shall be in the 
     Department of Education an Office of Dropout Prevention and 
     Program Completion (hereafter in this section referred to as 
     the `Office'), to be administered by the Director of the 
     Office of Dropout Prevention and Program Completion. The 
     Director of the Office shall report directly to the Secretary 
     and shall perform such additional functions as the Secretary 
     may prescribe.
       ``(b) Duties.--The Director of the Office of Dropout 
     Prevention and Program Completion (hereafter in this section 
     referred to as the `Director'), through the Office, shall--
       ``(1) help coordinate Federal, State, and local efforts to 
     lower school dropout rates and increase program completion by 
     middle school, secondary school, and college students;
       ``(2) recommend Federal policies, objectives, and 
     priorities to lower school dropout rates and increase program 
     completion;
       ``(3) oversee the implementation of subpart 2 of part C of 
     title V of the Elementary and Secondary Education Act of 
     1965;
       ``(4) develop and implement the National School Dropout 
     Prevention Strategy under section 5312 of the Elementary and 
     Secondary Education Act of 1965;
       ``(5) annually prepare and submit to Congress and the 
     Secretary a national report describing efforts and 
     recommended actions regarding school dropout prevention and 
     program completion;
       ``(6) recommend action to the Secretary and the President, 
     as appropriate, regarding school dropout prevention and 
     program completion; and
       ``(7) consult with and assist State and local governments 
     regarding school dropout prevention and program completion.
       ``(c) Scope of Duties.--The scope of the Director's duties 
     under subsection (b) shall include examination of all Federal 
     and non-Federal efforts related to--
       ``(1) promoting program completion for children attending 
     middle school or secondary school;
       ``(2) programs to obtain a secondary school diploma or its 
     recognized equivalent (including general equivalency diploma 
     (GED) programs), or college degree programs; and
       ``(3) reentry programs for individuals aged 12 to 24 who 
     are out of school.
       ``(d) Detailing.--In carrying out the Director's duties 
     under this section, the Director may request the head of any 
     Federal department or agency to detail personnel who are 
     engaged in school dropout prevention activities to another 
     Federal department or agency in order to implement the 
     National School Dropout Prevention Strategy.''.
       (d) State Responsibilities.--Title XIV of the Elementary 
     and Secondary Education Act of 1965 (20 U.S.C. 8801 et seq.) 
     is amended by adding at the end the following:

                      ``PART I--DROPOUT PREVENTION

     ``SEC. 14851. DROPOUT PREVENTION.

       ``In order to receive any assistance under this Act, a 
     State educational agency shall comply with the following 
     provisions regarding school dropouts:
       ``(1) Uniform data collection.--Within 1 year after the 
     date of enactment of the National Dropout Prevention Act of 
     1998, a State educational agency shall report to the 
     Secretary and statewide, all school district and school data 
     regarding school dropout rates in the State, and demographic 
     breakdowns, according to procedures that conform with the 
     National Center for Education Statistics' Common Core of 
     Data.

[[Page S2336]]

       ``(2) Attendance-neutral funding policies.--Within 2 years 
     after the date of enactment of the National Dropout 
     Prevention Act of 1998, a State educational agency shall 
     develop and implement education funding formula policies for 
     public schools that provide appropriate incentives to retain 
     students in school throughout the school year, such as--
       ``(A) a student count methodology that does not determine 
     annual budgets based on attendance on a single day early in 
     the academic year; and
       ``(B) specific incentives for retaining enrolled students 
     throughout each year.
       ``(3) Suspension and expulsion policies.--Within 2 years 
     after the date of enactment of the National Dropout 
     Prevention Act of 1998, a State educational agency shall 
     develop uniform, long-term suspension and expulsion policies 
     for serious infractions resulting in more than 10 days of 
     exclusion from school per academic year so that similar 
     violations result in similar penalties.''.
                                                                    ____


                           Amendment No. 2041

       At the end, add the following:
       TITLE ____--DROPOUT PREVENTION AND STATE RESPONSIBILITIES

     SEC. ____01. SHORT TITLE.

       This title may be cited as the ``National Dropout 
     Prevention Act of 1998''.
                     Subtitle A--Dropout Prevention

     SEC. ____11. DROPOUT PREVENTION.

       Part C of title V of the Elementary and Secondary Education 
     Act of 1965 (20 U.S.C. 7261 et seq.) is amended to read as 
     follows:

        ``PART C--ASSISTANCE TO ADDRESS SCHOOL DROPOUT PROBLEMS

               ``Subpart 1--Coordinated National Strategy

     ``SEC. 5311. NATIONAL ACTIVITIES.

       ``(a) National Priority.--It shall be a national priority, 
     for the 5-year period beginning on the date of enactment of 
     the National Dropout Prevention Act of 1998, to lower the 
     school dropout rate, and increase school completion, for 
     middle school and secondary school students in accordance 
     with Federal law. As part of this priority, all Federal 
     agencies that carry out activities that serve students at 
     risk of dropping out of school or that are intended to help 
     address the school dropout problem shall make school dropout 
     prevention a top priority in the agencies' funding priorities 
     during the 5-year period.
       ``(b) Enhanced Data Collection.--The Secretary shall 
     collect systematic data on the participation of different 
     racial and ethnic groups (including migrant and limited 
     English proficient students) in all Federal programs.

     ``SEC. 5312. NATIONAL SCHOOL DROPOUT PREVENTION STRATEGY.

       ``(a) Plan.--The Director shall develop, implement, and 
     monitor an interagency plan (in this section referred to as 
     the ``plan'') to assess the coordination, use of resources, 
     and availability of funding under Federal law that can be 
     used to address school dropout prevention, or middle school 
     or secondary school reentry. The plan shall be completed and 
     transmitted to the Secretary and Congress not later than 180 
     days after the first Director is appointed.
       ``(b) Coordination.--The plan shall address inter- and 
     intra-agency program coordination issues at the Federal level 
     with respect to school dropout prevention and middle school 
     and secondary school reentry, assess the targeting of 
     existing Federal services to students who are most at risk of 
     dropping out of school, and the cost-effectiveness of various 
     programs and approaches used to address school dropout 
     prevention.
       ``(c) Available Resources.--The plan shall also describe 
     the ways in which State and local agencies can implement 
     effective school dropout prevention programs using funds from 
     a variety of Federal programs, including the programs under 
     title I of the Elementary and Secondary Education Act of 1965 
     (20 U.S.C. 6301 et seq.) and the School-to-Work Opportunities 
     Act of 1994 (20 U.S.C. 6101 et seq.).
       ``(d) Scope.--The plan will address all Federal programs 
     with school dropout prevention or school reentry elements or 
     objectives, programs under chapter 1 of subpart 2 of part A 
     of title IV of the Higher Education Act of 1965 (20 U.S.C. 
     1070a-11 et seq.), title I of the Elementary and Secondary 
     Education Act of 1965 (20 U.S.C. 6301 et seq.), the School-
     to-Work Opportunities Act of 1994 (20 U.S.C. 6101 et seq.), 
     and part B of title IV of the Job Training Partnership Act 
     (29 U.S.C. 1691 et seq.), and other programs.

     ``SEC. 5313. NATIONAL CLEARINGHOUSE.

       ``Not later than 6 months after the date of enactment of 
     the National Dropout Prevention Act of 1998, the Director 
     shall establish a national clearinghouse on effective school 
     dropout prevention, intervention and reentry programs. The 
     clearinghouse shall be established through a competitive 
     grant or contract awarded to an organization with a 
     demonstrated capacity to provide technical assistance and 
     disseminate information in the area of school dropout 
     prevention, intervention, and reentry programs. The 
     clearinghouse shall--
       ``(1) collect and disseminate to educators, parents, and 
     policymakers information on research, effective programs, 
     best practices, and available Federal resources with respect 
     to school dropout prevention, intervention, and reentry 
     programs, including dissemination by an electronically 
     accessible database, a worldwide Web site, and a national 
     journal; and
       ``(2) provide technical assistance regarding securing 
     resources with respect to, and designing and implementing, 
     effective and comprehensive school dropout prevention, 
     intervention, and reentry programs.

     ``SEC. 5314. NATIONAL RECOGNITION PROGRAM.

       ``(a) In General.--The Director shall carry out a national 
     recognition program that recognizes schools that have made 
     extraordinary progress in lowering school dropout rates under 
     which a public middle school or secondary school from each 
     State will be recognized. The Director shall use uniform 
     national guidelines that are developed by the Director for 
     the recognition program and shall recognize schools from 
     nominations submitted by State educational agencies.
       ``(b) Eligible Schools.--The Director may recognize any 
     public middle school or secondary school (including a charter 
     school) that has implemented comprehensive reforms regarding 
     the lowering of school dropout rates for all students at that 
     school.
       ``(c) Support.--The Director may make monetary awards to 
     schools recognized under this section, in amounts determined 
     by the Director. Amounts received under this section shall be 
     used for dissemination activities within the school district 
     or nationally.

       ``Subpart 2--National School Dropout Prevention Initiative

     ``SEC. 5321. FINDINGS.

       ``Congress finds that, in order to lower dropout rates and 
     raise academic achievement levels, improved and redesigned 
     schools must--
       ``(1) challenge all children to attain their highest 
     academic potential; and
       ``(2) ensure that all students have substantial and ongoing 
     opportunities to--
       ``(A) achieve high levels of academic and technical skills;
       ``(B) prepare for college and careers;
       ``(C) learn by doing;
       ``(D) work with teachers in small schools within schools;
       ``(E) receive ongoing support from adult mentors;
       ``(F) access a wide variety of information about careers 
     and postsecondary education and training;
       ``(G) use technology to enhance and motivate learning; and
       ``(H) benefit from strong links among middle schools, 
     secondary schools, and postsecondary institutions.

     ``SEC. 5322. PROGRAM AUTHORIZED.

       ``(a) Allotments to States.--
       ``(1) In general.--From the sum made available under 
     section 5332(b) for a fiscal year the Secretary shall make an 
     allotment to each State in an amount that bears the same 
     relation to the sum as the amount the State received under 
     title I of the Elementary and Secondary Education Act of 1965 
     (20 U.S.C. 6301 et seq.) for the preceding fiscal year bears 
     to the amount received by all States under such title for the 
     preceding fiscal year.
       ``(2) Definition of state.--In this subpart, the term 
     ``State'' means each of the several States of the United 
     States, the District of Columbia, the Commonwealth of Puerto 
     Rico, 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.
       ``(b) Grants.--From amounts made available to a State under 
     subsection (a), the State educational agency may award grants 
     to public middle schools or secondary schools, that have 
     school dropout rates which are in the highest \1/3\ of all 
     school dropout rates in the State, to enable the schools to 
     pay only the startup and implementation costs of effective, 
     sustainable, coordinated, and whole school dropout prevention 
     programs that involve activities such as--
       ``(1) professional development;
       ``(2) obtaining curricular materials;
       ``(3) release time for professional staff; and
       ``(4) planning and research.
       ``(b) Intent of Congress.--It is the intent of Congress 
     that the activities started or implemented under subsection 
     (a) shall be continued with funding provided under part A of 
     title I of the Elementary and Secondary Education Act of 1965 
     (20 U.S.C. 6311 et seq.).
       ``(c) Number.--The State educational agency shall award not 
     more than 1,000 grants under this subpart during the first 
     year that the State receives an allotment under this subpart, 
     not more than 1,500 grants during the second such year, and 
     not more than 2,000 grants during the third such year.
       ``(d) Amount.--
       ``(1) In general.--Subject to subsection (e) and except as 
     provided in paragraph (2), a grant under this subpart shall 
     be awarded--
       ``(A) in the first year that a school receives a grant 
     payment under this subpart, in an amount that is not less 
     than $50,000 and not more than $100,000, based on factors 
     such as--
       ``(i) school size;
       ``(ii) costs of the model being implemented; and
       ``(iii) local cost factors such as poverty rates;
       ``(B) in the second such year, in an amount that is not 
     less than 75 percent of the amount the school received under 
     this subpart in the first such year;
       ``(C) in the third year, in an amount that is not less than 
     50 percent of the amount the school received under this 
     subpart in the first such year; and
       ``(D) in each succeeding year in an amount that is not less 
     than 30 percent of the

[[Page S2337]]

     amount the school received under this subpart in the first 
     such year.
       ``(2) Increases.--The Director shall increase the amount 
     awarded to a school under this subpart by 10 percent if the 
     school creates smaller learning communities within the school 
     and the creation is certified by the State educational 
     agency.
       ``(e) Duration.--A grant under this subpart shall be 
     awarded for a period of 3 years, and may be continued for a 
     period of 2 additional years if the State educational agency 
     determines, based on the annual reports described in section 
     5328(a), that significant progress has been made in lowering 
     the school dropout rate for students participating in the 
     program assisted under this subpart compared to students at 
     similar schools who are not participating in the program.

     ``SEC. 5323. STRATEGIES AND ALLOWABLE MODELS.

       ``(a) Strategies.--Each school receiving a grant under this 
     subpart shall implement research-based, sustainable, and 
     widely replicated, strategies for school dropout prevention 
     and reentry that address the needs of an entire school 
     population rather than a subset of students. The strategies 
     may include--
       ``(1) specific strategies for targeted purposes; and
       ``(2) approaches such as breaking larger schools down into 
     smaller learning communities and other comprehensive reform 
     approaches, developing clear linkages to career skills and 
     employment, and addressing specific gatekeeper hurdles that 
     often limit student retention and academic success.
       ``(b) Allowable Models.--The Director shall annually 
     establish and publish in the Federal Register the principles, 
     criteria, models, and other parameters regarding the types of 
     effective, proven program models that are allowed to be used 
     under this subpart, based on existing research.
       ``(c) Capacity Building.--
       ``(1) In general.--The Director, through a contract with a 
     non-Federal entity, shall conduct a capacity building and 
     design initiative in order to increase the types of proven 
     strategies for dropout prevention on a schoolwide level.
       ``(2) Number and duration.--
       ``(A) Number.--The Director shall award not more than 5 
     contracts under this subsection.
       ``(B) Duration.--The Director shall award a contract under 
     this section for a period of not more than 5 years.
       ``(d) Support for Existing Reform Networks.--
       ``(1) In general.--The Director shall provide appropriate 
     support to eligible entities to enable the eligible entities 
     to provide training, materials, development, and staff 
     assistance to schools assisted under this subpart.
       ``(2) Definition of eligible entity.--The term `eligible 
     entity' means an entity that, prior to the date of enactment 
     of the National Dropout Prevention Act of 1998--
       ``(A) provided training, technical assistance, and 
     materials to 100 or more elementary schools or secondary 
     schools; and
       ``(B) developed and published a specific educational 
     program or design for use by the schools.

     ``SEC. 5324. SELECTION OF SCHOOLS.

       ``(a) School Application.--
       ``(1) In general.--Each school desiring a grant under this 
     subpart shall submit an application to the State educational 
     agency at such time, in such manner, and accompanied by such 
     information as the State educational agency may require.
       ``(2) Contents.--Each application submitted under paragraph 
     (1) shall--
       ``(A) contain a certification from the local educational 
     agency serving the school that--
       ``(i) the school has the highest number or rates of school 
     dropouts in the age group served by the local educational 
     agency;
       ``(ii) the local educational agency is committed to 
     providing ongoing operational support, for the school's 
     comprehensive reform plan to address the problem of school 
     dropouts, for a period of 5 years; and
       ``(iii) the local educational agency will support the plan, 
     including--

       ``(I) release time for teacher training;
       ``(II) efforts to coordinate activities for feeder schools; 
     and
       ``(III) encouraging other schools served by the local 
     educational agency to participate in the plan;

       ``(B) demonstrate that the faculty and administration of 
     the school have agreed to apply for assistance under this 
     subpart, and provide evidence of the school's willingness and 
     ability to use the funds under this subpart, including 
     providing an assurance of the support of 80 percent or more 
     of the professional staff at the school;
       ``(C) describe the instructional strategies to be 
     implemented, how the strategies will serve all students, and 
     the effectiveness of the strategies;
       ``(D) describe a budget and timeline for implementing the 
     strategies;
       ``(E) contain evidence of interaction with an eligible 
     entity described in section 5323(d)(2);
       ``(F) contain evidence of coordination with existing 
     resources;
       ``(G) provide an assurance that funds provided under this 
     subpart will supplement and not supplant other Federal, 
     State, and local funds;
       ``(H) describe how the activities to be assisted conform 
     with an allowable model described in section 5323(b); and
       ``(I) demonstrate that the school and local educational 
     agency have agreed to conduct a schoolwide program under 
     1114.
       ``(b) State Agency Review and Award.--The State educational 
     agency shall review applications and award grants to schools 
     under subsection (a) according to a review by a panel of 
     experts on school dropout prevention.
       ``(c) Criteria.--The Director shall establish clear and 
     specific selection criteria for awarding grants to schools 
     under this subpart. Such criteria shall be based on school 
     dropout rates and other relevant factors for State 
     educational agencies to use in determining the number of 
     grants to award and the type of schools to be awarded grants.
       ``(d) Eligibility.--
       ``(1) In general.--A school is eligible to receive a grant 
     under this subpart if the school is--
       ``(A) a public school--
       ``(i) that is eligible to receive assistance under part A 
     of title I of the Elementary and Secondary Education Act of 
     1965 (20 U.S.C. 6311 et seq.), including a comprehensive 
     secondary school, a vocational or technical secondary school, 
     and a charter school; and
       ``(ii)(I) that serves students 50 percent or more of whom 
     are low-income individuals; or
       ``(II) with respect to which the feeder schools that 
     provide the majority of the incoming students to the school 
     serve students 50 percent or more of whom are low-income 
     individuals; or
       ``(B) is participating in a schoolwide program under 
     section 1114 during the grant period.
       ``(2) Other schools.--A private or parochial school, an 
     alternative school, or a school within a school, is not 
     eligible to receive a grant under this subpart, but an 
     alternative school or school within a school may be served 
     under this subpart as part of a whole school reform effort 
     within an entire school building.
       ``(e) Community-Based Organizations.--A school that 
     receives a grant under this subpart may use the grant funds 
     to secure necessary services from a community-based 
     organization, including private sector entities, if--
       ``(1) the school approves the use;
       ``(2) the funds are used to provide school dropout 
     prevention and reentry activities related to schoolwide 
     efforts; and
       ``(3) the community-based organization has demonstrated the 
     organization's ability to provide effective services as 
     described in section 107(a) of the Job Training Partnership 
     Act (29 U.S.C. 1517(a)).
       ``(f) Coordination.--Each school that receives a grant 
     under this subpart shall coordinate the activities assisted 
     under this subpart with other Federal programs, such as 
     programs assisted under chapter 1 of subpart 2 of part A of 
     title IV of the Higher Education Act of 1965 (20 U.S.C. 
     1070a-11 et seq.) and the School-to-Work Opportunities Act of 
     1994 (20 U.S.C. 6101 et seq.).

     ``SEC. 5325. DISSEMINATION ACTIVITIES.

       ``Each school that receives a grant under this subpart 
     shall provide information and technical assistance to other 
     schools within the school district, including presentations, 
     document-sharing, and joint staff development.

     ``SEC. 5326. PROGRESS INCENTIVES.

       ``Notwithstanding any other provision of law, each local 
     educational agency that receives funds under title I of the 
     Elementary and Secondary Education Act of 1965 (20 U.S.C. 
     6301 et seq.) shall use such funding to provide assistance to 
     schools served by the agency that have not made progress 
     toward lowering school dropout rates after receiving 
     assistance under this subpart for 2 fiscal years.

     ``SEC. 5327. SCHOOL DROPOUT RATE CALCULATION.

       ``For purposes of calculating a school dropout rate under 
     this subpart, a school shall use--
       ``(1) the annual event school dropout rate for students 
     leaving a school in a single year determined in accordance 
     with the National Center for Education Statistics' Common 
     Core of Data, if available; or
       ``(2) in other cases, a standard method for calculating the 
     school dropout rate as determined by the State educational 
     agency.

     ``SEC. 5328. REPORTING AND ACCOUNTABILITY.

       ``(a) Reporting.--In order to receive funding under this 
     subpart for a fiscal year after the first fiscal year a 
     school receives funding under this subpart, the school shall 
     provide, on an annual basis, to the Director a report 
     regarding the status of the implementation of activities 
     funded under this subpart, the disaggregated outcome data for 
     students at schools assisted under this subpart such as 
     dropout rates, and certification of progress from the 
     eligible entity whose strategies the school is implementing.
       ``(b) Accountability.--On the basis of the reports 
     submitted under subsection (a), the Director shall evaluate 
     the effect of the activities assisted under this subpart on 
     school dropout prevention compared to a control group.

     ``SEC. 5329. PROHIBITION ON TRACKING.

       ``(a) In General.--A school shall be ineligible to receive 
     funding under this subpart for a fiscal year, if the school--
       ``(1) has in place a general education track;
       ``(2) provides courses with significantly different 
     material and requirements to students at the same grade 
     level; or
       ``(3) fails to encourage all students to take a core 
     curriculum of courses.
       ``(b) Regulations.--The Secretary shall promulgate 
     regulations implementing subsection (a).

[[Page S2338]]

       ``Subpart 3--Definitions; Authorization of Appropriations

     ``SEC. 5331. DEFINITIONS.

       ``In this Act:
       ``(1) Director.--The term ``Director'' means the Director 
     of the Office of Dropout Prevention and Program Completion 
     established under section 219 of the General Education 
     Provisions Act.
       ``(2) Low-income.--The term ``low-income'', used with 
     respect to an individual, means an individual determined to 
     be low-income in accordance with measures described in 
     section 1113(a)(5) of the Elementary and Secondary Education 
     Act of 1965 (20 U.S.C. 6313(a)(5)).
       ``(3) School dropout.--The term ``school dropout'' has the 
     meaning given the term in section 4(17) of the School-to-Work 
     Opportunities Act of 1994 (20 U.S.C. 6103(17)).

     ``SEC. 5332. AUTHORIZATION OF APPROPRIATIONS.

       ``(a) Subpart 1.--There are authorized to be appropriated 
     to carry out subpart 1, $5,000,000 for fiscal year 1999 and 
     such sums as may be necessary for each of the 4 succeeding 
     fiscal years.
       ``(b) Subpart 2.--There are authorized to be appropriated 
     to carry out subpart 2, $145,000,000 for fiscal year 1999 and 
     such sums as may be necessary for each of the 4 succeeding 
     fiscal years, of which--
       ``(1) $125,000,000 shall be available to carry out section 
     5322; and
       ``(2) $20,000,000 shall be available to carry out section 
     5323.''.

     SEC. ____12. OFFICE OF DROPOUT PREVENTION AND PROGRAM 
                   COMPLETION.

       Title II of the Department of Education Organization Act 
     (20 U.S.C. 3411) is amended--
       (1) by redesignating section 216 (as added by Public Law 
     103-227) as section 218; and
       (2) by adding after section 218 (as redesignated by 
     paragraph (1)) the following:


         ``office of dropout prevention and program completion

       ``Sec. 219. (a) Establishment.--There shall be in the 
     Department of Education an Office of Dropout Prevention and 
     Program Completion (hereafter in this section referred to as 
     the `Office'), to be administered by the Director of the 
     Office of Dropout Prevention and Program Completion. The 
     Director of the Office shall report directly to the Secretary 
     and shall perform such additional functions as the Secretary 
     may prescribe.
       ``(b) Duties.--The Director of the Office of Dropout 
     Prevention and Program Completion (hereafter in this section 
     referred to as the `Director'), through the Office, shall--
       ``(1) help coordinate Federal, State, and local efforts to 
     lower school dropout rates and increase program completion by 
     middle school, secondary school, and college students;
       ``(2) recommend Federal policies, objectives, and 
     priorities to lower school dropout rates and increase program 
     completion;
       ``(3) oversee the implementation of subpart 2 of part C of 
     title V of the Elementary and Secondary Education Act of 
     1965;
       ``(4) develop and implement the National School Dropout 
     Prevention Strategy under section 5312 of the Elementary and 
     Secondary Education Act of 1965;
       ``(5) annually prepare and submit to Congress and the 
     Secretary a national report describing efforts and 
     recommended actions regarding school dropout prevention and 
     program completion;
       ``(6) recommend action to the Secretary and the President, 
     as appropriate, regarding school dropout prevention and 
     program completion; and
       ``(7) consult with and assist State and local governments 
     regarding school dropout prevention and program completion.
       ``(c) Scope of Duties.--The scope of the Director's duties 
     under subsection (b) shall include examination of all Federal 
     and non-Federal efforts related to--
       ``(1) promoting program completion for children attending 
     middle school or secondary school;
       ``(2) programs to obtain a secondary school diploma or its 
     recognized equivalent (including general equivalency diploma 
     (GED) programs), or college degree programs; and
       ``(3) reentry programs for individuals aged 12 to 24 who 
     are out of school.
       ``(d) Detailing.--In carrying out the Director's duties 
     under this section, the Director may request the head of any 
     Federal department or agency to detail personnel who are 
     engaged in school dropout prevention activities to another 
     Federal department or agency in order to implement the 
     National School Dropout Prevention Strategy.''.
                   Subtitle B--State Responsibilities

     SEC. ____21. STATE RESPONSIBILITIES.

       Title XIV of the Elementary and Secondary Education Act of 
     1965 (20 U.S.C. 8801 et seq.) is amended by adding at the end 
     the following:

                      ``PART I--DROPOUT PREVENTION

     ``SEC. 14851. DROPOUT PREVENTION.

       ``In order to receive any assistance under this Act, a 
     State educational agency shall comply with the following 
     provisions regarding school dropouts:
       ``(1) Uniform data collection.--Within 1 year after the 
     date of enactment of the National Dropout Prevention Act of 
     1998, a State educational agency shall report to the 
     Secretary and statewide, all school district and school data 
     regarding school dropout rates in the State, and demographic 
     breakdowns, according to procedures that conform with the 
     National Center for Education Statistics' Common Core of 
     Data.
       ``(2) Attendance-neutral funding policies.--Within 2 years 
     after the date of enactment of the National Dropout 
     Prevention Act of 1998, a State educational agency shall 
     develop and implement education funding formula policies for 
     public schools that provide appropriate incentives to retain 
     students in school throughout the school year, such as--
       ``(A) a student count methodology that does not determine 
     annual budgets based on attendance on a single day early in 
     the academic year; and
       ``(B) specific incentives for retaining enrolled students 
     throughout each year.
       ``(3) Suspension and expulsion policies.--Within 2 years 
     after the date of enactment of the National Dropout 
     Prevention Act of 1998, a State educational agency shall 
     develop uniform, long-term suspension and expulsion policies 
     for serious infractions resulting in more than 10 days of 
     exclusion from school per academic year so that similar 
     violations result in similar penalties.''.
                                 ______
                                 

                   KENNEDY AMENDMENTS NOS. 2042-2047

  (Ordered to lie on the table.)
  Mr. KENNEDY submitted six amendments intended to be proposed by him 
to the bill, H.R. 2646, supr; as follows:

                           Amendment No. 2042

       On page 3, beginning with line 22, strike all through page 
     5, line 6, and insert:
       ``(4) Qualified elementary and secondary education 
     expenses.--
       ``(A) In general.--The term `qualified elementary and 
     secondary education expenses' means--
       ``(i) expenses for tuition, fees, academic tutoring, 
     special needs services, books, supplies, computer equipment 
     (including related software and services), and other 
     equipment which are incurred in connection with the 
     enrollment or attendance of the designated beneficiary of the 
     trust as an elementary or secondary school student at a 
     public school, or
       ``(ii) expenses for room and board, uniforms, 
     transportation, and supplementary items and services 
     (including extended day programs) which are required or 
     provided by a public school in connection with such 
     enrollment or attendance.
       ``(B) School.--The term `school' means any public school 
     which provides elementary education or secondary education 
     (kindergarten through grade 12), as determined under State 
     law.''
                                                                    ____


                           Amendment No. 2043

       On page 3, beginning with line 22, strike all through page 
     5, line 6, and insert:
       ``(4) Qualified elementary and secondary education 
     expenses.--
       ``(A) In general.--The term `qualified elementary and 
     secondary education expenses' means--
       ``(i) expenses for tuition, fees, academic tutoring, 
     special needs services, books, supplies, computer equipment 
     (including related software and services), and other 
     equipment which are incurred in connection with the 
     enrollment or attendance of the designated beneficiary of the 
     trust as an elementary or secondary school student at a 
     public school, or
       ``(ii) expenses for room and board, uniforms, 
     transportation, and supplementary items and services 
     (including extended day programs) which are required or 
     provided by a public school in connection with such 
     enrollment or attendance.
       ``(B) Special rule for homeschooling.--Such term shall 
     include expenses described in subparagraph (A)(i) in 
     connection with 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 public school 
     which provides elementary education or secondary education 
     (kindergarten through grade 12), as determined under State 
     law.''
                                                                    ____


                           Amendment No. 2044

       Strike section 101 and insert the following:

     SEC. 101. MODIFICATIONS TO EDUCATION INDIVIDUAL RETIREMENT 
                   ACCOUNTS.

       (a) Maximum Annual Contributions.--
       (1) In general.--Section 530(b)(1)(A)(iii) (defining 
     education individual retirement account) is amended by 
     striking ``$500'' and inserting ``the contribution limit for 
     such taxable year''.
       (2) Contribution limit.--Section 530(b) (relating to 
     definitions and special rules) is amended by adding at the 
     end the following new paragraph:
       ``(4) Contribution limit.--The term `contribution limit' 
     means $500 ($1,500 in the case of any taxable year beginning 
     after December 31, 1998, and ending before January 1, 
     2003).''
       (3) Conforming amendments.--
       (A) Section 530(d)(4)(C) is amended by striking ``$500'' 
     and inserting ``the contribution limit for such taxable 
     year''.
       (B) Section 4973(e)(1)(A) is amended by striking ``$500'' 
     and inserting ``the contribution limit (as defined in section 
     530(b)(5)) for such taxable year''.
       (b) Waiver of Age Limitations for Children With Special 
     Needs.--Section 530(b)(1) (defining education individual 
     retirement account) is amended by adding at the end the 
     following flush sentence:

[[Page S2339]]

     ``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).''
       (c) Corporations Permitted To Contribute to Accounts.--
     Section 530(c)(1) (relating to reduction in permitted 
     contributions based on adjusted gross income) 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''.
       (d) No Double Benefit.--Section 530(d)(2) (relating to 
     distributions for qualified education expenses) is amended by 
     adding at the end the following new subparagraph:
       ``(D) Disallowance of excluded amounts as credit or 
     deduction.--No deduction or credit shall be allowed to the 
     taxpayer under any other section of this chapter for any 
     qualified education expenses to the extent taken into account 
     in determining the amount of the exclusion under this 
     paragraph.''
       (e) Technical Corrections.--
       (1)(A) Section 530(b)(1)(E) (defining education individual 
     retirement account) is amended to read as follows:
       ``(E) Any balance to the credit of the designated 
     beneficiary on the date on which the beneficiary attains age 
     30 shall be distributed within 30 days after such date to the 
     beneficiary or, if the beneficiary dies before attaining age 
     30, shall be distributed within 30 days after the date of 
     death to the estate of such beneficiary.''
       (B) Section 530(d) (relating to tax treatment of 
     distributions) is amended by adding at the end the following 
     new paragraph:
       ``(8) Deemed distribution on required distribution date.--
     In any case in which a distribution is required under 
     subsection (b)(1)(E), any balance to the credit of a 
     designated beneficiary as of the close of the 30-day period 
     referred to in such subsection for making such distribution 
     shall be deemed distributed at the close of such period.''
       (2)(A) Section 530(d)(1) is amended by striking ``section 
     72(b)'' and inserting ``section 72''.
       (B) Section 72(e) (relating to amounts not received as 
     annuities) is amended by inserting after paragraph (8) the 
     following new paragraph:
       ``(9) Extension of paragraph (2)(b) to qualified state 
     tuition programs and educational individual retirement 
     accounts.--Notwithstanding any other provision of this 
     subsection, paragraph (2)(B) shall apply to amounts received 
     under a qualified State tuition program (as defined in 
     section 529(b)) or under an education individual retirement 
     account (as defined in section 530(b)). The rule of paragraph 
     (8)(B) shall apply for purposes of this paragraph.''
       (3) Section 530(d)(4)(B) (relating to exceptions) is 
     amended by striking ``or'' at the end of clause (ii), by 
     striking the period at the end of clause (iii) and inserting 
     ``, or'', and by adding at the end the following new clause:
       ``(iv) an amount which is includible in gross income solely 
     because the taxpayer elected under paragraph (2)(C) to waive 
     the application of paragraph (2) for the taxable year.''
       (f) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to taxable years 
     beginning after December 31, 1998.
       (2) Technical corrections.--The amendments made by 
     subsection (e) shall take effect as if included in the 
     amendments made by section 213 of the Taxpayer Relief Act of 
     1997.
                                                                    ____


                           Amendment No. 2045

       Strike section 101 and insert the following:

     SEC. 101. MODIFICATIONS TO EDUCATION INDIVIDUAL RETIREMENT 
                   ACCOUNTS.

       (a) Maximum Annual Contributions.--
       (1) In general.--Section 530(b)(1)(A)(iii) (defining 
     education individual retirement account) is amended by 
     striking ``$500'' and inserting ``the contribution limit for 
     such taxable year''.
       (2) Contribution limit.--Section 530(b) (relating to 
     definitions and special rules) is amended by adding at the 
     end the following new paragraph:
       ``(4) Contribution limit.--The term `contribution limit' 
     means $500 ($1,000 in the case of any taxable year beginning 
     after December 31, 1998, and ending before January 1, 
     2003).''
       (3) Conforming amendments.--
       (A) Section 530(d)(4)(C) is amended by striking ``$500'' 
     and inserting ``the contribution limit for such taxable 
     year''.
       (B) Section 4973(e)(1)(A) is amended by striking ``$500'' 
     and inserting ``the contribution limit (as defined in section 
     530(b)(5)) for such taxable year''.
       (b) Waiver of Age Limitations for Children With Special 
     Needs.--Section 530(b)(1) (defining education individual 
     retirement account) 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).''
       (c) Corporations Permitted To Contribute to Accounts.--
     Section 530(c)(1) (relating to reduction in permitted 
     contributions based on adjusted gross income) 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''.
       (d) No Double Benefit.--Section 530(d)(2) (relating to 
     distributions for qualified education expenses) is amended by 
     adding at the end the following new subparagraph:
       ``(D) Disallowance of excluded amounts as credit or 
     deduction.--No deduction or credit shall be allowed to the 
     taxpayer under any other section of this chapter for any 
     qualified education expenses to the extent taken into account 
     in determining the amount of the exclusion under this 
     paragraph.''
       (e) Technical Corrections.--
       (1)(A) Section 530(b)(1)(E) (defining education individual 
     retirement account) is amended to read as follows:
       ``(E) Any balance to the credit of the designated 
     beneficiary on the date on which the beneficiary attains age 
     30 shall be distributed within 30 days after such date to the 
     beneficiary or, if the beneficiary dies before attaining age 
     30, shall be distributed within 30 days after the date of 
     death to the estate of such beneficiary.''
       (B) Section 530(d) (relating to tax treatment of 
     distributions) is amended by adding at the end the following 
     new paragraph:
       ``(8) Deemed distribution on required distribution date.--
     In any case in which a distribution is required under 
     subsection (b)(1)(E), any balance to the credit of a 
     designated beneficiary as of the close of the 30-day period 
     referred to in such subsection for making such distribution 
     shall be deemed distributed at the close of such period.''
       (2)(A) Section 530(d)(1) is amended by striking ``section 
     72(b)'' and inserting ``section 72''.
       (B) Section 72(e) (relating to amounts not received as 
     annuities) is amended by inserting after paragraph (8) the 
     following new paragraph:
       ``(9) Extension of paragraph (2)(b) to qualified state 
     tuition programs and educational individual retirement 
     accounts.--Notwithstanding any other provision of this 
     subsection, paragraph (2)(B) shall apply to amounts received 
     under a qualified State tuition program (as defined in 
     section 529(b)) or under an education individual retirement 
     account (as defined in section 530(b)). The rule of paragraph 
     (8)(B) shall apply for purposes of this paragraph.''
       (3) Section 530(d)(4)(B) (relating to exceptions) is 
     amended by striking ``or'' at the end of clause (ii), by 
     striking the period at the end of clause (iii) and inserting 
     ``, or'', and by adding at the end the following new clause:
       ``(iv) an amount which is includible in gross income solely 
     because the taxpayer elected under paragraph (2)(C) to waive 
     the application of paragraph (2) for the taxable year.''
       (f) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to taxable years 
     beginning after December 31, 1998.
       (2) Technical corrections.--The amendments made by 
     subsection (e) shall take effect as if included in the 
     amendments made by section 213 of the Taxpayer Relief Act of 
     1997.
                                                                    ____


                           Amendment No. 2046

       On page 10, line 17, strike ``1998'' and insert ``1998, 
     except that such amendments shall only take effect to the 
     extent that--
       ``(A) contributions to education individual retirement 
     accounts or qualified elementary and secondary education 
     expenses are--
       ``(i) limited to accounts that, at the time the account is 
     created or organized, are designated solely for the payment 
     of such expenses, and
       ``(ii) not allowed for contributors who have modified 
     adjusted gross income in excess of $60,000 and are ratably 
     reduced to zero for contributors who have modified adjusted 
     gross income between $50,000 and $60,000,
       ``(B) contributions to education individual retirement 
     accounts in excess of $500 for any taxable years 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 contributions made by a person 
     other than the taxpayer with respect to whom a deduction is 
     allowed 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. 2047

       Strike sections 101, 102, and 103, and insert:

     SEC. 102. EXCLUSION FROM GROSS INCOME OF EDUCATION 
                   DISTRIBUTIONS FROM QUALIFIED STATE TUITION 
                   PROGRAMS.

       (a) In General.--Section 529(c)(3)(B) (relating to 
     distributions) is amended to read as follows:
       ``(B) Distributions for qualified higher education 
     expenses.--
       ``(i) In general.--No amount shall be includible in gross 
     income under subparagraph (A) if the qualified higher 
     education expenses of the designated beneficiary during the 
     taxable year are not less than the aggregate distributions 
     during the taxable year.
       ``(ii) Distributions in excess of expenses.--If such 
     aggregate distributions exceed such expenses during the 
     taxable year,

[[Page S2340]]

     the amount otherwise includible in gross income under 
     subparagraph (A) shall be reduced by the amount which bears 
     the same ratio to the amount so includible (without regard to 
     this subparagraph) as such expenses bear to such aggregate 
     distributions.
       ``(iii) Election to waive exclusion.--A taxpayer may elect 
     to waive the application of this subparagraph for any taxable 
     year.
       ``(iv) In-kind distributions.--Any benefit furnished to a 
     designated beneficiary under a qualified State tuition 
     program shall be treated as a distribution to the beneficiary 
     for purposes of this paragraph.
       ``(v) Disallowable of excluded amounts as credit or 
     deduction.--No deduction or credit shall be allowed to the 
     taxpayer under any other section of this chapter for any 
     qualified higher education expenses to the extent taken into 
     account in determining the amount of the exclusion under this 
     paragraph.''
       (b) Definition of Qualified Higher Education Expenses.--
     Section 529(e)(3)(A) (defining qualified higher education 
     expenses) is amended to read as follows:
       ``(A) In general.--The term `qualified higher education 
     expenses' means expenses for tuition, fees, academic 
     tutoring, special needs services, books, supplies, computer 
     equipment (including related software and services), and 
     other equipment which are incurred in connection with the 
     enrollment or attendance of the designated beneficiary at an 
     eligible educational institution.''
       (c) Coordination With Education Credits.--Section 25A(e)(2) 
     (relating to coordination with exclusions) is amended--
       (1) by inserting ``a qualified State tuition program or'' 
     before ``an education individual retirement account'', and
       (2) by striking ``section 530(d)(2)'' and inserting 
     ``section 529(c)(3)(B) or 530(d)(2)''.
       (d) Technical Correction.--Section 529(c)(3)(A) is amended 
     by striking ``section 72(b)'' and inserting ``section 72''.
       (e) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to taxable years 
     beginning after December 31, 1998.
       (2) Technical correction.--The amendment made by subsection 
     (d) shall take effect as if included in the amendments made 
     by section 211 of the Taxpayer Relief Act of 1997.

     SEC. 103. EXTENSION OF EXCLUSION FOR EMPLOYER-PROVIDED 
                   EDUCATIONAL ASSISTANCE.

       ``(a) In General.--Section 127(d) (relating to termination 
     of exclusion for educational assistance programs) is amended 
     by striking ``May 31, 2000'' and inserting ``December 31, 
     2002''.
       ``(b) Repeal of Limitation on Graduate Education.--The last 
     sentence of section 127(c)(1) (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''.
       (c) Effective Dates.--
       (1) Extension.--The amendment made by subsection (a) shall 
     apply to expenses paid with respect to courses beginning 
     after May 31, 2000.
       (2) Graduate education.--The amendment made by subsection 
     (b) shall apply to expenses paid with respect to courses 
     beginning after June 30, 1996.
                                 ______
                                 

                D'AMATO (AND OTHERS) AMENDMENT NO. 2048

  (Ordered to lie on the table.)
  Mr. D'AMATO (for himself, Mr. Daschle, Ms. Snowe, and Mrs. Feinstein) 
submitted an amendment intended to be proposed by them to the bill, 
H.R. 2646, supra; as follows:

       In lieu of the matter proposed to be inserted, insert the 
     following:
                 TITLE ____--WOMEN'S HEALTH AND CANCER

     SEC. ____01. SHORT TITLE.

       This Act may be cited as the ``Women's Health and Cancer 
     Rights Act of 1998''.

     SEC. ____02. FINDINGS.

       Congress finds that--
       (1) breast cancer has become an epidemic in this nation 
     affecting alarming numbers of women;
       (2) the offering and operation of health plans affect 
     commerce among the States;
       (3) health care providers located in a State serve patients 
     who reside in the State and patients who reside in other 
     States; and
       (4) in order to provide for uniform treatment of health 
     care providers and patients among the States, it is necessary 
     to cover health plans operating in 1 State as well as health 
     plans operating among the several States.

     SEC. ____03. AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME 
                   SECURITY ACT OF 1974.

       (a) In General.--Subpart B of part 7 of subtitle B of title 
     I of the Employee Retirement Income Security Act of 1974 (as 
     added by section 603(a) of the Newborns' and Mothers' Health 
     Protection Act of 1996 and amended by section 702(a) of the 
     Mental Health Parity Act of 1996) is amended by adding at the 
     end the following new section:

     ``SEC. 713. REQUIRED COVERAGE FOR MINIMUM HOSPITAL STAY FOR 
                   MASTECTOMIES AND LYMPH NODE DISSECTIONS FOR THE 
                   TREATMENT OF BREAST CANCER, COVERAGE FOR 
                   RECONSTRUCTIVE SURGERY FOLLOWING MASTECTOMIES, 
                   AND COVERAGE FOR SECONDARY CONSULTATIONS.

       ``(a) Inpatient Care.--
       ``(1) In general.--A group health plan, and a health 
     insurance issuer providing health insurance coverage in 
     connection with a group health plan, that provides medical 
     and surgical benefits shall ensure that inpatient coverage 
     with respect to the treatment of breast cancer is provided 
     for a period of time as is determined by the attending 
     physician, in consultation with the patient, to be medically 
     appropriate following--
       ``(A) a mastectomy;
       ``(B) a lumpectomy; or
       ``(C) a lymph node dissection for the treatment of breast 
     cancer.
       ``(2) Exception.--Nothing in this section shall be 
     construed as requiring the provision of inpatient coverage if 
     the attending physician and patient determine that a shorter 
     period of hospital stay is medically appropriate.
       ``(b) Reconstructive Surgery.--A group health plan, and a 
     health insurance issuer providing health insurance coverage 
     in connection with a group health plan, that provides medical 
     and surgical benefits with respect to a mastectomy shall 
     ensure that, in a case in which a mastectomy patient elects 
     breast reconstruction, coverage is provided for--
       ``(1) all stages of reconstruction of the breast on which 
     the mastectomy has been performed;
       ``(2) surgery and reconstruction of the other breast to 
     produce a symmetrical appearance; and
       ``(3) the costs of prostheses and complications of 
     mastectomy including lymphodemas;

     in the manner determined by the attending physician and the 
     patient to be appropriate, and consistent with any fee 
     schedule contained in the plan.
       ``(c) Notice.--A group health plan, and a health insurance 
     issuer providing health insurance coverage in connection with 
     a group health plan shall provide notice to each participant 
     and beneficiary under such plan regarding the coverage 
     required by this section in accordance with regulations 
     promulgated by the Secretary. Such notice shall be in writing 
     and prominently positioned in any literature or 
     correspondence made available or distributed by the plan or 
     issuer and shall be transmitted--
       ``(1) in the next mailing made by the plan or issuer to the 
     participant or beneficiary;
       ``(2) as part of any yearly informational packet sent to 
     the participant or beneficiary; or
       ``(3) not later than January 1, 1998;
     whichever is earlier.
       ``(d) No Authorization Required.--
       ``(1) In general.--A provider shall not be required to 
     obtain authorization from the plan or issuer for prescribing 
     any length of stay in connection with a mastectomy, a 
     lumpectomy, or a lymph node dissection for the treatment of 
     breast cancer.
       ``(2) Prenotification.--Nothing in this section shall be 
     construed as preventing a group health plan from requiring 
     prenotification of an inpatient stay referred to in this 
     section if such requirement is consistent with terms and 
     conditions applicable to other inpatient benefits under the 
     plan, except that the provision of such inpatient stay 
     benefits shall not be contingent upon such notification.
       ``(e) Prohibitions.--A group health plan, and a health 
     insurance issuer offering group health insurance coverage in 
     connection with a group health plan, may not--
       ``(1) deny to a woman eligibility, or continued 
     eligibility, to enroll or to renew coverage under the terms 
     of the plan, solely for the purpose of avoiding the 
     requirements of this section;
       ``(2) provide monetary payments or rebates to individuals 
     to encourage such individuals to accept less than the minimum 
     protections available under this section;
       ``(3) penalize or otherwise reduce or limit the 
     reimbursement of an attending provider because such provider 
     provided care to an individual participant or beneficiary in 
     accordance with this section;
       ``(4) provide incentives (monetary or otherwise) to an 
     attending provider to induce such provider to provide care to 
     an individual participant or beneficiary in a manner 
     inconsistent with this section;
       ``(5) provide financial or other incentives to a physician 
     or specialist to induce the physician or specialist to 
     refrain from referring a participant or beneficiary for a 
     secondary consultation that would otherwise be covered by the 
     plan or coverage involved; and
       ``(6) subject to subsection (f)(3), restrict benefits for 
     any portion of a period within a hospital length of stay 
     required under subsection (a) in a manner which is less 
     favorable than the benefits provided for any preceding 
     portion of such stay.
       ``(f) Rules of Construction.--
       ``(1) In general.--Nothing in this section shall be 
     construed to require a woman who is a participant or 
     beneficiary--
       ``(A) to undergo a mastectomy or lymph node dissection in a 
     hospital; or
       ``(B) to stay in the hospital for a fixed period of time 
     following a mastectomy or lymph node dissection.
       ``(2) Limitation.--This section shall not apply with 
     respect to any group health plan, or any group health 
     insurance coverage offered by a health insurance issuer, 
     which

[[Page S2341]]

     does not provide benefits for hospital lengths of stay in 
     connection with a mastectomy or lymph node dissection for the 
     treatment of breast cancer.
       ``(3) Cost sharing.--Nothing in this section shall be 
     construed as preventing a group health plan or issuer from 
     imposing deductibles, coinsurance, or other cost-sharing in 
     relation to benefits for hospital lengths of stay in 
     connection with a mastectomy or lymph node dissection for the 
     treatment of breast cancer under the plan (or under health 
     insurance coverage offered in connection with a group health 
     plan), except that such coinsurance or other cost-sharing for 
     any portion of a period within a hospital length of stay 
     required under subsection (a) may not be greater than such 
     coinsurance or cost-sharing for any preceding portion of such 
     stay.
       ``(4) Level and type of reimbursements.--Nothing in this 
     section shall be construed to prevent a group health plan or 
     a health insurance issuer offering group health insurance 
     coverage from negotiating the level and type of reimbursement 
     with a provider for care provided in accordance with this 
     section.
       ``(g) Safe Harbors.--The provisions of this section shall 
     not be applicable to any group health plan for any plan year 
     for which such plan has voluntarily sought and received 
     certification from the National Cancer Institute, or any 
     similar entity authorized by the Secretary, that such plan 
     provides appropriate coverage, consistent with the objectives 
     of this section, for mastectomies, lumpectomies and lymph 
     node dissection for the treatment of breast cancer.''.
       (b) Clerical Amendment.--The table of contents in section 1 
     of the Employee Retirement Income Security Act of 1974, as 
     amended by section 603 of the Newborns' and Mothers' Health 
     Protection Act of 1996 and section 702 of the Mental Health 
     Parity Act of 1996, is amended by inserting after the item 
     relating to section 712 the following new item:

``Sec. 713. Required coverage for minimum hospital stay for 
              mastectomies and lymph node dissections for the treatment 
              of breast cancer, coverage for reconstructive surgery 
              following mastectomies, and coverage for secondary 
              consultations.''.

       (c) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply with respect to plan years beginning on or after the 
     date of enactment of this Act.
       (2) Special rule for collective bargaining agreements.--In 
     the case of a group health plan maintained pursuant to 1 or 
     more collective bargaining agreements between employee 
     representatives and 1 or more employers ratified before the 
     date of enactment of this Act, the amendments made by this 
     section shall not apply to plan years beginning before the 
     later of--
       (A) the date on which the last collective bargaining 
     agreements relating to the plan terminates (determined 
     without regard to any extension thereof agreed to after the 
     date of enactment of this Act), or
       (B) January 1, 1999.

     For purposes of subparagraph (A), any plan amendment made 
     pursuant to a collective bargaining agreement relating to the 
     plan which amends the plan solely to conform to any 
     requirement added by this section shall not be treated as a 
     termination of such collective bargaining agreement.

     SEC. ____04. AMENDMENTS TO THE PUBLIC HEALTH SERVICE ACT 
                   RELATING TO THE GROUP MARKET.

       (a) In General.--Subpart 2 of part A of title XXVII of the 
     Public Health Service Act (as added by section 604(a) of the 
     Newborns' and Mothers' Health Protection Act of 1996 and 
     amended by section 703(a) of the Mental Health Parity Act of 
     1996) is amended by adding at the end the following new 
     section:

     ``SEC. 2706. REQUIRED COVERAGE FOR MINIMUM HOSPITAL STAY FOR 
                   MASTECTOMIES AND LYMPH NODE DISSECTIONS FOR THE 
                   TREATMENT OF BREAST CANCER, COVERAGE FOR 
                   RECONSTRUCTIVE SURGERY FOLLOWING MASTECTOMIES, 
                   AND COVERAGE FOR SECONDARY CONSULTATIONS.

       ``(a) Inpatient Care.--
       ``(1) In general.--A group health plan, and a health 
     insurance issuer providing health insurance coverage in 
     connection with a group health plan, that provides medical 
     and surgical benefits shall ensure that inpatient coverage 
     with respect to the treatment of breast cancer is provided 
     for a period of time as is determined by the attending 
     physician, in consultation with the patient, to be medically 
     appropriate following--
       ``(A) a mastectomy;
       ``(B) a lumpectomy; or
       ``(C) a lymph node dissection for the treatment of breast 
     cancer.
       ``(2) Exception.--Nothing in this section shall be 
     construed as requiring the provision of inpatient coverage if 
     the attending physician and patient determine that a shorter 
     period of hospital stay is medically appropriate.
       ``(b) Reconstructive Surgery.--A group health plan, and a 
     health insurance issuer providing health insurance coverage 
     in connection with a group health plan, that provides medical 
     and surgical benefits with respect to a mastectomy shall 
     ensure that, in a case in which a mastectomy patient elects 
     breast reconstruction, coverage is provided for--
       ``(1) all stages of reconstruction of the breast on which 
     the mastectomy has been performed;
       ``(2) surgery and reconstruction of the other breast to 
     produce a symmetrical appearance; and
       ``(3) the costs of prostheses and complications of 
     mastectomy including lymphodemas;

     in the manner determined by the attending physician and the 
     patient to be appropriate, and consistent with any fee 
     schedule contained in the plan.
       ``(c) Notice.--A group health plan, and a health insurance 
     issuer providing health insurance coverage in connection with 
     a group health plan shall provide notice to each participant 
     and beneficiary under such plan regarding the coverage 
     required by this section in accordance with regulations 
     promulgated by the Secretary. Such notice shall be in writing 
     and prominently positioned in any literature or 
     correspondence made available or distributed by the plan or 
     issuer and shall be transmitted--
       ``(1) in the next mailing made by the plan or issuer to the 
     participant or beneficiary;
       ``(2) as part of any yearly informational packet sent to 
     the participant or beneficiary; or
       ``(3) not later than January 1, 1998;

     whichever is earlier.
       ``(d) No Authorization Required.--
       ``(1) In general.--A provider shall not be required to 
     obtain authorization from the plan or issuer for prescribing 
     any length of stay in connection with a mastectomy, a 
     lumpectomy, or a lymph node dissection for the treatment of 
     breast cancer.
       ``(2) Prenotification.--Nothing in this section shall be 
     construed as preventing a plan or issuer from requiring 
     prenotification of an inpatient stay referred to in this 
     section if such requirement is consistent with terms and 
     conditions applicable to other inpatient benefits under the 
     plan, except that the provision of such inpatient stay 
     benefits shall not be contingent upon such notification.
       ``(e) Prohibitions.--A group health plan, and a health 
     insurance issuer offering group health insurance coverage in 
     connection with a group health plan, may not--
       ``(1) deny to a woman eligibility, or continued 
     eligibility, to enroll or to renew coverage under the terms 
     of the plan, solely for the purpose of avoiding the 
     requirements of this section;
       ``(2) provide monetary payments or rebates to individuals 
     to encourage such individuals to accept less than the minimum 
     protections available under this section;
       ``(3) penalize or otherwise reduce or limit the 
     reimbursement of an attending provider because such provider 
     provided care to an individual participant or beneficiary in 
     accordance with this section;
       ``(4) provide incentives (monetary or otherwise) to an 
     attending provider to induce such provider to provide care to 
     an individual participant or beneficiary in a manner 
     inconsistent with this section;
       ``(5) provide financial or other incentives to a physician 
     or specialist to induce the physician or specialist to 
     refrain from referring a participant or beneficiary for a 
     secondary consultation that would otherwise be covered by the 
     plan or coverage involved; and
       ``(6) subject to subsection (f)(3), restrict benefits for 
     any portion of a period within a hospital length of stay 
     required under subsection (a) in a manner which is less 
     favorable than the benefits provided for any preceding 
     portion of such stay.
       ``(f) Rules of Construction.--
       ``(1) In general.--Nothing in this section shall be 
     construed to require a woman who is a participant or 
     beneficiary--
       ``(A) to undergo a mastectomy or lymph node dissection in a 
     hospital; or
       ``(B) to stay in the hospital for a fixed period of time 
     following a mastectomy or lymph node dissection.
       ``(2) Limitation.--This section shall not apply with 
     respect to any group health plan, or any group health 
     insurance coverage offered by a health insurance issuer, 
     which does not provide benefits for hospital lengths of stay 
     in connection with a mastectomy or lymph node dissection for 
     the treatment of breast cancer.
       ``(3) Cost sharing.--Nothing in this section shall be 
     construed as preventing a group health plan or issuer from 
     imposing deductibles, coinsurance, or other cost-sharing in 
     relation to benefits for hospital lengths of stay in 
     connection with a mastectomy or lymph node dissection for the 
     treatment of breast cancer under the plan (or under health 
     insurance coverage offered in connection with a group health 
     plan), except that such coinsurance or other cost-sharing for 
     any portion of a period within a hospital length of stay 
     required under subsection (a) may not be greater than such 
     coinsurance or cost-sharing for any preceding portion of such 
     stay.
       ``(4) Level and type of reimbursements.--Nothing in this 
     section shall be construed to prevent a group health plan or 
     a health insurance issuer offering group health insurance 
     coverage from negotiating the level and type of reimbursement 
     with a provider for care provided in accordance with this 
     section.
       ``(g) Safe Harbors.--The provisions of this section shall 
     not be applicable to any group health plan or health 
     insurance issuer in connection with a group health plan for 
     any plan year for which such plan has voluntarily sought and 
     received certification from the National Cancer Institute, or 
     any similar

[[Page S2342]]

     entity authorized by the Secretary, that such plan provides 
     appropriate coverage, consistent with the objectives of this 
     section, for mastectomies, lumpectomies and lymph node 
     dissection for the treatment of breast cancer.''.
       (b) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to group health plans for plan years beginning on or 
     after the date of enactment of this Act.
       (2) Special rule for collective bargaining agreements.--In 
     the case of a group health plan maintained pursuant to 1 or 
     more collective bargaining agreements between employee 
     representatives and 1 or more employers ratified before the 
     date of enactment of this Act, the amendments made by this 
     section shall not apply to plan years beginning before the 
     later of--
       (A) the date on which the last collective bargaining 
     agreements relating to the plan terminates (determined 
     without regard to any extension thereof agreed to after the 
     date of enactment of this Act), or
       (B) January 1, 1999.

     For purposes of subparagraph (A), any plan amendment made 
     pursuant to a collective bargaining agreement relating to the 
     plan which amends the plan solely to conform to any 
     requirement added by this section shall not be treated as a 
     termination of such collective bargaining agreement.

     SEC. ____05. AMENDMENT TO THE PUBLIC HEALTH SERVICE ACT 
                   RELATING TO THE INDIVIDUAL MARKET.

       (a) In General.--Subpart 3 of part B of title XXVII of the 
     Public Health Service Act (as added by section 605(a) of the 
     Newborn's and Mother's Health Protection Act of 1996) is 
     amended by adding at the end the following new section:

     ``SEC. 2752. REQUIRED COVERAGE FOR MINIMUM HOSPITAL STAY FOR 
                   MASTECTOMIES AND LYMPH NODE DISSECTIONS FOR THE 
                   TREATMENT OF BREAST CANCER AND SECONDARY 
                   CONSULTATIONS.

       ``The provisions of section 2706 shall apply to health 
     insurance coverage offered by a health insurance issuer in 
     the individual market in the same manner as they apply to 
     health insurance coverage offered by a health insurance 
     issuer in connection with a group health plan in the small or 
     large group market.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply with respect to health insurance coverage 
     offered, sold, issued, renewed, in effect, or operated in the 
     individual market on or after the date of enactment of this 
     Act.

     SEC. ____06. AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986.

       (a) In General.--Chapter 100 of the Internal Revenue Code 
     of 1986 (relating to group health plan portability, access, 
     and renewability requirements) is amended by redesignating 
     sections 9804, 9805, and 9806 as sections 9805, 9806, and 
     9807, respectively, and by inserting after section 9803 the 
     following new section:

     ``SEC. 9804. REQUIRED COVERAGE FOR MINIMUM HOSPITAL STAY FOR 
                   MASTECTOMIES AND LYMPH NODE DISSECTIONS FOR THE 
                   TREATMENT OF BREAST CANCER, COVERAGE FOR 
                   RECONSTRUCTIVE SURGERY FOLLOWING MASTECTOMIES, 
                   AND COVERAGE FOR SECONDARY CONSULTATIONS.

       ``(a) Inpatient Care.--
       ``(1) In general.--A group health plan, and a health 
     insurance issuer providing health insurance coverage in 
     connection with a group health plan, that provides medical 
     and surgical benefits shall ensure that inpatient coverage 
     with respect to the treatment of breast cancer is provided 
     for a period of time as is determined by the attending 
     physician, in consultation with the patient, to be medically 
     appropriate following--
       ``(A) a mastectomy;
       ``(B) a lumpectomy; or
       ``(C) a lymph node dissection for the treatment of breast 
     cancer.
       ``(2) Exception.--Nothing in this section shall be 
     construed as requiring the provision of inpatient coverage if 
     the attending physician and patient determine that a shorter 
     period of hospital stay is medically appropriate.
       ``(b) Reconstructive Surgery.--A group health plan, and a 
     health insurance issuer providing health insurance coverage 
     in connection with a group health plan, that provides medical 
     and surgical benefits with respect to a mastectomy shall 
     ensure that, in a case in which a mastectomy patient elects 
     breast reconstruction, coverage is provided for--
       ``(1) all stages of reconstruction of the breast on which 
     the mastectomy has been performed;
       ``(2) surgery and reconstruction of the other breast to 
     produce a symmetrical appearance; and
       ``(3) the costs of prostheses and complications of 
     mastectomy including lymphodemas;

     in the manner determined by the attending physician and the 
     patient to be appropriate, and consistent with any fee 
     schedule contained in the plan.
       ``(c) Notice.--A group health plan, and a health insurance 
     issuer providing health insurance coverage in connection with 
     a group health plan shall provide notice to each participant 
     and beneficiary under such plan regarding the coverage 
     required by this section in accordance with regulations 
     promulgated by the Secretary. Such notice shall be in writing 
     and prominently positioned in any literature or 
     correspondence made available or distributed by the plan or 
     issuer and shall be transmitted--
       ``(1) in the next mailing made by the plan or issuer to the 
     participant or beneficiary;
       ``(2) as part of any yearly informational packet sent to 
     the participant or beneficiary; or
       ``(3) not later than January 1, 1998;

     whichever is earlier.
       ``(d) No Authorization Required.--
       ``(1) In general.--A provider shall not be required to 
     obtain authorization from the plan or issuer for prescribing 
     any length of stay in connection with a mastectomy, a 
     lumpectomy, or a lymph node dissection for the treatment of 
     breast cancer.
       ``(2) Prenotification.--Nothing in this section shall be 
     construed as preventing a plan or issuer from requiring 
     prenotification of an inpatient stay referred to in this 
     section if such requirement is consistent with terms and 
     conditions applicable to other inpatient benefits under the 
     plan, except that the provision of such inpatient stay 
     benefits shall not be contingent upon such notification.
       ``(e) Prohibitions.--A group health plan, and a health 
     insurance issuer offering group health insurance coverage in 
     connection with a group health plan, may not--
       ``(1) deny to a woman eligibility, or continued 
     eligibility, to enroll or to renew coverage under the terms 
     of the plan, solely for the purpose of avoiding the 
     requirements of this section;
       ``(2) provide monetary payments or rebates to individuals 
     to encourage such individuals to accept less than the minimum 
     protections available under this section;
       ``(3) penalize or otherwise reduce or limit the 
     reimbursement of an attending provider because such provider 
     provided care to an individual participant or beneficiary in 
     accordance with this section;
       ``(4) provide incentives (monetary or otherwise) to an 
     attending provider to induce such provider to provide care to 
     an individual participant or beneficiary in a manner 
     inconsistent with this section;
       ``(5) provide financial or other incentives to a physician 
     or specialist to induce the physician or specialist to 
     refrain from referring a participant or beneficiary for a 
     secondary consultation that would otherwise be covered by the 
     plan or coverage involved; and
       ``(6) subject to subsection (f)(3), restrict benefits for 
     any portion of a period within a hospital length of stay 
     required under subsection (a) in a manner which is less 
     favorable than the benefits provided for any preceding 
     portion of such stay.
       ``(f) Rules of Construction.--
       ``(1) In general.--Nothing in this section shall be 
     construed to require a woman who is a participant or 
     beneficiary--
       ``(A) to undergo a mastectomy or lymph node dissection in a 
     hospital; or
       ``(B) to stay in the hospital for a fixed period of time 
     following a mastectomy or lymph node dissection.
       ``(2) Limitation.--This section shall not apply with 
     respect to any group health plan, or any group health 
     insurance coverage offered by a health insurance issuer, 
     which does not provide benefits for hospital lengths of stay 
     in connection with a mastectomy or lymph node dissection for 
     the treatment of breast cancer.
       ``(3) Cost sharing.--Nothing in this section shall be 
     construed as preventing a group health plan or issuer from 
     imposing deductibles, coinsurance, or other cost-sharing in 
     relation to benefits for hospital lengths of stay in 
     connection with a mastectomy or lymph node dissection for the 
     treatment of breast cancer under the plan (or under health 
     insurance coverage offered in connection with a group health 
     plan), except that such coinsurance or other cost-sharing for 
     any portion of a period within a hospital length of stay 
     required under subsection (a) may not be greater than such 
     coinsurance or cost-sharing for any preceding portion of such 
     stay.
       ``(4) Level and type of reimbursements.--Nothing in this 
     section shall be construed to prevent a group health plan or 
     a health insurance issuer offering group health insurance 
     coverage from negotiating the level and type of reimbursement 
     with a provider for care provided in accordance with this 
     section.
       ``(g) Safe Harbors.--The provisions of this section shall 
     not be applicable to any group health plan or health 
     insurance issuer in connection with a group health plan for 
     any plan year for which such plan has voluntarily sought and 
     received certification from the National Cancer Institute, or 
     any similar entity authorized by the Secretary, that such 
     plan provides appropriate coverage, consistent with the 
     objectives of this section, for mastectomies, lumpectomies 
     and lymph node dissection for the treatment of breast 
     cancer.''.
       (b) Conforming Amendments.--
       (1) Sections 9801(c)(1), 9805(b) (as redesignated by 
     subsection (a)), 9805(c) (as so redesignated), 
     4980D(c)(3)(B)(i)(I), 4980D(d)(3), and 4980D(f)(1) of such 
     Code are each amended by striking ``9805'' each place it 
     appears and inserting ``9806''.
       (2) The heading for subtitle K of such Code is amended to 
     read as follows:
``Subtitle K--Group Health Plan Portability, Access, Renewability, and 
                         Other Requirements''.
       (3) The heading for chapter 100 of such Code is amended to 
     read as follows:

[[Page S2343]]

``CHAPTER 100--GROUP HEALTH PLAN PORTABILITY, ACCESS, RENEWABILITY, AND 
                         OTHER REQUIREMENTS''.

       (4) Section 4980D(a) of such Code is amended by striking 
     ``and renewability'' and inserting ``renewability, and 
     other''.
       (c) Clerical Amendments.--
       (1) The table of contents for chapter 100 of such Code is 
     amended by redesignating the items relating to sections 9804, 
     9805, and 9806 as items relating to sections 9805, 9806, and 
     9807, and by inserting after the item relating to section 
     9803 the following new item:

``Sec. 9804. Required coverage for minimum hospital stay for 
              mastectomies and lymph node dissections for the treatment 
              of breast cancer, coverage for reconstructive surgery 
              following mastectomies, and coverage for secondary 
              consultations.''.

       (2) The item relating to subtitle K in the table of 
     subtitles for such Code is amended by striking ``and 
     renewability'' and inserting ``renewability, and other''.
       (3) The item relating to chapter 100 in the table of 
     chapters for subtitle K of such Code is amended by striking 
     ``and renewability'' and inserting ``renewability, and 
     other''.
       (d) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply with respect to plan years beginning on or after the 
     date of enactment of this Act.
       (2) Special rule for collective bargaining agreements.--In 
     the case of a group health plan maintained pursuant to 1 or 
     more collective bargaining agreements between employee 
     representatives and 1 or more employers ratified before the 
     date of enactment of this Act, the amendments made by this 
     section shall not apply to plan years beginning before the 
     later of--
       (A) the date on which the last collective bargaining 
     agreements relating to the plan terminates (determined 
     without regard to any extension thereof agreed to after the 
     date of enactment of this Act), or
       (B) January 1, 1999.

     For purposes of subparagraph (A), any plan amendment made 
     pursuant to a collective bargaining agreement relating to the 
     plan which amends the plan solely to conform to any 
     requirement added by this section shall not be treated as a 
     termination of such collective bargaining agreement.
                                 ______
                                 

                       DURBIN AMENDMENT NO. 2049

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

       Strike section 101 and insert:

     SEC. 101. INCREASE IN DEDUCTION FOR HEALTH INSURANCE COSTS OF 
                   SELF-EMPLOYED INDIVIDUALS.

       (a) Increase in Deduction.--
       (1) In general.--Subparagraph (B) of section 162(l)(1) is 
     amended to read as follows:
       ``(B) Applicable percentage.--For purposes of subparagraph 
     (A), the applicable percentage shall be determined under the 
     following table:

``For taxable years beginning in calendarThe applicable percentage is--
  1998...........................................................45....

  1999...........................................................60....

  2000..........................................................100....

  2001..........................................................100....

  2002..........................................................100....

  2003..........................................................100....

  2004..........................................................100....

  2005..........................................................100....

  2006 and thereafter........................................100.''....

       (2) Effective date.--The amendment made by this subsection 
     shall apply to taxable years beginning after December 31, 
     1997.
       (b) Rules Relating to Foreign Oil and Gas Income.--
       (1) Separate basket for foreign tax credit.--
       (A) In general.--Paragraph (1) of section 904(d) (relating 
     to separate application of section with respect to certain 
     categories of income) is amended by striking ``and'' at the 
     end of subparagraph (H), by redesignating subparagraph (I) as 
     subparagraph (J), and by inserting after subparagraph (H) the 
     following new subparagraph:
       ``(I) foreign oil and gas income, and''.
       (B) Definition.--Paragraph (2) of section 904(d) is amended 
     by redesignating subparagraphs (H) and (I) as subparagraphs 
     (I) and (J), respectively, and by inserting after 
     subparagraph (G) the following new subparagraph:
       ``(H) Foreign oil and gas income.--The term `foreign oil 
     and gas income' has the meaning given such term by section 
     954(g).''
       (C) Conforming amendments.--
       (i) Section 904(d)(3)(F)(i) is amended by striking ``or 
     (E)'' and inserting ``(E), or (I)''.
       (ii) Section 907(a) is hereby repealed.
       (iii) Section 907(c)(4) is hereby repealed.
       (iv) Section 907(f) is hereby repealed.
       (D) Effective dates.--
       (i) In general.--The amendments made by this paragraph 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.
       (ii) Transitional rules.--

       (I) Separate basket treatment.--Any taxes paid or accrued 
     in a taxable year beginning on or before the date of the 
     enactment of this Act, with respect to income which was 
     described in subparagraph (I) of section 904(d)(1) of such 
     Code (as in effect on the day before the date of the 
     enactment of this Act), shall be treated as taxes paid or 
     accrued with respect to foreign oil and gas income to the 
     extent the taxpayer establishes to the satisfaction of the 
     Secretary of the Treasury that such taxes were paid or 
     accrued with respect to foreign oil and gas income.
       (II) Carryovers.--Any unused oil and gas extraction taxes 
     which under section 907(f) of such Code (as so in effect) 
     would have been allowable as a carryover to the taxpayer's 
     first taxable year beginning after the date of the enactment 
     of this Act (without regard to the limitation of paragraph 
     (2) of such section 907(f) for first taxable year) shall be 
     allowed as carryovers under section 904(c) of such Code in 
     the same manner as if such taxes were unused taxes under such 
     section 904(c) with respect to foreign oil and gas extraction 
     income.
       (III) Losses.--The amendment made by subparagraph (C)(iii) 
     shall not apply to foreign oil and gas extraction losses 
     arising in taxable years beginning on or before the date of 
     the enactment of this Act.

       (2) Elimination of deferral for foreign oil and gas 
     extraction income.--
       (A) General rule.--Paragraph (1) of section 954(g) 
     (defining foreign base company oil related income) is amended 
     to read as follows:
       ``(1) In general.--Except as otherwise provided in this 
     subsection, the term `foreign oil and gas income' means any 
     income of a kind which would be taken into account in 
     determining the amount of--
       ``(A) foreign oil and gas extraction income (as defined in 
     section 907(c)), or
       ``(B) foreign oil related income (as defined in section 
     907(c)).''
       (B) Conforming amendments.--
       (i) Subsections (a)(5), (b)(5), and (b)(8) of section 954 
     are each amended by striking ``base company oil related 
     income'' each place it appears (including in the heading of 
     subsection (b)(8)) and inserting ``oil and gas income''.
       (ii) Subsection (b)(4) of section 954 is amended by 
     striking ``base company oil-related income'' and inserting 
     ``oil and gas income''.
       (iii) The subsection heading for subsection (g) of section 
     954 is amended by striking ``Foreign Base Company Oil Related 
     Income'' and inserting ``Foreign Oil and Gas Income''.
       (iv) Subparagraph (A) of section 954(g)(2) is amended by 
     striking ``foreign base company oil related income'' and 
     inserting ``foreign oil and gas income''.
       (C) Effective date.--The amendments made by this paragraph 
     shall apply to taxable years of foreign corporations 
     beginning after the date of the enactment of this Act, and to 
     taxable years of United States shareholders ending with or 
     within such taxable years of foreign corporations.
       (c) Valuation Rules for Transfers Involving Nonbusiness 
     Assets.--
       (1) In general.--Section 2031 (relating to definition of 
     gross estate) is amended by redesignating subsection (d) as 
     subsection (e) and by inserting after subsection (c) the 
     following new subsection:
       ``(d) Valuation Rules for Certain Transfers of Nonbusiness 
     Assets.--For purposes of this chapter and chapter 12--
       ``(1) In general.--In the case of the transfer of any 
     interest in an entity other than an interest which is 
     actively traded (within the meaning of section 1092)--
       ``(A) the value of any nonbusiness assets held by the 
     entity shall be determined as if the transferor had 
     transferred such assets directly to the transferee (and no 
     valuation discount shall be allowed with respect to such 
     nonbusiness assets), and
       ``(B) the nonbusiness assets shall not be taken into 
     account in determining the value of the interest in the 
     entity.
       ``(2) Nonbusiness assets.--For purposes of this 
     subsection--
       ``(A) In general.--The term `nonbusiness asset' means any 
     asset which is not used in the active conduct of 1 or more 
     trades or businesses.
       ``(B) Exception for certain passive assets.--Except as 
     provided in subparagraph (C), a passive asset shall not be 
     treated for purposes of subparagraph (A) as used in the 
     active conduct of a trade or business unless--
       ``(i) the asset is property described in paragraph (1) or 
     (4) of section 1221 or is a hedge with respect to such 
     property, or
       ``(ii) the asset is real property used in the active 
     conduct of 1 or more real property trades or businesses 
     (within the meaning of section 469(c)(7)(C)) in which the 
     transferor materially participates and with respect to which 
     the transferor meets the requirements of section 
     469(c)(7)(B)(ii).

     For purposes of clause (ii), material participation shall be 
     determined under the rules of section 469(h), except that 
     section 469(h)(3) shall be applied without regard to the 
     limitation to farming activity.
       ``(C) Exception for working capital.--Any asset (including 
     a passive asset) which is held as a part of the reasonably 
     required working capital needs of a trade or business shall 
     be treated as used in the active conduct of a trade or 
     business.
       ``(3) Passive asset.--For purposes of this subsection, the 
     term `passive asset' means any--
       ``(A) cash or cash equivalents,
       ``(B) except to the extent provided by the Secretary, stock 
     in a corporation or any other equity, profits, or capital 
     interest in any entity,
       ``(C) evidence of indebtedness, option, forward or futures 
     contract, notional principal contract, or derivative,
       ``(D) asset described in clause (iii), (iv), or (v) of 
     section 351(e)(1)(B),

[[Page S2344]]

       ``(E) annuity,
       ``(F) real property used in 1 or more real property trades 
     or businesses (as defined in section 469(c)(7)(C)),
       ``(G) asset (other than a patent, trademark, or copyright) 
     which produces royalty income,
       ``(H) commodity,
       ``(I) collectible (within the meaning of section 401(m)), 
     or
       ``(J) any other asset specified in regulations prescribed 
     by the Secretary.
       ``(4) Look-thru rules.--
       ``(A) In general.--If a nonbusiness asset of an entity 
     consists of a 10-percent interest in any other entity, this 
     subsection shall be applied by disregarding the 10-percent 
     interest and by treating the entity as holding directly its 
     ratable share of the assets of the other entity. This 
     subparagraph shall be applied successively to any 10-percent 
     interest of such other entity in any other entity.
       ``(B) 10-percent interest.--The term `10-percent interest' 
     means--
       ``(i) in the case of an interest in a corporation, 
     ownership of at least 10 percent (by vote or value) of the 
     stock in such corporation,
       ``(ii) in the case of an interest in a partnership, 
     ownership of at least 10 percent of the capital or profits 
     interest in the partnership, and
       ``(iii) in any other case, ownership of at least 10 percent 
     of the beneficial interests in the entity.
       ``(5) Coordination with subsection (b).--Subsection (b) 
     shall apply after the application of this subsection.''
       (2) Effective date.--The amendments made by this subsection 
     shall apply to transfers after the date of the enactment of 
     this Act.

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