[Congressional Record Volume 144, Number 44 (Tuesday, April 21, 1998)]
[Senate]
[Pages S3363-S3368]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                          AMENDMENTS SUBMITTED

                                 ______
                                 

        THE EDUCATION SAVINGS ACT FOR PUBLIC AND PRIVATE SCHOOLS

                                 ______
                                 

             MOSELEY-BRAUN (AND OTHERS) AMENDMENT NO. 2292

  Ms. MOSELEY-BRAUN (for herself, Mr. Moynihan, Mr. Daschle, Mr. 
Kennedy, Mrs. Murray, Mr. Dodd, Mr. Bingaman, Mr. Lautenberg, Ms. 
Mikulski, Mr. Reed, Mr. Robb, Mr. Glenn, Mr. Reid, Mr. Levin, Mr. 
Kerry, Mrs. Feinstein, Mr. Durbin, Mr. Kerrey, and Mr. Harkin) proposed 
an amendment 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:

       Strike all after ``SECTION'', and insert the following:

              1. SHORT TITLE; AMENDMENT TO 1986 CODE; TABLE OF 
                   CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Public 
     School Improvement Tax Act of 1998''.
       (b) Amendment to 1986 Code.--Except as otherwise expressly 
     provided, whenever in this Act an amendment or repeal is 
     expressed in terms of an amendment to, or repeal of, a 
     section or other provision, the reference shall be considered 
     to be made to a section or other provision of the Internal 
     Revenue Code of 1986.
       (c) Table of Contents.--The table of contents for this Act 
     is as follows:

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

                 TITLE I--TAX INCENTIVES FOR EDUCATION

Sec. 101. Expansion of incentives for public schools.
Sec. 102. Exclusion from gross income of education distributions from 
              qualified State tuition programs.
Sec. 103. Extension of exclusion for employer-provided educational 
              assistance.
Sec. 104. Additional increase in arbitrage rebate exception for 
              governmental bonds used to finance education facilities.
Sec. 105. Exclusion of certain amounts received under the National 
              Health Corps Scholarship program.
Sec. 106. Treatment of qualified public educational facility bonds as 
              exempt facility bonds.

                           TITLE II--REVENUE

Sec. 201. Clarification of deduction for deferred compensation.

[[Page S3364]]

Sec. 202. Modification to foreign tax credit carryback and carryover 
              periods.
Sec. 203. Certain taxpayers precluded from prematurely claiming losses 
              or from creating reserves for bad debts from receivables.
Sec. 204. Application of environmental income tax.
Sec. 205. Excise tax on purchase of structured settlement agreements.
Sec. 206. Property subject to a liability treated in same manner as 
              assumption of liability.
Sec. 207. Clarification and expansion of mathematical error assessment 
              procedures.
Sec. 208. Clarification of definition of specified liability loss.
Sec. 209. Modification of depreciation method for tax-exempt use 
              property.
                 TITLE I--TAX INCENTIVES FOR EDUCATION

     SEC. 101. EXPANSION OF INCENTIVES FOR PUBLIC SCHOOLS.

       (a) In General.--Part IV of subchapter U of chapter 1 
     (relating to incentives for education zones) is amended to 
     read as follows:

 ``PART IV--INCENTIVES FOR QUALIFIED PUBLIC SCHOOL MODERNIZATION BONDS

``Sec. 1397E. Credit to holders of qualified public school 
              modernization bonds.
``Sec. 1397F. Qualified zone academy bonds.
``Sec. 1397G. Qualified school construction bonds.

     ``SEC. 1397E. CREDIT TO HOLDERS OF QUALIFIED PUBLIC SCHOOL 
                   MODERNIZATION BONDS.

       ``(a) Allowance of Credit.--In the case of a taxpayer who 
     holds a qualified public school modernization bond on the 
     credit allowance date of such bond which occurs during the 
     taxable year, there shall be allowed as a credit against the 
     tax imposed by this chapter for such taxable year the amount 
     determined under subsection (b).
       ``(b) Amount of Credit.--
       ``(1) In general.--The amount of the credit determined 
     under this subsection with respect to any qualified public 
     school modernization bond is the amount equal to the product 
     of--
       ``(A) the credit rate determined by the Secretary under 
     paragraph (2) for the month in which such bond was issued, 
     multiplied by
       ``(B) the face amount of the bond held by the taxpayer on 
     the credit allowance date.
       ``(2) Determination.--During each calendar month, the 
     Secretary shall determine a credit rate which shall apply to 
     bonds issued during the following calendar month. The credit 
     rate for any month is the percentage which the Secretary 
     estimates will on average permit the issuance of qualified 
     public school modernization bonds without discount and 
     without interest cost to the issuer.
       ``(c) Limitation Based on Amount of Tax.--
       ``(1) In general.--The credit allowed under subsection (a) 
     for any taxable year shall not exceed the excess of--
       ``(A) the sum of the regular tax liability (as defined in 
     section 26(b)) plus the tax imposed by section 55, over
       ``(B) the sum of the credits allowable under part IV of 
     subchapter A (other than subpart C thereof, relating to 
     refundable credits).
       ``(2) Carryover of unused credit.--If the credit allowable 
     under subsection (a) exceeds the limitation imposed by 
     paragraph (1) for such taxable year, such excess shall be 
     carried to the succeeding taxable year and added to the 
     credit allowable under subsection (a) for such taxable year.
       ``(d) Qualified Public School Modernization Bond; Credit 
     Allowance Date.--For purposes of this section--
       ``(1) Qualified public school modernization bond.--The term 
     `qualified public school modernization bond' means--
       ``(A) a qualified zone academy bond, and
       ``(B) a qualified school construction bond.
       ``(2) Credit allowance date.--The term `credit allowance 
     date' means, with respect to any issue, the last day of the 
     1-year period beginning on the date of issuance of such issue 
     and the last day of each successive 1-year period thereafter.
       ``(e) Other Definitions.--For purposes of this part--
       ``(1) Local educational agency.--The term `local 
     educational agency' has the meaning given to such term by 
     section 14101 of the Elementary and Secondary Education Act 
     of 1965. Such term includes the local educational agency that 
     serves the District of Columbia but does not include any 
     other State agency.
       ``(2) Bond.--The term `bond' includes any obligation.
       ``(3) State.--The term `State' includes the District of 
     Columbia and any possession of the United States.
       ``(4) Public school facility.--The term `public school 
     facility' shall not include any stadium or other facility 
     primarily used for athletic contests or exhibitions or other 
     events for which admission is charged to the general public.
       ``(f) Credit Included in Gross Income.--Gross income 
     includes the amount of the credit allowed to the taxpayer 
     under this section and the amount so included shall be 
     treated as interest income.
       ``(g) Bonds Held By Regulated Investment Companies.--If any 
     qualified public school modernization bond is held by a 
     regulated investment company, the credit determined under 
     subsection (a) shall be allowed to shareholders of such 
     company under procedures prescribed by the Secretary.

     ``SEC. 1397F. QUALIFIED ZONE ACADEMY BONDS.

       ``(a) Qualified Zone Academy Bond.--For purposes of this 
     part--
       ``(1) In general.--The term `qualified zone academy bond' 
     means any bond issued as part of an issue if--
       ``(A) 95 percent or more of the proceeds of such issue are 
     to be used for a qualified purpose with respect to a 
     qualified zone academy established by a local educational 
     agency,
       ``(B) the bond is issued by a State or local government 
     within the jurisdiction of which such academy is located,
       ``(C) the issuer--
       ``(i) designates such bond for purposes of this section,
       ``(ii) certifies that it has written assurances that the 
     private business contribution requirement of paragraph (2) 
     will be met with respect to such academy, and
       ``(iii) certifies that it has the written approval of the 
     local educational agency for such bond issuance, and
       ``(D) the term of each bond which is part of such issue 
     does not exceed 15 years.
       ``(2) Private business contribution requirement.--
       ``(A) In general.--For purposes of paragraph (1), the 
     private business contribution requirement of this paragraph 
     is met with respect to any issue if the local educational 
     agency that established the qualified zone academy has 
     written commitments from private entities to make qualified 
     contributions having a present value (as of the date of 
     issuance of the issue) of not less than 10 percent of the 
     proceeds of the issue.
       ``(B) Qualified contributions.--For purposes of 
     subparagraph (A), the term `qualified contribution' means any 
     contribution (of a type and quality acceptable to the local 
     educational agency) of--
       ``(i) equipment for use in the qualified zone academy 
     (including state-of-the-art technology and vocational 
     equipment),
       ``(ii) technical assistance in developing curriculum or in 
     training teachers in order to promote appropriate market 
     driven technology in the classroom,
       ``(iii) services of employees as volunteer mentors,
       ``(iv) internships, field trips, or other educational 
     opportunities outside the academy for students, or
       ``(v) any other property or service specified by the local 
     educational agency.
       ``(3) Qualified zone academy.--The term `qualified zone 
     academy' means any public school (or academic program within 
     a public school) which is established by and operated under 
     the supervision of a local educational agency to provide 
     education or training below the postsecondary level if--
       ``(A) such public school or program (as the case may be) is 
     designed in cooperation with business to enhance the academic 
     curriculum, increase graduation and employment rates, and 
     better prepare students for the rigors of college and the 
     increasingly complex workforce,
       ``(B) students in such public school or program (as the 
     case may be) will be subject to the same academic standards 
     and assessments as other students educated by the local 
     educational agency,
       ``(D) the comprehensive education plan of such public 
     school or program is approved by the local educational 
     agency, and
       ``(E)(i) such public school is located in an empowerment 
     zone or enterprise community (including any such zone or 
     community designated after the date of the enactment of this 
     section), or
       ``(ii) there is a reasonable expectation (as of the date of 
     issuance of the bonds) that at least 35 percent of the 
     students attending such school or participating in such 
     program (as the case may be) will be eligible for free or 
     reduced-cost lunches under the school lunch program 
     established under the National School Lunch Act.
       ``(4) Qualified purpose.--The term `qualified purpose' 
     means, with respect to any qualified zone academy--
       ``(A) constructing, rehabilitating, or repairing the public 
     school facility in which the academy is established,
       ``(B) providing equipment for use at such academy,
       ``(C) developing course materials for education to be 
     provided at such academy, and
       ``(D) training teachers and other school personnel in such 
     academy.
       ``(5) Temporary period exception.--A bond shall not be 
     treated as failing to meet the requirement of paragraph 
     (1)(A) solely by reason of the fact that the proceeds of the 
     issue of which such bond is a part are invested for a 
     reasonable temporary period (but not more than 36 months) 
     until such proceeds are needed for the purpose for which such 
     issue was issued. Any earnings on such proceeds during such 
     period shall be treated as proceeds of the issue for purposes 
     of applying paragraph (1)(A).
       ``(b) Limitations on Amount of Bonds Designated.--
       ``(1) In general.--There is a national zone academy bond 
     limitation for each calendar year. Such limitation is--
       ``(A) $400,000,000 for 1998,
       ``(B) $700,000,000 for 1999,
       ``(C) $700,000,000 for 2000,
       ``(D) $700,000,000 for 2001,
       ``(C) $700,000,000 for 2002, and
       ``(D) except as provided in paragraph (3), zero after 2002.

[[Page S3365]]

       ``(2) Allocation of limitation.--
       ``(A) Allocation among states.--
       ``(i) 1998 limitation.--The national zone academy bond 
     limitation for calendar year 1998 shall be allocated by the 
     Secretary among the States on the basis of their respective 
     populations of individuals below the poverty line (as defined 
     by the Office of Management and Budget).
       ``(ii) Limitation after 1998.--The national zone academy 
     bond limitation for any calendar year after 1998 shall be 
     allocated by the Secretary among the States in the manner 
     prescribed by section 1397G(d); except that, in making the 
     allocation under this clause, the Secretary shall take into 
     account Basic Grants attributable to large local educational 
     agencies (as defined in section 1397G(e)).
       ``(B) Allocation to local educational agencies.--The 
     limitation amount allocated to a State under subparagraph (A) 
     shall be allocated by the State education agency to qualified 
     zone academies within such State.
       ``(C) Designation subject to limitation amount.--The 
     maximum aggregate face amount of bonds issued during any 
     calendar year which may be designated under subsection (a) 
     with respect to any qualified zone academy shall not exceed 
     the limitation amount allocated to such academy under 
     subparagraph (B) for such calendar year.
       ``(3) Carryover of unused limitation.--If for any calendar 
     year--
       ``(A) the limitation amount under this subsection for any 
     State, exceeds
       ``(B) the amount of bonds issued during such year which are 
     designated under subsection (a) with respect to qualified 
     zone academies within such State,

     the limitation amount under this subsection for such State 
     for the following calendar year shall be increased by the 
     amount of such excess. The preceding sentence shall not apply 
     if such following calendar year is after 2004.

     ``SEC. 1397G. QUALIFIED SCHOOL CONSTRUCTION BONDS.

       ``(a) Qualified School Construction Bond.--For purposes of 
     this part, the term `qualified school construction bond' 
     means any bond issued as part of an issue if--
       ``(1) 95 percent or more of the proceeds of such issue are 
     to be used for the construction, rehabilitation, or repair of 
     a public school facility,
       ``(2) the bond is issued by a State or local government 
     within the jurisdiction of which such school is located,
       ``(3) the issuer designates such bond for purposes of this 
     section, and
       ``(4) the term of each bond which is part of such issue 
     does not exceed 15 years.

     Rules similar to the rules of section 1397F(a)(5) shall apply 
     for purposes of paragraph (1).
       ``(b) Limitation on Amount of Bonds Designated.--The 
     maximum aggregate face amount of bonds issued during any 
     calendar year which may be designated under subsection (a) by 
     any issuer shall not exceed the sum of--
       ``(1) the limitation amount allocated under subsection (d) 
     for such calendar year to such issuer, and
       ``(2) if such issuer is a large local educational agency 
     (as defined in subsection (e)) or is issuing on behalf of 
     such an agency, the limitation amount allocated under 
     subsection (e) for such calendar year to such agency.
       ``(c) National Limitation on Amount of Bonds Designated.--
       ``(1) In general.--There is a national qualified school 
     construction bond limitation for each calendar year equal to 
     the dollar amount specified in paragraph (2) for such year, 
     reduced, in the case of calendar years 1999 and 2000, by 1.5 
     percent of such amount.
       ``(2) Dollar amount specified.--The dollar amount specified 
     in this paragraph is--
       ``(A) $9,700,000,000 for 1999,
       ``(B) $9,700,000,000 for 2000, and
       ``(C) except as provided in subsection (f), zero after 
     2000.
       ``(d) 65-Percent of Limitation Allocated Among States.--
       ``(1) In general.--Sixty-five percent of the limitation 
     applicable under subsection (c) for any calendar year shall 
     be allocated among the States under paragraph (2) by the 
     Secretary. The limitation amount allocated to a State under 
     the preceding sentence shall be allocated by the State 
     education agency to issuers within such State and such 
     allocations may be made only if there is an approved State 
     application.
       ``(2) Allocation formula.--The amount to be allocated under 
     paragraph (1) for any calendar year shall be allocated among 
     the States in proportion to the respective amounts each such 
     State received for Basic Grants under subpart 2 of part A of 
     title I of the Elementary and Secondary Education Act of 1965 
     (20 U.S.C. 6331 et seq.) for the most recent fiscal year 
     ending before such calendar year. For purposes of the 
     preceding sentence, Basic Grants attributable to large local 
     educational agencies (as defined in subsection (e)) shall be 
     disregarded.
       ``(3) Minimum allocations to states.--
       ``(A) In general.--The Secretary shall adjust the 
     allocations under this subsection for any calendar year for 
     each State to the extent necessary to ensure that the sum 
     of--
       ``(i) the amount allocated to such State under this 
     subsection for such year, and
       ``(ii) the aggregate amounts allocated under subsection (e) 
     to large local educational agencies in such State for such 
     year,

     is not less than an amount equal to such State's minimum 
     percentage of 65 percent of the national qualified school 
     construction bond limitation under subsection (c) for the 
     calendar year.
       ``(B) Minimum percentage.--A State's minimum percentage for 
     any calendar year is the minimum percentage described in 
     section 1124(d) of the Elementary and Secondary Education Act 
     of 1965 (20 U.S.C. 6334(d)) for such State for the most 
     recent fiscal year ending before such calendar year.
       ``(4) Allocations to certain possessions.--The amount to be 
     allocated under paragraph (1) to any possession of the United 
     States other than Puerto Rico shall be the amount which would 
     have been allocated if all allocations under paragraph (1) 
     were made on the basis of respective populations of 
     individuals below the poverty line (as defined by the Office 
     of Management and Budget). In making other allocations, the 
     amount to be allocated under paragraph (1) shall be reduced 
     by the aggregate amount allocated under this paragraph to 
     possessions of the United States.
       ``(5) Approved state application.--For purposes of 
     paragraph (1), the term `approved State application' means an 
     application which is approved by the Secretary of Education 
     and which includes--
       ``(A) the results of a recent publicly-available survey 
     (undertaken by the State with the involvement of local 
     education officials, members of the public, and experts in 
     school construction and management) of such State's needs for 
     public school facilities, including descriptions of--
       ``(i) health and safety problems at such facilities,
       ``(ii) the capacity of public schools in the State to house 
     projected enrollments, and
       ``(iii) the extent to which the public schools in the State 
     offer the physical infrastructure needed to provide a high-
     quality education to all students, and
       ``(B) a description of how the State will allocate to local 
     educational agencies, or otherwise use, its allocation under 
     this subsection to address the needs identified under 
     subparagraph (A), including a description of how it will--
       ``(i) give highest priority to localities with the greatest 
     needs, as demonstrated by inadequate school facilities 
     coupled with a low level of resources to meet those needs,
       ``(ii) use its allocation under this subsection to assist 
     localities that lack the fiscal capacity to issue bonds on 
     their own, including the issuance of bonds by the State on 
     behalf of such localities, and
       ``(iii) ensure that its allocation under this subsection is 
     used only to supplement, and not supplant, the amount of 
     school construction, rehabilitation, and repair in the State 
     that would have occurred in the absence of such allocation.

     Any allocation under paragraph (1) by a State education 
     agency shall be binding if such agency reasonably determined 
     that the allocation was in accordance with the plan approved 
     under this paragraph.
       ``(e) 35-Percent of Limitation Allocated Among Largest 
     School Districts.--
       ``(1) In general.--Thirty-five percent of the limitation 
     applicable under subsection (c) for any calendar year shall 
     be allocated under paragraph (2) by the Secretary among local 
     educational agencies which are large local educational 
     agencies for such year. No qualified school construction bond 
     may be issued by reason of an allocation to a large local 
     educational agency under the preceding sentence unless such 
     agency has an approved local application.
       ``(2) Allocation formula.--The amount to be allocated under 
     paragraph (1) for any calendar year shall be allocated among 
     large local educational agencies in proportion to the 
     respective amounts each such agency received for Basic Grants 
     under subpart 2 of part A of title I of the Elementary and 
     Secondary Education Act of 1965 (20 U.S.C. 6331 et seq.) for 
     the most recent fiscal year ending before such calendar year.
       ``(3) Large local educational agency.--For purposes of this 
     section, the term `large local educational agency' means, 
     with respect to a calendar year, any local educational agency 
     if such agency is--
       ``(A) among the 100 local educational agencies with the 
     largest numbers of children aged 5 through 17 from families 
     living below the poverty level, as determined by the 
     Secretary using the most recent data available from the 
     Department of Commerce that are satisfactory to the 
     Secretary, or
       ``(B) 1 of not more than 25 local educational agencies 
     (other than those described in clause (i)) that the Secretary 
     of Education determines (based on the most recent data 
     available satisfactory to the Secretary) are in particular 
     need of assistance, based on a low level of resources for 
     school construction, a high level of enrollment growth, or 
     such other factors as the Secretary deems appropriate.
       ``(4) Approved local application.--For purposes of 
     paragraph (1), the term `approved local application' means an 
     application which is approved by the Secretary of Education 
     and which includes--
       ``(A) the results of a recent publicly-available survey 
     (undertaken by the local educational agency with the 
     involvement of school officials, members of the public, and 
     experts in school construction and management) of such 
     agency's needs for public school facilities, including 
     descriptions of--

[[Page S3366]]

       ``(i) the overall condition of the local educational 
     agency's school facilities, including health and safety 
     problems,
       ``(ii) the capacity of the agency's schools to house 
     projected enrollments, and
       ``(iii) the extent to which the agency's schools offer the 
     physical infrastructure needed to provide a high-quality 
     education to all students,
       ``(B) a description of how the local educational agency 
     will use its allocation under this subsection to address the 
     needs identified under subparagraph (A), and
       ``(C) a description of how the local educational agency 
     will ensure that its allocation under this subsection is used 
     only to supplement, and not supplant, the amount of school 
     construction, rehabilitation, or repair in the locality that 
     would have occurred in the absence of such allocation.

     A rule similar to the rule of the last sentence of subsection 
     (d)(5) shall apply for purposes of this paragraph.
       ``(f) Carryover of Unused Limitation.--If for any calendar 
     year--
       ``(1) the amount allocated under subsection (d) to any 
     State, exceeds
       ``(2) the amount of bonds issued during such year which are 
     designated under subsection (a) pursuant to such allocation,

     the limitation amount under such subsection for such State 
     for the following calendar year shall be increased by the 
     amount of such excess. A similar rule shall apply to the 
     amounts allocated under subsection (e). The subsection shall 
     not apply if such following calendar year is after 2002.
       ``(g) Set-Aside Allocated Among Indian Tribes.--
       ``(1) In general.--The 1.5 percent set-aside applicable 
     under subsection (c)(1) for any calendar year shall be 
     allocated under paragraph (2) among Indian tribes for the 
     construction, rehabilitation, or repair of tribal schools. No 
     allocation may be made under the preceding sentence unless 
     the Indian tribe has an approved application.
       ``(2) Allocation formula.--The amount to be allocated under 
     paragraph (1) for any calendar year shall be allocated among 
     Indian tribes on a competitive basis by the Secretary of 
     Education, in consultation with the Secretary of the 
     Interior--
       ``(A) through a negotiated rulemaking procedure with the 
     tribes in the same manner as the procedure described in 
     section 106(b)(2) of the Native American Housing Assistance 
     and Self-Determination Act of 1996 (25 U.S.C. 4116(b)(2)), 
     and
       ``(B) based on criteria described in paragraphs (1), (3), 
     (4), (5), and (6) of section 12005(a) of the Elementary and 
     Secondary Education Act of 1965 (20 U.S.C. 8505(a)).
       ``(3) Approved application.--For purposes of paragraph (1), 
     the term `approved application' means an application 
     submitted by an Indian tribe which is approved by the 
     Secretary of Education and which includes--
       ``(A) the basis upon which the applicable tribal school 
     meets the criteria described in paragraph (2)(B), and
       ``(B) an assurance by the Indian tribe that such tribal 
     school will not receive funds pursuant to allocations 
     described in subsection (d) or (e).
       ``(4) Definitions.--For purposes of this subsection--
       ``(A) Indian tribe.--The term `Indian tribe' has the 
     meaning given such term by section 45A(c)(6).
       ``(B) Tribal school.--The term `tribal school' means a 
     school that is operated by an Indian tribe for the education 
     of Indian children with financial assistance under grant 
     under the Tribally Controlled Schools Act of 1988 (25 U.S.C. 
     2501 et seq.) or a contract with the Bureau of Indian Affairs 
     under the Indian Self-Determination and Education Assistance 
     Act (25 U.S.C. 450f et seq.).''
       (b) Reporting.--Subsection (d) of section 6049 (relating to 
     returns regarding payments of interest) is amended by adding 
     at the end the following new paragraph:
       ``(8) Reporting of Credit on Qualified Public School 
     Modernization Bonds.--
       ``(A) In general.--For purposes of subsection (a), the term 
     `interest` includes amounts includible in gross income under 
     section 1397E(f) and such amounts shall be treated as paid on 
     the credit allowance date (as defined in section 
     1397E(d)(2)).
       ``(B) Reporting to corporations, etc.--Except as otherwise 
     provided in regulations, in the case of any interest 
     described in subparagraph (A) of this paragraph, subsection 
     (b)(4) of this section shall be applied without regard to 
     subparagraphs (A), (H), (I), (J), (K), and (L)(i).
       ``(C) Regulatory authority.--The Secretary may prescribe 
     such regulations as are necessary or appropriate to carry out 
     the purposes of this paragraph, including regulations which 
     require more frequent or more detailed reporting.''
       (c) Clerical Amendments.--
       (1) The table of parts for subchapter U of chapter 1 is 
     amended by striking the item relating to part IV and 
     inserting the following new item:

``Part IV. Incentives for qualified public school modernization 
              bonds.''

       (2) Part V of subchapter U of chapter 1 is amended by 
     redesignating both section 1397F and the item relating 
     thereto in the table of sections for such part as section 
     1397H.
       (d) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to obligations 
     issued after December 31, 1998.
       (2) Repeal of restriction on zone academy bond holders.--
     The repeal of the limitation of section 1397E of the Internal 
     Revenue Code of 1986 (as in effect on the day before the date 
     of the enactment of this Act) to eligible taxpayers (as 
     defined in subsection (d)(6) of such section) shall apply to 
     obligations issued after December 31, 1997.

     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, 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) 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 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 December 31, 1997.

     SEC. 104. ADDITIONAL INCREASE IN ARBITRAGE REBATE EXCEPTION 
                   FOR GOVERNMENTAL BONDS USED TO FINANCE 
                   EDUCATION FACILITIES.

       (a) In General.--Section 148(f)(4)(D)(vii) (relating to 
     increase in exception for bonds financing public school 
     capital expenditures) is amended by striking ``$5,000,000'' 
     the second place it appears and inserting ``$10,000,000''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to obligations issued after December 31, 1998.

     SEC. 105. EXCLUSION OF CERTAIN AMOUNTS RECEIVED UNDER THE 
                   NATIONAL HEALTH CORPS SCHOLARSHIP PROGRAM.

       (a) In General.--Section 117(c) (relating to the exclusion 
     from gross income amounts received as a qualified 
     scholarship) is amended--
       (1) by striking ``Subsections (a)'' and inserting the 
     following:

[[Page S3367]]

       ``(1) In general.--Except as provided in paragraph (2), 
     subsections (a)''; and
       (2) by adding at the end the following new paragraph:
       ``(2) National health corps scholarship program.--Paragraph 
     (1) shall not apply to any amount received by an individual 
     under the National Health Corps Scholarship Program under 
     section 338A(g)(1)(A) of the Public Health Service Act.''
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to amounts received in taxable years beginning 
     after December 31, 1993.

     SEC. 106. TREATMENT OF QUALIFIED PUBLIC EDUCATIONAL FACILITY 
                   BONDS AS EXEMPT FACILITY BONDS.

       (a) Treatment as Exempt Facility Bond.--Subsection (a) of 
     section 142 (relating to exempt facility bond) is amended by 
     striking ``or'' at the end of paragraph (11), by striking the 
     period at the end of paragraph (12) and inserting ``, or'', 
     and by adding at the end the following:
       ``(13) qualified public educational facilities.''
       (b) Qualified Public Educational Facilities.--Section 142 
     is amended by adding at the end the following:
       ``(k) Qualified Public Educational Facilities.--
       ``(1) In general.--For purposes of subsection (a)(13), the 
     term `qualified public educational facility' means any school 
     facility which is--
       ``(A) part of a public elementary school or a public 
     secondary school,
       ``(B) except as provided in paragraph (6)(B)(iii), located 
     in a high-growth school district, and
       ``(C) owned by a private, for-profit corporation pursuant 
     to a public-private partnership agreement with a State or 
     local educational agency described in paragraph (2).
       ``(2) Public-private partnership agreement described.--A 
     public-private partnership agreement is described in this 
     paragraph if it is an agreement--
       ``(A) under which the corporation agrees--
       ``(i) to do 1 or more of the following: construct, 
     rehabilitate, refurbish, or equip a school facility, and
       ``(ii) at the end of the contract term, to transfer the 
     school facility to such agency for no additional 
     consideration, and
       ``(B) the term of which does not exceed the term of the 
     underlying issue.
       ``(3) School facility.--For purposes of this subsection, 
     the term `school facility' means--
       ``(A) school buildings,
       ``(B) functionally related and subordinate facilities and 
     land with respect to such buildings, including any stadium or 
     other facility primarily used for school events, and
       ``(C) any property, to which section 168 applies (or would 
     apply but for section 179), for use in the facility.
       ``(4) Public schools.--For purposes of this subsection, the 
     terms `elementary school' and `secondary school' have the 
     meanings given such terms by section 14101 of the Elementary 
     and Secondary Education Act of 1965 (20 U.S.C. 8801), as in 
     effect on the date of the enactment of this subsection.
       ``(5) High-growth school district.--For purposes of this 
     subsection, the term `high-growth school district' means a 
     school district established under State law which had an 
     enrollment of at least 5,000 students in the second academic 
     year preceding the date of the issuance of the bond and an 
     increase in student enrollment of at least 20 percent during 
     the 5-year period ending with such academic year.
       ``(6) Annual aggregate face amount of tax-exempt 
     financing.--
       ``(A) In general.--An issue shall not be treated as an 
     issue described in subsection (a)(13) if the aggregate face 
     amount of bonds issued by the State pursuant thereto (when 
     added to the aggregate face amount of bonds previously so 
     issued during the calendar year) exceeds an amount equal to 
     the greater of--
       ``(i) $10 multiplied by the State population, or
       ``(ii) $5,000,000.
       ``(B) Allocation rules.--
       ``(i) In general.--Except as otherwise provided in this 
     subparagraph, the State may allocate in a calendar year the 
     amount described in subparagraph (A) for such year in such 
     manner as the State determines appropriate.
       ``(ii) Rules for carryforward of unused amount.--With 
     respect to any calendar year, a State may make an election 
     under rules similar to the rules of section 146(f), except 
     that the sole carryforward purpose with respect to such 
     election is the issuance of exempt facility bonds described 
     in section 142(a)(13).
       ``(iii) Special allocation rule for schools outside high-
     growth school districts.--A State may elect to allocate an 
     aggregate face amount of bonds not to exceed $5,000,000 from 
     the amount described in subparagraph (A) for each calendar 
     year for qualified public educational facilities without 
     regard to the requirement under paragraph (1)(A).''
       (c) Exemption From General State Volume Caps.--Paragraph 
     (3) of section 146(g) (relating to exception for certain 
     bonds) is amended--
       (1) by striking ``or (12)'' and inserting ``(12), or 
     (13)'', and
       (2) by striking ``and environmental enhancements of 
     hydroelectric generating facilities'' and inserting 
     ``environmental enhancements of hydroelectric generating 
     facilities, and qualified public educational facilities''.
       (d) Exemption From Limitation on Use for Land 
     Acquisition.--Section 147(h) (relating to certain rules not 
     apply) is amended--
       (1) by adding at the end the following:
       ``(3) Exempt facility bonds for qualified public 
     educational facilities.--Subsection (c) shall not apply to 
     any exempt facility bond issued as part of an issue described 
     in section 142(a)(13) (relating to qualified public 
     educational facilities).'', and
       (2) by striking ``Mortgage Revenue Bonds, Qualified Student 
     Loan Bonds, and Qualified 501(c)(3) Bonds'' in the heading 
     and inserting ``Certain Bonds''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to bonds issued after December 31, 1998.
                           TITLE II--REVENUE

     SEC. 201. CLARIFICATION OF DEDUCTION FOR DEFERRED 
                   COMPENSATION.

       (a) In General.--Section 404(a) (relating to deduction for 
     contributions of an employer to an employee's trust or 
     annuity plan and compensation under a deferred-payment plan) 
     is amended by adding at the end the following new paragraph:
       ``(11) Determinations relating to deferred compensation.--
     For purposes of determining under this section--
       ``(A) whether compensation of an employee is deferred 
     compensation, and
       ``(B) 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) Effective Date.--
       (1) In general.--The amendment made by subsection (a) shall 
     apply to taxable years ending after the date of the enactment 
     of this Act except with respect to compensation relating to 
     severance pay, which shall apply to taxable years beginning 
     after December 31, 2000.
       (2) Change in method of accounting.--In the case of any 
     taxpayer required by the amendment made by subsection (a) to 
     change its method of accounting for its first taxable year 
     ending after the date of the enactment of this Act--
       (A) such change shall be treated as initiated by the 
     taxpayer,
       (B) such change shall be treated as made with the consent 
     of the Secretary 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.

     SEC. 202. MODIFICATION TO FOREIGN TAX CREDIT CARRYBACK AND 
                   CARRYOVER PERIODS.

       (a) In General.--Section 904(c) (relating to limitation on 
     credit) is amended--
       (1) by striking ``in the second preceding taxable year,'', 
     and
       (2) by striking ``or fifth'' and inserting ``fifth, sixth, 
     or seventh''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to credits arising in taxable years beginning 
     after December 31, 1998.

     SEC. 203. CERTAIN TAXPAYERS PRECLUDED FROM PREMATURELY 
                   CLAIMING LOSSES OR FROM CREATING RESERVES FOR 
                   BAD DEBTS FROM RECEIVABLES.

       (a) Repeal of Non-Accrual Experience Method for Service 
     Providers.--Section 448(d) (relating to definitions and 
     special rules) is amended by striking paragraph (5) and by 
     redesignating paragraphs (6), (7), and (8) as paragraphs (5), 
     (6), and (7), respectively.
       (b) Certain Receivables Not Eligible for Mark to Market.--
     Section 475(c) (relating to definitions) is amended by adding 
     at the end the following new paragraph:
       ``(4) Special rules for certain receivables.--
       ``(A) In general.--Paragraph (2)(C) shall not include any 
     note, bond, debenture, or other evidence of indebtedness 
     which is nonfinancial customer paper.
       ``(B) Nonfinancial customer paper.--For purposes of 
     subparagraph (A), the term `nonfinancial customer paper' 
     means any receivable--
       ``(i) arising out of the sale of goods or services by a 
     person the principal activity of which is the selling or 
     providing of nonfinancial goods and services, and
       ``(ii) held by such person or a related person at all times 
     since issue.''
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to taxable years beginning after December 31, 2002.
       (2) Change in method of accounting.--In the case of any 
     taxpayer required by the amendments made by this section to 
     change its method of accounting for its first taxable year 
     beginning after December 31, 2000--
       (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 
     ratably over the 4-taxable year period beginning with such 
     first taxable year.

     SEC. 204. APPLICATION OF ENVIRONMENTAL INCOME TAX.

       (a) Extension of Tax.--Section 59A(e) (relating to 
     application of tax) is amended to read as follows:

[[Page S3368]]

       ``(e) Application of Tax.--The tax imposed by this section 
     shall apply to taxable years beginning after December 31, 
     1986, and before January 1, 1996, and to taxable years 
     beginning after December 31, 2003.''
       (b) Coordination With Exception of Certain Small 
     Corporations From Alternative Minimum Tax.--Section 59A(a) 
     (relating to imposition of tax) is amended by adding at the 
     end the following flush sentence:

     ``Such tax shall not be imposed on a corporation for any 
     taxable year if such corporation is exempt under section 
     55(e)(1) for the taxable year.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 205. EXCISE TAX ON PURCHASE OF STRUCTURED SETTLEMENT 
                   AGREEMENTS.

       (a) In General.--Subtitle D (relating to miscellaneous 
     excise taxes) is amended by adding at the end the following 
     new chapter:

             ``CHAPTER 48--STRUCTURED SETTLEMENT AGREEMENTS

``Sec. 5000A. Tax on purchases of structured settlement agreements.

     ``SEC. 5000A. TAX ON PURCHASES OF STRUCTURED SETTLEMENT 
                   AGREEMENTS.

       ``(a) Imposition of Tax.--There is hereby imposed on any 
     person who purchases the right to receive payments under a 
     structured settlement agreement a tax equal to 20 percent of 
     the amount of the purchase price.
       ``(b) Exception for Court-Ordered Purchases.--Subsection 
     (a) shall not apply to any purchase which is pursuant to a 
     court order which finds that such purchase is necessary 
     because of the extraordinary and unanticipated needs of the 
     individual with the personal injuries or sickness giving rise 
     to the structured settlement agreement.
       ``(c) Structured Settlement Agreement.--For purposes of 
     this section, the term `structured settlement agreement' 
     means--
       ``(1) any right to receive (whether by suit or agreement) 
     periodic payments as damages on account of personal injuries 
     or sickness, or
       ``(2) any right to receive periodic payments as 
     compensation for personal injuries or sickness under any 
     workmen's compensation act.
       ``(d) Purchase.--For purposes of this section, the term 
     `purchase' has the meaning given such term by section 
     179(d)(2).''
       (b) Conforming Amendment.--The table of chapters for 
     subtitle D is amended by adding at the end the following new 
     item:

``Chapter 48. Structured settlement agreements.

       (c) Effective Date.--The amendments made by this section 
     shall apply to purchases after the date of the enactment of 
     this Act.

     SEC. 206. PROPERTY SUBJECT TO A LIABILITY TREATED IN SAME 
                   MANNER AS ASSUMPTION OF LIABILITY.

       (a) Repeal of Property Subject to a Liability Test.--
       (1) Section 357.--Section 357(a) (relating to assumption of 
     liability) is amended by striking ``, or acquires from the 
     taxpayer property subject to a liability'' in paragraph (2).
       (2) Section 358.--Section 358(d)(1) (relating to assumption 
     of liability) is amended by striking ``or acquired from the 
     taxpayer property subject to a liability''.
       (3) Section 368.--
       (A) Section 368(a)(1)(C) is amended by striking ``, or the 
     fact that property acquired is subject to a liability,''.
       (B) The last sentence of section 368(a)(2)(B) is amended by 
     striking ``, and the amount of any liability to which any 
     property acquired from the acquiring corporation is 
     subject,''.
       (b) Clarification of Assumption of Liability.--Section 
     357(c) is amended by adding at the end the following new 
     paragraph:
       ``(4) Determination of amount of liability assumed.--For 
     purposes of this section, section 358(d), section 
     368(a)(1)(C), and section 368(a)(2)(B)--
       ``(A) a liability shall be treated as having been assumed 
     to the extent, as determined on the basis of facts and 
     circumstances, the transferor is relieved of such liability 
     or any portion thereof (including through an indemnity 
     agreement or other similar arrangement), and
       ``(B) in the case of the transfer of any property subject 
     to a nonrecourse liability, unless the facts and 
     circumstances indicate otherwise, the transferee shall be 
     treated as assuming with respect to such property a ratable 
     portion of such liability determined on the basis of the 
     relative fair market values (determined without regard to 
     section 7701(g)) of all assets subject to such liability.
       (c) Application to Provisions Other Than Subchapter C.--
       (1) Section 584.--Section 584(h)(3) is amended--
       (A) by striking ``, and the fact that any property 
     transferred by the common trust fund is subject to a 
     liability,'' in subparagraph (A),
       (B) by striking clause (ii) of subparagraph (B) and 
     inserting:
       ``(ii) Assumed liabilities.--For purposes of clause (i), 
     the term `assumed liabilities' means any liability of the 
     common trust fund assumed by any regulated investment company 
     in connection with the transfer referred to in paragraph 
     (1)(A).
       ``(C) Assumption.--For purposes of this paragraph, in 
     determining the amount of any liability assumed, the rules of 
     section 357(c)(4) shall apply.''
       (2) Section 1031.--The last sentence of section 1031(d) is 
     amended--
       (A) by striking ``assumed a liability of the taxpayer or 
     acquired from the taxpayer property subject to a liability'' 
     and inserting ``assumed (as determined under section 
     357(c)(4)) a liability of the taxpayer'', and
       (B) by striking ``or acquisition (in the amount of the 
     liability)''.
       (d) Conforming Amendments.--
       (1) Section 351(h)(1) is amended by striking ``, or 
     acquires property subject to a liability,''.
       (2) Section 357 is amended by striking ``or acquisition'' 
     each place it appears in subsection (a) or (b).
       (3) Section 357(b)(1) is amended by striking ``or 
     acquired''.
       (4) Section 357(c)(1) is amended by striking ``, plus the 
     amount of the liabilities to which the property is 
     subject,''.
       (5) Section 357(c)(3) is amended by striking ``or to which 
     the property transferred is subject''.
       (6) Section 358(d)(1) is amended by striking ``or 
     acquisition (in the amount of the liability)''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to transfers after the date of the enactment of 
     this Act.

     SEC. 207. CLARIFICATION AND EXPANSION OF MATHEMATICAL ERROR 
                   ASSESSMENT PROCEDURES.

       (a) TIN Deemed Incorrect if Information on Return Differs 
     With Agency Records.--Section 6213(g)(2) (defining 
     mathematical or clerical error) is amended by adding at the 
     end the following flush sentence:

     ``A taxpayer shall be treated as having omitted a correct TIN 
     for purposes of the preceding sentence if information 
     provided by the taxpayer on the return with respect to the 
     individual whose TIN was provided differs from the 
     information the Secretary obtains from the person issuing the 
     TIN.''
       (b) Expansion of Mathematical Error Procedures to Cases 
     Where TIN Establishes Individual Not Eligible for Tax 
     Credit.--Section 6213(g)(2) is amended by striking ``and'' at 
     the end of subparagraph (I), by striking the period at the 
     end of the first subparagraph (J) (relating to higher 
     education credit) and inserting a comma, by redesignating the 
     second subparagraph (J) (relating to earned income credit) as 
     subparagraph (K) and by striking the period at the end and 
     inserting ``, and'', and by adding at the end the following 
     new subparagraph:
       ``(L) the inclusion of a TIN on a return with respect to an 
     individual for whom a credit is claimed under section 21, 24, 
     or 32 if, on the basis of data obtained by the Secretary from 
     the person issuing the TIN, it is established that the 
     individual does not meet any applicable age requirements for 
     such credit.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after the date of the 
     enactment of this Act.

     SEC. 208. CLARIFICATION OF DEFINITION OF SPECIFIED LIABILITY 
                   LOSS.

       (a) In General.--Subparagraph (B) of section 172(f)(1) 
     (defining specified liability loss) is amended to read as 
     follows:
       ``(B) Any amount (not described in subparagraph (A)) 
     allowable as a deduction under this chapter which is 
     attributable to a liability--
       ``(i) under a Federal or State law requiring the 
     reclamation of land, decommissioning of a nuclear power plant 
     (or any unit thereof), dismantlement of an offshore drilling 
     platform, remediation of environmental contamination, or 
     payment of workmen's compensation, and
       ``(ii) with respect to which the act (or failure to act) 
     giving rise to such liability occurs at least 3 years before 
     the beginning of the taxable year.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to net operating losses for taxable years 
     beginning after the date of the enactment of this Act.

     SEC. 209. MODIFICATION OF DEPRECIATION METHOD FOR TAX-EXEMPT 
                   USE PROPERTY.

       (a) In General.--Subparagraph (A) of section 168(g)(3) 
     (relating to tax-exempt use property subject to lease) is 
     amended to read as follows:
       ``(A) Tax-exempt use property.--In the case of any tax-
     exempt use property, the recovery period used for purposes of 
     paragraph (2) shall be equal to 150 percent of the class life 
     of the property determined without regard to this 
     subparagraph.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to property--
       (1) placed in service after December 31, 1998, and
       (2) placed in service on or before such date which--
       (A) becomes tax-exempt use property after such date, or
       (B) becomes subject to a lease after such date which was 
     not in effect on such date.

     In the case of property to which paragraph (2) applies, the 
     amendment shall only apply with respect to periods on and 
     after the date the property becomes tax-exempt use property 
     or subject to such a lease.

                          ____________________