[Congressional Record Volume 144, Number 129 (Thursday, September 24, 1998)]
[House]
[Pages H8627-H8655]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                               AMENDMENTS

  Under clause 6 of rule XXIII, proposed amendments were submitted as 
follows:

                               H.R. 4578

                         Offered by: Mr. Rangel

               (Amendment in the Nature of a Substitute)

       Amendment No. 1: Strike all after the enacting clause and 
     insert the following:

     SECTION 1. RESERVATION OF SOCIAL SECURITY SURPLUSES SOLELY 
                   FOR SOCIAL SECURITY SYSTEM.

       (a) In General.--Section 201 of the Social Security Act (42 
     U.S.C. 401) is amended by adding at the end the following new 
     subsection:
       ``(n)(1) The Secretary of the Treasury, before the 
     beginning of each fiscal year, shall estimate the amount of 
     the Social Security surplus for such year. For purposes of 
     this subsection, the term `Social Security surplus' means the 
     excess of the receipts in the Trust Funds during the fiscal 
     year (including interest on obligations held in such funds) 
     over the outlays from such funds during such year:
       ``(2) If the Secretary of the Treasury determines that 
     there is a Social Security surplus for any fiscal year, such 
     Secretary shall transfer during such year from the General 
     fund of the Treasury an amount equal to the amount of the 
     surplus to the Federal Reserve Bank of New York. Such 
     transfer shall be made monthly on the basis of estimates by 
     the Secretary of the Treasury of the portion of the surplus 
     attributable to the month, and proper adjustments shall be 
     made in amounts, subsequently transferred to the extent prior 
     estimates were in excess of or less than amounts required to 
     be transferred. Amounts transferred under this paragraph 
     shall substitute for (and be in lieu of) equivalent amounts 
     otherwise required to be transferred to the Trust Funds.
       ``(3) The Federal Reserve Bank of New York shall hold the 
     amounts transferred under paragraph (2), and all income from 
     investment thereof, in trust for the benefit of the Trust 
     Funds. Amounts so held shall be invested in marketable 
     obligations of the United States with maturities that the 
     Managing Trustee determines are consistent with the 
     requirements of the Trust Funds. Amounts held in trust under 
     this paragraph (and earnings thereon) shall be treated as 
     part of the balance of the Trust Funds.
       ``(4) If, at any time, any obligation acquired under 
     paragraph (2) has a market value less than its acquisition 
     cost by reason of a change in interest rates, the Federal 
     Reserve Bank of New York may, at any time,

[[Page H8628]]

     present such obligation to the Secretary of the Treasury for 
     redemption, notwithstanding the maturity date or any other 
     requirement relating to such obligation, and the Secretary of 
     the Treasury shall redeem such obligation for an amount that 
     is not less than such acquisition cost.
       ``(5) Upon request by the Managing Trustee, the Federal 
     Reserve Bank of New York shall transfer to the appropriate 
     Trust Fund the amount determined by the Managing Trustee to 
     be necessary to meet the obligations of such Fund.
       ``(6) All transfers to the Federal Reserve Bank of New York 
     under paragraph (2) shall be treated as Federal outlays for 
     all budgetary purposes of the United States Government, 
     except that such transfers shall not be subject to section 
     252 of the Balanced Budget and Emergency Deficit Control Act 
     of 1985 and all transfers to the Trust Funds under paragraph 
     (5) shall be treated as offsetting receipts.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to fiscal years beginning on or after October 1, 
     1998.
       Amend the title so as to read: ``A bill to reserve 100 
     percent of the social security surpluses solely for the 
     Social Security System.''.

                               H.R. 4579

                         Offered By: Mr. Rangel

               (Amendment in the Nature of a Substitute)

       Amendment No. 1: Strike all after the enacting clause and 
     insert the following:

     SECTION 1. SHORT TITLE, ETC.

       (a) Short Title.--This Act may be cited as the ``Taxpayer 
     Relief Act of 1998''.
       (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, etc.

    TITLE I--PROVISIONS PRIMARILY AFFECTING INDIVIDUALS AND FAMILIES

                     Subtitle A--General Provisions

Sec. 101. Elimination of marriage penalty in standard deduction.
Sec. 102. Exemption of certain interest and dividend income from tax.
Sec. 103. Nonrefundable personal credits allowed against alternative 
              minimum tax.
Sec. 104. 100 percent deduction for health insurance costs of self-
              employed individuals.
Sec. 105. Special rule for members of uniformed services and Foreign 
              Service in determining exclusion of gain from sale of 
              principal residence.
Sec. 106. $1,000,000 exemption from estate and gift taxes.

              Subtitle B--Provisions Relating to Education

Sec. 111. Eligible educational institutions permitted to maintain 
              qualified tuition programs.
Sec. 112. Modification of arbitrage rebate rules applicable to public 
              school construction bonds.

           Subtitle C--Provisions Relating to Social Security

Sec. 121. Increases in the social security earnings limit for 
              individuals who have attained retirement age.
Sec. 122. Recomputation of benefits after normal retirement age.

 TITLE II--PROVISIONS PRIMARILY AFFECTING FARMING AND OTHER BUSINESSES

     Subtitle A--Increase in Expense Treatment for Small Businesses

Sec. 201. Increase in expense treatment for small businesses.

               Subtitle B--Provisions Relating to Farmers

Sec. 211. Income averaging for farmers made permanent.
Sec. 212. 5-year net operating loss carryback for farming losses.
Sec. 213. Production flexibility contract payments.

      Subtitle C--Increase in Volume Cap on Private Activity Bonds

Sec. 221. Increase in volume cap on private activity bonds.

  TITLE III--EXTENSION AND MODIFICATION OF CERTAIN EXPIRING PROVISIONS

                       Subtitle A--Tax Provisions

Sec. 301. Research credit.
Sec. 302. Work opportunity credit.
Sec. 303. Welfare-to-work credit.
Sec. 304. Contributions of stock to private foundations; expanded 
              public inspection of private foundations' annual returns.
Sec. 305. Subpart F exemption for active financing income.

             Subtitle B--Generalized System of Preferences

Sec. 311. Extension of Generalized System of Preferences.

                        TITLE IV--REVENUE OFFSET

Sec. 401. Treatment of certain deductible liquidating distributions of 
              regulated investment companies and real estate investment 
              trusts.

                     TITLE V--TECHNICAL CORRECTIONS

Sec. 501. Definitions; coordination with other titles.
Sec. 502. Amendments related to Internal Revenue Service Restructuring 
              and Reform Act of 1998.
Sec. 503. Amendments related to Taxpayer Relief Act of 1997.
Sec. 504. Amendments related to Tax Reform Act of 1984.
Sec. 505. Other amendments.

            TITLE VI--AMERICAN COMMUNITY RENEWAL ACT OF 1998

Sec. 601. Short title.
Sec. 602. Designation of and tax incentives for renewal communities.
Sec. 603. Extension of expensing of environmental remediation costs to 
              renewal communities.
Sec. 604. Extension of work opportunity tax credit for renewal 
              communities
Sec. 605. Conforming and clerical amendments.
Sec. 606. Evaluation and reporting requirements.

     TITLE VII--TAX REDUCTIONS CONTINGENT ON SAVING SOCIAL SECURITY

Sec. 701. Tax reductions contingent on saving social security.

    TITLE I--PROVISIONS PRIMARILY AFFECTING INDIVIDUALS AND FAMILIES

                     Subtitle A--General Provisions

     SEC. 101. ELIMINATION OF MARRIAGE PENALTY IN STANDARD 
                   DEDUCTION.

       (a) In General.--Paragraph (2) of section 63(c) (relating 
     to standard deduction) is amended--
       (1) by striking ``$5,000'' in subparagraph (A) and 
     inserting ``twice the dollar amount in effect under 
     subparagraph (C) for the taxable year'',
       (2) by adding ``or'' at the end of subparagraph (B),
       (3) by striking ``in the case of'' and all that follows in 
     subparagraph (C) and inserting ``in any other case.'', and
       (4) by striking subparagraph (D).
       (b) Additional Standard Deduction for Aged and Blind To Be 
     the Same for Married and Unmarried Individuals.--
       (1) Paragraphs (1) and (2) of section 63(f) are each 
     amended by striking ``$600'' and inserting ``$750''.
       (2) Subsection (f) of section 63 is amended by striking 
     paragraph (3) and by redesignating paragraph (4) as paragraph 
     (3).
       (c) Technical Amendments.--
       (1) Subparagraph (B) of section 1(f)(6) is amended by 
     striking ``(other than with'' and all that follows through 
     ``shall be applied'' and inserting ``(other than with respect 
     to sections 63(c)(4) and 151(d)(4)(A)) shall be applied''.
       (2) Paragraph (4) of section 63(c) is amended by adding at 
     the end the following flush sentence:

     ``The preceding sentence shall not apply to the amount 
     referred to in paragraph (2)(A).''
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1998.

     SEC. 102. EXEMPTION OF CERTAIN INTEREST AND DIVIDEND INCOME 
                   FROM TAX.

       (a) In General.--Part III of subchapter B of chapter 1 
     (relating to amounts specifically excluded from gross income) 
     is amended by inserting after section 115 the following new 
     section:

     ``SEC. 116. PARTIAL EXCLUSION OF DIVIDENDS AND INTEREST 
                   RECEIVED BY INDIVIDUALS.

       ``(a) Exclusion From Gross Income.--Gross income does not 
     include dividends and interest received during the taxable 
     year by an individual.
       ``(b) Limitations.--
       ``(1) Maximum amount.--The aggregate amount excluded under 
     subsection (a) for any taxable year shall not exceed $200 
     ($400 in the case of a joint return).
       ``(2) Certain dividends excluded.--Subsection (a) shall not 
     apply to any dividend from a corporation which, for the 
     taxable year of the corporation in which the distribution is 
     made, or for the next preceding taxable year of the 
     corporation, is a corporation exempt from tax under section 
     501 (relating to certain charitable, etc., organization) or 
     section 521 (relating to farmers' cooperative associations).
       ``(c) Special Rules.--For purposes of this section--
       ``(1) Exclusion not to apply to capital gain dividends from 
     regulated investment companies and real estate investment 
     trusts.--

  ``For treatment of capital gain dividends, see sections 854(a) and 
857(c).

       ``(2) Certain nonresident aliens ineligible for 
     exclusion.--In the case of a nonresident alien individual, 
     subsection (a) shall apply only--
       ``(A) in determining the tax imposed for the taxable year 
     pursuant to section 871(b)(1) and only in respect of 
     dividends and interest which are effectively connected with 
     the conduct of a trade or business within the United States, 
     or
       ``(B) in determining the tax imposed for the taxable year 
     pursuant to section 877(b).
       ``(3) Dividends from employee stock ownership plans.--
     Subsection (a) shall not apply to any dividend described in 
     section 404(k).''
       (b) Conforming Amendments.--
       (1)(A) Subparagraph (A) of section 135(c)(4) is amended by 
     inserting ``116,'' before ``137''.
       (B) Subsection (d) of section 135 is amended by 
     redesignating paragraph (4) as paragraph

[[Page H8629]]

     (5) and by inserting after paragraph (3) the following new 
     paragraph:
       ``(4) Coordination with section 116.--This section shall be 
     applied before section 116.''
       (2) Paragraph (2) of section 265(a) is amended by inserting 
     before the period ``, or to purchase or carry obligations or 
     shares, or to make deposits, to the extent the interest 
     thereon is excludable from gross income under section 116''.
       (3) Subsection (c) of section 584 is amended by adding at 
     the end thereof the following new flush sentence:

     ``The proportionate share of each participant in the amount 
     of dividends or interest received by the common trust fund 
     and to which section 116 applies shall be considered for 
     purposes of such section as having been received by such 
     participant.''
       (4) Subsection (a) of section 643 is amended by 
     redesignating paragraph (7) as paragraph (8) and by inserting 
     after paragraph (6) the following new paragraph:
       ``(7) Dividends or interest.--There shall be included the 
     amount of any dividends or interest excluded from gross 
     income pursuant to section 116.''
       (5) Section 854(a) is amended by inserting ``section 116 
     (relating to partial exclusion of dividends and interest 
     received by individuals) and'' after ``For purposes of''.
       (6) Section 857(c) is amended to read as follows:
       ``(c) Restrictions Applicable to Dividends Received From 
     Real Estate Investment Trusts.--
       ``(1) Treatment for section 116.--For purposes of section 
     116 (relating to partial exclusion of dividends and interest 
     received by individuals), a capital gain dividend (as defined 
     in subsection (b)(3)(C)) received from a real estate 
     investment trust which meets the requirements of this part 
     shall not be considered as a dividend.
       ``(2) Treatment for section 243.--For purposes of section 
     243 (relating to deductions for dividends received by 
     corporations), a dividend received from a real estate 
     investment trust which meets the requirements of this part 
     shall not be considered as a dividend.''
       (7) The table of sections for part III of subchapter B of 
     chapter 1 is amended by inserting after the item relating to 
     section 115 the following new item:

``Sec. 116. Partial exclusion of dividends and interest received by 
              individuals.''

       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1998.

     SEC. 103. NONREFUNDABLE PERSONAL CREDITS ALLOWED AGAINST 
                   ALTERNATIVE MINIMUM TAX.

       (a) In General.--Subsection (a) of section 26 is amended to 
     read as follows:
       ``(a) Limitation Based on Amount of Tax.--The aggregate 
     amount of credits allowed by this subpart for the taxable 
     year shall not exceed the sum of--
       ``(1) the taxpayer's regular tax liability for the taxable 
     year, and
       ``(2) the tax imposed for the taxable year by section 
     55(a).

     For purposes of applying the preceding sentence, paragraph 
     (2) shall be treated as being zero for any taxable year 
     beginning during 1998.''.
       (b) Conforming Amendments.--
       (1) Subsection (d) of section 24 is amended by striking 
     paragraph (2) and by redesignating paragraph (3) as paragraph 
     (2).
       (2) Section 32 is amended by striking subsection (h).
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1997.

     SEC. 104. 100 PERCENT DEDUCTION FOR HEALTH INSURANCE COSTS OF 
                   SELF-EMPLOYED INDIVIDUALS.

       (a) In General.--Paragraph (1) of section 162(l) (relating 
     to special rules for health insurance costs of self-employed 
     individuals) is amended to read as follows:
       ``(1) Allowance of deduction.--In the case of an individual 
     who is an employee within the meaning of section 401(c)(1), 
     there shall be allowed as a deduction under this section an 
     amount equal to 100 percent of the amount paid during the 
     taxable year for insurance which constitutes medical care for 
     the taxpayer, his spouse, and dependents.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1998.

     SEC. 105. SPECIAL RULE FOR MEMBERS OF UNIFORMED SERVICES AND 
                   FOREIGN SERVICE IN DETERMINING EXCLUSION OF 
                   GAIN FROM SALE OF PRINCIPAL RESIDENCE.

       (a) In General.--Subsection (d) of section 121 (relating to 
     exclusion of gain from sale of principal residence) is 
     amended by adding at the end the following new paragraph:
       ``(9) Members of uniformed services and foreign service.--
       ``(A) In general.--The running of the 5-year period 
     described in subsection (a) shall be suspended with respect 
     to an individual during any time that such individual or such 
     individual's spouse is serving on qualified official extended 
     duty as a member of the uniformed services or of the Foreign 
     Service.
       ``(B) Qualified official extended duty.--For purposes of 
     this paragraph--
       ``(i) In general.--The term `qualified official extended 
     duty' means any period of extended duty as a member of the 
     uniformed services or a member of the Foreign Service during 
     which the member serves at a duty station which is at least 
     50 miles from such property or is under Government orders to 
     reside in Government quarters.
       ``(ii) Uniformed services.--The term `uniformed services' 
     has the meaning given such term by section 101(a)(5) of title 
     10, United States Code, as in effect on the date of the 
     enactment of the Taxpayer Relief Act of 1998.
       ``(iii) Foreign service of the united states.--The term 
     `member of the Foreign Service' has the meaning given the 
     term `member of the Service' by paragraph (1), (2), (3), (4), 
     or (5) of section 103 of the Foreign Service Act of 1980, as 
     in effect on the date of the enactment of the Taxpayer Relief 
     Act of 1998.
       ``(iv) Extended duty.--The term `extended duty' means any 
     period of active duty pursuant to a call or order to such 
     duty for a period in excess of 90 days or for an indefinite 
     period.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to sales and exchanges after the date of the 
     enactment of this Act.

     SEC. 106. $1,000,000 EXEMPTION FROM ESTATE AND GIFT TAXES.

       (a) In General.--Subsection (c) of section 2010 (relating 
     to applicable credit amount) is amended to read as follows:
       ``(c) Applicable Credit Amount.--
       ``(1) In general.--For purposes of this section, the 
     applicable credit amount is $345,800.
       ``(2) Applicable exclusion amount.--For purposes of the 
     provisions of this title which refer to this subsection, the 
     applicable exclusion amount is $1,000,000.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to estates of decedents dying, and gifts made, 
     after December 31, 1998.

              Subtitle B--Provisions Relating to Education

     SEC. 111. ELIGIBLE EDUCATIONAL INSTITUTIONS PERMITTED TO 
                   MAINTAIN QUALIFIED TUITION PROGRAMS.

       (a) In General.--Paragraph (1) of section 529(b) (defining 
     qualified State tuition program) is amended by inserting ``or 
     by 1 or more eligible educational institutions'' after 
     ``maintained by a State or agency or instrumentality 
     thereof''.
       (b) Technical Amendments.--
       (1) The texts of sections 72(e)(9), 135(c)(2)(C), 
     135(d)(1)(D), 529, 530, and 4973(e)(1)(B) are each amended by 
     striking ``qualified State tuition program'' each place it 
     appears and inserting ``qualified tuition program''.
       (2) The paragraph heading for paragraph (9) of section 
     72(e) and the subparagraph heading for subparagraph (B) of 
     section 530(b)(2) are each amended by striking ``state''.
       (3) The subparagraph heading for subparagraph (C) of 
     section 135(c)(2) is amended by striking ``qualified state 
     tuition program'' and inserting ``qualified tuition 
     programs''.
       (4) Sections 529(c)(3)(D)(i) and 6693(a)(2)(C) are each 
     amended by striking ``qualified State tuition programs'' and 
     inserting ``qualified tuition programs''.
       (5)(A) The section heading of section 529 is amended to 
     read as follows:

     ``SEC. 529. QUALIFIED TUITION PROGRAMS.''.

       (B) The item relating to section 529 in the table of 
     sections for part VIII of subchapter F of chapter 1 is 
     amended by striking ``State''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 1999.

     SEC. 112. MODIFICATION OF ARBITRAGE REBATE RULES APPLICABLE 
                   TO PUBLIC SCHOOL CONSTRUCTION BONDS.

       (a) In General.--Subparagraph (C) of section 148(f)(4) is 
     amended by adding at the end the following new clause:
       ``(xviii) 4-year spending requirement for public school 
     construction issue.--

       ``(I) In general.--In the case of a public school 
     construction issue, the spending requirements of clause (ii) 
     shall be treated as met if at least 10 percent of the 
     available construction proceeds of the construction issue are 
     spent for the governmental purposes of the issue within the 
     1-year period beginning on the date the bonds are issued, 30 
     percent of such proceeds are spent for such purposes within 
     the 2-year period beginning on such date, 50 percent of such 
     proceeds are spent for such purposes within the 3-year period 
     beginning on such date, and 100 percent of such proceeds are 
     spent for such purposes within the 4-year period beginning on 
     such date.
       ``(II) Public school construction issue.--For purposes of 
     this clause, the term `public school construction issue' 
     means any construction issue if no bond which is part of such 
     issue is a private activity bond and all of the available 
     construction proceeds of such issue are to be used for the 
     construction (as defined in clause (iv)) of public school 
     facilities to provide education or training below the 
     postsecondary level or for the acquisition of land that is 
     functionally related and subordinate to such facilities.
       ``(III) Other rules to apply.--Rules similar to the rules 
     of the preceding provisions of this subparagraph which apply 
     to clause (ii) also apply to this clause.''

       (b) Effective Date.--The amendment made by this section 
     shall apply to obligations issued after December 31, 1998.

[[Page H8630]]

           Subtitle C--Provisions Relating to Social Security

     SEC. 121. INCREASES IN THE SOCIAL SECURITY EARNINGS LIMIT FOR 
                   INDIVIDUALS WHO HAVE ATTAINED RETIREMENT AGE.

       (a) In General.--Section 203(f)(8)(D) of the Social 
     Security Act (42 U.S.C. 403(f)(8)(D)) is amended by striking 
     clauses (iv) through (vii) and inserting the following new 
     clauses:
       ``(iv) for each month of any taxable year ending after 1998 
     and before 2000, $1,416.66\2/3\,
       ``(v) for each month of any taxable year ending after 1999 
     and before 2001, $1,541.66\2/3\,
       ``(vi) for each month of any taxable year ending after 2000 
     and before 2002, $2,166.66\2/3\,
       ``(vii) for each month of any taxable year ending after 
     2001 and before 2003, $2,500.00,
       ``(viii) for each month of any taxable year ending after 
     2002 and before 2004, $2,608.33\1/3\,
       ``(ix) for each month of any taxable year ending after 2003 
     and before 2005, $2,833.33\1/3\,
       ``(x) for each month of any taxable year ending after 2004 
     and before 2006, $2,950.00,
       ``(xi) for each month of any taxable year ending after 2005 
     and before 2007, $3,066.66\2/3\,
       ``(xii) for each month of any taxable year ending after 
     2006 and before 2008, $3,195.83\1/3\, and
       ``(xiii) for each month of any taxable year ending after 
     2007 and before 2009, $3,312.50.''.
       (b) Conforming Amendments.--
       (1) Section 203(f)(8)(B)(ii) of such Act (42 U.S.C. 
     403(f)(8)(B)(ii)) is amended--
       (A) by striking ``after 2001 and before 2003'' and 
     inserting ``after 2007 and before 2009''; and
       (B) in subclause (II), by striking ``2000'' and inserting 
     ``2006''.
       (2) The second sentence of section 223(d)(4)(A) of such Act 
     (42 U.S.C. 423(d)(4)(A)) is amended by inserting ``and 
     section 121 of the Taxpayer Relief Act of 1998'' after 
     ``1996''.
       (c) Effective Date.--The amendments made by this section 
     shall apply with respect to taxable years ending after 1998.

     SEC. 122. RECOMPUTATION OF BENEFITS AFTER NORMAL RETIREMENT 
                   AGE.

       (a) In General.--Section 215(f)(2)(D)(i) of the Social 
     Security Act (42 U.S.C. 415(f)(2)(D)(i)) is amended to read 
     as follows:
       ``(i) in the case of an individual who did not die in the 
     year with respect to which the recomputation is made, for 
     monthly benefits beginning with benefits for January of--
       ``(I) the second year following the year with respect to 
     which the recomputation is made, in any such case in which 
     the individual is entitled to old-age insurance benefits, the 
     individual has attained retirement age (as defined in section 
     216(l)) as of the end of the year preceding the year with 
     respect to which the recomputation is made, and the year with 
     respect to which the recomputation is made would not be 
     substituted in recomputation under this subsection for a 
     benefit computation year in which no wages or self-employment 
     income have been credited previously to such individual, or
       ``(II) the first year following the year with respect to 
     which the recomputation is made, in any other such case; 
     or''.
       (b) Conforming Amendments.--
       (1) Section 215(f)(7) of such Act (42 U.S.C. 415(f)(7)) is 
     amended by inserting ``, and as amended by section 122(b)(2) 
     of the Taxpayer Relief Act of 1998,'' after ``This subsection 
     as in effect in December 1978''.
       (2) Subparagraph (A) of section 215(f)(2) of the Social 
     Security Act as in effect in December 1978 and applied in 
     certain cases under the provisions of such Act as in effect 
     after December 1978 is amended--
       (A) by striking ``in the case of an individual who did not 
     die'' and all that follows and inserting ``in the case of an 
     individual who did not die in the year with respect to which 
     the recomputation is made, for monthly benefits beginning 
     with benefits for January of--''; and
       (B) by adding at the end the following:
       ``(i) the second year following the year with respect to 
     which the recomputation is made, in any such case in which 
     the individual is entitled to old-age insurance benefits, the 
     individual has attained age 65 as of the end of the year 
     preceding the year with respect to which the recomputation is 
     made, and the year with respect to which the recomputation is 
     made would not be substituted in recomputation under this 
     subsection for a benefit computation year in which no wages 
     or self-employment income have been credited previously to 
     such individual, or
       ``(ii) the first year following the year with respect to 
     which the recomputation is made, in any other such case; 
     or''.
       (c) Effective Date.--The amendments made by this section 
     shall apply with respect to recomputations of primary 
     insurance amounts based on wages paid and self employment 
     income derived after 1997 and with respect to benefits 
     payable after December 31, 1998.

 TITLE II--PROVISIONS PRIMARILY AFFECTING FARMING AND OTHER BUSINESSES

     Subtitle A--Increase in Expense Treatment for Small Businesses

     SEC. 201. INCREASE IN EXPENSE TREATMENT FOR SMALL BUSINESSES.

       (a) General Rule.--Paragraph (1) of section 179(b) 
     (relating to dollar limitation) is amended to read as 
     follows:
       ``(1) Dollar limitation.--The aggregate cost which may be 
     taken into account under subsection (a) for any taxable year 
     shall not exceed $25,000.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1998.

               Subtitle B--Provisions Relating to Farmers

     SEC. 211. INCOME AVERAGING FOR FARMERS MADE PERMANENT.

       Subsection (c) of section 933 of the Taxpayer Relief Act of 
     1997 is amended by striking ``, and before January 1, 2001''.

     SEC. 212. 5-YEAR NET OPERATING LOSS CARRYBACK FOR FARMING 
                   LOSSES.

       (a) In General.--Paragraph (1) of section 172(b) (relating 
     to net operating loss deduction) is amended by adding at the 
     end the following new subparagraph:
       ``(G) Farming losses.--In the case of a taxpayer which has 
     a farming loss (as defined in subsection (i)) for a taxable 
     year, such farming loss shall be a net operating loss 
     carryback to each of the 5 taxable years preceding the 
     taxable year of such loss.''
       (b) Farming loss.--Section 172 is amended by redesignating 
     subsection (i) as subsection (j) and by inserting after 
     subsection (h) the following new subsection:
       ``(i) Rules Relating to Farming Losses.--For purposes of 
     this section--
       ``(1) In general.--The term `farming loss' means the lesser 
     of--
       ``(A) the amount which would be the net operating loss for 
     the taxable year if only income and deductions attributable 
     to farming businesses (as defined in section 263A(e)(4)) are 
     taken into account, or
       ``(B) the amount of the net operating loss for such taxable 
     year.
       ``(2) Coordination with subsection (b)(2).--For purposes of 
     applying subsection (b)(2), a farming loss for any taxable 
     year shall be treated in a manner similar to the manner in 
     which a specified liability loss is treated.
       ``(3) Election.--Any taxpayer entitled to a 5-year 
     carryback under subsection (b)(1)(G) from any loss year may 
     elect to have the carryback period with respect to such loss 
     year determined without regard to subsection (b)(1)(G). Such 
     election shall be made in such manner as may be prescribed by 
     the Secretary and shall be made by the due date (including 
     extensions of time) for filing the taxpayer's return for the 
     taxable year of the net operating loss. Such election, once 
     made for any taxable year, shall be irrevocable for such 
     taxable year.''
       (c) Coordination With Farm Disaster Losses.--Clause (ii) of 
     section 172(b)(1)(F) is amended by adding at the end the 
     following flush sentence:

     ``Such term shall not include any farming loss (as defined in 
     subsection (i)).''
       (d) Effective Date.--The amendments made by this section 
     shall apply to net operating losses for taxable years 
     beginning after December 31, 1997.

     SEC. 213. PRODUCTION FLEXIBILITY CONTRACT PAYMENTS.

       The option under section 112(d)(3) of the Federal 
     Agriculture Improvement and Reform Act of 1996 (7 U.S.C. 
     7212(d)(3)) shall be disregarded in determining the taxable 
     year for which the payment for fiscal year 1999 under a 
     production flexibility contract under subtitle B of title I 
     of such Act is properly includible in gross income for 
     purposes of the Internal Revenue Code of 1986.

      Subtitle C--Increase in Volume Cap on Private Activity Bonds

     SEC. 221. INCREASE IN VOLUME CAP ON PRIVATE ACTIVITY BONDS.

       (a) In General.--Subsection (d) of section 146 (relating to 
     volume cap) is amended by striking paragraph (2), by 
     redesignating paragraphs (3) and (4) as paragraphs (2) and 
     (3), respectively, and by striking paragraph (1) and 
     inserting the following new paragraph:
       ``(1) In general.--The State ceiling applicable to any 
     State for any calendar year shall be the greater of--
       ``(A) an amount equal to $75 multiplied by the State 
     population, or
       ``(B) $225,000,000.
     Subparagraph (B) shall not apply to any possession of the 
     United States.''
       (b) Conforming Amendment.--Sections 25(f)(3) and 
     42(h)(3)(E)(iii) are each amended by striking ``section 
     146(d)(3)(C)'' and inserting ``section 146(d)(2)(C)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to calendar years after 1998.

  TITLE III--EXTENSION AND MODIFICATION OF CERTAIN EXPIRING PROVISIONS

                       Subtitle A--Tax Provisions

     SEC. 301. RESEARCH CREDIT.

       (a) Temporary Extension.--
       (1) In general.--Paragraph (1) of section 41(h) (relating 
     to termination) is amended--
       (A) by striking ``June 30, 1998'' and inserting ``December 
     31, 1999'',
       (B) by striking ``24-month'' and inserting ``42-month'', 
     and
       (C) by striking ``24 months'' and inserting ``42 months''.
       (2) Technical amendment.--Subparagraph (D) of section 
     45C(b)(1) is amended by striking ``June 30, 1998'' and 
     inserting ``December 31, 1999''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to amounts paid or incurred after June 30, 1998.
       (b) Increase in Percentages Under Alternative Incremental 
     Credit.--
       (1) In general.--Subparagraph (A) of section 41(c)(4) is 
     amended--
       (A) by striking ``1.65 percent'' and inserting ``2.65 
     percent'',
       (B) by striking ``2.2 percent'' and inserting ``3.2 
     percent'', and
       (C) by striking ``2.75 percent'' and inserting ``3.75 
     percent''.

[[Page H8631]]

       (2) Effective date.--The amendments made by this subsection 
     shall apply to taxable years beginning after June 30, 1998.

     SEC. 302. WORK OPPORTUNITY CREDIT.

       (a) Temporary Extension.--Subparagraph (B) of section 
     51(c)(4) (relating to termination) is amended by striking 
     ``June 30, 1998'' and inserting ``December 31, 1999''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to individuals who begin work for the employer 
     after June 30, 1998.

     SEC. 303. WELFARE-TO-WORK CREDIT.

       Subsection (f) of section 51A (relating to termination) is 
     amended by striking ``April 30, 1999'' and inserting 
     ``December 31, 1999''.

     SEC. 304. CONTRIBUTIONS OF STOCK TO PRIVATE FOUNDATIONS; 
                   EXPANDED PUBLIC INSPECTION OF PRIVATE 
                   FOUNDATIONS' ANNUAL RETURNS.

       (a) Special Rule for Contributions of Stock Made 
     Permanent.--
       (1) In general.--Paragraph (5) of section 170(e) is amended 
     by striking subparagraph (D) (relating to termination).
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to contributions made after June 30, 1998.
       (b) Expanded Public Inspection of Private Foundations' 
     Annual Returns, Etc.--
       (1) In general.--Section 6104 (relating to publicity of 
     information required from certain exempt organizations and 
     certain trusts) is amended by striking subsections (d) and 
     (e) and inserting after subsection (c) the following new 
     subsection:
       ``(d) Public Inspection of Certain Annual Returns and 
     Applications for Exemption.--
       ``(1) In general.--In the case of an organization described 
     in subsection (c) or (d) of section 501 and exempt from 
     taxation under section 501(a)--
       ``(A) a copy of--
       ``(i) the annual return filed under section 6033 (relating 
     to returns by exempt organizations) by such organization, and
       ``(ii) if the organization filed an application for 
     recognition of exemption under section 501, the exempt status 
     application materials of such organization,

     shall be made available by such organization for inspection 
     during regular business hours by any individual at the 
     principal office of such organization and, if such 
     organization regularly maintains 1 or more regional or 
     district offices having 3 or more employees, at each such 
     regional or district office, and
       ``(B) upon request of an individual made at such principal 
     office or such a regional or district office, a copy of such 
     annual return and exempt status application materials shall 
     be provided to such individual without charge other than a 
     reasonable fee for any reproduction and mailing costs.

     The request described in subparagraph (B) must be made in 
     person or in writing. If such request is made in person, such 
     copy shall be provided immediately and, if made in writing, 
     shall be provided within 30 days.
       ``(2) 3-year limitation on inspection of returns.--
     Paragraph (1) shall apply to an annual return filed under 
     section 6033 only during the 3-year period beginning on the 
     last day prescribed for filing such return (determined with 
     regard to any extension of time for filing).
       ``(3) Exceptions from disclosure requirement.--
       ``(A) Nondisclosure of contributors, etc.--Paragraph (1) 
     shall not require the disclosure of the name or address of 
     any contributor to the organization. In the case of an 
     organization described in section 501(d), subparagraph (A) 
     shall not require the disclosure of the copies referred to in 
     section 6031(b) with respect to such organization.
       ``(B) Nondisclosure of certain other information.--
     Paragraph (1) shall not require the disclosure of any 
     information if the Secretary withheld such information from 
     public inspection under subsection (a)(1)(D).
       ``(4) Limitation on providing copies.--Paragraph (1)(B) 
     shall not apply to any request if, in accordance with 
     regulations promulgated by the Secretary, the organization 
     has made the requested documents widely available, or the 
     Secretary determines, upon application by an organization, 
     that such request is part of a harassment campaign and that 
     compliance with such request is not in the public interest.
       ``(5) Exempt status application materials.--For purposes of 
     paragraph (1), the term `exempt status applicable materials' 
     means the application for recognition of exemption under 
     section 501 and any papers submitted in support of such 
     application and any letter or other document issued by the 
     Internal Revenue Service with respect to such application.''
       (2) Conforming amendments.--
       (A) Subsection (c) of section 6033 is amended by adding 
     ``and'' at the end of paragraph (1), by striking paragraph 
     (2), and by redesignating paragraph (3) as paragraph (2).
       (B) Subparagraph (C) of section 6652(c)(1) is amended by 
     striking ``subsection (d) or (e)(1) of section 6104 (relating 
     to public inspection of annual returns)'' and inserting 
     ``section 6104(d) with respect to any annual return''.
       (C) Subparagraph (D) of section 6652(c)(1) is amended by 
     striking ``section 6104(e)(2) (relating to public inspection 
     of applications for exemption)'' and inserting ``section 
     6104(d) with respect to any exempt status application 
     materials (as defined in such section)''.
       (D) Section 6685 is amended by striking ``or (e)''.
       (E) Section 7207 is amended by striking ``or (e)''.
       (3) Effective date.--
       (A) In general.--Except as provided in subparagraph (B), 
     the amendments made by this subsection shall apply to 
     requests made after the later of December 31, 1998, or the 
     60th day after the Secretary of the Treasury first issues the 
     regulations referred to such section 6104(d)(4) of the 
     Internal Revenue Code of 1986, as amended by this section.
       (B) Publication of annual returns.--Section 6104(d) of such 
     Code, as in effect before the amendments made by this 
     subsection, shall not apply to any return the due date for 
     which is after the date such amendments take effect under 
     subparagraph (A).

     SEC. 305. SUBPART F EXEMPTION FOR ACTIVE FINANCING INCOME.

       (a) Income Derived From Banking, Financing or Similar 
     Businesses.--Section 954(h) (relating to income derived in 
     the active conduct of banking, financing, or similar 
     businesses) is amended to read as follows:
       ``(h) Special Rule for Income Derived in the Active Conduct 
     of Banking, Financing, or Similar Businesses.--
       ``(1) In general.--For purposes of subsection (c)(1), 
     foreign personal holding company income shall not include 
     qualified banking or financing income of an eligible 
     controlled foreign corporation.
       ``(2) Eligible controlled foreign corporation.--For 
     purposes of this subsection--
       ``(A) In general.--The term `eligible controlled foreign 
     corporation' means a controlled foreign corporation which--
       ``(i) is predominantly engaged in the active conduct of a 
     banking, financing, or similar business, and
       ``(ii) conducts substantial activity with respect to such 
     business.
       ``(B) Predominantly engaged.--A controlled foreign 
     corporation shall be treated as predominantly engaged in the 
     active conduct of a banking, financing, or similar business 
     if--
       ``(i) more than 70 percent of the gross income of the 
     controlled foreign corporation is derived directly from the 
     active and regular conduct of a lending or finance business 
     from transactions with customers which are not related 
     persons,
       ``(ii) it is engaged in the active conduct of a banking 
     business and is an institution licensed to do business as a 
     bank in the United States (or is any other corporation not so 
     licensed which is specified by the Secretary in regulations), 
     or
       ``(iii) it is engaged in the active conduct of a securities 
     business and is registered as a securities broker or dealer 
     under section 15(a) of the Securities Exchange Act of 1934 or 
     is registered as a Government securities broker or dealer 
     under section 15C(a) of such Act (or is any other corporation 
     not so registered which is specified by the Secretary in 
     regulations).
       ``(3) Qualified banking or financing income.--For purposes 
     of this subsection--
       ``(A) In general.--The term `qualified banking or financing 
     income' means income of an eligible controlled foreign 
     corporation which--
       ``(i) is derived in the active conduct of a banking, 
     financing, or similar business by--

       ``(I) such eligible controlled foreign corporation, or
       ``(II) a qualified business unit of such eligible 
     controlled foreign corporation,

       ``(ii) is derived from 1 or more transactions--

       ``(I) with customers located in a country other than the 
     United States, and
       ``(II) substantially all of the activities in connection 
     with which are conducted directly by the corporation or unit 
     in its home country, and

       ``(iii) is treated as earned by such corporation or unit in 
     its home country for purposes of such country's tax laws.
       ``(B) Limitation on nonbanking and nonsecurities 
     businesses.--No income of an eligible controlled foreign 
     corporation not described in clause (ii) or (iii) of 
     paragraph (2)(B) (or of a qualified business unit of such 
     corporation) shall be treated as qualified banking or 
     financing income unless more than 30 percent of such 
     corporation's or unit's gross income is derived directly from 
     the active and regular conduct of a lending or finance 
     business from transactions with customers which are not 
     related persons and which are located within such 
     corporation's or unit's home country.
       ``(C) Substantial activity requirement for cross border 
     income.--The term `qualified banking or financing income' 
     shall not include income derived from 1 or more transactions 
     with customers located in a country other than the home 
     country of the eligible controlled foreign corporation or a 
     qualified business unit of such corporation unless such 
     corporation or unit conducts substantial activity with 
     respect to a banking, financing, or similar business in its 
     home country.
       ``(D) Determinations made separately.--For purposes of this 
     paragraph, the qualified banking or financing income of an 
     eligible controlled foreign corporation and each qualified 
     business unit of such corporation shall be determined 
     separately for such corporation and each such unit by taking 
     into account--
       ``(i) in the case of the eligible controlled foreign 
     corporation, only items of income, deduction, gain, or loss 
     and activities of such corporation not properly allocable or 
     attributable to any qualified business unit of such 
     corporation, and
       ``(ii) in the case of a qualified business unit, only items 
     of income, deduction, gain,

[[Page H8632]]

     or loss and activities properly allocable or attributable to 
     such unit.
       ``(4) Lending or finance business.--For purposes of this 
     subsection, the term `lending or finance business' means the 
     business of--
       ``(A) making loans,
       ``(B) purchasing or discounting accounts receivable, notes, 
     or installment obligations,
       ``(C) engaging in leasing (including entering into leases 
     and purchasing, servicing, and disposing of leases and leased 
     assets),
       ``(D) issuing letters of credit or providing guarantees,
       ``(E) providing charge and credit card services, or
       ``(F) rendering services or making facilities available in 
     connection with activities described in subparagraphs (A) 
     through (E) carried on by--
       ``(i) the corporation (or qualified business unit) 
     rendering services or making facilities available, or
       ``(ii) another corporation (or qualified business unit of a 
     corporation) which is a member of the same affiliated group 
     (as defined in section 1504, but determined without regard to 
     section 1504(b)(3)).
       ``(5) Other definitions.--For purposes of this subsection--
       ``(A) Customer.--The term `customer' means, with respect to 
     any controlled foreign corporation or qualified business 
     unit, any person which has a customer relationship with such 
     corporation or unit and which is acting in its capacity as 
     such.
       ``(B) Home country.--Except as provided in regulations--
       ``(i) Controlled foreign corporation.--The term `home 
     country' means, with respect to any controlled foreign 
     corporation, the country under the laws of which the 
     corporation was created or organized.
       ``(ii) Qualified business unit.--The term `home country' 
     means, with respect to any qualified business unit, the 
     country in which such unit maintains its principal office.
       ``(C) Located.--The determination of where a customer is 
     located shall be made under rules prescribed by the 
     Secretary.
       ``(D) Qualified business unit.--The term `qualified 
     business unit' has the meaning given such term by section 
     989(a).
       ``(E) Related person.--The term `related person' has the 
     meaning given such term by subsection (d)(3).
       ``(6) Coordination with exception for dealers.--Paragraph 
     (1) shall not apply to income described in subsection 
     (c)(2)(C)(ii) of a dealer in securities (within the meaning 
     of section 475) which is an eligible controlled foreign 
     corporation described in paragraph (2)(B)(iii).
       ``(7) Anti-abuse rules.--For purposes of applying this 
     subsection and subsection (c)(2)(C)(ii)--
       ``(A) there shall be disregarded any item of income, gain, 
     loss, or deduction with respect to any transaction or series 
     of transactions one of the principal purposes of which is 
     qualifying income or gain for the exclusion under this 
     section, including any transaction or series of transactions 
     a principal purpose of which is the acceleration or deferral 
     of any item in order to claim the benefits of such exclusion 
     through the application of this subsection,
       ``(B) there shall be disregarded any item of income, gain, 
     loss, or deduction of an entity which is not engaged in 
     regular and continuous transactions with customers which are 
     not related persons,
       ``(C) there shall be disregarded any item of income, gain, 
     loss, or deduction with respect to any transaction or series 
     of transactions utilizing, or doing business with--
       ``(i) one or more entities in order to satisfy any home 
     country requirement under this subsection, or
       ``(ii) a special purpose entity or arrangement, including a 
     securitization, financing, or similar entity or arrangement,

     if one of the principal purposes of such transaction or 
     series of transactions is qualifying income or gain for the 
     exclusion under this subsection, and
       ``(D) a related person, an officer, a director, or an 
     employee with respect to any controlled foreign corporation 
     (or qualified business unit) which would otherwise be treated 
     as a customer of such corporation or unit with respect to any 
     transaction shall not be so treated if a principal purpose of 
     such transaction is to satisfy any requirement of this 
     subsection.
       ``(8) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this subsection, subsection (c)(1)(B)(i), 
     subsection (c)(2)(C)(ii), and the last sentence of subsection 
     (e)(2).
       ``(9) Application.--This subsection, subsection 
     (c)(2)(C)(ii), and the last sentence of subsection (e)(2) 
     shall apply only to the first taxable year of a foreign 
     corporation beginning after December 31, 1998, and before 
     January 1, 2000, and to taxable years of United States 
     shareholders with or within which such taxable year of such 
     foreign corporation ends.''
       (b) Income Derived From Insurance Business.--
       (1) Income attributable to issuance or reinsurance.--
       (A) In general.--Section 953(a) (defining insurance income) 
     is amended to read as follows:
       ``(a) Insurance Income.--
       ``(1) In general.--For purposes of section 952(a)(1), the 
     term `insurance income' means any income which--
       ``(A) is attributable to the issuing (or reinsuring) of an 
     insurance or annuity contract, and
       ``(B) would (subject to the modifications provided by 
     subsection (b)) be taxed under subchapter L of this chapter 
     if such income were the income of a domestic insurance 
     company.
       ``(2) Exception.--Such term shall not include any exempt 
     insurance income (as defined in subsection (e)).''
       (B) Exempt insurance income.--Section 953 (relating to 
     insurance income) is amended by adding at the end the 
     following new subsection:
       ``(e) Exempt Insurance Income.--For purposes of this 
     section--
       ``(1) Exempt insurance income defined.--
       ``(A) In general.--The term `exempt insurance income' means 
     income derived by a qualifying insurance company which--
       ``(i) is attributable to the issuing (or reinsuring) of an 
     exempt contract by such company or a qualifying insurance 
     company branch of such company, and
       ``(ii) is treated as earned by such company or branch in 
     its home country for purposes of such country's tax laws.
       ``(B) Exception for certain arrangements.--Such term shall 
     not include income attributable to the issuing (or 
     reinsuring) of an exempt contract as the result of any 
     arrangement whereby another corporation receives a 
     substantially equal amount of premiums or other consideration 
     in respect of issuing (or reinsuring) a contract which is not 
     an exempt contract.
       ``(C) Determinations made separately.--For purposes of this 
     subsection and section 954(i), the exempt insurance income 
     and exempt contracts of a qualifying insurance company or any 
     qualifying insurance company branch of such company shall be 
     determined separately for such company and each such branch 
     by taking into account--
       ``(i) in the case of the qualifying insurance company, only 
     items of income, deduction, gain, or loss, and activities of 
     such company not properly allocable or attributable to any 
     qualifying insurance company branch of such company, and
       ``(ii) in the case of a qualifying insurance company 
     branch, only items of income, deduction, gain, or loss and 
     activities properly allocable or attributable to such unit.
       ``(2) Exempt contract.--
       ``(A) In general.--The term `exempt contract' means an 
     insurance or annuity contract issued or reinsured by a 
     qualifying insurance company or qualifying insurance company 
     branch in connection with property in, liability arising out 
     of activity in, or the lives or health of residents of, a 
     country other than the United States.
       ``(B) Minimum home country income required.--
       ``(i) In general.--No contract of a qualifying insurance 
     company or of a qualifying insurance company branch shall be 
     treated as an exempt contract unless such company or branch 
     derives more than 30 percent of its net written premiums from 
     exempt contracts (determined without regard to this 
     subparagraph)--

       ``(I) which cover applicable home country risks, and
       ``(II) with respect to which no policyholder, insured, 
     annuitant, or beneficiary is a related person (as defined in 
     section 954(d)(3)).

       ``(ii) Applicable home country risks.--The term `applicable 
     home country risks' means risks in connection with property 
     in, liability arising out of activity in, or the lives or 
     health of residents of, the home country of the qualifying 
     insurance company or qualifying insurance company branch, as 
     the case may be, issuing or reinsuring the contract covering 
     the risks.
       ``(C) Substantial activity requirements for cross border 
     risks.--A contract issued by a qualifying insurance company 
     or qualifying insurance company branch which covers risks 
     other than applicable home country risks (as defined in 
     subparagraph (B)(ii)) shall not be treated as an exempt 
     contract unless such company or branch, as the case may be--
       ``(i) conducts substantial activity with respect to an 
     insurance business in its home country, and
       ``(ii) performs in its home country substantially all of 
     the activities necessary to give rise to the income generated 
     by such contract.
       ``(3) Qualifying insurance company.--The term `qualifying 
     insurance company' means any controlled foreign corporation 
     which--
       ``(A) is subject to regulation as an insurance (or 
     reinsurance) company by its home country, and is licensed, 
     authorized, or regulated by the applicable insurance 
     regulatory body for its home country to sell insurance, 
     reinsurance, or annuity contracts to persons other than 
     related persons (within the meaning of section 954(d)(3)) in 
     such home country,
       ``(B) derives more than 50 percent of its aggregate net 
     written premiums from the issuance or reinsurance by such 
     controlled foreign corporation and each of its qualifying 
     insurance company branches of contracts--
       ``(i) covering applicable home country risks (as defined in 
     paragraph (2)) of such corporation or branch, as the case may 
     be, and
       ``(ii) with respect to which no policyholder, insured, 
     annuitant, or beneficiary is a related person (as defined in 
     section 954(d)(3)),


[[Page H8633]]


     except that in the case of a branch, such premiums shall only 
     be taken into account to the extent such premiums are treated 
     as earned by such branch in its home country for purposes of 
     such country's tax laws, and
       ``(C) is engaged in the insurance business and would be 
     subject to tax under subchapter L if it were a domestic 
     corporation.
       ``(4) Qualifying insurance company branch.--The term 
     `qualifying insurance company branch' means a qualified 
     business unit (within the meaning of section 989(a)) of a 
     controlled foreign corporation if--
       ``(A) such unit is licensed, authorized, or regulated by 
     the applicable insurance regulatory body for its home country 
     to sell insurance, reinsurance, or annuity contracts to 
     persons other than related persons (within the meaning of 
     section 954(d)(3)) in such home country, and
       ``(B) such controlled foreign corporation is a qualifying 
     insurance company, determined under paragraph (3) as if such 
     unit were a qualifying insurance company branch.
       ``(5) Life insurance or annuity contract.--For purposes of 
     this section and section 954, the determination of whether a 
     contract issued by a controlled foreign corporation or a 
     qualified business unit (within the meaning of section 
     989(a)) is a life insurance contract or an annuity contract 
     shall be made without regard to sections 72(s), 101(f), 
     817(h), and 7702 if--
       ``(A) such contract is regulated as a life insurance or 
     annuity contract by the corporation's or unit's home country, 
     and
       ``(B) no policyholder, insured, annuitant, or beneficiary 
     with respect to the contract is a United States person.
       ``(6) Home country.--For purposes of this subsection, 
     except as provided in regulations--
       ``(A) Controlled foreign corporation.--The term `home 
     country' means, with respect to a controlled foreign 
     corporation, the country in which such corporation is created 
     or organized.
       ``(B) Qualified business unit.--The term `home country' 
     means, with respect to a qualified business unit (as defined 
     in section 989(a)), the country in which the principal office 
     of such unit is located and in which such unit is licensed, 
     authorized, or regulated by the applicable insurance 
     regulatory body to sell insurance, reinsurance, or annuity 
     contracts to persons other than related persons (as defined 
     in section 954(d)(3)) in such country.
       ``(7) Anti-abuse rules.--For purposes of applying this 
     subsection and section 954(i)--
       ``(A) the rules of section 954(h)(7) (other than 
     subparagraph (B) thereof) shall apply,
       ``(B) there shall be disregarded any item of income, gain, 
     loss, or deduction of, or derived from, an entity which is 
     not engaged in regular and continuous transactions with 
     persons which are not related persons,
       ``(C) there shall be disregarded any change in the method 
     of computing reserves a principal purpose of which is the 
     acceleration or deferral of any item in order to claim the 
     benefits of this subsection or section 954(i),
       ``(D) a contract of insurance or reinsurance shall not be 
     treated as an exempt contract (and premiums from such 
     contract shall not be taken into account for purposes of 
     paragraph (2)(B) or (3)) if--
       ``(i) any policyholder, insured, annuitant, or beneficiary 
     is a resident of the United States and such contract was 
     marketed to such resident and was written to cover a risk 
     outside the United States, or
       ``(ii) the contract covers risks located within and without 
     the United States and the qualifying insurance company or 
     qualifying insurance company branch does not maintain such 
     contemporaneous records, and file such reports, with respect 
     to such contract as the Secretary may require,
       ``(E) the Secretary may prescribe rules for the allocation 
     of contracts (and income from contracts) among 2 or more 
     qualifying insurance company branches of a qualifying 
     insurance company in order to clearly reflect the income of 
     such branches, and
       ``(F) premiums from a contract shall not be taken into 
     account for purposes of paragraph (2)(B) or (3) if such 
     contract reinsures a contract issued or reinsured by a 
     related person (as defined in section 954(d)(3)).

     For purposes of subparagraph (D), the determination of where 
     risks are located shall be made under the principles of 
     section 953.
       ``(8) Coordination with subsection (c).--In determining 
     insurance income for purposes of subsection (c), exempt 
     insurance income shall not include income derived from exempt 
     contracts which cover risks other than applicable home 
     country risks.
       ``(9) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this subsection and section 954(i).
       ``(10) Application.--This subsection and section 954(i) 
     shall apply only to the first taxable year of a foreign 
     corporation beginning after December 31, 1998, and before 
     January 1, 2000, and to taxable years of United States 
     shareholders with or within which such taxable year of such 
     foreign corporation ends.
       ``(11) Cross reference.--

  ``For income exempt from foreign personal holding company income, see 
section 954(i).''

       (2) Exemption from foreign personal holding company 
     income.--Section 954 (defining foreign base company income) 
     is amended by adding at the end the following new subsection:
       ``(i) Special Rule for Income Derived in the Active Conduct 
     of Insurance Business.--
       ``(1) In general.--For purposes of subsection (c)(1), 
     foreign personal holding company income shall not include 
     qualified insurance income of a qualifying insurance company.
       ``(2) Qualified insurance income.--The term `qualified 
     insurance income' means income of a qualifying insurance 
     company which is--
       ``(A) received from a person other than a related person 
     (within the meaning of subsection (d)(3)) and derived from 
     the investments made by a qualifying insurance company or a 
     qualifying insurance company branch of its reserves allocable 
     to exempt contracts or of 80 percent of its unearned premiums 
     from exempt contracts (as both are determined in the manner 
     prescribed under paragraph (4)), or
       ``(B) received from a person other than a related person 
     (within the meaning of subsection (d)(3)) and derived from 
     investments made by a qualifying insurance company or a 
     qualifying insurance company branch of an amount of its 
     assets allocable to exempt contracts equal to--
       ``(i) in the case of property, casualty, or health 
     insurance contracts, one-third of its premiums earned on such 
     insurance contracts during the taxable year (as defined in 
     section 832(b)(4)), and
       ``(ii) in the case of life insurance or annuity contracts, 
     10 percent of the reserves described in subparagraph (A) for 
     such contracts.
       ``(3) Principles for determining insurance income.--Except 
     as provided by the Secretary, for purposes of subparagraphs 
     (A) and (B) of paragraph (2)--
       ``(A) in the case of any contract which is a separate 
     account-type contract (including any variable contract not 
     meeting the requirements of section 817), income credited 
     under such contract shall be allocable only to such contract, 
     and
       ``(B) income not allocable under subparagraph (A) shall be 
     allocated ratably among contracts not described in 
     subparagraph (A).
       ``(4) Methods for determining unearned premiums and 
     reserves.--For purposes of paragraph (2)(A)--
       ``(A) Property and casualty contracts.--The unearned 
     premiums and reserves of a qualifying insurance company or a 
     qualifying insurance company branch with respect to property, 
     casualty, or health insurance contracts shall be determined 
     using the same methods and interest rates which would be used 
     if such company or branch were subject to tax under 
     subchapter L, except that--
       ``(i) the interest rate determined for the functional 
     currency of the company or branch, and which, except as 
     provided by the Secretary, is calculated in the same manner 
     as the Federal mid-term rate under section 1274(d), shall be 
     substituted for the applicable Federal interest rate, and
       ``(ii) such company or branch shall use the appropriate 
     foreign loss payment pattern.
       ``(B) Life insurance and annuity contracts.--The amount of 
     the reserve of a qualifying insurance company or qualifying 
     insurance company branch for any life insurance or annuity 
     contract shall be equal to the greater of--
       ``(i) the net surrender value of such contract (as defined 
     in section 807(e)(1)(A)), or
       ``(ii) the reserve determined under paragraph (5).
       ``(C) Limitation on reserves.--In no event shall the 
     reserve determined under this paragraph for any contract as 
     of any time exceed the amount which would be taken into 
     account with respect to such contract as of such time in 
     determining foreign statement reserves (less any catastrophe, 
     deficiency, equalization, or similar reserves).
       ``(5) Amount of reserve.--The amount of the reserve 
     determined under this paragraph with respect to any contract 
     shall be determined in the same manner as it would be 
     determined if the qualifying insurance company or qualifying 
     insurance company branch were subject to tax under subchapter 
     L, except that in applying such subchapter--
       ``(A) the interest rate determined for the functional 
     currency of the company or branch, and which, except as 
     provided by the Secretary, is calculated in the same manner 
     as the Federal mid-term rate under section 1274(d), shall be 
     substituted for the applicable Federal interest rate,
       ``(B) the highest assumed interest rate permitted to be 
     used in determining foreign statement reserves shall be 
     substituted for the prevailing State assumed interest rate, 
     and
       ``(C) tables for mortality and morbidity which reasonably 
     reflect the current mortality and morbidity risks in the 
     company's or branch's home country shall be substituted for 
     the mortality and morbidity tables otherwise used for such 
     subchapter.

     The Secretary may provide that the interest rate and 
     mortality and morbidity tables of a qualifying insurance 
     company may be used for 1 or more of its qualifying insurance 
     company branches when appropriate.
       ``(6) Definitions.--For purposes of this subsection, any 
     term used in this subsection which is also used in section 
     953(e) shall have the meaning given such term by section 
     953.''
       (3) Reserves.--Section 953(b) is amended by redesignating 
     paragraph (3) as paragraph (4) and by inserting after 
     paragraph (2) the following new paragraph:
       ``(3) Reserves for any insurance or annuity contract shall 
     be determined in the same manner as under section 954(i).''

[[Page H8634]]

       (c) Special Rules for Dealers.--Section 954(c)(2)(C) is 
     amended to read as follows:
       ``(C) Exception for dealers.--Except as provided by 
     regulations, in the case of a regular dealer in property 
     which is property described in paragraph (1)(B), forward 
     contracts, option contracts, or similar financial instruments 
     (including notional principal contracts and all instruments 
     referenced to commodities), there shall not be taken into 
     account in computing foreign personal holding company 
     income--
       ``(i) any item of income, gain, deduction, or loss (other 
     than any item described in subparagraph (A), (E), or (G) of 
     paragraph (1)) from any transaction (including hedging 
     transactions) entered into in the ordinary course of such 
     dealer's trade or business as such a dealer, and
       ``(ii) if such dealer is a dealer in securities (within the 
     meaning of section 475), any interest or dividend or 
     equivalent amount described in subparagraph (E) or (G) of 
     paragraph (1) from any transaction (including any hedging 
     transaction or transaction described in section 956(c)(2)(J)) 
     entered into in the ordinary course of such dealer's trade or 
     business as such a dealer in securities, but only if the 
     income from the transaction is attributable to activities of 
     the dealer in the country under the laws of which the dealer 
     is created or organized (or in the case of a qualified 
     business unit described in section 989(a), is attributable to 
     activities of the unit in the country in which the unit both 
     maintains its principal office and conducts substantial 
     business activity).''
       (d) Exemption From Foreign Base Company Services Income.--
     Paragraph (2) of section 954(e) is amended by inserting 
     ``or'' at the end of subparagraph (A), by striking ``, or'' 
     at the end of subparagraph (B) and inserting a period, by 
     striking subparagraph (C), and by adding at the end the 
     following new flush sentence:

     ``Paragraph (1) shall also not apply to income which is 
     exempt insurance income (as defined in section 953(e)) or 
     which is not treated as foreign personal holding income by 
     reason of subsection (c)(2)(C)(ii), (h), or (i).''
       (e) Exemption for Gain.--Section 954(c)(1)(B)(i) (relating 
     to net gains from certain property transactions) is amended 
     by inserting ``other than property which gives rise to income 
     not treated as foreign personal holding company income by 
     reason of subsection (h) or (i) for the taxable year'' before 
     the comma at the end.

             Subtitle B--Generalized System of Preferences

     SEC. 311. EXTENSION OF GENERALIZED SYSTEM OF PREFERENCES.

       (a) Extension of Duty-Free Treatment Under System.--Section 
     505 of the Trade Act of 1974 (29 U.S.C. 2465) is amended by 
     striking ``June 30, 1998'' and inserting ``December 31, 
     1999''.
       (b) Retroactive Application for Certain Liquidations and 
     Reliquidations.--
       (1) In general.--Notwithstanding section 514 of the Tariff 
     Act of 1930 or any other provision of law, and subject to 
     paragraph (2), any entry--
       (A) of an article to which duty-free treatment under title 
     V of the Trade Act of 1974 would have applied if such title 
     had been in effect during the period beginning on July 1, 
     1998, and ending on the day before the date of the enactment 
     of this Act, and
       (B) that was made after June 30, 1998, and before the date 
     of the enactment of this Act,

     shall be liquidated or reliquidated as free of duty, and the 
     Secretary of the Treasury shall refund any duty paid with 
     respect to such entry. As used in this subsection, the term 
     ``entry'' includes a withdrawal from warehouse for 
     consumption.
       (2) Requests.--Liquidation or reliquidation may be made 
     under paragraph (1) with respect to an entry only if a 
     request therefor is filed with the Customs Service, within 
     180 days after the date of the enactment of this Act, that 
     contains sufficient information to enable the Customs 
     Service--
       (A) to locate the entry; or
       (B) to reconstruct the entry if it cannot be located.

                        TITLE IV--REVENUE OFFSET

     SEC. 401. TREATMENT OF CERTAIN DEDUCTIBLE LIQUIDATING 
                   DISTRIBUTIONS OF REGULATED INVESTMENT COMPANIES 
                   AND REAL ESTATE INVESTMENT TRUSTS.

       (a) In General.--Section 332 (relating to complete 
     liquidations of subsidiaries) is amended by adding at the end 
     the following new subsection:
       ``(c) Deductible Liquidating Distributions of Regulated 
     Investment Companies and Real Estate Investment Trusts.--If a 
     corporation receives a distribution from a regulated 
     investment company or a real estate investment trust which is 
     considered under subsection (b) as being in complete 
     liquidation of such company or trust, then, notwithstanding 
     any other provision of this chapter, such corporation shall 
     recognize and treat as a dividend from such company or trust 
     an amount equal to the deduction for dividends paid allowable 
     to such company or trust by reason of such distribution.''.
       (b) Conforming Amendments.--
       (1) The material preceding paragraph (1) of section 332(b) 
     is amended by striking ``subsection (a)'' and inserting 
     ``this section''.
       (2) Paragraph (1) of section 334(b) is amended by striking 
     ``section 332(a)'' and inserting ``section 332''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to distributions after May 21, 1998.

                     TITLE V--TECHNICAL CORRECTIONS

     SEC. 501. DEFINITIONS; COORDINATION WITH OTHER TITLES.

       (a) Definitions.--For purposes of this title--
       (1) 1986 code.--The term ``1986 Code'' means the Internal 
     Revenue Code of 1986.
       (2) 1998 act.--The term ``1998 Act'' means the Internal 
     Revenue Service Restructuring and Reform Act of 1998 (Public 
     Law 105-206).
       (3) 1997 act.--The term ``1997 Act'' means the Taxpayer 
     Relief Act of 1997 (Public Law 105-34).
       (b) Coordination With Other Titles.--For purposes of 
     applying the amendments made by any title of this Act other 
     than this title, the provisions of this title shall be 
     treated as having been enacted immediately before the 
     provisions of such other titles.

     SEC. 502. AMENDMENTS RELATED TO INTERNAL REVENUE SERVICE 
                   RESTRUCTURING AND REFORM ACT OF 1998.

       (a) Amendment Related to Section 1101 of 1998 Act.--
     Paragraph (5) of section 6103(h) of the 1986 Code, as added 
     by section 1101(b) of the 1998 Act, is redesignated as 
     paragraph (6).
       (b) Amendment Related to Section 3001 of 1998 Act.--
     Paragraph (2) of section 7491(a) of the 1986 Code is amended 
     by adding at the end the following flush sentence:

     ``Subparagraph (C) shall not apply to any qualified revocable 
     trust (as defined in section 645(b)(1)) with respect to 
     liability for tax for any taxable year ending after the date 
     of the decedent's death and before the applicable date (as 
     defined in section 645(b)(2)).''.
       (c) Amendments Related to Section 3201 of 1998 Act.--
       (1) Section 7421(a) of the 1986 Code is amended by striking 
     ``6015(d)'' and inserting ``6015(e)''.
       (2) Subparagraph (A) of section 6015(e)(3) is amended by 
     striking ``of this section'' and inserting ``of subsection 
     (b) or (f)''.
       (d) Amendment Related to Section 3301 of 1998 Act.--
     Paragraph (2) of section 3301(c) of the 1998 Act is amended 
     by striking ``The amendments'' and inserting ``Subject to any 
     applicable statute of limitation not having expired with 
     regard to either a tax underpayment or a tax overpayment, the 
     amendments''.
       (e) Amendment Related to Section 3401 of 1998 Act.--Section 
     3401(c) of the 1998 Act is amended--
       (1) in paragraph (1), by striking ``7443(b)'' and inserting 
     ``7443A(b)''; and
       (2) in paragraph (2), by striking ``7443(c)'' and inserting 
     ``7443A(c)''.
       (f) Amendment Related to Section 3433 of 1998 Act.--Section 
     7421(a) of the 1986 Code is amended by inserting ``6331(i),'' 
     after ``6246(b),''.
       (g) Amendment Related to Section 3708 of 1998 Act.--
     Subparagraph (A) of section 6103(p)(3) of the 1986 Code is 
     amended by inserting ``(f)(5),'' after ``(c), (e),''.
       (h) Amendment Related to Section 5001 of 1998 Act.--
       (1) Subparagraph (B) of section 1(h)(13) of the 1986 Code 
     is amended by striking ``paragraph (7)(A)'' and inserting 
     ``paragraph (7)(A)(i)''.
       (2)(A) Subparagraphs (A)(i)(II), (A)(ii)(II), and (B)(ii) 
     of section 1(h)(13) of the 1986 Code shall not apply to any 
     distribution after December 31, 1997, by a regulated 
     investment company or a real estate investment trust with 
     respect to--
       (i) gains and losses recognized directly by such company or 
     trust, and
       (ii) amounts properly taken into account by such company or 
     trust by reason of holding (directly or indirectly) an 
     interest in another such company or trust to the extent that 
     such subparagraphs did not apply to such other company or 
     trust with respect to such amounts.
       (B) Subparagraph (A) shall not apply to any distribution 
     which is treated under section 852(b)(7) or 857(b)(8) of the 
     1986 Code as received on December 31, 1997.
       (C) For purposes of subparagraph (A), any amount which is 
     includible in gross income of its shareholders under section 
     852(b)(3)(D) or 857(b)(3)(D) of the 1986 Code after December 
     31, 1997, shall be treated as distributed after such date.
       (D)(i) For purposes of subparagraph (A), in the case of a 
     qualified partnership with respect to which a regulated 
     investment company meets the holding requirement of clause 
     (iii)--
       (I) the subparagraphs referred to in subparagraph (A) shall 
     not apply to gains and losses recognized directly by such 
     partnership for purposes of determining such company's 
     distributive share of such gains and losses, and
       (II) such company's distributive share of such gains and 
     losses (as so determined) shall be treated as recognized 
     directly by such company.

     The preceding sentence shall apply only if the qualified 
     partnership provides the company with written documentation 
     of such distributive share as so determined.
       (ii) For purposes of clause (i), the term ``qualified 
     partnership'' means, with respect to a regulated investment 
     company, any partnership if--
       (I) the partnership is an investment company registered 
     under the Investment Company Act of 1940,
       (II) the regulated investment company is permitted to 
     invest in such partnership by reason of section 12(d)(1)(E) 
     of such Act or an exemptive order of the Securities and 
     Exchange Commission under such section, and

[[Page H8635]]

       (III) the regulated investment company and the partnership 
     have the same taxable year.
       (iii) A regulated investment company meets the holding 
     requirement of this clause with respect to a qualified 
     partnership if (as of January 1, 1998)--
       (I) the value of the interests of the regulated investment 
     company in such partnership is 35 percent or more of the 
     value of such company's total assets, or
       (II) the value of the interests of the regulated investment 
     company in such partnership and all other qualified 
     partnerships is 90 percent or more of the value of such 
     company's total assets.
       (i) Effective Date.--The amendments made by this section 
     shall take effect as if included in the provisions of the 
     1998 Act to which they relate.

     SEC. 503. AMENDMENTS RELATED TO TAXPAYER RELIEF ACT OF 1997.

       (a) Amendment Related to Section 202 of 1997 Act.--
     Paragraph (2) of section 163(h) of the 1986 Code is amended 
     by striking ``and'' at the end of subparagraph (D), by 
     striking the period at the end of subparagraph (E) and 
     inserting ``, and'', and by adding at the end the following 
     new subparagraph:
       ``(F) any interest allowable as a deduction under section 
     221 (relating to interest on educational loans).''
       (b) Provision Related to Section 311 of 1997 Act.--In the 
     case of any capital gain distribution made after 1997 by a 
     trust to which section 664 of the 1986 Code applies with 
     respect to amounts properly taken into account by such trust 
     during 1997, paragraphs (5)(A)(i)(I), (5)(A)(ii)(I), and 
     (13)(A) of section 1(h) of the 1986 Code (as in effect for 
     taxable years ending on December 31, 1997) shall not apply.
       (c) Amendment Related to Section 506 of 1997 Act.--
       (1) Section 2001(f)(2) of the 1986 Code is amended by 
     adding at the end the following:

     ``For purposes of subparagraph (A), the value of an item 
     shall be treated as shown on a return if the item is 
     disclosed in the return, or in a statement attached to the 
     return, in a manner adequate to apprise the Secretary of the 
     nature of such item.''.
       (2) Paragraph (9) of section 6501(c) of the 1986 Code is 
     amended by striking the last sentence.
       (d) Amendments Related to Section 904 of 1997 Act.--
       (1) Paragraph (1) of section 9510(c) of the 1986 Code is 
     amended to read as follows:
       ``(1) In general.--Amounts in the Vaccine Injury 
     Compensation Trust Fund shall be available, as provided in 
     appropriation Acts, only for--
       ``(A) the payment of compensation under subtitle 2 of title 
     XXI of the Public Health Service Act (as in effect on August 
     5, 1997) for vaccine-related injury or death with respect to 
     any vaccine--
       ``(i) which is administered after September 30, 1988, and
       ``(ii) which is a taxable vaccine (as defined in section 
     4132(a)(1)) at the time compensation is paid under such 
     subtitle 2, or
       ``(B) the payment of all expenses of administration (but 
     not in excess of $9,500,000 for any fiscal year) incurred by 
     the Federal Government in administering such subtitle.''.
       (2) Section 9510(b) of the 1986 Code is amended by adding 
     at the end the following new paragraph:
       ``(3) Limitation on transfers to vaccine injury 
     compensation trust fund.--No amount may be appropriated to 
     the Vaccine Injury Compensation Trust Fund on and after the 
     date of any expenditure from the Trust Fund which is not 
     permitted by this section. The determination of whether an 
     expenditure is so permitted shall be made without regard to--
       ``(A) any provision of law which is not contained or 
     referenced in this title or in a revenue Act, and
       ``(B) whether such provision of law is a subsequently 
     enacted provision or directly or indirectly seeks to waive 
     the application of this paragraph.''.
       (e) Amendments Related to Section 915 of 1997 Act.--
       (1) Section 915 of the Taxpayer Relief Act of 1997 is 
     amended--
       (A) in subsection (b), by inserting ``or 1998'' after 
     ``1997'', and
       (B) by amending subsection (d) to read as follows:
       ``(d) Effective Date.--This section shall apply to taxable 
     years ending with or within calendar year 1997.''.
       (2) Paragraph (2) of section 6404(h) of the 1986 Code is 
     amended by inserting ``Robert T. Stafford'' before 
     ``Disaster''.
       (f) Amendments Related to Section 1012 of 1997 Act.--
       (1) Paragraph (2) of section 351(c) of the 1986 Code, as 
     amended by section 6010(c) of the 1998 Act, is amended by 
     inserting ``, or the fact that the corporation whose stock 
     was distributed issues additional stock,'' after ``dispose of 
     part or all of the distributed stock''.
       (2) Clause (ii) of section 368(a)(2)(H) of the 1986 Code, 
     as amended by section 6010(c) of the 1998 Act, is amended by 
     inserting ``, or the fact that the corporation whose stock 
     was distributed issues additional stock,'' after ``dispose of 
     part or all of the distributed stock''.
       (g) Amendment Related to Section 1082 of 1997 Act.--
     Subparagraph (F) of section 172(b)(1) of the 1986 Code is 
     amended by adding at the end the following new clause:
       ``(iv) Coordination with paragraph (2).--For purposes of 
     applying paragraph (2), an eligible loss for any taxable year 
     shall be treated in a manner similar to the manner in which a 
     specified liability loss is treated.''
       (h) Amendment Related to Section 1084 of 1997 Act.--
     Paragraph (3) of section 264(f) of the 1986 Code is amended 
     by adding at the end the following flush sentence:

     ``If the amount described in subparagraph (A) with respect to 
     any policy or contract does not reasonably approximate its 
     actual value, the amount taken into account under 
     subparagraph (A) shall be the greater of the amount of the 
     insurance company liability or the insurance company reserve 
     with respect to such policy or contract (as determined for 
     purposes of the annual statement approved by the National 
     Association of Insurance Commissioners) or shall be such 
     other amount as is determined by the Secretary.''
       (i) Amendment Related to Section 1205 of 1997 Act.--
     Paragraph (2) of section 6311(d) of the 1986 Code is amended 
     by striking ``under such contracts'' in the last sentence and 
     inserting ``under any such contract for the use of credit or 
     debit cards for the payment of taxes imposed by subtitle A''.
       (j) Effective Date.--The amendments made by this section 
     shall take effect as if included in the provisions of the 
     Taxpayer Relief Act of 1997 to which they relate.

     SEC. 504. AMENDMENTS RELATED TO TAX REFORM ACT OF 1984.

       (a) In General.--Subparagraph (C) of section 172(d)(4) of 
     the 1986 Code is amended to read as follows:
       ``(C) any deduction for casualty or theft losses allowable 
     under paragraph (2) or (3) of section 165(c) shall be treated 
     as attributable to the trade or business; and''.
       (b) Conforming Amendments.--
       (1) Paragraph (3) of section 67(b) of the 1986 Code is 
     amended by striking ``for losses described in subsection 
     (c)(3) or (d) of section 165'' and inserting ``for casualty 
     or theft losses described in paragraph (2) or (3) of section 
     165(c) or for losses described in section 165(d)''.
       (2) Paragraph (3) of section 68(c) of the 1986 Code is 
     amended by striking ``for losses described in subsection 
     (c)(3) or (d) of section 165'' and inserting ``for casualty 
     or theft losses described in paragraph (2) or (3) of section 
     165(c) or for losses described in section 165(d)''.
       (3) Paragraph (1) of section 873(b) is amended to read as 
     follows:
       ``(1) Losses.--The deduction allowed by section 165 for 
     casualty or theft losses described in paragraph (2) or (3) of 
     section 165(c), but only if the loss is of property located 
     within the United States.''
       (c) Effective Dates.--
       (1) The amendments made by subsections (a) and (b)(3) shall 
     apply to taxable years beginning after December 31, 1983.
       (2) The amendment made by subsection (b)(1) shall apply to 
     taxable years beginning after December 31, 1986.
       (3) The amendment made by subsection (b)(2) shall apply to 
     taxable years beginning after December 31, 1990.

     SEC. 505. OTHER AMENDMENTS.

       (a) Amendments Related to Section 6103 of 1986 Code.--
       (1) Subsection (j) of section 6103 of the 1986 Code is 
     amended by adding at the end the following new paragraph:
       ``(5) Department of agriculture.--Upon request in writing 
     by the Secretary of Agriculture, the Secretary shall furnish 
     such returns, or return information reflected thereon, as the 
     Secretary may prescribe by regulation to officers and 
     employees of the Department of Agriculture whose official 
     duties require access to such returns or information for the 
     purpose of, but only to the extent necessary in, structuring, 
     preparing, and conducting the census of agriculture pursuant 
     to the Census of Agriculture Act of 1997 (Public Law 105-
     113).''.
       (2) Paragraph (4) of section 6103(p) of the 1986 Code is 
     amended by striking ``(j)(1) or (2)'' in the material 
     preceding subparagraph (A) and in subparagraph (F) and 
     inserting ``(j)(1), (2), or (5)''.
       (3) The amendments made by this subsection shall apply to 
     requests made on or after the date of the enactment of this 
     Act.
       (b) Amendment Related to Section 9004 of Transportation 
     Equity Act for the 21st Century.--
       (1) Paragraph (2) of section 9503(f) of the 1986 Code is 
     amended to read as follows:
       ``(2) notwithstanding section 9602(b), obligations held by 
     such Fund after September 30, 1998, shall be obligations of 
     the United States which are not interest-bearing.''
       (2) The amendment made by paragraph (1) shall take effect 
     on October 1, 1998.
       (c) Clerical Amendments.--
       (1) Clause (i) of section 51(d)(6)(B) of the 1986 Code is 
     amended by striking ``rehabilitation plan'' and inserting 
     ``plan for employment''. The reference to plan for employment 
     in such clause shall be treated as including a reference to 
     the rehabilitation plans referred to in such clause as in 
     effect before the amendment made by the preceding sentence.
       (2) Subparagraphs (C) and (D) of section 6693(a)(2) of the 
     1986 Code are each amended by striking ``Section'' and 
     inserting ``section''.

            TITLE VI--AMERICAN COMMUNITY RENEWAL ACT OF 1998

     SEC. 601. SHORT TITLE.

       This title may be cited as the ``American Community Renewal 
     Act of 1998''.

[[Page H8636]]

     SEC. 602. DESIGNATION OF AND TAX INCENTIVES FOR RENEWAL 
                   COMMUNITIES.

       (a) In General.--Chapter 1 is amended by adding at the end 
     the following new subchapter:

                  ``Subchapter X--Renewal Communities

``Part I.   Designation.
``Part II.  Renewal community capital gain; renewal community business.
``Part III. Family development accounts.
``Part IV.  Additional incentives.

                         ``PART I--DESIGNATION

``Sec. 1400E. Designation of renewal communities.

     ``SEC. 1400E. DESIGNATION OF RENEWAL COMMUNITIES.

       ``(a) Designation.--
       ``(1) Definitions.--For purposes of this title, the term 
     `renewal community' means any area--
       ``(A) which is nominated by one or more local governments 
     and the State or States in which it is located for 
     designation as a renewal community (hereinafter in this 
     section referred to as a `nominated area'), and
       ``(B) which the Secretary of Housing and Urban Development 
     designates as a renewal community, after consultation with--
       ``(i) the Secretaries of Agriculture, Commerce, Labor, and 
     the Treasury; the Director of the Office of Management and 
     Budget; and the Administrator of the Small Business 
     Administration, and
       ``(ii) in the case of an area on an Indian reservation, the 
     Secretary of the Interior.
       ``(2) Number of designations.--
       ``(A) In general.--The Secretary of Housing and Urban 
     Development may designate not more than 20 nominated areas as 
     renewal communities.
       ``(B) Minimum designation in rural areas.--Of the areas 
     designated under paragraph (1), at least 4 must be areas--
       ``(i) which are within a local government jurisdiction or 
     jurisdictions with a population of less than 50,000,
       ``(ii) which are outside of a metropolitan statistical area 
     (within the meaning of section 143(k)(2)(B)), or
       ``(iii) which are determined by the Secretary of Housing 
     and Urban Development, after consultation with the Secretary 
     of Commerce, to be rural areas.
       ``(3) Areas designated based on degree of poverty, etc.--
       ``(A) In general.--Except as otherwise provided in this 
     section, the nominated areas designated as renewal 
     communities under this subsection shall be those nominated 
     areas with the highest average ranking with respect to the 
     criteria described in subparagraphs (B), (C), and (D) of 
     subsection (c)(3). For purposes of the preceding sentence, an 
     area shall be ranked within each such criterion on the basis 
     of the amount by which the area exceeds such criterion, with 
     the area which exceeds such criterion by the greatest amount 
     given the highest ranking.
       ``(B) Exception where inadequate course of action, etc.--An 
     area shall not be designated under subparagraph (A) if the 
     Secretary of Housing and Urban Development determines that 
     the course of action described in subsection (d)(2) with 
     respect to such area is inadequate.
       ``(C) Priority for empowerment zones and enterprise 
     communities with respect to first half of designations.--With 
     respect to the first 10 designations made under this 
     section--
       ``(i) 10 shall be chosen from nominated areas which are 
     empowerment zones or enterprise communities (and are 
     otherwise eligible for designation under this section), and
       ``(ii) of such 10, 2 shall be areas described in paragraph 
     (2)(B).
       ``(4) Limitation on designations.--
       ``(A) Publication of regulations.--The Secretary of Housing 
     and Urban Development shall prescribe by regulation no later 
     than 4 months after the date of the enactment of this 
     section, after consultation with the officials described in 
     paragraph (1)(B)--
       ``(i) the procedures for nominating an area under paragraph 
     (1)(A),
       ``(ii) the parameters relating to the size and population 
     characteristics of a renewal community, and
       ``(iii) the manner in which nominated areas will be 
     evaluated based on the criteria specified in subsection (d).
       ``(B) Time limitations.--The Secretary of Housing and Urban 
     Development may designate nominated areas as renewal 
     communities only during the 24-month period beginning on the 
     first day of the first month following the month in which the 
     regulations described in subparagraph (A) are prescribed.
       ``(C) Procedural rules.--The Secretary of Housing and Urban 
     Development shall not make any designation of a nominated 
     area as a renewal community under paragraph (2) unless--
       ``(i) the local governments and the States in which the 
     nominated area is located have the authority--

       ``(I) to nominate such area for designation as a renewal 
     community,
       ``(II) to make the State and local commitments described in 
     subsection (d), and
       ``(III) to provide assurances satisfactory to the Secretary 
     of Housing and Urban Development that such commitments will 
     be fulfilled,

       ``(ii) a nomination regarding such area is submitted in 
     such a manner and in such form, and contains such 
     information, as the Secretary of Housing and Urban 
     Development shall by regulation prescribe, and
       ``(iii) the Secretary of Housing and Urban Development 
     determines that any information furnished is reasonably 
     accurate.
       ``(5) Nomination process for indian reservations.--For 
     purposes of this subchapter, in the case of a nominated area 
     on an Indian reservation, the reservation governing body (as 
     determined by the Secretary of the Interior) shall be treated 
     as being both the State and local governments with respect to 
     such area.
       ``(b) Period for Which Designation Is in Effect.--
       ``(1) In general.--Any designation of an area as a renewal 
     community shall remain in effect during the period beginning 
     on the date of the designation and ending on the earliest 
     of--
       ``(A) December 31, 2006,
       ``(B) the termination date designated by the State and 
     local governments in their nomination, or
       ``(C) the date the Secretary of Housing and Urban 
     Development revokes such designation.
       ``(2) Revocation of designation.--The Secretary of Housing 
     and Urban Development may revoke the designation under this 
     section of an area if such Secretary determines that the 
     local government or the State in which the area is located--
       ``(A) has modified the boundaries of the area, or
       ``(B) is not complying substantially with, or fails to make 
     progress in achieving, the State or local commitments, 
     respectively, described in subsection (d).
       ``(c) Area and Eligibility Requirements.--
       ``(1) In general.--The Secretary of Housing and Urban 
     Development may designate a nominated area as a renewal 
     community under subsection (a) only if the area meets the 
     requirements of paragraphs (2) and (3) of this subsection.
       ``(2) Area requirements.--A nominated area meets the 
     requirements of this paragraph if--
       ``(A) the area is within the jurisdiction of one or more 
     local governments,
       ``(B) the boundary of the area is continuous, and
       ``(C) the area--
       ``(i) has a population, of at least--

       ``(I) 4,000 if any portion of such area (other than a rural 
     area described in subsection (a)(2)(B)(i)) is located within 
     a metropolitan statistical area (within the meaning of 
     section 143(k)(2)(B)) which has a population of 50,000 or 
     greater, or
       ``(II) 1,000 in any other case, or

       ``(ii) is entirely within an Indian reservation (as 
     determined by the Secretary of the Interior).
       ``(3) Eligibility requirements.--A nominated area meets the 
     requirements of this paragraph if the State and the local 
     governments in which it is located certify (and the Secretary 
     of Housing and Urban Development, after such review of 
     supporting data as he deems appropriate, accepts such 
     certification) that--
       ``(A) the area is one of pervasive poverty, unemployment, 
     and general distress,
       ``(B) the unemployment rate in the area, as determined by 
     the most recent available data, was at least 1\1/2\ times the 
     national unemployment rate for the period to which such data 
     relate,
       ``(C) the poverty rate for each population census tract 
     within the nominated area is at least 20 percent, and
       ``(D) in the case of an urban area, at least 70 percent of 
     the households living in the area have incomes below 80 
     percent of the median income of households within the 
     jurisdiction of the local government (determined in the same 
     manner as under section 119(b)(2) of the Housing and 
     Community Development Act of 1974).
       ``(4) Consideration of high incidence of crime.--The 
     Secretary of Housing and Urban Development shall take into 
     account, in selecting nominated areas for designation as 
     renewal communities under this section, the extent to which 
     such areas have a high incidence of crime.
       ``(5) Consideration of communities identified in gao 
     study.--The Secretary of Housing and Urban Development shall 
     take into account, in selecting nominated areas for 
     designation as renewal communities under this section, if the 
     area has census tracts identified in the May 12, 1998, report 
     of the Government Accounting Office regarding the 
     identification of economically distressed areas.
       ``(d) Required State and Local Commitments.--
       ``(1) In general.--The Secretary of Housing and Urban 
     Development may designate any nominated area as a renewal 
     community under subsection (a) only if--
       ``(A) the local government and the State in which the area 
     is located agree in writing that, during any period during 
     which the area is a renewal community, such governments will 
     follow a specified course of action which meets the 
     requirements of paragraph (2) and is designed to reduce the 
     various burdens borne by employers or employees in such area, 
     and
       ``(B) the economic growth promotion requirements of 
     paragraph (3) are met.
       ``(2) Course of action.--
       ``(A) In general.--A course of action meets the 
     requirements of this paragraph if such course of action is a 
     written document, signed by a State (or local government) and 
     neighborhood organizations, which evidences a partnership 
     between such State or government and community-based 
     organizations

[[Page H8637]]

     and which commits each signatory to specific and measurable 
     goals, actions, and timetables. Such course of action shall 
     include at least five of the following:
       ``(i) A reduction of tax rates or fees applying within the 
     renewal community.
       ``(ii) An increase in the level of efficiency of local 
     services within the renewal community.
       ``(iii) Crime reduction strategies, such as crime 
     prevention (including the provision of such services by 
     nongovernmental entities).
       ``(iv) Actions to reduce, remove, simplify, or streamline 
     governmental requirements applying within the renewal 
     community.
       ``(v) Involvement in the program by private entities, 
     organizations, neighborhood organizations, and community 
     groups, particularly those in the renewal community, 
     including a commitment from such private entities to provide 
     jobs and job training for, and technical, financial, or other 
     assistance to, employers, employees, and residents from the 
     renewal community.
       ``(vi) State or local income tax benefits for fees paid for 
     services performed by a nongovernmental entity which were 
     formerly performed by a governmental entity.
       ``(vii) The gift (or sale at below fair market value) of 
     surplus real property (such as land, homes, and commercial or 
     industrial structures) in the renewal community to 
     neighborhood organizations, community development 
     corporations, or private companies.
       ``(B) Recognition of past efforts.--For purposes of this 
     section, in evaluating the course of action agreed to by any 
     State or local government, the Secretary of Housing and Urban 
     Development shall take into account the past efforts of such 
     State or local government in reducing the various burdens 
     borne by employers and employees in the area involved.
       ``(3) Economic growth promotion requirements.--The economic 
     growth promotion requirements of this paragraph are met with 
     respect to a nominated area if the local government and the 
     State in which such area is located certify in writing that 
     such government and State, respectively, have repealed or 
     otherwise will not enforce within the area, if such area is 
     designated as a renewal community--
       ``(A) licensing requirements for occupations that do not 
     ordinarily require a professional degree,
       ``(B) zoning restrictions on home-based businesses which do 
     not create a public nuisance,
       ``(C) permit requirements for street vendors who do not 
     create a public nuisance,
       ``(D) zoning or other restrictions that impede the 
     formation of schools or child care centers, and
       ``(E) franchises or other restrictions on competition for 
     businesses providing public services, including but not 
     limited to taxicabs, jitneys, cable television, or trash 
     hauling,

     except to the extent that such regulation of businesses and 
     occupations is necessary for and well-tailored to the 
     protection of health and safety.
       ``(e) Coordination With Treatment of Empowerment Zones and 
     Enterprise Communities.--For purposes of this title, if there 
     are in effect with respect to the same area both--
       ``(1) a designation as a renewal community, and
       ``(2) a designation as an empowerment zone or enterprise 
     community,

     both of such designations shall be given full effect with 
     respect to such area.
       ``(f) Definitions and Special Rules.--For purposes of this 
     subchapter--
       ``(1) Governments.--If more than one government seeks to 
     nominate an area as a renewal community, any reference to, or 
     requirement of, this section shall apply to all such 
     governments.
       ``(2) State.--The term `State' includes Puerto Rico, the 
     Virgin Islands of the United States, Guam, American Samoa, 
     the Northern Mariana Islands, and any other possession of the 
     United States.
       ``(3) Local government.--The term `local government' 
     means--
       ``(A) any county, city, town, township, parish, village, or 
     other general purpose political subdivision of a State,
       ``(B) any combination of political subdivisions described 
     in subparagraph (A) recognized by the Secretary of Housing 
     and Urban Development, and
       ``(C) the District of Columbia.
       ``(4) Application of rules relating to census tracts and 
     census data.--The rules of sections 1392(b)(4) and 1393(a)(9) 
     shall apply.

 ``PART II--RENEWAL COMMUNITY CAPITAL GAIN; RENEWAL COMMUNITY BUSINESS

``Sec. 1400F. Renewal community capital gain.
``Sec. 1400G. Renewal community business defined.

     ``SEC. 1400F. RENEWAL COMMUNITY CAPITAL GAIN.

       ``(a) General Rule.--Gross income does not include any 
     qualified capital gain recognized on the sale or exchange of 
     a qualified community asset held for more than 5 years.
       ``(b) Qualified Community Asset.--For purposes of this 
     section--
       ``(1) In general.--The term `qualified community asset' 
     means--
       ``(A) any qualified community stock,
       ``(B) any qualified community partnership interest, and
       ``(C) any qualified community business property.
       ``(2) Qualified community stock.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the term `qualified community stock' means any stock in a 
     domestic corporation if--
       ``(i) such stock is acquired by the taxpayer after December 
     31, 1999, and before January 1, 2007, at its original issue 
     (directly or through an underwriter) from the corporation 
     solely in exchange for cash,
       ``(ii) as of the time such stock was issued, such 
     corporation was a renewal community business (or, in the case 
     of a new corporation, such corporation was being organized 
     for purposes of being a renewal community business), and
       ``(iii) during substantially all of the taxpayer's holding 
     period for such stock, such corporation qualified as a 
     renewal community business.
       ``(B) Redemptions.--A rule similar to the rule of section 
     1202(c)(3) shall apply for purposes of this paragraph.
       ``(3) Qualified community partnership interest.--The term 
     `qualified community partnership interest' means any interest 
     in a partnership if--
       ``(A) such interest is acquired by the taxpayer after 
     December 31, 1999, and before January 1, 2007,
       ``(B) as of the time such interest was acquired, such 
     partnership was a renewal community business (or, in the case 
     of a new partnership, such partnership was being organized 
     for purposes of being a renewal community business), and
       ``(C) during substantially all of the taxpayer's holding 
     period for such interest, such partnership qualified as a 
     renewal community business.

     A rule similar to the rule of paragraph (2)(B) shall apply 
     for purposes of this paragraph.
       ``(4) Qualified community business property.--
       ``(A) In general.--The term `qualified community business 
     property' means tangible property if--
       ``(i) such property was acquired by the taxpayer by 
     purchase (as defined in section 179(d)(2)) after December 31, 
     1999, and before January 1, 2007,
       ``(ii) the original use of such property in the renewal 
     community commences with the taxpayer, and
       ``(iii) during substantially all of the taxpayer's holding 
     period for such property, substantially all of the use of 
     such property was in a renewal community business of the 
     taxpayer.
       ``(B) Special rule for substantial improvements.--The 
     requirements of clauses (i) and (ii) of subparagraph (A) 
     shall be treated as satisfied with respect to--
       ``(i) property which is substantially improved (within the 
     meaning of section 1400B(b)(4)(B)(ii)) by the taxpayer before 
     January 1, 2007, and
       ``(ii) any land on which such property is located.
       ``(c) Certain Rules To Apply.--Rules similar to the rules 
     of paragraphs (5), (6), and (7) of subsection (b), and 
     subsections (e), (f), and (g), of section 1400B shall apply 
     for purposes of this section.

     ``SEC. 1400G. RENEWAL COMMUNITY BUSINESS DEFINED.

       ``For purposes of this part, the term `renewal community 
     business' means any entity or proprietorship which would be a 
     qualified business entity or qualified proprietorship under 
     section 1397B if--
       ``(1) references to renewal communities were substituted 
     for references to empowerment zones in such section; and
       ``(2) `80 percent' were substituted for `50 percent' in 
     subsections (b)(2) and (c)(1) of such section.

                ``PART III--FAMILY DEVELOPMENT ACCOUNTS

``Sec. 1400H. Family development accounts for renewal community EITC 
              recipients.
``Sec. 1400I. Demonstration program to provide matching contributions 
              to family development accounts in certain renewal 
              communities.
``Sec. 1400J. Designation of earned income tax credit payments for 
              deposit to family development account.

     ``SEC. 1400H. FAMILY DEVELOPMENT ACCOUNTS FOR RENEWAL 
                   COMMUNITY EITC RECIPIENTS.

       ``(a) Allowance of Deduction.--
       ``(1) In general.--There shall be allowed as a deduction--
       ``(A) in the case of a qualified individual, the amount 
     paid in cash for the taxable year by such individual to any 
     family development account for such individual's benefit, and
       ``(B) in the case of any person other than a qualified 
     individual, the amount paid in cash for the taxable year by 
     such person to any family development account for the benefit 
     of a qualified individual but only if the amount so paid is 
     designated for purposes of this section by such individual.

     No deduction shall be allowed under this paragraph for any 
     amount deposited in a family development account under 
     section 1400I (relating to demonstration program to provide 
     matching amounts in renewal communities).
       ``(2) Limitation.--
       ``(A) In general.--The amount allowable as a deduction to 
     any individual for any taxable year by reason of paragraph 
     (1)(A) shall not exceed the lesser of--

[[Page H8638]]

       ``(i) $2,000, or
       ``(ii) an amount equal to the compensation includible in 
     the individual's gross income for such taxable year.
       ``(B) Persons donating to family development accounts of 
     others.--The amount which may be designated under paragraph 
     (1)(B) by any qualified individual for any taxable year of 
     such individual shall not exceed $1,000.
       ``(3) Special rules for certain married individuals.--Rules 
     similar to rules of section 219(c) shall apply to the 
     limitation in paragraph (2)(A).
       ``(4) Coordination with ira's.--No deduction shall be 
     allowed under this section to any person by reason of a 
     payment to an account for the benefit of a qualified 
     individual if any amount is paid into an individual 
     retirement account (including a Roth IRA) for the benefit of 
     such individual.
       ``(5) Rollovers.--No deduction shall be allowed under this 
     section with respect to any rollover contribution.
       ``(b) Tax Treatment of Distributions.--
       ``(1) Inclusion of amounts in gross income.--Except as 
     otherwise provided in this subsection, any amount paid or 
     distributed out of a family development account shall be 
     included in gross income by the payee or distributee, as the 
     case may be.
       ``(2) Exclusion of qualified family development 
     distributions.--Paragraph (1) shall not apply to any 
     qualified family development distribution.
       ``(c) Qualified Family Development Distribution.--For 
     purposes of this section--
       ``(1) In general.--The term `qualified family development 
     distribution' means any amount paid or distributed out of a 
     family development account which would otherwise be 
     includible in gross income, to the extent that such payment 
     or distribution is used exclusively to pay qualified family 
     development expenses for the holder of the account or the 
     spouse or dependent (as defined in section 152) of such 
     holder.
       ``(2) Qualified family development expenses.--The term 
     `qualified family development expenses' means any of the 
     following:
       ``(A) Qualified higher education expenses.
       ``(B) Qualified first-time homebuyer costs.
       ``(C) Qualified business capitalization costs.
       ``(D) Qualified medical expenses.
       ``(E) Qualified rollovers.
       ``(3) Qualified higher education expenses.--
       ``(A) In general.--The term `qualified higher education 
     expenses' has the meaning given such term by section 
     72(t)(7), determined by treating postsecondary vocational 
     educational schools as eligible educational institutions.
       ``(B) Postsecondary vocational education school.--The term 
     `postsecondary vocational educational school' means an area 
     vocational education school (as defined in subparagraph (C) 
     or (D) of section 521(4) of the Carl D. Perkins Vocational 
     and Applied Technology Education Act (20 U.S.C. 2471(4))) 
     which is in any State (as defined in section 521(33) of such 
     Act), as such sections are in effect on the date of the 
     enactment of this section.
       ``(C) Coordination with other benefits.--The amount of 
     qualified higher education expenses for any taxable year 
     shall be reduced as provided in section 25A(g)(2).
       ``(4) Qualified first-time homebuyer costs.--The term 
     `qualified first-time homebuyer costs' means qualified 
     acquisition costs (as defined in section 72(t)(8) without 
     regard to subparagraph (B) thereof) with respect to a 
     principal residence (within the meaning of section 121) for a 
     qualified first-time homebuyer (as defined in such section).
       ``(5) Qualified business capitalization costs.--
       ``(A) In general.--The term `qualified business 
     capitalization costs' means qualified expenditures for the 
     capitalization of a qualified business pursuant to a 
     qualified plan.
       ``(B) Qualified expenditures.--The term `qualified 
     expenditures' means expenditures included in a qualified 
     plan, including capital, plant, equipment, working capital, 
     and inventory expenses.
       ``(C) Qualified business.--The term `qualified business' 
     means any business that does not contravene any law.
       ``(D) Qualified plan.--The term `qualified plan' means a 
     business plan which meets such requirements as the Secretary 
     may specify.
       ``(6) Qualified medical expenses.--The term `qualified 
     medical expenses' means any amount paid during the taxable 
     year, not compensated for by insurance or otherwise, for 
     medical care (as defined in section 213(d)) of the taxpayer, 
     his spouse, or his dependent (as defined in section 152).
       ``(7) Qualified rollovers.--The term `qualified rollover' 
     means any amount paid from a family development account of a 
     taxpayer into another such account established for the 
     benefit of--
       ``(A) such taxpayer, or
       ``(B) any qualified individual who is--
       ``(i) the spouse of such taxpayer, or
       ``(ii) any dependent (as defined in section 152) of the 
     taxpayer.

     Rules similar to the rules of section 408(d)(3) shall apply 
     for purposes of this paragraph.
       ``(d) Tax Treatment of Accounts.--
       ``(1) In general.--Any family development account is exempt 
     from taxation under this subtitle unless such account has 
     ceased to be a family development account by reason of 
     paragraph (2). Notwithstanding the preceding sentence, any 
     such account is subject to the taxes imposed by section 511 
     (relating to imposition of tax on unrelated business income 
     of charitable, etc., organizations). Notwithstanding any 
     other provision of this title (including chapters 11 and 12), 
     the basis of any person in such an account is zero.
       ``(2) Loss of exemption in case of prohibited 
     transactions.--For purposes of this section, rules similar to 
     the rules of section 408(e) shall apply.
       ``(3) Other rules to apply.--Rules similar to the rules of 
     paragraphs (4), (5), and (6) of section 408(d) shall apply 
     for purposes of this section.
       ``(e) Family Development Account.--For purposes of this 
     title, the term `family development account' means a trust 
     created or organized in the United States for the exclusive 
     benefit of a qualified individual or his beneficiaries, but 
     only if the written governing instrument creating the trust 
     meets the following requirements:
       ``(1) Except in the case of a qualified rollover (as 
     defined in subsection (c)(7))--
       ``(A) no contribution will be accepted unless it is in 
     cash, and
       ``(B) contributions will not be accepted for the taxable 
     year in excess of $3,000 (determined without regard to any 
     contribution made under section 1400I (relating to 
     demonstration program to provide matching amounts in renewal 
     communities)).
       ``(2) The requirements of paragraphs (2) through (6) of 
     section 408(a) are met.
       ``(f) Qualified Individual.--For purposes of this section, 
     the term `qualified individual' means, for any taxable year, 
     an individual--
       ``(1) who is a bona fide resident of a renewal community 
     throughout the taxable year, and
       ``(2) to whom a credit was allowed under section 32 for the 
     preceding taxable year.
       ``(g) Other Definitions and Special Rules.--
       ``(1) Compensation.--The term `compensation' has the 
     meaning given such term by section 219(f)(1).
       ``(2) Married individuals.--The maximum deduction under 
     subsection (a) shall be computed separately for each 
     individual, and this section shall be applied without regard 
     to any community property laws.
       ``(3) Time when contributions deemed made.--For purposes of 
     this section, a taxpayer shall be deemed to have made a 
     contribution to a family development account on the last day 
     of the preceding taxable year if the contribution is made on 
     account of such taxable year and is made not later than the 
     time prescribed by law for filing the return for such taxable 
     year (not including extensions thereof).
       ``(4) Employer payments; custodial accounts.--Rules similar 
     to the rules of sections 219(f)(5) and 408(h) shall apply for 
     purposes of this section.
       ``(5) Reports.--The trustee of a family development account 
     shall make such reports regarding such account to the 
     Secretary and to the individual for whom the account is 
     maintained with respect to contributions (and the years to 
     which they relate), distributions, and such other matters as 
     the Secretary may require under regulations. The reports 
     required by this paragraph--
       ``(A) shall be filed at such time and in such manner as the 
     Secretary prescribes in such regulations, and
       ``(B) shall be furnished to individuals--
       ``(i) not later than January 31 of the calendar year 
     following the calendar year to which such reports relate, and
       ``(ii) in such manner as the Secretary prescribes in such 
     regulations.
       ``(6) Investment in collectibles treated as 
     distributions.--Rules similar to the rules of section 408(m) 
     shall apply for purposes of this section.
       ``(h) Penalty for Distributions Not Used for Qualified 
     Family Development Expenses.--
       ``(1) In general.--If any amount is distributed from a 
     family development account and is not used exclusively to pay 
     qualified family development expenses for the holder of the 
     account or the spouse or dependent (as defined in section 
     152) of such holder, the tax imposed by this chapter for the 
     taxable year of such distribution shall be increased by the 
     sum of--
       ``(A) 100 percent of the portion of such amount which is 
     includible in gross income and is attributable to amounts 
     contributed under section 1400I (relating to demonstration 
     program to provide matching amounts in renewal communities), 
     and
       ``(B) 10 percent of the portion of such amount which is 
     includible in gross income and is not described in 
     subparagraph (A).

     For purposes of this subsection, distributions which are 
     includable in gross income shall be treated as attributable 
     to amounts contributed under section 1400I to the extent 
     thereof. For purposes of the preceding sentence, all family 
     development accounts of an individual shall be treated as one 
     account.
       ``(2) Exception for certain distributions.--Paragraph (1) 
     shall not apply to distributions which are--
       ``(A) made on or after the date on which the account holder 
     attains age 59\1/2\,
       ``(B) made to a beneficiary (or the estate of the account 
     holder) on or after the death of the account holder, or
       ``(C) attributable to the account holder's being disabled 
     within the meaning of section 72(m)(7).
       ``(i) Termination.--No deduction shall be allowed under 
     this section for any amount

[[Page H8639]]

     paid to a family development account for any taxable year 
     beginning after December 31, 2006.

     ``SEC. 1400I. DEMONSTRATION PROGRAM TO PROVIDE MATCHING 
                   CONTRIBUTIONS TO FAMILY DEVELOPMENT ACCOUNTS IN 
                   CERTAIN RENEWAL COMMUNITIES.

       ``(a) Designation.--
       ``(1) Definitions.--For purposes of this section, the term 
     `FDA matching demonstration area' means any renewal 
     community--
       ``(A) which is nominated under this section by each of the 
     local governments and States which nominated such community 
     for designation as a renewal community under section 
     1400E(a)(1)(A), and
       ``(B) which the Secretary of Housing and Urban Development 
     designates as an FDA matching demonstration area after 
     consultation with--
       ``(i) the Secretaries of Agriculture, Commerce, Labor, and 
     the Treasury, the Director of the Office of Management and 
     Budget, and the Administrator of the Small Business 
     Administration, and
       ``(ii) in the case of a community on an Indian reservation, 
     the Secretary of the Interior.
       ``(2) Number of designations.--
       ``(A) In general.--The Secretary of Housing and Urban 
     Development may designate not more than 5 communities as FDA 
     matching demonstration areas.
       ``(B) Minimum designation in rural areas.--Of the areas 
     designated under subparagraph (A), at least 2 must be areas 
     described in section 1400E(a)(2)(B).
       ``(3) Limitations on designations.--
       ``(A) Publication of regulations.--The Secretary of Housing 
     and Urban Development shall prescribe by regulation no later 
     than 4 months after the date of the enactment of this 
     section, after consultation with the officials described in 
     paragraph (1)(B)--
       ``(i) the procedures for nominating a renewal community 
     under paragraph (1)(A) (including procedures for coordinating 
     such nomination with the nomination of an area for 
     designation as a renewal community under section 1400E), and
       ``(ii) the manner in which nominated renewal communities 
     will be evaluated for purposes of this section.
       ``(B) Time limitations.--The Secretary of Housing and Urban 
     Development may designate renewal communities as FDA matching 
     demonstration areas only during the 24-month period beginning 
     on the first day of the first month following the month in 
     which the regulations described in subparagraph (A) are 
     prescribed.
       ``(4) Designation based on degree of poverty, etc.--The 
     rules of section 1400E(a)(3) shall apply for purposes of 
     designations of FDA matching demonstration areas under this 
     section.
       ``(b) Period for Which Designation is in Effect.--Any 
     designation of a renewal community as an FDA matching 
     demonstration area shall remain in effect during the period 
     beginning on the date of such designation and ending on the 
     date on which such area ceases to be a renewal community.
       ``(c) Matching Contributions to Family Development 
     Accounts.--
       ``(1) In general.--Not less than once each taxable year, 
     the Secretary shall deposit (to the extent provided in 
     appropriation Acts) into a family development account of each 
     qualified individual (as defined in section 1400H(f))--
       ``(A) who is a resident throughout the taxable year of an 
     FDA matching demonstration area, and
       ``(B) who requests (in such form and manner as the 
     Secretary prescribes) such deposit for the taxable year,

     an amount equal to the sum of the amounts deposited into all 
     of the family development accounts of such individual during 
     such taxable year (determined without regard to any amount 
     contributed under this section).
       ``(2) Limitations.--
       ``(A) Annual limit.--The Secretary shall not deposit more 
     than $1000 under paragraph (1) with respect to any individual 
     for any taxable year.
       ``(B) Aggregate limit.--The Secretary shall not deposit 
     more than $2000 under paragraph (1) with respect to any 
     individual for all taxable years.
       ``(3) Exclusion from income.--Except as provided in section 
     1400H, gross income shall not include any amount deposited 
     into a family development account under paragraph (1).
       ``(d) Notice of Program.--The Secretary shall provide 
     appropriate notice to residents of FDA matching demonstration 
     areas of the availability of the benefits under this section.
       ``(e) Termination.--No amount may be deposited under this 
     section for any taxable year beginning after December 31, 
     2006.

     ``SEC. 1400J. DESIGNATION OF EARNED INCOME TAX CREDIT 
                   PAYMENTS FOR DEPOSIT TO FAMILY DEVELOPMENT 
                   ACCOUNT.

       ``(a) In General.--With respect to the return of any 
     qualified individual (as defined in section 1400H(f)) for the 
     taxable year of the tax imposed by this chapter, such 
     individual may designate that a specified portion (not less 
     than $1) of any overpayment of tax for such taxable year 
     which is attributable to the earned income tax credit shall 
     be deposited by the Secretary into a family development 
     account of such individual. The Secretary shall so deposit 
     such portion designated under this subsection.
       ``(b) Manner and Time of Designation.--A designation under 
     subsection (a) may be made with respect to any taxable year--
       ``(1) at the time of filing the return of the tax imposed 
     by this chapter for such taxable year, or
       ``(2) at any other time (after the time of filing the 
     return of the tax imposed by this chapter for such taxable 
     year) specified in regulations prescribed by the Secretary.

     Such designation shall be made in such manner as the 
     Secretary prescribes by regulations.
       ``(c) Portion Attributable to Earned Income Tax Credit.--
     For purposes of subsection (a), an overpayment for any 
     taxable year shall be treated as attributable to the earned 
     income tax credit to the extent that such overpayment does 
     not exceed the credit allowed to the taxpayer under section 
     32 for such taxable year.
       ``(d) Overpayments Treated as Refunded.--For purposes of 
     this title, any portion of an overpayment of tax designated 
     under subsection (a) shall be treated as being refunded to 
     the taxpayer as of the last date prescribed for filing the 
     return of tax imposed by this chapter (determined without 
     regard to extensions) or, if later, the date the return is 
     filed.
       ``(e) Termination.--This section shall not apply to any 
     taxable year beginning after December 31, 2006.

                    ``PART IV--ADDITIONAL INCENTIVES

``Sec. 1400K. Commercial revitalization credit.
``Sec. 1400L. Increase in expensing under section 179.

     ``SEC. 1400K. COMMERCIAL REVITALIZATION CREDIT.

       ``(a) General Rule.--For purposes of section 46, except as 
     provided in subsection (e), the commercial revitalization 
     credit for any taxable year is an amount equal to the 
     applicable percentage of the qualified revitalization 
     expenditures with respect to any qualified revitalization 
     building.
       ``(b) Applicable Percentage.--For purposes of this 
     section--
       ``(1) In general.--The term `applicable percentage' means--
       ``(A) 20 percent for the taxable year in which a qualified 
     revitalization building is placed in service, or
       ``(B) at the election of the taxpayer, 5 percent for each 
     taxable year in the credit period.

     The election under subparagraph (B), once made, shall be 
     irrevocable.
       ``(2) Credit period.--
       ``(A) In general.--The term `credit period' means, with 
     respect to any building, the period of 10 taxable years 
     beginning with the taxable year in which the building is 
     placed in service.
       ``(B) Applicable rules.--Rules similar to the rules under 
     paragraphs (2) and (4) of section 42(f) shall apply.
       ``(c) Qualified Revitalization Buildings and 
     Expenditures.--For purposes of this section--
       ``(1) Qualified revitalization building.--The term 
     `qualified revitalization building' means any building (and 
     its structural components) if--
       ``(A) such building is located in a renewal community and 
     is placed in service after December 31, 1999,
       ``(B) a commercial revitalization credit amount is 
     allocated to the building under subsection (e), and
       ``(C) depreciation (or amortization in lieu of 
     depreciation) is allowable with respect to the building.
       ``(2) Qualified revitalization expenditure.--
       ``(A) In general.--The term `qualified revitalization 
     expenditure' means any amount properly chargeable to capital 
     account--
       ``(i) for property for which depreciation is allowable 
     under section 168 and which is--

       ``(I) nonresidential real property, or
       ``(II) an addition or improvement to property described in 
     subclause (I), and

       ``(ii) in connection with the construction of any qualified 
     revitalization building which was not previously placed in 
     service or in connection with the substantial rehabilitation 
     (within the meaning of section 47(c)(1)(C)) of a building 
     which was placed in service before the beginning of such 
     rehabilitation.
       ``(B) Dollar limitation.--The aggregate amount which may be 
     treated as qualified revitalization expenditures with respect 
     to any qualified revitalization building for any taxable year 
     shall not exceed the excess of--
       ``(i) $10,000,000, reduced by
       ``(ii) any such expenditures with respect to the building 
     taken into account by the taxpayer or any predecessor in 
     determining the amount of the credit under this section for 
     all preceding taxable years.
       ``(C) Certain expenditures not included.--The term 
     `qualified revitalization expenditure' does not include--
       ``(i) Straight line depreciation must be used.--Any 
     expenditure (other than with respect to land acquisitions) 
     with respect to which the taxpayer does not use the straight 
     line method over a recovery period determined under 
     subsection (c) or (g) of section 168. The preceding sentence 
     shall not apply to any expenditure to the extent the 
     alternative depreciation system of section 168(g) applies to 
     such expenditure by reason of subparagraph (B) or (C) of 
     section 168(g)(1).
       ``(ii) Acquisition costs.--The costs of acquiring any 
     building or interest therein and any land in connection with 
     such building to the extent that such costs exceed 30 percent

[[Page H8640]]

     of the qualified revitalization expenditures determined 
     without regard to this clause.
       ``(iii) Other credits.--Any expenditure which the taxpayer 
     may take into account in computing any other credit allowable 
     under this title unless the taxpayer elects to take the 
     expenditure into account only for purposes of this section.
       ``(d) When Expenditures Taken Into Account.--
       ``(1) In general.--Qualified revitalization expenditures 
     with respect to any qualified revitalization building shall 
     be taken into account for the taxable year in which the 
     qualified revitalization building is placed in service. For 
     purposes of the preceding sentence, a substantial 
     rehabilitation of a building shall be treated as a separate 
     building.
       ``(2) Progress expenditure payments.--Rules similar to the 
     rules of subsections (b)(2) and (d) of section 47 shall apply 
     for purposes of this section.
       ``(e) Limitation on Aggregate Credits Allowable With 
     Respect to Buildings Located in a State.--
       ``(1) In general.--The amount of the credit determined 
     under this section for any taxable year with respect to any 
     building shall not exceed the commercial revitalization 
     credit amount (in the case of an amount determined under 
     subsection (b)(1)(B), the present value of such amount as 
     determined under the rules of section 42(b)(2)(C)) allocated 
     to such building under this subsection by the commercial 
     revitalization credit agency. Such allocation shall be made 
     at the same time and in the same manner as under paragraphs 
     (1) and (7) of section 42(h).
       ``(2) Commercial revitalization credit amount for 
     agencies.--
       ``(A) In general.--The aggregate commercial revitalization 
     credit amount which a commercial revitalization credit agency 
     may allocate for any calendar year is the amount of the State 
     commercial revitalization credit ceiling determined under 
     this paragraph for such calendar year for such agency.
       ``(B) State commercial revitalization credit ceiling.--The 
     State commercial revitalization credit ceiling applicable to 
     any State--
       ``(i) for each calendar year after 1999 and before 2007 is 
     $2,000,000 for each renewal community in the State, and
       ``(ii) zero for each calendar year thereafter.
       ``(C) Commercial revitalization credit agency.--For 
     purposes of this section, the term `commercial revitalization 
     credit agency' means any agency authorized by a State to 
     carry out this section.
       ``(f) Responsibilities of Commercial Revitalization Credit 
     Agencies.--
       ``(1) Plans for allocation.--Notwithstanding any other 
     provision of this section, the commercial revitalization 
     credit amount with respect to any building shall be zero 
     unless--
       ``(A) such amount was allocated pursuant to a qualified 
     allocation plan of the commercial revitalization credit 
     agency which is approved (in accordance with rules similar to 
     the rules of section 147(f)(2) (other than subparagraph 
     (B)(ii) thereof)) by the governmental unit of which such 
     agency is a part, and
       ``(B) such agency notifies the chief executive officer (or 
     its equivalent) of the local jurisdiction within which the 
     building is located of such allocation and provides such 
     individual a reasonable opportunity to comment on the 
     allocation.
       ``(2) Qualified allocation plan.--For purposes of this 
     subsection, the term `qualified allocation plan' means any 
     plan--
       ``(A) which sets forth selection criteria to be used to 
     determine priorities of the commercial revitalization credit 
     agency which are appropriate to local conditions,
       ``(B) which considers--
       ``(i) the degree to which a project contributes to the 
     implementation of a strategic plan that is devised for a 
     renewal community through a citizen participation process,
       ``(ii) the amount of any increase in permanent, full-time 
     employment by reason of any project, and
       ``(iii) the active involvement of residents and nonprofit 
     groups within the renewal community, and
       ``(C) which provides a procedure that the agency (or its 
     agent) will follow in monitoring compliance with this 
     section.
       ``(g) Termination.--This section shall not apply to any 
     building placed in service after December 31, 2006.

     ``SEC. 1400L. INCREASE IN EXPENSING UNDER SECTION 179.

       ``(a) General Rule.--In the case of a renewal community 
     business (as defined in section 1400G), for purposes of 
     section 179--
       ``(1) the limitation under section 179(b)(1) shall be 
     increased by the lesser of--
       ``(A) $35,000, or
       ``(B) the cost of section 179 property which is qualified 
     renewal property placed in service during the taxable year, 
     and
       ``(2) the amount taken into account under section 179(b)(2) 
     with respect to any section 179 property which is qualified 
     renewal property shall be 50 percent of the cost thereof.
       ``(b) Recapture.--Rules similar to the rules under section 
     179(d)(10) shall apply with respect to any qualified renewal 
     property which ceases to be used in a renewal community by a 
     renewal community business.
       ``(c) Qualified Renewal Property.--For purposes of this 
     section--
       ``(1) In general.--The term `qualified renewal property' 
     means any property to which section 168 applies (or would 
     apply but for section 179) if--
       ``(A) such property was acquired by the taxpayer by 
     purchase (as defined in section 179(d)(2)) after December 31, 
     1999, and before January 1, 2007, and
       ``(B) such property would be qualified zone property (as 
     defined in section 1397C) if references to renewal 
     communities were substituted for references to empowerment 
     zones in section 1397C.
       ``(2) Certain rules to apply.--The rules of subsections 
     (a)(2) and (b) of section 1397C shall apply for purposes of 
     this section.''

     SEC. 603. EXTENSION OF EXPENSING OF ENVIRONMENTAL REMEDIATION 
                   COSTS TO RENEWAL COMMUNITIES.

       (a) Extension.--Paragraph (2) of section 198(c) (defining 
     targeted area) is amended by redesignating subparagraph (C) 
     as subparagraph (D) and by inserting after subparagraph (B) 
     the following new subparagraph:
       ``(C) Renewal communities included.--Except as provided in 
     subparagraph (B), such term shall include a renewal community 
     (as defined in section 1400E).''
       (b) Extension of Termination Date for Renewal 
     Communities.--Subsection (h) of section 198 is amended by 
     inserting before the period ``(December 31, 2006, in the case 
     of a renewal community, as defined in section 1400E).''

     SEC. 604. EXTENSION OF WORK OPPORTUNITY TAX CREDIT FOR 
                   RENEWAL COMMUNITIES

       (a) Extension.--Subsection (c) of section 51 (relating to 
     termination) is amended by adding at the end the following 
     new paragraph:
       ``(5) Extension of credit for renewal communities.--
       ``(A) In general.--In the case of an individual who begins 
     work for the employer after the date contained in paragraph 
     (4)(B), for purposes of section 38--
       ``(i) in lieu of applying subsection (a), the amount of the 
     work opportunity credit determined under this section for the 
     taxable year shall be equal to--

       ``(I) 15 percent of the qualified first-year wages for such 
     year, and
       ``(II) 30 percent of the qualified second-year wages for 
     such year,

       ``(ii) subsection (b)(3) shall be applied by substituting 
     `$10,000' for `$6,000',
       ``(iii) paragraph (4)(B) shall be applied by substituting 
     for the date contained therein the last day for which the 
     designation under section 1400E of the renewal community 
     referred to in subparagraph (B)(i) is in effect, and
       ``(iv) rules similar to the rules of section 51A(b)(5)(C) 
     shall apply.
       ``(B) Qualified first- and second-year wages.--For purposes 
     of subparagraph (A)--
       ``(i) In general.--The term `qualified wages' means, with 
     respect to each 1-year period referred to in clause (ii) or 
     (iii), as the case may be, the wages paid or incurred by the 
     employer during the taxable year to any individual but only 
     if--

       ``(I) the employer is engaged in a trade or business in a 
     renewal community throughout such 1-year period,
       ``(II) the principal place of abode of such individual is 
     in such renewal community throughout such 1-year period, and
       ``(III) substantially all of the services which such 
     individual performs for the employer during such 1-year 
     period are performed in such renewal community.

       ``(ii) Qualified first-year wages.--The term `qualified 
     first-year wages' means, with respect to any individual, 
     qualified wages attributable to service rendered during the 
     1-year period beginning with the day the individual begins 
     work for the employer.
       ``(iii) Qualified second-year wages.--The term `qualified 
     second-year wages' means, with respect to any individual, 
     qualified wages attributable to service rendered during the 
     1-year period beginning on the day after the last day of the 
     1-year period with respect to such individual determined 
     under clause (ii).''
       (b) Congruent Treatment of Renewal Communities and 
     Enterprise Zones for Purposes of Youth Residence 
     Requirements.--
       (1) High-risk youth.--Subparagraphs (A)(ii) and (B) of 
     section 51(d)(5) are each amended by striking ``empowerment 
     zone or enterprise community'' and inserting ``empowerment 
     zone, enterprise community, or renewal community''.
       (2) Qualified summer youth employee.--Clause (iv) of 
     section 51(d)(7)(A) is amended by striking ``empowerment zone 
     or enterprise community'' and inserting ``empowerment zone, 
     enterprise community, or renewal community''.
       (3) Headings.--Paragraphs (5)(B) and (7)(C) of section 
     51(d) are each amended by inserting ``or community'' in the 
     heading after ``zone''.

     SEC. 605. CONFORMING AND CLERICAL AMENDMENTS.

       (a) Deduction for Contributions to Family Development 
     Accounts Allowable Whether or Not Taxpayer Itemizes.--
     Subsection (a) of section 62 (relating to adjusted gross 
     income defined) is amended by inserting after paragraph (17) 
     the following new paragraph:
       ``(18) Family development accounts.--The deduction allowed 
     by section 1400H(a)(1)(A).''
       (b) Tax on Excess Contributions.--
       (1) Tax imposed.--Subsection (a) of section 4973 is amended 
     by striking ``or'' at the end of paragraph (3), adding ``or'' 
     at the end of paragraph (4), and inserting after paragraph 
     (4) the following new paragraph:
       ``(5) a family development account (within the meaning of 
     section 1400H(e)),''.
       (2) Excess contributions.--Section 4973 is amended by 
     adding at the end the following new subsection:

[[Page H8641]]

       ``(g) Family Development Accounts.--For purposes of this 
     section, in the case of a family development account, the 
     term `excess contributions' means the sum of--
       ``(1) the excess (if any) of--
       ``(A) the amount contributed for the taxable year to the 
     account (other than a qualified rollover, as defined in 
     section 1400H(c)(7), or a contribution under section 
     1400I), over
       ``(B) the amount allowable as a deduction under section 
     1400H for such contributions, and
       ``(2) the amount determined under this subsection for the 
     preceding taxable year reduced by the sum of--
       ``(A) the distributions out of the account for the taxable 
     year which were included in the gross income of the payee 
     under section 1400H(b)(1),
       ``(B) the distributions out of the account for the taxable 
     year to which rules similar to the rules of section 408(d)(5) 
     apply by reason of section 1400H(d)(3), and
       ``(C) the excess (if any) of the maximum amount allowable 
     as a deduction under section 1400H for the taxable year over 
     the amount contributed to the account for the taxable year 
     (other than a contribution under section 1400I).

     For purposes of this subsection, any contribution which is 
     distributed from the family development account in a 
     distribution to which rules similar to the rules of section 
     408(d)(4) apply by reason of section 1400H(d)(3) shall be 
     treated as an amount not contributed.''
       (c) Tax on Prohibited Transactions.--Section 4975 is 
     amended--
       (1) by adding at the end of subsection (c) the following 
     new paragraph:
       ``(6) Special rule for family development accounts.--An 
     individual for whose benefit a family development account is 
     established and any contributor to such account shall be 
     exempt from the tax imposed by this section with respect to 
     any transaction concerning such account (which would 
     otherwise be taxable under this section) if, with respect to 
     such transaction, the account ceases to be a family 
     development account by reason of the application of section 
     1400H(d)(2) to such account.'', and
       (2) in subsection (e)(1), by striking ``or'' at the end of 
     subparagraph (E), by redesignating subparagraph (F) as 
     subparagraph (G), and by inserting after subparagraph (E) the 
     following new subparagraph:
       ``(F) a family development account described in section 
     1400H(e), or''.
       (d) Information Relating to Certain Trusts and Annuity 
     Plans.--Subsection (c) of section 6047 is amended--
       (1) by inserting ``or section 1400H'' after ``section 
     219'', and
       (2) by inserting ``, of any family development account 
     described in section 1400H(e),'', after ``section 408(a)''.
       (e) Inspection of Applications for Tax Exemption.--Clause 
     (i) of section 6104(a)(1)(B) is amended by inserting ``a 
     family development account described in section 1400H(e),'' 
     after ``section 408(a),''.
       (f) Failure To Provide Reports on Family Development 
     Accounts.--Paragraph (2) of section 6693(a) is amended by 
     striking ``and'' at the end of subparagraph (C), by striking 
     the period and inserting ``, and'' at the end of subparagraph 
     (D), and by adding at the end the following new subparagraph:
       ``(E) section 1400H(g)(6) (relating to family development 
     accounts).''
       (g) Conforming Amendments Regarding Commercial 
     Revitalization Credit.--
       (1) Section 46 (relating to investment credit) is amended 
     by striking ``and'' at the end of paragraph (2), by striking 
     the period at the end of paragraph (3) and inserting ``, 
     and'', and by adding at the end the following new paragraph:
       ``(4) the commercial revitalization credit provided under 
     section 1400K.''
       (2) Section 39(d) is amended by adding at the end the 
     following new paragraph:
       ``(9) No carryback of section 1400k credit before date of 
     enactment.--No portion of the unused business credit for any 
     taxable year which is attributable to any commercial 
     revitalization credit determined under section 1400K may be 
     carried back to a taxable year ending before the date of the 
     enactment of section 1400K.''
       (3) Subparagraph (B) of section 48(a)(2) is amended by 
     inserting ``or commercial revitalization'' after 
     ``rehabilitation'' each place it appears in the text and 
     heading.
       (4) Subparagraph (C) of section 49(a)(1) is amended by 
     striking ``and'' at the end of clause (ii), by striking the 
     period at the end of clause (iii) and inserting ``, and'', 
     and by adding at the end the following new clause:
       ``(iv) the portion of the basis of any qualified 
     revitalization building attributable to qualified 
     revitalization expenditures.''
       (5) Paragraph (2) of section 50(a) is amended by inserting 
     ``or 1400K(d)(2)'' after ``section 47(d)'' each place it 
     appears.
       (6) Subparagraph (A) of section 50(a)(2) is amended by 
     inserting ``or qualified revitalization building 
     (respectively)'' after ``qualified rehabilitated building''.
       (7) Subparagraph (B) of section 50(a)(2) is amended by 
     adding at the end the following new sentence: ``A similar 
     rule shall apply for purposes of section 1400K.''
       (8) Paragraph (2) of section 50(b) is amended by striking 
     ``and'' at the end of subparagraph (C), by striking the 
     period at the end of subparagraph (D) and inserting ``; 
     and'', and by adding at the end the following new 
     subparagraph:
       ``(E) a qualified revitalization building (as defined in 
     section 1400K) to the extent of the portion of the basis 
     which is attributable to qualified revitalization 
     expenditures (as defined in section 1400K).''
       (9) The last sentence of section 50(b)(3) is amended to 
     read as follows: ``If any qualified rehabilitated building or 
     qualified revitalization building is used by the tax-exempt 
     organization pursuant to a lease, this paragraph shall not 
     apply for purposes of determining the amount of the 
     rehabilitation credit or the commercial revitalization 
     credit.''
       (10) Subparagraph (C) of section 50(b)(4) is amended--
       (A) by inserting ``or commercial revitalization'' after 
     ``rehabilitated'' in the text and heading, and
       (B) by inserting ``or commercial revitalization'' after 
     ``rehabilitation''.
       (11) Subparagraph (C) of section 469(i)(3) is amended--
       (A) by inserting ``or section 1400K'' after ``section 42''; 
     and
       (B) by striking ``credit'' in the heading and inserting 
     ``and commercial revitalization credits''.
       (h) Clerical Amendments.--The table of subchapters for 
     chapter 1 is amended by adding at the end the following new 
     item:

``Subchapter X. Renewal Communities.''

     SEC. 606. EVALUATION AND REPORTING REQUIREMENTS.

       Not later than the close of the fourth calendar year after 
     the year in which the Secretary of Housing and Urban 
     Development first designates an area as a renewal community 
     under section 1400E of the Internal Revenue Code of 1986, and 
     at the close of each fourth calendar year thereafter, such 
     Secretary shall prepare and submit to the Congress a report 
     on the effects of such designations in stimulating the 
     creation of new jobs, particularly for disadvantaged workers 
     and long-term unemployed individuals, and promoting the 
     revitalization of economically distressed areas.

     TITLE VII--TAX REDUCTIONS CONTINGENT ON SAVING SOCIAL SECURITY

     SEC. 701. TAX REDUCTIONS CONTINGENT ON SAVING SOCIAL 
                   SECURITY.

       (a) Requirement for Balanced Budget and Social Security 
     Solvency.--Notwithstanding any other provision of this Act, 
     no provision of this Act (or amendment made thereby) shall 
     take effect before the first January 1 after the date of the 
     enactment of this Act that follows a calendar year for which 
     there is a social security solvency certification.
       (b) Exemption of Funded Provisions .--The following 
     provisions shall take effect without regard to subsection 
     (a):
       (1) Subtitle C of title I (relating to increase in social 
     security earnings limit and recomputation of benefits).
       (2) Section 213 (relating to production flexibility 
     contract payments).
       (3) Title III (relating to extension and modification of 
     certain expiring provisions).
       (4) Title IV (relating to revenue offset).
       (5) Title V (relating to technical corrections).
       (c) Social Security Solvency Certification.--For purposes 
     of subsection (a), there is a social security solvency 
     certification for a calendar year if, during such year, the 
     Board of Trustees of the Social Security Trust Funds 
     certifies that the Federal Old-Age and Survivors Insurance 
     Trust Fund and the Federal Disability Insurance Trust Fund 
     are in actuarial balance for the 75-year period utilized in 
     the most recent annual report of such Board of Trustees 
     pursuant to section 201(c)(2) of the Social Security Act (42 
     U.S.C. 401(c)(2)).

                               H.R. 4579

                        Offered By: Mr. Stenholm

               (Amendment in the Nature of a Substitute)

       Amendment No. 2: Strike all after the enacting clause and 
     insert the following:

     SECTION 1. SHORT TITLE, ETC.

       (a) Short Title.--This Act may be cited as the ``Taxpayer 
     Relief Act of 1998''.
       (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, etc.

    TITLE I--PROVISIONS PRIMARILY AFFECTING INDIVIDUALS AND FAMILIES

                     Subtitle A--General Provisions

Sec. 101. Elimination of marriage penalty in standard deduction.
Sec. 102. Exemption of certain interest and dividend income from tax.
Sec. 103. Nonrefundable personal credits allowed against alternative 
              minimum tax.
Sec. 104. 100 percent deduction for health insurance costs of self-
              employed individuals.
Sec. 105. Special rule for members of uniformed services and Foreign 
              Service in determining exclusion of gain from sale of 
              principal residence.
Sec. 106. $1,000,000 exemption from estate and gift taxes.

              Subtitle B--Provisions Relating to Education

Sec. 111. Eligible educational institutions permitted to maintain 
              qualified tuition programs.

[[Page H8642]]

Sec. 112. Modification of arbitrage rebate rules applicable to public 
              school construction bonds.

           Subtitle C--Provisions Relating to Social Security

Sec. 121. Increases in the social security earnings limit for 
              individuals who have attained retirement age.
Sec. 122. Recomputation of benefits after normal retirement age.

 TITLE II--PROVISIONS PRIMARILY AFFECTING FARMING AND OTHER BUSINESSES

     Subtitle A--Increase in Expense Treatment for Small Businesses

Sec. 201. Increase in expense treatment for small businesses.

               Subtitle B--Provisions Relating to Farmers

Sec. 211. Income averaging for farmers made permanent.
Sec. 212. 5-year net operating loss carryback for farming losses.
Sec. 213. Production flexibility contract payments.

      Subtitle C--Increase in Volume Cap on Private Activity Bonds

Sec. 221. Increase in volume cap on private activity bonds.

  TITLE III--EXTENSION AND MODIFICATION OF CERTAIN EXPIRING PROVISIONS

                       Subtitle A--Tax Provisions

Sec. 301. Research credit.
Sec. 302. Work opportunity credit.
Sec. 303. Welfare-to-work credit.
Sec. 304. Contributions of stock to private foundations; expanded 
              public inspection of private foundations' annual returns.
Sec. 305. Subpart F exemption for active financing income.

             Subtitle B--Generalized System of Preferences

Sec. 311. Extension of Generalized System of Preferences.

                        TITLE IV--REVENUE OFFSET

Sec. 401. Treatment of certain deductible liquidating distributions of 
              regulated investment companies and real estate investment 
              trusts.

                     TITLE V--TECHNICAL CORRECTIONS

Sec. 501. Definitions; coordination with other titles.
Sec. 502. Amendments related to Internal Revenue Service Restructuring 
              and Reform Act of 1998.
Sec. 503. Amendments related to Taxpayer Relief Act of 1997.
Sec. 504. Amendments related to Tax Reform Act of 1984.
Sec. 505. Other amendments.

            TITLE VI--AMERICAN COMMUNITY RENEWAL ACT OF 1998

Sec. 601. Short title.
Sec. 602. Designation of and tax incentives for renewal communities.
Sec. 603. Extension of expensing of environmental remediation costs to 
              renewal communities.
Sec. 604. Extension of work opportunity tax credit for renewal 
              communities
Sec. 605. Conforming and clerical amendments.
Sec. 606. Evaluation and reporting requirements.

        TITLE VII--TAX REDUCTIONS CONTINGENT ON BALANCED BUDGET

Sec. 701. Tax reductions contingent on balanced budget.

    TITLE I--PROVISIONS PRIMARILY AFFECTING INDIVIDUALS AND FAMILIES

                     Subtitle A--General Provisions

     SEC. 101. ELIMINATION OF MARRIAGE PENALTY IN STANDARD 
                   DEDUCTION.

       (a) In General.--Paragraph (2) of section 63(c) (relating 
     to standard deduction) is amended--
       (1) by striking ``$5,000'' in subparagraph (A) and 
     inserting ``twice the dollar amount in effect under 
     subparagraph (C) for the taxable year'',
       (2) by adding ``or'' at the end of subparagraph (B),
       (3) by striking ``in the case of'' and all that follows in 
     subparagraph (C) and inserting ``in any other case.'', and
       (4) by striking subparagraph (D).
       (b) Additional Standard Deduction for Aged and Blind To Be 
     the Same for Married and Unmarried Individuals.--
       (1) Paragraphs (1) and (2) of section 63(f) are each 
     amended by striking ``$600'' and inserting ``$750''.
       (2) Subsection (f) of section 63 is amended by striking 
     paragraph (3) and by redesignating paragraph (4) as paragraph 
     (3).
       (c) Technical Amendments.--
       (1) Subparagraph (B) of section 1(f)(6) is amended by 
     striking ``(other than with'' and all that follows through 
     ``shall be applied'' and inserting ``(other than with respect 
     to sections 63(c)(4) and 151(d)(4)(A)) shall be applied''.
       (2) Paragraph (4) of section 63(c) is amended by adding at 
     the end the following flush sentence:
     ``The preceding sentence shall not apply to the amount 
     referred to in paragraph (2)(A).''
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1998.

     SEC. 102. EXEMPTION OF CERTAIN INTEREST AND DIVIDEND INCOME 
                   FROM TAX.

       (a) In General.--Part III of subchapter B of chapter 1 
     (relating to amounts specifically excluded from gross income) 
     is amended by inserting after section 115 the following new 
     section:

     ``SEC. 116. PARTIAL EXCLUSION OF DIVIDENDS AND INTEREST 
                   RECEIVED BY INDIVIDUALS.

       ``(a) Exclusion From Gross Income.--Gross income does not 
     include dividends and interest received during the taxable 
     year by an individual.
       ``(b) Limitations.--
       ``(1) Maximum amount.--The aggregate amount excluded under 
     subsection (a) for any taxable year shall not exceed $200 
     ($400 in the case of a joint return).
       ``(2) Certain dividends excluded.--Subsection (a) shall not 
     apply to any dividend from a corporation which, for the 
     taxable year of the corporation in which the distribution is 
     made, or for the next preceding taxable year of the 
     corporation, is a corporation exempt from tax under section 
     501 (relating to certain charitable, etc., organization) or 
     section 521 (relating to farmers' cooperative associations).
       ``(c) Special Rules.--For purposes of this section--
       ``(1) Exclusion not to apply to capital gain dividends from 
     regulated investment companies and real estate investment 
     trusts.--

  ``For treatment of capital gain dividends, see sections 854(a) and 
857(c).
       ``(2) Certain nonresident aliens ineligible for 
     exclusion.--In the case of a nonresident alien individual, 
     subsection (a) shall apply only--
       ``(A) in determining the tax imposed for the taxable year 
     pursuant to section 871(b)(1) and only in respect of 
     dividends and interest which are effectively connected with 
     the conduct of a trade or business within the United States, 
     or
       ``(B) in determining the tax imposed for the taxable year 
     pursuant to section 877(b).
       ``(3) Dividends from employee stock ownership plans.--
     Subsection (a) shall not apply to any dividend described in 
     section 404(k).''
       (b) Conforming Amendments.--
       (1)(A) Subparagraph (A) of section 135(c)(4) is amended by 
     inserting ``116,'' before ``137''.
       (B) Subsection (d) of section 135 is amended by 
     redesignating paragraph (4) as paragraph (5) and by inserting 
     after paragraph (3) the following new paragraph:
       ``(4) Coordination with section 116.--This section shall be 
     applied before section 116.''
       (2) Paragraph (2) of section 265(a) is amended by inserting 
     before the period ``, or to purchase or carry obligations or 
     shares, or to make deposits, to the extent the interest 
     thereon is excludable from gross income under section 116''.
       (3) Subsection (c) of section 584 is amended by adding at 
     the end thereof the following new flush sentence:

     ``The proportionate share of each participant in the amount 
     of dividends or interest received by the common trust fund 
     and to which section 116 applies shall be considered for 
     purposes of such section as having been received by such 
     participant.''
       (4) Subsection (a) of section 643 is amended by 
     redesignating paragraph (7) as paragraph (8) and by inserting 
     after paragraph (6) the following new paragraph:
       ``(7) Dividends or interest.--There shall be included the 
     amount of any dividends or interest excluded from gross 
     income pursuant to section 116.''
       (5) Section 854(a) is amended by inserting ``section 116 
     (relating to partial exclusion of dividends and interest 
     received by individuals) and'' after ``For purposes of''.
       (6) Section 857(c) is amended to read as follows:
       ``(c) Restrictions Applicable to Dividends Received From 
     Real Estate Investment Trusts.--
       ``(1) Treatment for section 116.--For purposes of section 
     116 (relating to partial exclusion of dividends and interest 
     received by individuals), a capital gain dividend (as defined 
     in subsection (b)(3)(C)) received from a real estate 
     investment trust which meets the requirements of this part 
     shall not be considered as a dividend.
       ``(2) Treatment for section 243.--For purposes of section 
     243 (relating to deductions for dividends received by 
     corporations), a dividend received from a real estate 
     investment trust which meets the requirements of this part 
     shall not be considered as a dividend.''
       (7) The table of sections for part III of subchapter B of 
     chapter 1 is amended by inserting after the item relating to 
     section 115 the following new item:

``Sec. 116. Partial exclusion of dividends and interest received by 
              individuals.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1998.

     SEC. 103. NONREFUNDABLE PERSONAL CREDITS ALLOWED AGAINST 
                   ALTERNATIVE MINIMUM TAX.

       (a) In General.--Subsection (a) of section 26 is amended to 
     read as follows:
       ``(a) Limitation Based on Amount of Tax.--The aggregate 
     amount of credits allowed by this subpart for the taxable 
     year shall not exceed the sum of--
       ``(1) the taxpayer's regular tax liability for the taxable 
     year, and
       ``(2) the tax imposed for the taxable year by section 
     55(a).


[[Page H8643]]


     For purposes of applying the preceding sentence, paragraph 
     (2) shall be treated as being zero for any taxable year 
     beginning during 1998.''.
       (b) Conforming Amendments.--
       (1) Subsection (d) of section 24 is amended by striking 
     paragraph (2) and by redesignating paragraph (3) as paragraph 
     (2).
       (2) Section 32 is amended by striking subsection (h).
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1997.

     SEC. 104. 100 PERCENT DEDUCTION FOR HEALTH INSURANCE COSTS OF 
                   SELF-EMPLOYED INDIVIDUALS.

       (a) In General.--Paragraph (1) of section 162(l) (relating 
     to special rules for health insurance costs of self-employed 
     individuals) is amended to read as follows:
       ``(1) Allowance of deduction.--In the case of an individual 
     who is an employee within the meaning of section 401(c)(1), 
     there shall be allowed as a deduction under this section an 
     amount equal to 100 percent of the amount paid during the 
     taxable year for insurance which constitutes medical care for 
     the taxpayer, his spouse, and dependents.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1998.

     SEC. 105. SPECIAL RULE FOR MEMBERS OF UNIFORMED SERVICES AND 
                   FOREIGN SERVICE IN DETERMINING EXCLUSION OF 
                   GAIN FROM SALE OF PRINCIPAL RESIDENCE.

       (a) In General.--Subsection (d) of section 121 (relating to 
     exclusion of gain from sale of principal residence) is 
     amended by adding at the end the following new paragraph:
       ``(9) Members of uniformed services and foreign service.--
       ``(A) In general.--The running of the 5-year period 
     described in subsection (a) shall be suspended with respect 
     to an individual during any time that such individual or such 
     individual's spouse is serving on qualified official extended 
     duty as a member of the uniformed services or of the Foreign 
     Service.
       ``(B) Qualified official extended duty.--For purposes of 
     this paragraph--
       ``(i) In general.--The term `qualified official extended 
     duty' means any period of extended duty as a member of the 
     uniformed services or a member of the Foreign Service during 
     which the member serves at a duty station which is at least 
     50 miles from such property or is under Government orders to 
     reside in Government quarters.
       ``(ii) Uniformed services.--The term `uniformed services' 
     has the meaning given such term by section 101(a)(5) of title 
     10, United States Code, as in effect on the date of the 
     enactment of the Taxpayer Relief Act of 1998.
       ``(iii) Foreign service of the united states.--The term 
     `member of the Foreign Service' has the meaning given the 
     term `member of the Service' by paragraph (1), (2), (3), (4), 
     or (5) of section 103 of the Foreign Service Act of 1980, as 
     in effect on the date of the enactment of the Taxpayer Relief 
     Act of 1998.
       ``(iv) Extended duty.--The term `extended duty' means any 
     period of active duty pursuant to a call or order to such 
     duty for a period in excess of 90 days or for an indefinite 
     period.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to sales and exchanges after the date of the 
     enactment of this Act.

     SEC. 106. $1,000,000 EXEMPTION FROM ESTATE AND GIFT TAXES.

       (a) In General.--Subsection (c) of section 2010 (relating 
     to applicable credit amount) is amended to read as follows:
       ``(c) Applicable Credit Amount.--
       ``(1) In general.--For purposes of this section, the 
     applicable credit amount is $345,800.
       ``(2) Applicable exclusion amount.--For purposes of the 
     provisions of this title which refer to this subsection, the 
     applicable exclusion amount is $1,000,000.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to estates of decedents dying, and gifts made, 
     after December 31, 1998.

              Subtitle B--Provisions Relating to Education

     SEC. 111. ELIGIBLE EDUCATIONAL INSTITUTIONS PERMITTED TO 
                   MAINTAIN QUALIFIED TUITION PROGRAMS.

       (a) In General.--Paragraph (1) of section 529(b) (defining 
     qualified State tuition program) is amended by inserting ``or 
     by 1 or more eligible educational institutions'' after 
     ``maintained by a State or agency or instrumentality 
     thereof''.
       (b) Technical Amendments.--
       (1) The texts of sections 72(e)(9), 135(c)(2)(C), 
     135(d)(1)(D), 529, 530, and 4973(e)(1)(B) are each amended by 
     striking ``qualified State tuition program'' each place it 
     appears and inserting ``qualified tuition program''.
       (2) The paragraph heading for paragraph (9) of section 
     72(e) and the subparagraph heading for subparagraph (B) of 
     section 530(b)(2) are each amended by striking ``state''.
       (3) The subparagraph heading for subparagraph (C) of 
     section 135(c)(2) is amended by striking ``qualified state 
     tuition program'' and inserting ``qualified tuition 
     programs''.
       (4) Sections 529(c)(3)(D)(i) and 6693(a)(2)(C) are each 
     amended by striking ``qualified State tuition programs'' and 
     inserting ``qualified tuition programs''.
       (5)(A) The section heading of section 529 is amended to 
     read as follows:

     ``SEC. 529. QUALIFIED TUITION PROGRAMS.''.

       (B) The item relating to section 529 in the table of 
     sections for part VIII of subchapter F of chapter 1 is 
     amended by striking ``State''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 1999.

     SEC. 112. MODIFICATION OF ARBITRAGE REBATE RULES APPLICABLE 
                   TO PUBLIC SCHOOL CONSTRUCTION BONDS.

       (a) In General.--Subparagraph (C) of section 148(f)(4) is 
     amended by adding at the end the following new clause:
       ``(xviii) 4-year spending requirement for public school 
     construction issue.--

       ``(I) In general.--In the case of a public school 
     construction issue, the spending requirements of clause (ii) 
     shall be treated as met if at least 10 percent of the 
     available construction proceeds of the construction issue are 
     spent for the governmental purposes of the issue within the 
     1-year period beginning on the date the bonds are issued, 30 
     percent of such proceeds are spent for such purposes within 
     the 2-year period beginning on such date, 50 percent of such 
     proceeds are spent for such purposes within the 3-year period 
     beginning on such date, and 100 percent of such proceeds are 
     spent for such purposes within the 4-year period beginning on 
     such date.
       ``(II) Public school construction issue.--For purposes of 
     this clause, the term `public school construction issue' 
     means any construction issue if no bond which is part of such 
     issue is a private activity bond and all of the available 
     construction proceeds of such issue are to be used for the 
     construction (as defined in clause (iv)) of public school 
     facilities to provide education or training below the 
     postsecondary level or for the acquisition of land that is 
     functionally related and subordinate to such facilities.
       ``(III) Other rules to apply.--Rules similar to the rules 
     of the preceding provisions of this subparagraph which apply 
     to clause (ii) also apply to this clause.''

       (b) Effective Date.--The amendment made by this section 
     shall apply to obligations issued after December 31, 1998.

           Subtitle C--Provisions Relating to Social Security

     SEC. 121. INCREASES IN THE SOCIAL SECURITY EARNINGS LIMIT FOR 
                   INDIVIDUALS WHO HAVE ATTAINED RETIREMENT AGE.

       (a) In General.--Section 203(f)(8)(D) of the Social 
     Security Act (42 U.S.C. 403(f)(8)(D)) is amended by striking 
     clauses (iv) through (vii) and inserting the following new 
     clauses:
       ``(iv) for each month of any taxable year ending after 1998 
     and before 2000, $1,416.66\2/3\,
       ``(v) for each month of any taxable year ending after 1999 
     and before 2001, $1,541.66\2/3\,
       ``(vi) for each month of any taxable year ending after 2000 
     and before 2002, $2,166.66\2/3\,
       ``(vii) for each month of any taxable year ending after 
     2001 and before 2003, $2,500.00,
       ``(viii) for each month of any taxable year ending after 
     2002 and before 2004, $2,608.33\1/3\,
       ``(ix) for each month of any taxable year ending after 2003 
     and before 2005, $2,833.33\1/3\,
       ``(x) for each month of any taxable year ending after 2004 
     and before 2006, $2,950.00,
       ``(xi) for each month of any taxable year ending after 2005 
     and before 2007, $3,066.66\2/3\,
       ``(xii) for each month of any taxable year ending after 
     2006 and before 2008, $3,195.83\1/3\, and
       ``(xiii) for each month of any taxable year ending after 
     2007 and before 2009, $3,312.50.''.
       (b) Conforming Amendments.--
       (1) Section 203(f)(8)(B)(ii) of such Act (42 U.S.C. 
     403(f)(8)(B)(ii)) is amended--
       (A) by striking ``after 2001 and before 2003'' and 
     inserting ``after 2007 and before 2009''; and
       (B) in subclause (II), by striking ``2000'' and inserting 
     ``2006''.
       (2) The second sentence of section 223(d)(4)(A) of such Act 
     (42 U.S.C. 423(d)(4)(A)) is amended by inserting ``and 
     section 121 of the Taxpayer Relief Act of 1998'' after 
     ``1996''.
       (c) Effective Date.--The amendments made by this section 
     shall apply with respect to taxable years ending after 1998.

     SEC. 122. RECOMPUTATION OF BENEFITS AFTER NORMAL RETIREMENT 
                   AGE.

       (a) In General.--Section 215(f)(2)(D)(i) of the Social 
     Security Act (42 U.S.C. 415(f)(2)(D)(i)) is amended to read 
     as follows:
       ``(i) in the case of an individual who did not die in the 
     year with respect to which the recomputation is made, for 
     monthly benefits beginning with benefits for January of--
       ``(I) the second year following the year with respect to 
     which the recomputation is made, in any such case in which 
     the individual is entitled to old-age insurance benefits, the 
     individual has attained retirement age (as defined in section 
     216(l)) as of the end of the year preceding the year with 
     respect to which the recomputation is made, and the year with 
     respect to which the recomputation is made would not be 
     substituted in recomputation under this subsection for a 
     benefit computation year in which no wages or self-employment 
     income have been credited previously to such individual, or
       ``(II) the first year following the year with respect to 
     which the recomputation is made, in any other such case; 
     or''.
       (b) Conforming Amendments.--
       (1) Section 215(f)(7) of such Act (42 U.S.C. 415(f)(7)) is 
     amended by inserting ``, and as amended by section 122(b)(2) 
     of the Taxpayer Relief Act of 1998,'' after ``This subsection 
     as in effect in December 1978''.
       (2) Subparagraph (A) of section 215(f)(2) of the Social 
     Security Act as in effect in December 1978 and applied in 
     certain cases under the provisions of such Act as in effect 
     after December 1978 is amended--

[[Page H8644]]

       (A) by striking ``in the case of an individual who did not 
     die'' and all that follows and inserting ``in the case of an 
     individual who did not die in the year with respect to which 
     the recomputation is made, for monthly benefits beginning 
     with benefits for January of--''; and
       (B) by adding at the end the following:
       ``(i) the second year following the year with respect to 
     which the recomputation is made, in any such case in which 
     the individual is entitled to old-age insurance benefits, the 
     individual has attained age 65 as of the end of the year 
     preceding the year with respect to which the recomputation is 
     made, and the year with respect to which the recomputation is 
     made would not be substituted in recomputation under this 
     subsection for a benefit computation year in which no wages 
     or self-employment income have been credited previously to 
     such individual, or
       ``(ii) the first year following the year with respect to 
     which the recomputation is made, in any other such case; 
     or''.
       (c) Effective Date.--The amendments made by this section 
     shall apply with respect to recomputations of primary 
     insurance amounts based on wages paid and self employment 
     income derived after 1997 and with respect to benefits 
     payable after December 31, 1998.

 TITLE II--PROVISIONS PRIMARILY AFFECTING FARMING AND OTHER BUSINESSES

     Subtitle A--Increase in Expense Treatment for Small Businesses

     SEC. 201. INCREASE IN EXPENSE TREATMENT FOR SMALL BUSINESSES.

       (a) General Rule.--Paragraph (1) of section 179(b) 
     (relating to dollar limitation) is amended to read as 
     follows:
       ``(1) Dollar limitation.--The aggregate cost which may be 
     taken into account under subsection (a) for any taxable year 
     shall not exceed $25,000.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1998.

               Subtitle B--Provisions Relating to Farmers

     SEC. 211. INCOME AVERAGING FOR FARMERS MADE PERMANENT.

       Subsection (c) of section 933 of the Taxpayer Relief Act of 
     1997 is amended by striking ``, and before January 1, 2001''.

     SEC. 212. 5-YEAR NET OPERATING LOSS CARRYBACK FOR FARMING 
                   LOSSES.

       (a) In General.--Paragraph (1) of section 172(b) (relating 
     to net operating loss deduction) is amended by adding at the 
     end the following new subparagraph:
       ``(G) Farming losses.--In the case of a taxpayer which has 
     a farming loss (as defined in subsection (i)) for a taxable 
     year, such farming loss shall be a net operating loss 
     carryback to each of the 5 taxable years preceding the 
     taxable year of such loss.''
       (b) Farming loss.--Section 172 is amended by redesignating 
     subsection (i) as subsection (j) and by inserting after 
     subsection (h) the following new subsection:
       ``(i) Rules Relating to Farming Losses.--For purposes of 
     this section--
       ``(1) In general.--The term `farming loss' means the lesser 
     of--
       ``(A) the amount which would be the net operating loss for 
     the taxable year if only income and deductions attributable 
     to farming businesses (as defined in section 263A(e)(4)) are 
     taken into account, or
       ``(B) the amount of the net operating loss for such taxable 
     year.
       ``(2) Coordination with subsection (b)(2).--For purposes of 
     applying subsection (b)(2), a farming loss for any taxable 
     year shall be treated in a manner similar to the manner in 
     which a specified liability loss is treated.
       ``(3) Election.--Any taxpayer entitled to a 5-year 
     carryback under subsection (b)(1)(G) from any loss year may 
     elect to have the carryback period with respect to such loss 
     year determined without regard to subsection (b)(1)(G). Such 
     election shall be made in such manner as may be prescribed by 
     the Secretary and shall be made by the due date (including 
     extensions of time) for filing the taxpayer's return for the 
     taxable year of the net operating loss. Such election, once 
     made for any taxable year, shall be irrevocable for such 
     taxable year.''
       (c) Coordination With Farm Disaster Losses.--Clause (ii) of 
     section 172(b)(1)(F) is amended by adding at the end the 
     following flush sentence:
     ``Such term shall not include any farming loss (as defined in 
     subsection (i)).''
       (d) Effective Date.--The amendments made by this section 
     shall apply to net operating losses for taxable years 
     beginning after December 31, 1997.

     SEC. 213. PRODUCTION FLEXIBILITY CONTRACT PAYMENTS.

       The option under section 112(d)(3) of the Federal 
     Agriculture Improvement and Reform Act of 1996 (7 U.S.C. 
     7212(d)(3)) shall be disregarded in determining the taxable 
     year for which the payment for fiscal year 1999 under a 
     production flexibility contract under subtitle B of title I 
     of such Act is properly includible in gross income for 
     purposes of the Internal Revenue Code of 1986.

      Subtitle C--Increase in Volume Cap on Private Activity Bonds

     SEC. 221. INCREASE IN VOLUME CAP ON PRIVATE ACTIVITY BONDS.

       (a) In General.--Subsection (d) of section 146 (relating to 
     volume cap) is amended by striking paragraph (2), by 
     redesignating paragraphs (3) and (4) as paragraphs (2) and 
     (3), respectively, and by striking paragraph (1) and 
     inserting the following new paragraph:
       ``(1) In general.--The State ceiling applicable to any 
     State for any calendar year shall be the greater of--
       ``(A) an amount equal to $75 multiplied by the State 
     population, or
       ``(B) $225,000,000.
     Subparagraph (B) shall not apply to any possession of the 
     United States.''
       (b) Conforming Amendment.--Sections 25(f)(3) and 
     42(h)(3)(E)(iii) are each amended by striking ``section 
     146(d)(3)(C)'' and inserting ``section 146(d)(2)(C)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to calendar years after 1998.

  TITLE III--EXTENSION AND MODIFICATION OF CERTAIN EXPIRING PROVISIONS

                       Subtitle A--Tax Provisions

     SEC. 301. RESEARCH CREDIT.

       (a) Temporary Extension.--
       (1) In general.--Paragraph (1) of section 41(h) (relating 
     to termination) is amended--
       (A) by striking ``June 30, 1998'' and inserting ``February 
     29, 2000'',
       (B) by striking ``24-month'' and inserting ``44-month'', 
     and
       (C) by striking ``24 months'' and inserting ``44 months''.
       (2) Technical amendment.--Subparagraph (D) of section 
     45C(b)(1) is amended by striking ``June 30, 1998'' and 
     inserting ``February 29, 2000''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to amounts paid or incurred after June 30, 1998.
       (b) Increase in Percentages Under Alternative Incremental 
     Credit.--
       (1) In general.--Subparagraph (A) of section 41(c)(4) is 
     amended--
       (A) by striking ``1.65 percent'' and inserting ``2.65 
     percent'',
       (B) by striking ``2.2 percent'' and inserting ``3.2 
     percent'', and
       (C) by striking ``2.75 percent'' and inserting ``3.75 
     percent''.
       (2) Effective date.--The amendments made by this subsection 
     shall apply to taxable years beginning after June 30, 1998.

     SEC. 302. WORK OPPORTUNITY CREDIT.

       (a) Temporary Extension.--Subparagraph (B) of section 
     51(c)(4) (relating to termination) is amended by striking 
     ``June 30, 1998'' and inserting ``February 29, 2000''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to individuals who begin work for the employer 
     after June 30, 1998.

     SEC. 303. WELFARE-TO-WORK CREDIT.

       Subsection (f) of section 51A (relating to termination) is 
     amended by striking ``April 30, 1999'' and inserting 
     ``February 29, 2000''.

     SEC. 304. CONTRIBUTIONS OF STOCK TO PRIVATE FOUNDATIONS; 
                   EXPANDED PUBLIC INSPECTION OF PRIVATE 
                   FOUNDATIONS' ANNUAL RETURNS.

       (a) Special Rule for Contributions of Stock Made 
     Permanent.--
       (1) In general.--Paragraph (5) of section 170(e) is amended 
     by striking subparagraph (D) (relating to termination).
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to contributions made after June 30, 1998.
       (b) Expanded Public Inspection of Private Foundations' 
     Annual Returns, Etc.--
       (1) In general.--Section 6104 (relating to publicity of 
     information required from certain exempt organizations and 
     certain trusts) is amended by striking subsections (d) and 
     (e) and inserting after subsection (c) the following new 
     subsection:
       ``(d) Public Inspection of Certain Annual Returns and 
     Applications for Exemption.--
       ``(1) In general.--In the case of an organization described 
     in subsection (c) or (d) of section 501 and exempt from 
     taxation under section 501(a)--
       ``(A) a copy of--
       ``(i) the annual return filed under section 6033 (relating 
     to returns by exempt organizations) by such organization, and
       ``(ii) if the organization filed an application for 
     recognition of exemption under section 501, the exempt status 
     application materials of such organization,

     shall be made available by such organization for inspection 
     during regular business hours by any individual at the 
     principal office of such organization and, if such 
     organization regularly maintains 1 or more regional or 
     district offices having 3 or more employees, at each such 
     regional or district office, and
       ``(B) upon request of an individual made at such principal 
     office or such a regional or district office, a copy of such 
     annual return and exempt status application materials shall 
     be provided to such individual without charge other than a 
     reasonable fee for any reproduction and mailing costs.
     The request described in subparagraph (B) must be made in 
     person or in writing. If such request is made in person, such 
     copy shall be provided immediately and, if made in writing, 
     shall be provided within 30 days.
       ``(2) 3-year limitation on inspection of returns.--
     Paragraph (1) shall apply to an annual return filed under 
     section 6033 only during the 3-year period beginning on the 
     last day prescribed for filing such return (determined with 
     regard to any extension of time for filing).
       ``(3) Exceptions from disclosure requirement.--
       ``(A) Nondisclosure of contributors, etc.--Paragraph (1) 
     shall not require the disclosure of the name or address of 
     any contributor to the organization. In the case of

[[Page H8645]]

     an organization described in section 501(d), subparagraph (A) 
     shall not require the disclosure of the copies referred to in 
     section 6031(b) with respect to such organization.
       ``(B) Nondisclosure of certain other information.--
     Paragraph (1) shall not require the disclosure of any 
     information if the Secretary withheld such information from 
     public inspection under subsection (a)(1)(D).
       ``(4) Limitation on providing copies.--Paragraph (1)(B) 
     shall not apply to any request if, in accordance with 
     regulations promulgated by the Secretary, the organization 
     has made the requested documents widely available, or the 
     Secretary determines, upon application by an organization, 
     that such request is part of a harassment campaign and that 
     compliance with such request is not in the public interest.
       ``(5) Exempt status application materials.--For purposes of 
     paragraph (1), the term `exempt status applicable materials' 
     means the application for recognition of exemption under 
     section 501 and any papers submitted in support of such 
     application and any letter or other document issued by the 
     Internal Revenue Service with respect to such application.''
       (2) Conforming amendments.--
       (A) Subsection (c) of section 6033 is amended by adding 
     ``and'' at the end of paragraph (1), by striking paragraph 
     (2), and by redesignating paragraph (3) as paragraph (2).
       (B) Subparagraph (C) of section 6652(c)(1) is amended by 
     striking ``subsection (d) or (e)(1) of section 6104 (relating 
     to public inspection of annual returns)'' and inserting 
     ``section 6104(d) with respect to any annual return''.
       (C) Subparagraph (D) of section 6652(c)(1) is amended by 
     striking ``section 6104(e)(2) (relating to public inspection 
     of applications for exemption)'' and inserting ``section 
     6104(d) with respect to any exempt status application 
     materials (as defined in such section)''.
       (D) Section 6685 is amended by striking ``or (e)''.
       (E) Section 7207 is amended by striking ``or (e)''.
       (3) Effective date.--
       (A) In general.--Except as provided in subparagraph (B), 
     the amendments made by this subsection shall apply to 
     requests made after the later of December 31, 1998, or the 
     60th day after the Secretary of the Treasury first issues the 
     regulations referred to such section 6104(d)(4) of the 
     Internal Revenue Code of 1986, as amended by this section.
       (B) Publication of annual returns.--Section 6104(d) of such 
     Code, as in effect before the amendments made by this 
     subsection, shall not apply to any return the due date for 
     which is after the date such amendments take effect under 
     subparagraph (A).

     SEC. 305. SUBPART F EXEMPTION FOR ACTIVE FINANCING INCOME.

       (a) Income Derived From Banking, Financing or Similar 
     Businesses.--Section 954(h) (relating to income derived in 
     the active conduct of banking, financing, or similar 
     businesses) is amended to read as follows:
       ``(h) Special Rule for Income Derived in the Active Conduct 
     of Banking, Financing, or Similar Businesses.--
       ``(1) In general.--For purposes of subsection (c)(1), 
     foreign personal holding company income shall not include 
     qualified banking or financing income of an eligible 
     controlled foreign corporation.
       ``(2) Eligible controlled foreign corporation.--For 
     purposes of this subsection--
       ``(A) In general.--The term `eligible controlled foreign 
     corporation' means a controlled foreign corporation which--
       ``(i) is predominantly engaged in the active conduct of a 
     banking, financing, or similar business, and
       ``(ii) conducts substantial activity with respect to such 
     business.
       ``(B) Predominantly engaged.--A controlled foreign 
     corporation shall be treated as predominantly engaged in the 
     active conduct of a banking, financing, or similar business 
     if--
       ``(i) more than 70 percent of the gross income of the 
     controlled foreign corporation is derived directly from the 
     active and regular conduct of a lending or finance business 
     from transactions with customers which are not related 
     persons,
       ``(ii) it is engaged in the active conduct of a banking 
     business and is an institution licensed to do business as a 
     bank in the United States (or is any other corporation not so 
     licensed which is specified by the Secretary in regulations), 
     or
       ``(iii) it is engaged in the active conduct of a securities 
     business and is registered as a securities broker or dealer 
     under section 15(a) of the Securities Exchange Act of 1934 or 
     is registered as a Government securities broker or dealer 
     under section 15C(a) of such Act (or is any other corporation 
     not so registered which is specified by the Secretary in 
     regulations).
       ``(3) Qualified banking or financing income.--For purposes 
     of this subsection--
       ``(A) In general.--The term `qualified banking or financing 
     income' means income of an eligible controlled foreign 
     corporation which--
       ``(i) is derived in the active conduct of a banking, 
     financing, or similar business by--

       ``(I) such eligible controlled foreign corporation, or
       ``(II) a qualified business unit of such eligible 
     controlled foreign corporation,

       ``(ii) is derived from 1 or more transactions--

       ``(I) with customers located in a country other than the 
     United States, and
       ``(II) substantially all of the activities in connection 
     with which are conducted directly by the corporation or unit 
     in its home country, and

       ``(iii) is treated as earned by such corporation or unit in 
     its home country for purposes of such country's tax laws.
       ``(B) Limitation on nonbanking and nonsecurities 
     businesses.--No income of an eligible controlled foreign 
     corporation not described in clause (ii) or (iii) of 
     paragraph (2)(B) (or of a qualified business unit of such 
     corporation) shall be treated as qualified banking or 
     financing income unless more than 30 percent of such 
     corporation's or unit's gross income is derived directly from 
     the active and regular conduct of a lending or finance 
     business from transactions with customers which are not 
     related persons and which are located within such 
     corporation's or unit's home country.
       ``(C) Substantial activity requirement for cross border 
     income.--The term `qualified banking or financing income' 
     shall not include income derived from 1 or more transactions 
     with customers located in a country other than the home 
     country of the eligible controlled foreign corporation or a 
     qualified business unit of such corporation unless such 
     corporation or unit conducts substantial activity with 
     respect to a banking, financing, or similar business in its 
     home country.
       ``(D) Determinations made separately.--For purposes of this 
     paragraph, the qualified banking or financing income of an 
     eligible controlled foreign corporation and each qualified 
     business unit of such corporation shall be determined 
     separately for such corporation and each such unit by taking 
     into account--
       ``(i) in the case of the eligible controlled foreign 
     corporation, only items of income, deduction, gain, or loss 
     and activities of such corporation not properly allocable or 
     attributable to any qualified business unit of such 
     corporation, and
       ``(ii) in the case of a qualified business unit, only items 
     of income, deduction, gain, or loss and activities properly 
     allocable or attributable to such unit.
       ``(4) Lending or finance business.--For purposes of this 
     subsection, the term `lending or finance business' means the 
     business of--
       ``(A) making loans,
       ``(B) purchasing or discounting accounts receivable, notes, 
     or installment obligations,
       ``(C) engaging in leasing (including entering into leases 
     and purchasing, servicing, and disposing of leases and leased 
     assets),
       ``(D) issuing letters of credit or providing guarantees,
       ``(E) providing charge and credit card services, or
       ``(F) rendering services or making facilities available in 
     connection with activities described in subparagraphs (A) 
     through (E) carried on by--
       ``(i) the corporation (or qualified business unit) 
     rendering services or making facilities available, or
       ``(ii) another corporation (or qualified business unit of a 
     corporation) which is a member of the same affiliated group 
     (as defined in section 1504, but determined without regard to 
     section 1504(b)(3)).
       ``(5) Other definitions.--For purposes of this subsection--
       ``(A) Customer.--The term `customer' means, with respect to 
     any controlled foreign corporation or qualified business 
     unit, any person which has a customer relationship with such 
     corporation or unit and which is acting in its capacity as 
     such.
       ``(B) Home country.--Except as provided in regulations--
       ``(i) Controlled foreign corporation.--The term `home 
     country' means, with respect to any controlled foreign 
     corporation, the country under the laws of which the 
     corporation was created or organized.
       ``(ii) Qualified business unit.--The term `home country' 
     means, with respect to any qualified business unit, the 
     country in which such unit maintains its principal office.
       ``(C) Located.--The determination of where a customer is 
     located shall be made under rules prescribed by the 
     Secretary.
       ``(D) Qualified business unit.--The term `qualified 
     business unit' has the meaning given such term by section 
     989(a).
       ``(E) Related person.--The term `related person' has the 
     meaning given such term by subsection (d)(3).
       ``(6) Coordination with exception for dealers.--Paragraph 
     (1) shall not apply to income described in subsection 
     (c)(2)(C)(ii) of a dealer in securities (within the meaning 
     of section 475) which is an eligible controlled foreign 
     corporation described in paragraph (2)(B)(iii).
       ``(7) Anti-abuse rules.--For purposes of applying this 
     subsection and subsection (c)(2)(C)(ii)--
       ``(A) there shall be disregarded any item of income, gain, 
     loss, or deduction with respect to any transaction or series 
     of transactions one of the principal purposes of which is 
     qualifying income or gain for the exclusion under this 
     section, including any transaction or series of transactions 
     a principal purpose of which is the acceleration or deferral 
     of any item in order to claim the benefits of such exclusion 
     through the application of this subsection,
       ``(B) there shall be disregarded any item of income, gain, 
     loss, or deduction of an entity which is not engaged in 
     regular and continuous transactions with customers which are 
     not related persons,
       ``(C) there shall be disregarded any item of income, gain, 
     loss, or deduction with respect

[[Page H8646]]

     to any transaction or series of transactions utilizing, or 
     doing business with--
       ``(i) one or more entities in order to satisfy any home 
     country requirement under this subsection, or
       ``(ii) a special purpose entity or arrangement, including a 
     securitization, financing, or similar entity or arrangement,
     if one of the principal purposes of such transaction or 
     series of transactions is qualifying income or gain for the 
     exclusion under this subsection, and
       ``(D) a related person, an officer, a director, or an 
     employee with respect to any controlled foreign corporation 
     (or qualified business unit) which would otherwise be treated 
     as a customer of such corporation or unit with respect to any 
     transaction shall not be so treated if a principal purpose of 
     such transaction is to satisfy any requirement of this 
     subsection.
       ``(8) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this subsection, subsection (c)(1)(B)(i), 
     subsection (c)(2)(C)(ii), and the last sentence of subsection 
     (e)(2).
       ``(9) Application.--This subsection, subsection 
     (c)(2)(C)(ii), and the last sentence of subsection (e)(2) 
     shall apply only to the first taxable year of a foreign 
     corporation beginning after December 31, 1998, and before 
     January 1, 2000, and to taxable years of United States 
     shareholders with or within which such taxable year of such 
     foreign corporation ends.''
       (b) Income Derived From Insurance Business.--
       (1) Income attributable to issuance or reinsurance.--
       (A) In general.--Section 953(a) (defining insurance income) 
     is amended to read as follows:
       ``(a) Insurance Income.--
       ``(1) In general.--For purposes of section 952(a)(1), the 
     term `insurance income' means any income which--
       ``(A) is attributable to the issuing (or reinsuring) of an 
     insurance or annuity contract, and
       ``(B) would (subject to the modifications provided by 
     subsection (b)) be taxed under subchapter L of this chapter 
     if such income were the income of a domestic insurance 
     company.
       ``(2) Exception.--Such term shall not include any exempt 
     insurance income (as defined in subsection (e)).''
       (B) Exempt insurance income.--Section 953 (relating to 
     insurance income) is amended by adding at the end the 
     following new subsection:
       ``(e) Exempt Insurance Income.--For purposes of this 
     section--
       ``(1) Exempt insurance income defined.--
       ``(A) In general.--The term `exempt insurance income' means 
     income derived by a qualifying insurance company which--
       ``(i) is attributable to the issuing (or reinsuring) of an 
     exempt contract by such company or a qualifying insurance 
     company branch of such company, and
       ``(ii) is treated as earned by such company or branch in 
     its home country for purposes of such country's tax laws.
       ``(B) Exception for certain arrangements.--Such term shall 
     not include income attributable to the issuing (or 
     reinsuring) of an exempt contract as the result of any 
     arrangement whereby another corporation receives a 
     substantially equal amount of premiums or other consideration 
     in respect of issuing (or reinsuring) a contract which is not 
     an exempt contract.
       ``(C) Determinations made separately.--For purposes of this 
     subsection and section 954(i), the exempt insurance income 
     and exempt contracts of a qualifying insurance company or any 
     qualifying insurance company branch of such company shall be 
     determined separately for such company and each such branch 
     by taking into account--
       ``(i) in the case of the qualifying insurance company, only 
     items of income, deduction, gain, or loss, and activities of 
     such company not properly allocable or attributable to any 
     qualifying insurance company branch of such company, and
       ``(ii) in the case of a qualifying insurance company 
     branch, only items of income, deduction, gain, or loss and 
     activities properly allocable or attributable to such unit.
       ``(2) Exempt contract.--
       ``(A) In general.--The term `exempt contract' means an 
     insurance or annuity contract issued or reinsured by a 
     qualifying insurance company or qualifying insurance company 
     branch in connection with property in, liability arising out 
     of activity in, or the lives or health of residents of, a 
     country other than the United States.
       ``(B) Minimum home country income required.--
       ``(i) In general.--No contract of a qualifying insurance 
     company or of a qualifying insurance company branch shall be 
     treated as an exempt contract unless such company or branch 
     derives more than 30 percent of its net written premiums from 
     exempt contracts (determined without regard to this 
     subparagraph)--

       ``(I) which cover applicable home country risks, and
       ``(II) with respect to which no policyholder, insured, 
     annuitant, or beneficiary is a related person (as defined in 
     section 954(d)(3)).

       ``(ii) Applicable home country risks.--The term `applicable 
     home country risks' means risks in connection with property 
     in, liability arising out of activity in, or the lives or 
     health of residents of, the home country of the qualifying 
     insurance company or qualifying insurance company branch, as 
     the case may be, issuing or reinsuring the contract covering 
     the risks.
       ``(C) Substantial activity requirements for cross border 
     risks.--A contract issued by a qualifying insurance company 
     or qualifying insurance company branch which covers risks 
     other than applicable home country risks (as defined in 
     subparagraph (B)(ii)) shall not be treated as an exempt 
     contract unless such company or branch, as the case may be--
       ``(i) conducts substantial activity with respect to an 
     insurance business in its home country, and
       ``(ii) performs in its home country substantially all of 
     the activities necessary to give rise to the income generated 
     by such contract.
       ``(3) Qualifying insurance company.--The term `qualifying 
     insurance company' means any controlled foreign corporation 
     which--
       ``(A) is subject to regulation as an insurance (or 
     reinsurance) company by its home country, and is licensed, 
     authorized, or regulated by the applicable insurance 
     regulatory body for its home country to sell insurance, 
     reinsurance, or annuity contracts to persons other than 
     related persons (within the meaning of section 954(d)(3)) in 
     such home country,
       ``(B) derives more than 50 percent of its aggregate net 
     written premiums from the issuance or reinsurance by such 
     controlled foreign corporation and each of its qualifying 
     insurance company branches of contracts--
       ``(i) covering applicable home country risks (as defined in 
     paragraph (2)) of such corporation or branch, as the case may 
     be, and
       ``(ii) with respect to which no policyholder, insured, 
     annuitant, or beneficiary is a related person (as defined in 
     section 954(d)(3)),

     except that in the case of a branch, such premiums shall only 
     be taken into account to the extent such premiums are treated 
     as earned by such branch in its home country for purposes of 
     such country's tax laws, and
       ``(C) is engaged in the insurance business and would be 
     subject to tax under subchapter L if it were a domestic 
     corporation.
       ``(4) Qualifying insurance company branch.--The term 
     `qualifying insurance company branch' means a qualified 
     business unit (within the meaning of section 989(a)) of a 
     controlled foreign corporation if--
       ``(A) such unit is licensed, authorized, or regulated by 
     the applicable insurance regulatory body for its home country 
     to sell insurance, reinsurance, or annuity contracts to 
     persons other than related persons (within the meaning of 
     section 954(d)(3)) in such home country, and
       ``(B) such controlled foreign corporation is a qualifying 
     insurance company, determined under paragraph (3) as if such 
     unit were a qualifying insurance company branch.
       ``(5) Life insurance or annuity contract.--For purposes of 
     this section and section 954, the determination of whether a 
     contract issued by a controlled foreign corporation or a 
     qualified business unit (within the meaning of section 
     989(a)) is a life insurance contract or an annuity contract 
     shall be made without regard to sections 72(s), 101(f), 
     817(h), and 7702 if--
       ``(A) such contract is regulated as a life insurance or 
     annuity contract by the corporation's or unit's home country, 
     and
       ``(B) no policyholder, insured, annuitant, or beneficiary 
     with respect to the contract is a United States person.
       ``(6) Home country.--For purposes of this subsection, 
     except as provided in regulations--
       ``(A) Controlled foreign corporation.--The term `home 
     country' means, with respect to a controlled foreign 
     corporation, the country in which such corporation is created 
     or organized.
       ``(B) Qualified business unit.--The term `home country' 
     means, with respect to a qualified business unit (as defined 
     in section 989(a)), the country in which the principal office 
     of such unit is located and in which such unit is licensed, 
     authorized, or regulated by the applicable insurance 
     regulatory body to sell insurance, reinsurance, or annuity 
     contracts to persons other than related persons (as defined 
     in section 954(d)(3)) in such country.
       ``(7) Anti-abuse rules.--For purposes of applying this 
     subsection and section 954(i)--
       ``(A) the rules of section 954(h)(7) (other than 
     subparagraph (B) thereof) shall apply,
       ``(B) there shall be disregarded any item of income, gain, 
     loss, or deduction of, or derived from, an entity which is 
     not engaged in regular and continuous transactions with 
     persons which are not related persons,
       ``(C) there shall be disregarded any change in the method 
     of computing reserves a principal purpose of which is the 
     acceleration or deferral of any item in order to claim the 
     benefits of this subsection or section 954(i),
       ``(D) a contract of insurance or reinsurance shall not be 
     treated as an exempt contract (and premiums from such 
     contract shall not be taken into account for purposes of 
     paragraph (2)(B) or (3)) if--
       ``(i) any policyholder, insured, annuitant, or beneficiary 
     is a resident of the United States and such contract was 
     marketed to such resident and was written to cover a risk 
     outside the United States, or
       ``(ii) the contract covers risks located within and without 
     the United States and the qualifying insurance company or 
     qualifying insurance company branch does not maintain such 
     contemporaneous records, and

[[Page H8647]]

     file such reports, with respect to such contract as the 
     Secretary may require,
       ``(E) the Secretary may prescribe rules for the allocation 
     of contracts (and income from contracts) among 2 or more 
     qualifying insurance company branches of a qualifying 
     insurance company in order to clearly reflect the income of 
     such branches, and
       ``(F) premiums from a contract shall not be taken into 
     account for purposes of paragraph (2)(B) or (3) if such 
     contract reinsures a contract issued or reinsured by a 
     related person (as defined in section 954(d)(3)).

     For purposes of subparagraph (D), the determination of where 
     risks are located shall be made under the principles of 
     section 953.
       ``(8) Coordination with subsection (c).--In determining 
     insurance income for purposes of subsection (c), exempt 
     insurance income shall not include income derived from exempt 
     contracts which cover risks other than applicable home 
     country risks.
       ``(9) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this subsection and section 954(i).
       ``(10) Application.--This subsection and section 954(i) 
     shall apply only to the first taxable year of a foreign 
     corporation beginning after December 31, 1998, and before 
     January 1, 2000, and to taxable years of United States 
     shareholders with or within which such taxable year of such 
     foreign corporation ends.
       ``(11) Cross reference.--

  ``For income exempt from foreign personal holding company income, see 
section 954(i).''
       (2) Exemption from foreign personal holding company 
     income.--Section 954 (defining foreign base company income) 
     is amended by adding at the end the following new subsection:
       ``(i) Special Rule for Income Derived in the Active Conduct 
     of Insurance Business.--
       ``(1) In general.--For purposes of subsection (c)(1), 
     foreign personal holding company income shall not include 
     qualified insurance income of a qualifying insurance company.
       ``(2) Qualified insurance income.--The term `qualified 
     insurance income' means income of a qualifying insurance 
     company which is--
       ``(A) received from a person other than a related person 
     (within the meaning of subsection (d)(3)) and derived from 
     the investments made by a qualifying insurance company or a 
     qualifying insurance company branch of its reserves allocable 
     to exempt contracts or of 80 percent of its unearned premiums 
     from exempt contracts (as both are determined in the manner 
     prescribed under paragraph (4)), or
       ``(B) received from a person other than a related person 
     (within the meaning of subsection (d)(3)) and derived from 
     investments made by a qualifying insurance company or a 
     qualifying insurance company branch of an amount of its 
     assets allocable to exempt contracts equal to--
       ``(i) in the case of property, casualty, or health 
     insurance contracts, one-third of its premiums earned on such 
     insurance contracts during the taxable year (as defined in 
     section 832(b)(4)), and
       ``(ii) in the case of life insurance or annuity contracts, 
     10 percent of the reserves described in subparagraph (A) for 
     such contracts.
       ``(3) Principles for determining insurance income.--Except 
     as provided by the Secretary, for purposes of subparagraphs 
     (A) and (B) of paragraph (2)--
       ``(A) in the case of any contract which is a separate 
     account-type contract (including any variable contract not 
     meeting the requirements of section 817), income credited 
     under such contract shall be allocable only to such contract, 
     and
       ``(B) income not allocable under subparagraph (A) shall be 
     allocated ratably among contracts not described in 
     subparagraph (A).
       ``(4) Methods for determining unearned premiums and 
     reserves.--For purposes of paragraph (2)(A)--
       ``(A) Property and casualty contracts.--The unearned 
     premiums and reserves of a qualifying insurance company or a 
     qualifying insurance company branch with respect to property, 
     casualty, or health insurance contracts shall be determined 
     using the same methods and interest rates which would be used 
     if such company or branch were subject to tax under 
     subchapter L, except that--
       ``(i) the interest rate determined for the functional 
     currency of the company or branch, and which, except as 
     provided by the Secretary, is calculated in the same manner 
     as the Federal mid-term rate under section 1274(d), shall be 
     substituted for the applicable Federal interest rate, and
       ``(ii) such company or branch shall use the appropriate 
     foreign loss payment pattern.
       ``(B) Life insurance and annuity contracts.--The amount of 
     the reserve of a qualifying insurance company or qualifying 
     insurance company branch for any life insurance or annuity 
     contract shall be equal to the greater of--
       ``(i) the net surrender value of such contract (as defined 
     in section 807(e)(1)(A)), or
       ``(ii) the reserve determined under paragraph (5).
       ``(C) Limitation on reserves.--In no event shall the 
     reserve determined under this paragraph for any contract as 
     of any time exceed the amount which would be taken into 
     account with respect to such contract as of such time in 
     determining foreign statement reserves (less any catastrophe, 
     deficiency, equalization, or similar reserves).
       ``(5) Amount of reserve.--The amount of the reserve 
     determined under this paragraph with respect to any contract 
     shall be determined in the same manner as it would be 
     determined if the qualifying insurance company or qualifying 
     insurance company branch were subject to tax under subchapter 
     L, except that in applying such subchapter--
       ``(A) the interest rate determined for the functional 
     currency of the company or branch, and which, except as 
     provided by the Secretary, is calculated in the same manner 
     as the Federal mid-term rate under section 1274(d), shall be 
     substituted for the applicable Federal interest rate,
       ``(B) the highest assumed interest rate permitted to be 
     used in determining foreign statement reserves shall be 
     substituted for the prevailing State assumed interest rate, 
     and
       ``(C) tables for mortality and morbidity which reasonably 
     reflect the current mortality and morbidity risks in the 
     company's or branch's home country shall be substituted for 
     the mortality and morbidity tables otherwise used for such 
     subchapter.

     The Secretary may provide that the interest rate and 
     mortality and morbidity tables of a qualifying insurance 
     company may be used for 1 or more of its qualifying insurance 
     company branches when appropriate.
       ``(6) Definitions.--For purposes of this subsection, any 
     term used in this subsection which is also used in section 
     953(e) shall have the meaning given such term by section 
     953.''
       (3) Reserves.--Section 953(b) is amended by redesignating 
     paragraph (3) as paragraph (4) and by inserting after 
     paragraph (2) the following new paragraph:
       ``(3) Reserves for any insurance or annuity contract shall 
     be determined in the same manner as under section 954(i).''
       (c) Special Rules for Dealers.--Section 954(c)(2)(C) is 
     amended to read as follows:
       ``(C) Exception for dealers.--Except as provided by 
     regulations, in the case of a regular dealer in property 
     which is property described in paragraph (1)(B), forward 
     contracts, option contracts, or similar financial instruments 
     (including notional principal contracts and all instruments 
     referenced to commodities), there shall not be taken into 
     account in computing foreign personal holding company 
     income--
       ``(i) any item of income, gain, deduction, or loss (other 
     than any item described in subparagraph (A), (E), or (G) of 
     paragraph (1)) from any transaction (including hedging 
     transactions) entered into in the ordinary course of such 
     dealer's trade or business as such a dealer, and
       ``(ii) if such dealer is a dealer in securities (within the 
     meaning of section 475), any interest or dividend or 
     equivalent amount described in subparagraph (E) or (G) of 
     paragraph (1) from any transaction (including any hedging 
     transaction or transaction described in section 956(c)(2)(J)) 
     entered into in the ordinary course of such dealer's trade or 
     business as such a dealer in securities, but only if the 
     income from the transaction is attributable to activities of 
     the dealer in the country under the laws of which the dealer 
     is created or organized (or in the case of a qualified 
     business unit described in section 989(a), is attributable to 
     activities of the unit in the country in which the unit both 
     maintains its principal office and conducts substantial 
     business activity).''
       (d) Exemption From Foreign Base Company Services Income.--
     Paragraph (2) of section 954(e) is amended by inserting 
     ``or'' at the end of subparagraph (A), by striking ``, or'' 
     at the end of subparagraph (B) and inserting a period, by 
     striking subparagraph (C), and by adding at the end the 
     following new flush sentence:

     ``Paragraph (1) shall also not apply to income which is 
     exempt insurance income (as defined in section 953(e)) or 
     which is not treated as foreign personal holding income by 
     reason of subsection (c)(2)(C)(ii), (h), or (i).''
       (e) Exemption for Gain.--Section 954(c)(1)(B)(i) (relating 
     to net gains from certain property transactions) is amended 
     by inserting ``other than property which gives rise to income 
     not treated as foreign personal holding company income by 
     reason of subsection (h) or (i) for the taxable year'' before 
     the comma at the end.

             Subtitle B--Generalized System of Preferences

     SEC. 311. EXTENSION OF GENERALIZED SYSTEM OF PREFERENCES.

       (a) Extension of Duty-Free Treatment Under System.--Section 
     505 of the Trade Act of 1974 (29 U.S.C. 2465) is amended by 
     striking ``June 30, 1998'' and inserting ``February 29, 
     2000''.
       (b) Retroactive Application for Certain Liquidations and 
     Reliquidations.--
       (1) In general.--Notwithstanding section 514 of the Tariff 
     Act of 1930 or any other provision of law, and subject to 
     paragraph (2), any entry--
       (A) of an article to which duty-free treatment under title 
     V of the Trade Act of 1974 would have applied if such title 
     had been in effect during the period beginning on July 1, 
     1998, and ending on the day before the date of the enactment 
     of this Act, and
       (B) that was made after June 30, 1998, and before the date 
     of the enactment of this Act,
     shall be liquidated or reliquidated as free of duty, and the 
     Secretary of the Treasury shall refund any duty paid with 
     respect to such entry. As used in this subsection, the term 
     ``entry'' includes a withdrawal from warehouse for 
     consumption.

[[Page H8648]]

       (2) Requests.--Liquidation or reliquidation may be made 
     under paragraph (1) with respect to an entry only if a 
     request therefor is filed with the Customs Service, within 
     180 days after the date of the enactment of this Act, that 
     contains sufficient information to enable the Customs 
     Service--
       (A) to locate the entry; or
       (B) to reconstruct the entry if it cannot be located.

                        TITLE IV--REVENUE OFFSET

     SEC. 401. TREATMENT OF CERTAIN DEDUCTIBLE LIQUIDATING 
                   DISTRIBUTIONS OF REGULATED INVESTMENT COMPANIES 
                   AND REAL ESTATE INVESTMENT TRUSTS.

       (a) In General.--Section 332 (relating to complete 
     liquidations of subsidiaries) is amended by adding at the end 
     the following new subsection:
       ``(c) Deductible Liquidating Distributions of Regulated 
     Investment Companies and Real Estate Investment Trusts.--If a 
     corporation receives a distribution from a regulated 
     investment company or a real estate investment trust which is 
     considered under subsection (b) as being in complete 
     liquidation of such company or trust, then, notwithstanding 
     any other provision of this chapter, such corporation shall 
     recognize and treat as a dividend from such company or trust 
     an amount equal to the deduction for dividends paid allowable 
     to such company or trust by reason of such distribution.''.
       (b) Conforming Amendments.--
       (1) The material preceding paragraph (1) of section 332(b) 
     is amended by striking ``subsection (a)'' and inserting 
     ``this section''.
       (2) Paragraph (1) of section 334(b) is amended by striking 
     ``section 332(a)'' and inserting ``section 332''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to distributions after May 21, 1998.

                     TITLE V--TECHNICAL CORRECTIONS

     SEC. 501. DEFINITIONS; COORDINATION WITH OTHER TITLES.

       (a) Definitions.--For purposes of this title--
       (1) 1986 code.--The term ``1986 Code'' means the Internal 
     Revenue Code of 1986.
       (2) 1998 act.--The term ``1998 Act'' means the Internal 
     Revenue Service Restructuring and Reform Act of 1998 (Public 
     Law 105-206).
       (3) 1997 act.--The term ``1997 Act'' means the Taxpayer 
     Relief Act of 1997 (Public Law 105-34).
       (b) Coordination With Other Titles.--For purposes of 
     applying the amendments made by any title of this Act other 
     than this title, the provisions of this title shall be 
     treated as having been enacted immediately before the 
     provisions of such other titles.

     SEC. 502. AMENDMENTS RELATED TO INTERNAL REVENUE SERVICE 
                   RESTRUCTURING AND REFORM ACT OF 1998.

       (a) Amendment Related to Section 1101 of 1998 Act.--
     Paragraph (5) of section 6103(h) of the 1986 Code, as added 
     by section 1101(b) of the 1998 Act, is redesignated as 
     paragraph (6).
       (b) Amendment Related to Section 3001 of 1998 Act.--
     Paragraph (2) of section 7491(a) of the 1986 Code is amended 
     by adding at the end the following flush sentence:
     ``Subparagraph (C) shall not apply to any qualified revocable 
     trust (as defined in section 645(b)(1)) with respect to 
     liability for tax for any taxable year ending after the date 
     of the decedent's death and before the applicable date (as 
     defined in section 645(b)(2)).''.
       (c) Amendments Related to Section 3201 of 1998 Act.--
       (1) Section 7421(a) of the 1986 Code is amended by striking 
     ``6015(d)'' and inserting ``6015(e)''.
       (2) Subparagraph (A) of section 6015(e)(3) is amended by 
     striking ``of this section'' and inserting ``of subsection 
     (b) or (f)''.
       (d) Amendment Related to Section 3301 of 1998 Act.--
     Paragraph (2) of section 3301(c) of the 1998 Act is amended 
     by striking ``The amendments'' and inserting ``Subject to any 
     applicable statute of limitation not having expired with 
     regard to either a tax underpayment or a tax overpayment, the 
     amendments''.
       (e) Amendment Related to Section 3401 of 1998 Act.--Section 
     3401(c) of the 1998 Act is amended--
       (1) in paragraph (1), by striking ``7443(b)'' and inserting 
     ``7443A(b)''; and
       (2) in paragraph (2), by striking ``7443(c)'' and inserting 
     ``7443A(c)''.
       (f) Amendment Related to Section 3433 of 1998 Act.--Section 
     7421(a) of the 1986 Code is amended by inserting ``6331(i),'' 
     after ``6246(b),''.
       (g) Amendment Related to Section 3708 of 1998 Act.--
     Subparagraph (A) of section 6103(p)(3) of the 1986 Code is 
     amended by inserting ``(f)(5),'' after ``(c), (e),''.
       (h) Amendment Related to Section 5001 of 1998 Act.--
       (1) Subparagraph (B) of section 1(h)(13) of the 1986 Code 
     is amended by striking ``paragraph (7)(A)'' and inserting 
     ``paragraph (7)(A)(i)''.
       (2)(A) Subparagraphs (A)(i)(II), (A)(ii)(II), and (B)(ii) 
     of section 1(h)(13) of the 1986 Code shall not apply to any 
     distribution after December 31, 1997, by a regulated 
     investment company or a real estate investment trust with 
     respect to--
       (i) gains and losses recognized directly by such company or 
     trust, and
       (ii) amounts properly taken into account by such company or 
     trust by reason of holding (directly or indirectly) an 
     interest in another such company or trust to the extent that 
     such subparagraphs did not apply to such other company or 
     trust with respect to such amounts.
       (B) Subparagraph (A) shall not apply to any distribution 
     which is treated under section 852(b)(7) or 857(b)(8) of the 
     1986 Code as received on December 31, 1997.
       (C) For purposes of subparagraph (A), any amount which is 
     includible in gross income of its shareholders under section 
     852(b)(3)(D) or 857(b)(3)(D) of the 1986 Code after December 
     31, 1997, shall be treated as distributed after such date.
       (D)(i) For purposes of subparagraph (A), in the case of a 
     qualified partnership with respect to which a regulated 
     investment company meets the holding requirement of clause 
     (iii)--
       (I) the subparagraphs referred to in subparagraph (A) shall 
     not apply to gains and losses recognized directly by such 
     partnership for purposes of determining such company's 
     distributive share of such gains and losses, and
       (II) such company's distributive share of such gains and 
     losses (as so determined) shall be treated as recognized 
     directly by such company.

     The preceding sentence shall apply only if the qualified 
     partnership provides the company with written documentation 
     of such distributive share as so determined.
       (ii) For purposes of clause (i), the term ``qualified 
     partnership'' means, with respect to a regulated investment 
     company, any partnership if--
       (I) the partnership is an investment company registered 
     under the Investment Company Act of 1940,
       (II) the regulated investment company is permitted to 
     invest in such partnership by reason of section 12(d)(1)(E) 
     of such Act or an exemptive order of the Securities and 
     Exchange Commission under such section, and
       (III) the regulated investment company and the partnership 
     have the same taxable year.
       (iii) A regulated investment company meets the holding 
     requirement of this clause with respect to a qualified 
     partnership if (as of January 1, 1998)--
       (I) the value of the interests of the regulated investment 
     company in such partnership is 35 percent or more of the 
     value of such company's total assets, or
       (II) the value of the interests of the regulated investment 
     company in such partnership and all other qualified 
     partnerships is 90 percent or more of the value of such 
     company's total assets.
       (i) Effective Date.--The amendments made by this section 
     shall take effect as if included in the provisions of the 
     1998 Act to which they relate.

     SEC. 503. AMENDMENTS RELATED TO TAXPAYER RELIEF ACT OF 1997.

       (a) Amendment Related to Section 202 of 1997 Act.--
     Paragraph (2) of section 163(h) of the 1986 Code is amended 
     by striking ``and'' at the end of subparagraph (D), by 
     striking the period at the end of subparagraph (E) and 
     inserting ``, and'', and by adding at the end the following 
     new subparagraph:
       ``(F) any interest allowable as a deduction under section 
     221 (relating to interest on educational loans).''
       (b) Provision Related to Section 311 of 1997 Act.--In the 
     case of any capital gain distribution made after 1997 by a 
     trust to which section 664 of the 1986 Code applies with 
     respect to amounts properly taken into account by such trust 
     during 1997, paragraphs (5)(A)(i)(I), (5)(A)(ii)(I), and 
     (13)(A) of section 1(h) of the 1986 Code (as in effect for 
     taxable years ending on December 31, 1997) shall not apply.
       (c) Amendment Related to Section 506 of 1997 Act.--
       (1) Section 2001(f)(2) of the 1986 Code is amended by 
     adding at the end the following:

     ``For purposes of subparagraph (A), the value of an item 
     shall be treated as shown on a return if the item is 
     disclosed in the return, or in a statement attached to the 
     return, in a manner adequate to apprise the Secretary of the 
     nature of such item.''.
       (2) Paragraph (9) of section 6501(c) of the 1986 Code is 
     amended by striking the last sentence.
       (d) Amendments Related to Section 904 of 1997 Act.--
       (1) Paragraph (1) of section 9510(c) of the 1986 Code is 
     amended to read as follows:
       ``(1) In general.--Amounts in the Vaccine Injury 
     Compensation Trust Fund shall be available, as provided in 
     appropriation Acts, only for--
       ``(A) the payment of compensation under subtitle 2 of title 
     XXI of the Public Health Service Act (as in effect on August 
     5, 1997) for vaccine-related injury or death with respect to 
     any vaccine--
       ``(i) which is administered after September 30, 1988, and
       ``(ii) which is a taxable vaccine (as defined in section 
     4132(a)(1)) at the time compensation is paid under such 
     subtitle 2, or
       ``(B) the payment of all expenses of administration (but 
     not in excess of $9,500,000 for any fiscal year) incurred by 
     the Federal Government in administering such subtitle.''.

       (2) Section 9510(b) of the 1986 Code is amended by adding 
     at the end the following new paragraph:
       ``(3) Limitation on transfers to vaccine injury 
     compensation trust fund.--No amount may be appropriated to 
     the Vaccine Injury Compensation Trust Fund on and after the 
     date of any expenditure from the Trust Fund which is not 
     permitted by this

[[Page H8649]]

     section. The determination of whether an expenditure is so 
     permitted shall be made without regard to--
       ``(A) any provision of law which is not contained or 
     referenced in this title or in a revenue Act, and
       ``(B) whether such provision of law is a subsequently 
     enacted provision or directly or indirectly seeks to waive 
     the application of this paragraph.''.
       (e) Amendments Related to Section 915 of 1997 Act.--
       (1) Section 915 of the Taxpayer Relief Act of 1997 is 
     amended--
       (A) in subsection (b), by inserting ``or 1998'' after 
     ``1997'', and
       (B) by amending subsection (d) to read as follows:
       ``(d) Effective Date.--This section shall apply to taxable 
     years ending with or within calendar year 1997.''.
       (2) Paragraph (2) of section 6404(h) of the 1986 Code is 
     amended by inserting ``Robert T. Stafford'' before 
     ``Disaster''.
       (f) Amendments Related to Section 1012 of 1997 Act.--
       (1) Paragraph (2) of section 351(c) of the 1986 Code, as 
     amended by section 6010(c) of the 1998 Act, is amended by 
     inserting ``, or the fact that the corporation whose stock 
     was distributed issues additional stock,'' after ``dispose of 
     part or all of the distributed stock''.
       (2) Clause (ii) of section 368(a)(2)(H) of the 1986 Code, 
     as amended by section 6010(c) of the 1998 Act, is amended by 
     inserting ``, or the fact that the corporation whose stock 
     was distributed issues additional stock,'' after ``dispose of 
     part or all of the distributed stock''.
       (g) Amendment Related to Section 1082 of 1997 Act.--
     Subparagraph (F) of section 172(b)(1) of the 1986 Code is 
     amended by adding at the end the following new clause:
       ``(iv) Coordination with paragraph (2).--For purposes of 
     applying paragraph (2), an eligible loss for any taxable year 
     shall be treated in a manner similar to the manner in which a 
     specified liability loss is treated.''
       (h) Amendment Related to Section 1084 of 1997 Act.--
     Paragraph (3) of section 264(f) of the 1986 Code is amended 
     by adding at the end the following flush sentence:
     ``If the amount described in subparagraph (A) with respect to 
     any policy or contract does not reasonably approximate its 
     actual value, the amount taken into account under 
     subparagraph (A) shall be the greater of the amount of the 
     insurance company liability or the insurance company reserve 
     with respect to such policy or contract (as determined for 
     purposes of the annual statement approved by the National 
     Association of Insurance Commissioners) or shall be such 
     other amount as is determined by the Secretary.''
       (i) Amendment Related to Section 1205 of 1997 Act.--
     Paragraph (2) of section 6311(d) of the 1986 Code is amended 
     by striking ``under such contracts'' in the last sentence and 
     inserting ``under any such contract for the use of credit or 
     debit cards for the payment of taxes imposed by subtitle A''.
       (j) Effective Date.--The amendments made by this section 
     shall take effect as if included in the provisions of the 
     Taxpayer Relief Act of 1997 to which they relate.

     SEC. 504. AMENDMENTS RELATED TO TAX REFORM ACT OF 1984.

       (a) In General.--Subparagraph (C) of section 172(d)(4) of 
     the 1986 Code is amended to read as follows:
       ``(C) any deduction for casualty or theft losses allowable 
     under paragraph (2) or (3) of section 165(c) shall be treated 
     as attributable to the trade or business; and''.
       (b) Conforming Amendments.--
       (1) Paragraph (3) of section 67(b) of the 1986 Code is 
     amended by striking ``for losses described in subsection 
     (c)(3) or (d) of section 165'' and inserting ``for casualty 
     or theft losses described in paragraph (2) or (3) of section 
     165(c) or for losses described in section 165(d)''.
       (2) Paragraph (3) of section 68(c) of the 1986 Code is 
     amended by striking ``for losses described in subsection 
     (c)(3) or (d) of section 165'' and inserting ``for casualty 
     or theft losses described in paragraph (2) or (3) of section 
     165(c) or for losses described in section 165(d)''.
       (3) Paragraph (1) of section 873(b) is amended to read as 
     follows:
       ``(1) Losses.--The deduction allowed by section 165 for 
     casualty or theft losses described in paragraph (2) or (3) of 
     section 165(c), but only if the loss is of property located 
     within the United States.''
       (c) Effective Dates.--
       (1) The amendments made by subsections (a) and (b)(3) shall 
     apply to taxable years beginning after December 31, 1983.
       (2) The amendment made by subsection (b)(1) shall apply to 
     taxable years beginning after December 31, 1986.
       (3) The amendment made by subsection (b)(2) shall apply to 
     taxable years beginning after December 31, 1990.

     SEC. 505. OTHER AMENDMENTS.

       (a) Amendments Related to Section 6103 of 1986 Code.--
       (1) Subsection (j) of section 6103 of the 1986 Code is 
     amended by adding at the end the following new paragraph:
       ``(5) Department of agriculture.--Upon request in writing 
     by the Secretary of Agriculture, the Secretary shall furnish 
     such returns, or return information reflected thereon, as the 
     Secretary may prescribe by regulation to officers and 
     employees of the Department of Agriculture whose official 
     duties require access to such returns or information for the 
     purpose of, but only to the extent necessary in, structuring, 
     preparing, and conducting the census of agriculture pursuant 
     to the Census of Agriculture Act of 1997 (Public Law 105-
     113).''.
       (2) Paragraph (4) of section 6103(p) of the 1986 Code is 
     amended by striking ``(j)(1) or (2)'' in the material 
     preceding subparagraph (A) and in subparagraph (F) and 
     inserting ``(j)(1), (2), or (5)''.
       (3) The amendments made by this subsection shall apply to 
     requests made on or after the date of the enactment of this 
     Act.
       (b) Amendment Related to Section 9004 of Transportation 
     Equity Act for the 21st Century.--
       (1) Paragraph (2) of section 9503(f) of the 1986 Code is 
     amended to read as follows:
       ``(2) notwithstanding section 9602(b), obligations held by 
     such Fund after September 30, 1998, shall be obligations of 
     the United States which are not interest-bearing.''
       (2) The amendment made by paragraph (1) shall take effect 
     on October 1, 1998.
       (c) Clerical Amendments.--
       (1) Clause (i) of section 51(d)(6)(B) of the 1986 Code is 
     amended by striking ``rehabilitation plan'' and inserting 
     ``plan for employment''. The reference to plan for employment 
     in such clause shall be treated as including a reference to 
     the rehabilitation plans referred to in such clause as in 
     effect before the amendment made by the preceding sentence.
       (2) Subparagraphs (C) and (D) of section 6693(a)(2) of the 
     1986 Code are each amended by striking ``Section'' and 
     inserting ``section''.

            TITLE VI--AMERICAN COMMUNITY RENEWAL ACT OF 1998

     SEC. 601. SHORT TITLE.

       This title may be cited as the ``American Community Renewal 
     Act of 1998''.

     SEC. 602. DESIGNATION OF AND TAX INCENTIVES FOR RENEWAL 
                   COMMUNITIES.

       (a) In General.--Chapter 1 is amended by adding at the end 
     the following new subchapter:

                  ``Subchapter X--Renewal Communities

``Part I.   Designation.
``Part II.  Renewal community capital gain; renewal community business.
``Part III. Family development accounts.
``Part IV.  Additional incentives.

                         ``PART I--DESIGNATION

``Sec. 1400E. Designation of renewal communities.

     ``SEC. 1400E. DESIGNATION OF RENEWAL COMMUNITIES.

       ``(a) Designation.--
       ``(1) Definitions.--For purposes of this title, the term 
     `renewal community' means any area--
       ``(A) which is nominated by one or more local governments 
     and the State or States in which it is located for 
     designation as a renewal community (hereinafter in this 
     section referred to as a `nominated area'), and
       ``(B) which the Secretary of Housing and Urban Development 
     designates as a renewal community, after consultation with--
       ``(i) the Secretaries of Agriculture, Commerce, Labor, and 
     the Treasury; the Director of the Office of Management and 
     Budget; and the Administrator of the Small Business 
     Administration, and
       ``(ii) in the case of an area on an Indian reservation, the 
     Secretary of the Interior.
       ``(2) Number of designations.--
       ``(A) In general.--The Secretary of Housing and Urban 
     Development may designate not more than 20 nominated areas as 
     renewal communities.
       ``(B) Minimum designation in rural areas.--Of the areas 
     designated under paragraph (1), at least 4 must be areas--
       ``(i) which are within a local government jurisdiction or 
     jurisdictions with a population of less than 50,000,
       ``(ii) which are outside of a metropolitan statistical area 
     (within the meaning of section 143(k)(2)(B)), or
       ``(iii) which are determined by the Secretary of Housing 
     and Urban Development, after consultation with the Secretary 
     of Commerce, to be rural areas.
       ``(3) Areas designated based on degree of poverty, etc.--
       ``(A) In general.--Except as otherwise provided in this 
     section, the nominated areas designated as renewal 
     communities under this subsection shall be those nominated 
     areas with the highest average ranking with respect to the 
     criteria described in subparagraphs (B), (C), and (D) of 
     subsection (c)(3). For purposes of the preceding sentence, an 
     area shall be ranked within each such criterion on the basis 
     of the amount by which the area exceeds such criterion, with 
     the area which exceeds such criterion by the greatest amount 
     given the highest ranking.
       ``(B) Exception where inadequate course of action, etc.--An 
     area shall not be designated under subparagraph (A) if the 
     Secretary of Housing and Urban Development determines that 
     the course of action described in subsection (d)(2) with 
     respect to such area is inadequate.
       ``(C) Priority for empowerment zones and enterprise 
     communities with respect to first half of designations.--With 
     respect to the first 10 designations made under this 
     section--
       ``(i) 10 shall be chosen from nominated areas which are 
     empowerment zones or enterprise communities (and are 
     otherwise eligible for designation under this section), and
       ``(ii) of such 10, 2 shall be areas described in paragraph 
     (2)(B).

[[Page H8650]]

       ``(4) Limitation on designations.--
       ``(A) Publication of regulations.--The Secretary of Housing 
     and Urban Development shall prescribe by regulation no later 
     than 4 months after the date of the enactment of this 
     section, after consultation with the officials described in 
     paragraph (1)(B)--
       ``(i) the procedures for nominating an area under paragraph 
     (1)(A),
       ``(ii) the parameters relating to the size and population 
     characteristics of a renewal community, and
       ``(iii) the manner in which nominated areas will be 
     evaluated based on the criteria specified in subsection (d).
       ``(B) Time limitations.--The Secretary of Housing and Urban 
     Development may designate nominated areas as renewal 
     communities only during the 24-month period beginning on the 
     first day of the first month following the month in which the 
     regulations described in subparagraph (A) are prescribed.
       ``(C) Procedural rules.--The Secretary of Housing and Urban 
     Development shall not make any designation of a nominated 
     area as a renewal community under paragraph (2) unless--
       ``(i) the local governments and the States in which the 
     nominated area is located have the authority--

       ``(I) to nominate such area for designation as a renewal 
     community,
       ``(II) to make the State and local commitments described in 
     subsection (d), and
       ``(III) to provide assurances satisfactory to the Secretary 
     of Housing and Urban Development that such commitments will 
     be fulfilled,

       ``(ii) a nomination regarding such area is submitted in 
     such a manner and in such form, and contains such 
     information, as the Secretary of Housing and Urban 
     Development shall by regulation prescribe, and
       ``(iii) the Secretary of Housing and Urban Development 
     determines that any information furnished is reasonably 
     accurate.
       ``(5) Nomination process for indian reservations.--For 
     purposes of this subchapter, in the case of a nominated area 
     on an Indian reservation, the reservation governing body (as 
     determined by the Secretary of the Interior) shall be treated 
     as being both the State and local governments with respect to 
     such area.
       ``(b) Period for Which Designation Is in Effect.--
       ``(1) In general.--Any designation of an area as a renewal 
     community shall remain in effect during the period beginning 
     on the date of the designation and ending on the earliest 
     of--
       ``(A) December 31, 2006,
       ``(B) the termination date designated by the State and 
     local governments in their nomination, or
       ``(C) the date the Secretary of Housing and Urban 
     Development revokes such designation.
       ``(2) Revocation of designation.--The Secretary of Housing 
     and Urban Development may revoke the designation under this 
     section of an area if such Secretary determines that the 
     local government or the State in which the area is located--
       ``(A) has modified the boundaries of the area, or
       ``(B) is not complying substantially with, or fails to make 
     progress in achieving, the State or local commitments, 
     respectively, described in subsection (d).
       ``(c) Area and Eligibility Requirements.--
       ``(1) In general.--The Secretary of Housing and Urban 
     Development may designate a nominated area as a renewal 
     community under subsection (a) only if the area meets the 
     requirements of paragraphs (2) and (3) of this subsection.
       ``(2) Area requirements.--A nominated area meets the 
     requirements of this paragraph if--
       ``(A) the area is within the jurisdiction of one or more 
     local governments,
       ``(B) the boundary of the area is continuous, and
       ``(C) the area--
       ``(i) has a population, of at least--

       ``(I) 4,000 if any portion of such area (other than a rural 
     area described in subsection (a)(2)(B)(i)) is located within 
     a metropolitan statistical area (within the meaning of 
     section 143(k)(2)(B)) which has a population of 50,000 or 
     greater, or
       ``(II) 1,000 in any other case, or

       ``(ii) is entirely within an Indian reservation (as 
     determined by the Secretary of the Interior).
       ``(3) Eligibility requirements.--A nominated area meets the 
     requirements of this paragraph if the State and the local 
     governments in which it is located certify (and the Secretary 
     of Housing and Urban Development, after such review of 
     supporting data as he deems appropriate, accepts such 
     certification) that--
       ``(A) the area is one of pervasive poverty, unemployment, 
     and general distress,
       ``(B) the unemployment rate in the area, as determined by 
     the most recent available data, was at least 1\1/2\ times the 
     national unemployment rate for the period to which such data 
     relate,
       ``(C) the poverty rate for each population census tract 
     within the nominated area is at least 20 percent, and
       ``(D) in the case of an urban area, at least 70 percent of 
     the households living in the area have incomes below 80 
     percent of the median income of households within the 
     jurisdiction of the local government (determined in the same 
     manner as under section 119(b)(2) of the Housing and 
     Community Development Act of 1974).
       ``(4) Consideration of high incidence of crime.--The 
     Secretary of Housing and Urban Development shall take into 
     account, in selecting nominated areas for designation as 
     renewal communities under this section, the extent to which 
     such areas have a high incidence of crime.
       ``(5) Consideration of communities identified in gao 
     study.--The Secretary of Housing and Urban Development shall 
     take into account, in selecting nominated areas for 
     designation as renewal communities under this section, if the 
     area has census tracts identified in the May 12, 1998, report 
     of the Government Accounting Office regarding the 
     identification of economically distressed areas.
       ``(d) Required State and Local Commitments.--
       ``(1) In general.--The Secretary of Housing and Urban 
     Development may designate any nominated area as a renewal 
     community under subsection (a) only if--
       ``(A) the local government and the State in which the area 
     is located agree in writing that, during any period during 
     which the area is a renewal community, such governments will 
     follow a specified course of action which meets the 
     requirements of paragraph (2) and is designed to reduce the 
     various burdens borne by employers or employees in such area, 
     and
       ``(B) the economic growth promotion requirements of 
     paragraph (3) are met.
       ``(2) Course of action.--
       ``(A) In general.--A course of action meets the 
     requirements of this paragraph if such course of action is a 
     written document, signed by a State (or local government) and 
     neighborhood organizations, which evidences a partnership 
     between such State or government and community-based 
     organizations and which commits each signatory to specific 
     and measurable goals, actions, and timetables. Such course of 
     action shall include at least five of the following:
       ``(i) A reduction of tax rates or fees applying within the 
     renewal community.
       ``(ii) An increase in the level of efficiency of local 
     services within the renewal community.
       ``(iii) Crime reduction strategies, such as crime 
     prevention (including the provision of such services by 
     nongovernmental entities).
       ``(iv) Actions to reduce, remove, simplify, or streamline 
     governmental requirements applying within the renewal 
     community.
       ``(v) Involvement in the program by private entities, 
     organizations, neighborhood organizations, and community 
     groups, particularly those in the renewal community, 
     including a commitment from such private entities to provide 
     jobs and job training for, and technical, financial, or other 
     assistance to, employers, employees, and residents from the 
     renewal community.
       ``(vi) State or local income tax benefits for fees paid for 
     services performed by a nongovernmental entity which were 
     formerly performed by a governmental entity.
       ``(vii) The gift (or sale at below fair market value) of 
     surplus real property (such as land, homes, and commercial or 
     industrial structures) in the renewal community to 
     neighborhood organizations, community development 
     corporations, or private companies.
       ``(B) Recognition of past efforts.--For purposes of this 
     section, in evaluating the course of action agreed to by any 
     State or local government, the Secretary of Housing and Urban 
     Development shall take into account the past efforts of such 
     State or local government in reducing the various burdens 
     borne by employers and employees in the area involved.
       ``(3) Economic growth promotion requirements.--The economic 
     growth promotion requirements of this paragraph are met with 
     respect to a nominated area if the local government and the 
     State in which such area is located certify in writing that 
     such government and State, respectively, have repealed or 
     otherwise will not enforce within the area, if such area is 
     designated as a renewal community--
       ``(A) licensing requirements for occupations that do not 
     ordinarily require a professional degree,
       ``(B) zoning restrictions on home-based businesses which do 
     not create a public nuisance,
       ``(C) permit requirements for street vendors who do not 
     create a public nuisance,
       ``(D) zoning or other restrictions that impede the 
     formation of schools or child care centers, and
       ``(E) franchises or other restrictions on competition for 
     businesses providing public services, including but not 
     limited to taxicabs, jitneys, cable television, or trash 
     hauling,
     except to the extent that such regulation of businesses and 
     occupations is necessary for and well-tailored to the 
     protection of health and safety.
       ``(e) Coordination With Treatment of Empowerment Zones and 
     Enterprise Communities.--For purposes of this title, if there 
     are in effect with respect to the same area both--
       ``(1) a designation as a renewal community, and
       ``(2) a designation as an empowerment zone or enterprise 
     community,
     both of such designations shall be given full effect with 
     respect to such area.
       ``(f) Definitions and Special Rules.--For purposes of this 
     subchapter--

[[Page H8651]]

       ``(1) Governments.--If more than one government seeks to 
     nominate an area as a renewal community, any reference to, or 
     requirement of, this section shall apply to all such 
     governments.
       ``(2) State.--The term `State' includes Puerto Rico, the 
     Virgin Islands of the United States, Guam, American Samoa, 
     the Northern Mariana Islands, and any other possession of the 
     United States.
       ``(3) Local government.--The term `local government' 
     means--
       ``(A) any county, city, town, township, parish, village, or 
     other general purpose political subdivision of a State,
       ``(B) any combination of political subdivisions described 
     in subparagraph (A) recognized by the Secretary of Housing 
     and Urban Development, and
       ``(C) the District of Columbia.
       ``(4) Application of rules relating to census tracts and 
     census data.--The rules of sections 1392(b)(4) and 1393(a)(9) 
     shall apply.

 ``PART II--RENEWAL COMMUNITY CAPITAL GAIN; RENEWAL COMMUNITY BUSINESS

``Sec. 1400F. Renewal community capital gain.
``Sec. 1400G. Renewal community business defined.

     ``SEC. 1400F. RENEWAL COMMUNITY CAPITAL GAIN.

       ``(a) General Rule.--Gross income does not include any 
     qualified capital gain recognized on the sale or exchange of 
     a qualified community asset held for more than 5 years.
       ``(b) Qualified Community Asset.--For purposes of this 
     section--
       ``(1) In general.--The term `qualified community asset' 
     means--
       ``(A) any qualified community stock,
       ``(B) any qualified community partnership interest, and
       ``(C) any qualified community business property.
       ``(2) Qualified community stock.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the term `qualified community stock' means any stock in a 
     domestic corporation if--
       ``(i) such stock is acquired by the taxpayer after December 
     31, 1999, and before January 1, 2007, at its original issue 
     (directly or through an underwriter) from the corporation 
     solely in exchange for cash,
       ``(ii) as of the time such stock was issued, such 
     corporation was a renewal community business (or, in the case 
     of a new corporation, such corporation was being organized 
     for purposes of being a renewal community business), and
       ``(iii) during substantially all of the taxpayer's holding 
     period for such stock, such corporation qualified as a 
     renewal community business.
       ``(B) Redemptions.--A rule similar to the rule of section 
     1202(c)(3) shall apply for purposes of this paragraph.
       ``(3) Qualified community partnership interest.--The term 
     `qualified community partnership interest' means any interest 
     in a partnership if--
       ``(A) such interest is acquired by the taxpayer after 
     December 31, 1999, and before January 1, 2007,
       ``(B) as of the time such interest was acquired, such 
     partnership was a renewal community business (or, in the case 
     of a new partnership, such partnership was being organized 
     for purposes of being a renewal community business), and
       ``(C) during substantially all of the taxpayer's holding 
     period for such interest, such partnership qualified as a 
     renewal community business.
     A rule similar to the rule of paragraph (2)(B) shall apply 
     for purposes of this paragraph.
       ``(4) Qualified community business property.--
       ``(A) In general.--The term `qualified community business 
     property' means tangible property if--
       ``(i) such property was acquired by the taxpayer by 
     purchase (as defined in section 179(d)(2)) after December 31, 
     1999, and before January 1, 2007,
       ``(ii) the original use of such property in the renewal 
     community commences with the taxpayer, and
       ``(iii) during substantially all of the taxpayer's holding 
     period for such property, substantially all of the use of 
     such property was in a renewal community business of the 
     taxpayer.
       ``(B) Special rule for substantial improvements.--The 
     requirements of clauses (i) and (ii) of subparagraph (A) 
     shall be treated as satisfied with respect to--
       ``(i) property which is substantially improved (within the 
     meaning of section 1400B(b)(4)(B)(ii)) by the taxpayer before 
     January 1, 2007, and
       ``(ii) any land on which such property is located.
       ``(c) Certain Rules To Apply.--Rules similar to the rules 
     of paragraphs (5), (6), and (7) of subsection (b), and 
     subsections (e), (f), and (g), of section 1400B shall apply 
     for purposes of this section.

     ``SEC. 1400G. RENEWAL COMMUNITY BUSINESS DEFINED.

       ``For purposes of this part, the term `renewal community 
     business' means any entity or proprietorship which would be a 
     qualified business entity or qualified proprietorship under 
     section 1397B if--
       ``(1) references to renewal communities were substituted 
     for references to empowerment zones in such section; and
       ``(2) `80 percent' were substituted for `50 percent' in 
     subsections (b)(2) and (c)(1) of such section.

                ``PART III--FAMILY DEVELOPMENT ACCOUNTS

``Sec. 1400H. Family development accounts for renewal community EITC 
              recipients.
``Sec. 1400I. Demonstration program to provide matching contributions 
              to family development accounts in certain renewal 
              communities.
``Sec. 1400J. Designation of earned income tax credit payments for 
              deposit to family development account.

     ``SEC. 1400H. FAMILY DEVELOPMENT ACCOUNTS FOR RENEWAL 
                   COMMUNITY EITC RECIPIENTS.

       ``(a) Allowance of Deduction.--
       ``(1) In general.--There shall be allowed as a deduction--
       ``(A) in the case of a qualified individual, the amount 
     paid in cash for the taxable year by such individual to any 
     family development account for such individual's benefit, and
       ``(B) in the case of any person other than a qualified 
     individual, the amount paid in cash for the taxable year by 
     such person to any family development account for the benefit 
     of a qualified individual but only if the amount so paid is 
     designated for purposes of this section by such individual.
     No deduction shall be allowed under this paragraph for any 
     amount deposited in a family development account under 
     section 1400I (relating to demonstration program to provide 
     matching amounts in renewal communities).
       ``(2) Limitation.--
       ``(A) In general.--The amount allowable as a deduction to 
     any individual for any taxable year by reason of paragraph 
     (1)(A) shall not exceed the lesser of--
       ``(i) $2,000, or
       ``(ii) an amount equal to the compensation includible in 
     the individual's gross income for such taxable year.
       ``(B) Persons donating to family development accounts of 
     others.--The amount which may be designated under paragraph 
     (1)(B) by any qualified individual for any taxable year of 
     such individual shall not exceed $1,000.
       ``(3) Special rules for certain married individuals.--Rules 
     similar to rules of section 219(c) shall apply to the 
     limitation in paragraph (2)(A).
       ``(4) Coordination with ira's.--No deduction shall be 
     allowed under this section to any person by reason of a 
     payment to an account for the benefit of a qualified 
     individual if any amount is paid into an individual 
     retirement account (including a Roth IRA) for the benefit of 
     such individual.
       ``(5) Rollovers.--No deduction shall be allowed under this 
     section with respect to any rollover contribution.
       ``(b) Tax Treatment of Distributions.--
       ``(1) Inclusion of amounts in gross income.--Except as 
     otherwise provided in this subsection, any amount paid or 
     distributed out of a family development account shall be 
     included in gross income by the payee or distributee, as the 
     case may be.
       ``(2) Exclusion of qualified family development 
     distributions.--Paragraph (1) shall not apply to any 
     qualified family development distribution.
       ``(c) Qualified Family Development Distribution.--For 
     purposes of this section--
       ``(1) In general.--The term `qualified family development 
     distribution' means any amount paid or distributed out of a 
     family development account which would otherwise be 
     includible in gross income, to the extent that such payment 
     or distribution is used exclusively to pay qualified family 
     development expenses for the holder of the account or the 
     spouse or dependent (as defined in section 152) of such 
     holder.
       ``(2) Qualified family development expenses.--The term 
     `qualified family development expenses' means any of the 
     following:
       ``(A) Qualified higher education expenses.
       ``(B) Qualified first-time homebuyer costs.
       ``(C) Qualified business capitalization costs.
       ``(D) Qualified medical expenses.
       ``(E) Qualified rollovers.
       ``(3) Qualified higher education expenses.--
       ``(A) In general.--The term `qualified higher education 
     expenses' has the meaning given such term by section 
     72(t)(7), determined by treating postsecondary vocational 
     educational schools as eligible educational institutions.
       ``(B) Postsecondary vocational education school.--The term 
     `postsecondary vocational educational school' means an area 
     vocational education school (as defined in subparagraph (C) 
     or (D) of section 521(4) of the Carl D. Perkins Vocational 
     and Applied Technology Education Act (20 U.S.C. 2471(4))) 
     which is in any State (as defined in section 521(33) of such 
     Act), as such sections are in effect on the date of the 
     enactment of this section.
       ``(C) Coordination with other benefits.--The amount of 
     qualified higher education expenses for any taxable year 
     shall be reduced as provided in section 25A(g)(2).
       ``(4) Qualified first-time homebuyer costs.--The term 
     `qualified first-time homebuyer costs' means qualified 
     acquisition costs (as defined in section 72(t)(8) without 
     regard to subparagraph (B) thereof) with respect to a 
     principal residence (within the meaning of section 121) for a 
     qualified first-time homebuyer (as defined in such section).
       ``(5) Qualified business capitalization costs.--

[[Page H8652]]

       ``(A) In general.--The term `qualified business 
     capitalization costs' means qualified expenditures for the 
     capitalization of a qualified business pursuant to a 
     qualified plan.
       ``(B) Qualified expenditures.--The term `qualified 
     expenditures' means expenditures included in a qualified 
     plan, including capital, plant, equipment, working capital, 
     and inventory expenses.
       ``(C) Qualified business.--The term `qualified business' 
     means any business that does not contravene any law.
       ``(D) Qualified plan.--The term `qualified plan' means a 
     business plan which meets such requirements as the Secretary 
     may specify.
       ``(6) Qualified medical expenses.--The term `qualified 
     medical expenses' means any amount paid during the taxable 
     year, not compensated for by insurance or otherwise, for 
     medical care (as defined in section 213(d)) of the taxpayer, 
     his spouse, or his dependent (as defined in section 152).
       ``(7) Qualified rollovers.--The term `qualified rollover' 
     means any amount paid from a family development account of a 
     taxpayer into another such account established for the 
     benefit of--
       ``(A) such taxpayer, or
       ``(B) any qualified individual who is--
       ``(i) the spouse of such taxpayer, or
       ``(ii) any dependent (as defined in section 152) of the 
     taxpayer.
     Rules similar to the rules of section 408(d)(3) shall apply 
     for purposes of this paragraph.
       ``(d) Tax Treatment of Accounts.--
       ``(1) In general.--Any family development account is exempt 
     from taxation under this subtitle unless such account has 
     ceased to be a family development account by reason of 
     paragraph (2). Notwithstanding the preceding sentence, any 
     such account is subject to the taxes imposed by section 511 
     (relating to imposition of tax on unrelated business income 
     of charitable, etc., organizations). Notwithstanding any 
     other provision of this title (including chapters 11 and 12), 
     the basis of any person in such an account is zero.
       ``(2) Loss of exemption in case of prohibited 
     transactions.--For purposes of this section, rules similar to 
     the rules of section 408(e) shall apply.
       ``(3) Other rules to apply.--Rules similar to the rules of 
     paragraphs (4), (5), and (6) of section 408(d) shall apply 
     for purposes of this section.
       ``(e) Family Development Account.--For purposes of this 
     title, the term `family development account' means a trust 
     created or organized in the United States for the exclusive 
     benefit of a qualified individual or his beneficiaries, but 
     only if the written governing instrument creating the trust 
     meets the following requirements:
       ``(1) Except in the case of a qualified rollover (as 
     defined in subsection (c)(7))--
       ``(A) no contribution will be accepted unless it is in 
     cash, and
       ``(B) contributions will not be accepted for the taxable 
     year in excess of $3,000 (determined without regard to any 
     contribution made under section 1400I (relating to 
     demonstration program to provide matching amounts in renewal 
     communities)).
       ``(2) The requirements of paragraphs (2) through (6) of 
     section 408(a) are met.
       ``(f) Qualified Individual.--For purposes of this section, 
     the term `qualified individual' means, for any taxable year, 
     an individual--
       ``(1) who is a bona fide resident of a renewal community 
     throughout the taxable year, and
       ``(2) to whom a credit was allowed under section 32 for the 
     preceding taxable year.
       ``(g) Other Definitions and Special Rules.--
       ``(1) Compensation.--The term `compensation' has the 
     meaning given such term by section 219(f)(1).
       ``(2) Married individuals.--The maximum deduction under 
     subsection (a) shall be computed separately for each 
     individual, and this section shall be applied without regard 
     to any community property laws.
       ``(3) Time when contributions deemed made.--For purposes of 
     this section, a taxpayer shall be deemed to have made a 
     contribution to a family development account on the last day 
     of the preceding taxable year if the contribution is made on 
     account of such taxable year and is made not later than the 
     time prescribed by law for filing the return for such taxable 
     year (not including extensions thereof).
       ``(4) Employer payments; custodial accounts.--Rules similar 
     to the rules of sections 219(f)(5) and 408(h) shall apply for 
     purposes of this section.
       ``(5) Reports.--The trustee of a family development account 
     shall make such reports regarding such account to the 
     Secretary and to the individual for whom the account is 
     maintained with respect to contributions (and the years to 
     which they relate), distributions, and such other matters as 
     the Secretary may require under regulations. The reports 
     required by this paragraph--
       ``(A) shall be filed at such time and in such manner as the 
     Secretary prescribes in such regulations, and
       ``(B) shall be furnished to individuals--
       ``(i) not later than January 31 of the calendar year 
     following the calendar year to which such reports relate, and
       ``(ii) in such manner as the Secretary prescribes in such 
     regulations.
       ``(6) Investment in collectibles treated as 
     distributions.--Rules similar to the rules of section 408(m) 
     shall apply for purposes of this section.
       ``(h) Penalty for Distributions Not Used for Qualified 
     Family Development Expenses.--
       ``(1) In general.--If any amount is distributed from a 
     family development account and is not used exclusively to pay 
     qualified family development expenses for the holder of the 
     account or the spouse or dependent (as defined in section 
     152) of such holder, the tax imposed by this chapter for the 
     taxable year of such distribution shall be increased by the 
     sum of--
       ``(A) 100 percent of the portion of such amount which is 
     includible in gross income and is attributable to amounts 
     contributed under section 1400I (relating to demonstration 
     program to provide matching amounts in renewal communities), 
     and
       ``(B) 10 percent of the portion of such amount which is 
     includible in gross income and is not described in 
     subparagraph (A).
     For purposes of this subsection, distributions which are 
     includable in gross income shall be treated as attributable 
     to amounts contributed under section 1400I to the extent 
     thereof. For purposes of the preceding sentence, all family 
     development accounts of an individual shall be treated as one 
     account.
       ``(2) Exception for certain distributions.--Paragraph (1) 
     shall not apply to distributions which are--
       ``(A) made on or after the date on which the account holder 
     attains age 59\1/2\,
       ``(B) made to a beneficiary (or the estate of the account 
     holder) on or after the death of the account holder, or
       ``(C) attributable to the account holder's being disabled 
     within the meaning of section 72(m)(7).
       ``(i) Termination.--No deduction shall be allowed under 
     this section for any amount paid to a family development 
     account for any taxable year beginning after December 31, 
     2006.

     ``SEC. 1400I. DEMONSTRATION PROGRAM TO PROVIDE MATCHING 
                   CONTRIBUTIONS TO FAMILY DEVELOPMENT ACCOUNTS IN 
                   CERTAIN RENEWAL COMMUNITIES.

       ``(a) Designation.--
       ``(1) Definitions.--For purposes of this section, the term 
     `FDA matching demonstration area' means any renewal 
     community--
       ``(A) which is nominated under this section by each of the 
     local governments and States which nominated such community 
     for designation as a renewal community under section 
     1400E(a)(1)(A), and
       ``(B) which the Secretary of Housing and Urban Development 
     designates as an FDA matching demonstration area after 
     consultation with--
       ``(i) the Secretaries of Agriculture, Commerce, Labor, and 
     the Treasury, the Director of the Office of Management and 
     Budget, and the Administrator of the Small Business 
     Administration, and
       ``(ii) in the case of a community on an Indian reservation, 
     the Secretary of the Interior.
       ``(2) Number of designations.--
       ``(A) In general.--The Secretary of Housing and Urban 
     Development may designate not more than 5 communities as FDA 
     matching demonstration areas.
       ``(B) Minimum designation in rural areas.--Of the areas 
     designated under subparagraph (A), at least 2 must be areas 
     described in section 1400E(a)(2)(B).
       ``(3) Limitations on designations.--
       ``(A) Publication of regulations.--The Secretary of Housing 
     and Urban Development shall prescribe by regulation no later 
     than 4 months after the date of the enactment of this 
     section, after consultation with the officials described in 
     paragraph (1)(B)--
       ``(i) the procedures for nominating a renewal community 
     under paragraph (1)(A) (including procedures for coordinating 
     such nomination with the nomination of an area for 
     designation as a renewal community under section 1400E), and
       ``(ii) the manner in which nominated renewal communities 
     will be evaluated for purposes of this section.
       ``(B) Time limitations.--The Secretary of Housing and Urban 
     Development may designate renewal communities as FDA matching 
     demonstration areas only during the 24-month period beginning 
     on the first day of the first month following the month in 
     which the regulations described in subparagraph (A) are 
     prescribed.
       ``(4) Designation based on degree of poverty, etc.--The 
     rules of section 1400E(a)(3) shall apply for purposes of 
     designations of FDA matching demonstration areas under this 
     section.
       ``(b) Period for Which Designation is in Effect.--Any 
     designation of a renewal community as an FDA matching 
     demonstration area shall remain in effect during the period 
     beginning on the date of such designation and ending on the 
     date on which such area ceases to be a renewal community.
       ``(c) Matching Contributions to Family Development 
     Accounts.--
       ``(1) In general.--Not less than once each taxable year, 
     the Secretary shall deposit (to the extent provided in 
     appropriation Acts) into a family development account of each 
     qualified individual (as defined in section 1400H(f))--
       ``(A) who is a resident throughout the taxable year of an 
     FDA matching demonstration area, and
       ``(B) who requests (in such form and manner as the 
     Secretary prescribes) such deposit for the taxable year,
     an amount equal to the sum of the amounts deposited into all 
     of the family development

[[Page H8653]]

     accounts of such individual during such taxable year 
     (determined without regard to any amount contributed under 
     this section).
       ``(2) Limitations.--
       ``(A) Annual limit.--The Secretary shall not deposit more 
     than $1000 under paragraph (1) with respect to any individual 
     for any taxable year.
       ``(B) Aggregate limit.--The Secretary shall not deposit 
     more than $2000 under paragraph (1) with respect to any 
     individual for all taxable years.
       ``(3) Exclusion from income.--Except as provided in section 
     1400H, gross income shall not include any amount deposited 
     into a family development account under paragraph (1).
       ``(d) Notice of Program.--The Secretary shall provide 
     appropriate notice to residents of FDA matching demonstration 
     areas of the availability of the benefits under this section.
       ``(e) Termination.--No amount may be deposited under this 
     section for any taxable year beginning after December 31, 
     2006.

     ``SEC. 1400J. DESIGNATION OF EARNED INCOME TAX CREDIT 
                   PAYMENTS FOR DEPOSIT TO FAMILY DEVELOPMENT 
                   ACCOUNT.

       ``(a) In General.--With respect to the return of any 
     qualified individual (as defined in section 1400H(f)) for the 
     taxable year of the tax imposed by this chapter, such 
     individual may designate that a specified portion (not less 
     than $1) of any overpayment of tax for such taxable year 
     which is attributable to the earned income tax credit shall 
     be deposited by the Secretary into a family development 
     account of such individual. The Secretary shall so deposit 
     such portion designated under this subsection.
       ``(b) Manner and Time of Designation.--A designation under 
     subsection (a) may be made with respect to any taxable year--
       ``(1) at the time of filing the return of the tax imposed 
     by this chapter for such taxable year, or
       ``(2) at any other time (after the time of filing the 
     return of the tax imposed by this chapter for such taxable 
     year) specified in regulations prescribed by the Secretary.
     Such designation shall be made in such manner as the 
     Secretary prescribes by regulations.
       ``(c) Portion Attributable to Earned Income Tax Credit.--
     For purposes of subsection (a), an overpayment for any 
     taxable year shall be treated as attributable to the earned 
     income tax credit to the extent that such overpayment does 
     not exceed the credit allowed to the taxpayer under section 
     32 for such taxable year.
       ``(d) Overpayments Treated as Refunded.--For purposes of 
     this title, any portion of an overpayment of tax designated 
     under subsection (a) shall be treated as being refunded to 
     the taxpayer as of the last date prescribed for filing the 
     return of tax imposed by this chapter (determined without 
     regard to extensions) or, if later, the date the return is 
     filed.
       ``(e) Termination.--This section shall not apply to any 
     taxable year beginning after December 31, 2006.

                    ``PART IV--ADDITIONAL INCENTIVES

``Sec. 1400K. Commercial revitalization credit.
``Sec. 1400L. Increase in expensing under section 179.

     ``SEC. 1400K. COMMERCIAL REVITALIZATION CREDIT.

       ``(a) General Rule.--For purposes of section 46, except as 
     provided in subsection (e), the commercial revitalization 
     credit for any taxable year is an amount equal to the 
     applicable percentage of the qualified revitalization 
     expenditures with respect to any qualified revitalization 
     building.
       ``(b) Applicable Percentage.--For purposes of this 
     section--
       ``(1) In general.--The term `applicable percentage' means--
       ``(A) 20 percent for the taxable year in which a qualified 
     revitalization building is placed in service, or
       ``(B) at the election of the taxpayer, 5 percent for each 
     taxable year in the credit period.
     The election under subparagraph (B), once made, shall be 
     irrevocable.
       ``(2) Credit period.--
       ``(A) In general.--The term `credit period' means, with 
     respect to any building, the period of 10 taxable years 
     beginning with the taxable year in which the building is 
     placed in service.
       ``(B) Applicable rules.--Rules similar to the rules under 
     paragraphs (2) and (4) of section 42(f) shall apply.
       ``(c) Qualified Revitalization Buildings and 
     Expenditures.--For purposes of this section--
       ``(1) Qualified revitalization building.--The term 
     `qualified revitalization building' means any building (and 
     its structural components) if--
       ``(A) such building is located in a renewal community and 
     is placed in service after December 31, 1999,
       ``(B) a commercial revitalization credit amount is 
     allocated to the building under subsection (e), and
       ``(C) depreciation (or amortization in lieu of 
     depreciation) is allowable with respect to the building.
       ``(2) Qualified revitalization expenditure.--
       ``(A) In general.--The term `qualified revitalization 
     expenditure' means any amount properly chargeable to capital 
     account--
       ``(i) for property for which depreciation is allowable 
     under section 168 and which is--

       ``(I) nonresidential real property, or
       ``(II) an addition or improvement to property described in 
     subclause (I), and

       ``(ii) in connection with the construction of any qualified 
     revitalization building which was not previously placed in 
     service or in connection with the substantial rehabilitation 
     (within the meaning of section 47(c)(1)(C)) of a building 
     which was placed in service before the beginning of such 
     rehabilitation.
       ``(B) Dollar limitation.--The aggregate amount which may be 
     treated as qualified revitalization expenditures with respect 
     to any qualified revitalization building for any taxable year 
     shall not exceed the excess of--
       ``(i) $10,000,000, reduced by
       ``(ii) any such expenditures with respect to the building 
     taken into account by the taxpayer or any predecessor in 
     determining the amount of the credit under this section for 
     all preceding taxable years.
       ``(C) Certain expenditures not included.--The term 
     `qualified revitalization expenditure' does not include--
       ``(i) Straight line depreciation must be used.--Any 
     expenditure (other than with respect to land acquisitions) 
     with respect to which the taxpayer does not use the straight 
     line method over a recovery period determined under 
     subsection (c) or (g) of section 168. The preceding sentence 
     shall not apply to any expenditure to the extent the 
     alternative depreciation system of section 168(g) applies to 
     such expenditure by reason of subparagraph (B) or (C) of 
     section 168(g)(1).
       ``(ii) Acquisition costs.--The costs of acquiring any 
     building or interest therein and any land in connection with 
     such building to the extent that such costs exceed 30 percent 
     of the qualified revitalization expenditures determined 
     without regard to this clause.
       ``(iii) Other credits.--Any expenditure which the taxpayer 
     may take into account in computing any other credit allowable 
     under this title unless the taxpayer elects to take the 
     expenditure into account only for purposes of this section.
       ``(d) When Expenditures Taken Into Account.--
       ``(1) In general.--Qualified revitalization expenditures 
     with respect to any qualified revitalization building shall 
     be taken into account for the taxable year in which the 
     qualified revitalization building is placed in service. For 
     purposes of the preceding sentence, a substantial 
     rehabilitation of a building shall be treated as a separate 
     building.
       ``(2) Progress expenditure payments.--Rules similar to the 
     rules of subsections (b)(2) and (d) of section 47 shall apply 
     for purposes of this section.
       ``(e) Limitation on Aggregate Credits Allowable With 
     Respect to Buildings Located in a State.--
       ``(1) In general.--The amount of the credit determined 
     under this section for any taxable year with respect to any 
     building shall not exceed the commercial revitalization 
     credit amount (in the case of an amount determined under 
     subsection (b)(1)(B), the present value of such amount as 
     determined under the rules of section 42(b)(2)(C)) allocated 
     to such building under this subsection by the commercial 
     revitalization credit agency. Such allocation shall be made 
     at the same time and in the same manner as under paragraphs 
     (1) and (7) of section 42(h).
       ``(2) Commercial revitalization credit amount for 
     agencies.--
       ``(A) In general.--The aggregate commercial revitalization 
     credit amount which a commercial revitalization credit agency 
     may allocate for any calendar year is the amount of the State 
     commercial revitalization credit ceiling determined under 
     this paragraph for such calendar year for such agency.
       ``(B) State commercial revitalization credit ceiling.--The 
     State commercial revitalization credit ceiling applicable to 
     any State--
       ``(i) for each calendar year after 1999 and before 2007 is 
     $2,000,000 for each renewal community in the State, and
       ``(ii) zero for each calendar year thereafter.
       ``(C) Commercial revitalization credit agency.--For 
     purposes of this section, the term `commercial revitalization 
     credit agency' means any agency authorized by a State to 
     carry out this section.
       ``(f) Responsibilities of Commercial Revitalization Credit 
     Agencies.--
       ``(1) Plans for allocation.--Notwithstanding any other 
     provision of this section, the commercial revitalization 
     credit amount with respect to any building shall be zero 
     unless--
       ``(A) such amount was allocated pursuant to a qualified 
     allocation plan of the commercial revitalization credit 
     agency which is approved (in accordance with rules similar to 
     the rules of section 147(f)(2) (other than subparagraph 
     (B)(ii) thereof)) by the governmental unit of which such 
     agency is a part, and
       ``(B) such agency notifies the chief executive officer (or 
     its equivalent) of the local jurisdiction within which the 
     building is located of such allocation and provides such 
     individual a reasonable opportunity to comment on the 
     allocation.
       ``(2) Qualified allocation plan.--For purposes of this 
     subsection, the term `qualified allocation plan' means any 
     plan--
       ``(A) which sets forth selection criteria to be used to 
     determine priorities of the commercial revitalization credit 
     agency which are appropriate to local conditions,
       ``(B) which considers--
       ``(i) the degree to which a project contributes to the 
     implementation of a strategic

[[Page H8654]]

     plan that is devised for a renewal community through a 
     citizen participation process,
       ``(ii) the amount of any increase in permanent, full-time 
     employment by reason of any project, and
       ``(iii) the active involvement of residents and nonprofit 
     groups within the renewal community, and
       ``(C) which provides a procedure that the agency (or its 
     agent) will follow in monitoring compliance with this 
     section.
       ``(g) Termination.--This section shall not apply to any 
     building placed in service after December 31, 2006.

     ``SEC. 1400L. INCREASE IN EXPENSING UNDER SECTION 179.

       ``(a) General Rule.--In the case of a renewal community 
     business (as defined in section 1400G), for purposes of 
     section 179--
       ``(1) the limitation under section 179(b)(1) shall be 
     increased by the lesser of--
       ``(A) $35,000, or
       ``(B) the cost of section 179 property which is qualified 
     renewal property placed in service during the taxable year, 
     and
       ``(2) the amount taken into account under section 179(b)(2) 
     with respect to any section 179 property which is qualified 
     renewal property shall be 50 percent of the cost thereof.
       ``(b) Recapture.--Rules similar to the rules under section 
     179(d)(10) shall apply with respect to any qualified renewal 
     property which ceases to be used in a renewal community by a 
     renewal community business.
       ``(c) Qualified Renewal Property.--For purposes of this 
     section--
       ``(1) In general.--The term `qualified renewal property' 
     means any property to which section 168 applies (or would 
     apply but for section 179) if--
       ``(A) such property was acquired by the taxpayer by 
     purchase (as defined in section 179(d)(2)) after December 31, 
     1999, and before January 1, 2007, and
       ``(B) such property would be qualified zone property (as 
     defined in section 1397C) if references to renewal 
     communities were substituted for references to empowerment 
     zones in section 1397C.
       ``(2) Certain rules to apply.--The rules of subsections 
     (a)(2) and (b) of section 1397C shall apply for purposes of 
     this section.''

     SEC. 603. EXTENSION OF EXPENSING OF ENVIRONMENTAL REMEDIATION 
                   COSTS TO RENEWAL COMMUNITIES.

       (a) Extension.--Paragraph (2) of section 198(c) (defining 
     targeted area) is amended by redesignating subparagraph (C) 
     as subparagraph (D) and by inserting after subparagraph (B) 
     the following new subparagraph:
       ``(C) Renewal communities included.--Except as provided in 
     subparagraph (B), such term shall include a renewal community 
     (as defined in section 1400E).''
       (b) Extension of Termination Date for Renewal 
     Communities.--Subsection (h) of section 198 is amended by 
     inserting before the period ``(December 31, 2006, in the case 
     of a renewal community, as defined in section 1400E).''

     SEC. 604. EXTENSION OF WORK OPPORTUNITY TAX CREDIT FOR 
                   RENEWAL COMMUNITIES

       (a) Extension.--Subsection (c) of section 51 (relating to 
     termination) is amended by adding at the end the following 
     new paragraph:
       ``(5) Extension of credit for renewal communities.--
       ``(A) In general.--In the case of an individual who begins 
     work for the employer after the date contained in paragraph 
     (4)(B), for purposes of section 38--
       ``(i) in lieu of applying subsection (a), the amount of the 
     work opportunity credit determined under this section for the 
     taxable year shall be equal to--

       ``(I) 15 percent of the qualified first-year wages for such 
     year, and
       ``(II) 30 percent of the qualified second-year wages for 
     such year,

       ``(ii) subsection (b)(3) shall be applied by substituting 
     `$10,000' for `$6,000',
       ``(iii) paragraph (4)(B) shall be applied by substituting 
     for the date contained therein the last day for which the 
     designation under section 1400E of the renewal community 
     referred to in subparagraph (B)(i) is in effect, and
       ``(iv) rules similar to the rules of section 51A(b)(5)(C) 
     shall apply.
       ``(B) Qualified first- and second-year wages.--For purposes 
     of subparagraph (A)--
       ``(i) In general.--The term `qualified wages' means, with 
     respect to each 1-year period referred to in clause (ii) or 
     (iii), as the case may be, the wages paid or incurred by the 
     employer during the taxable year to any individual but only 
     if--

       ``(I) the employer is engaged in a trade or business in a 
     renewal community throughout such 1-year period,
       ``(II) the principal place of abode of such individual is 
     in such renewal community throughout such 1-year period, and
       ``(III) substantially all of the services which such 
     individual performs for the employer during such 1-year 
     period are performed in such renewal community.

       ``(ii) Qualified first-year wages.--The term `qualified 
     first-year wages' means, with respect to any individual, 
     qualified wages attributable to service rendered during the 
     1-year period beginning with the day the individual begins 
     work for the employer.
       ``(iii) Qualified second-year wages.--The term `qualified 
     second-year wages' means, with respect to any individual, 
     qualified wages attributable to service rendered during the 
     1-year period beginning on the day after the last day of the 
     1-year period with respect to such individual determined 
     under clause (ii).''
       (b) Congruent Treatment of Renewal Communities and 
     Enterprise Zones for Purposes of Youth Residence 
     Requirements.--
       (1) High-risk youth.--Subparagraphs (A)(ii) and (B) of 
     section 51(d)(5) are each amended by striking ``empowerment 
     zone or enterprise community'' and inserting ``empowerment 
     zone, enterprise community, or renewal community''.
       (2) Qualified summer youth employee.--Clause (iv) of 
     section 51(d)(7)(A) is amended by striking ``empowerment zone 
     or enterprise community'' and inserting ``empowerment zone, 
     enterprise community, or renewal community''.
       (3) Headings.--Paragraphs (5)(B) and (7)(C) of section 
     51(d) are each amended by inserting ``or community'' in the 
     heading after ``zone''.

     SEC. 605. CONFORMING AND CLERICAL AMENDMENTS.

       (a) Deduction for Contributions to Family Development 
     Accounts Allowable Whether or Not Taxpayer Itemizes.--
     Subsection (a) of section 62 (relating to adjusted gross 
     income defined) is amended by inserting after paragraph (17) 
     the following new paragraph:
       ``(18) Family development accounts.--The deduction allowed 
     by section 1400H(a)(1)(A).''
       (b) Tax on Excess Contributions.--
       (1) Tax imposed.--Subsection (a) of section 4973 is amended 
     by striking ``or'' at the end of paragraph (3), adding ``or'' 
     at the end of paragraph (4), and inserting after paragraph 
     (4) the following new paragraph:
       ``(5) a family development account (within the meaning of 
     section 1400H(e)),''.
       (2) Excess contributions.--Section 4973 is amended by 
     adding at the end the following new subsection:
       ``(g) Family Development Accounts.--For purposes of this 
     section, in the case of a family development account, the 
     term `excess contributions' means the sum of--
       ``(1) the excess (if any) of--
       ``(A) the amount contributed for the taxable year to the 
     account (other than a qualified rollover, as defined in 
     section 1400H(c)(7), or a contribution under section 
     1400I), over
       ``(B) the amount allowable as a deduction under section 
     1400H for such contributions, and
       ``(2) the amount determined under this subsection for the 
     preceding taxable year reduced by the sum of--
       ``(A) the distributions out of the account for the taxable 
     year which were included in the gross income of the payee 
     under section 1400H(b)(1),
       ``(B) the distributions out of the account for the taxable 
     year to which rules similar to the rules of section 408(d)(5) 
     apply by reason of section 1400H(d)(3), and
       ``(C) the excess (if any) of the maximum amount allowable 
     as a deduction under section 1400H for the taxable year over 
     the amount contributed to the account for the taxable year 
     (other than a contribution under section 1400I).
     For purposes of this subsection, any contribution which is 
     distributed from the family development account in a 
     distribution to which rules similar to the rules of section 
     408(d)(4) apply by reason of section 1400H(d)(3) shall be 
     treated as an amount not contributed.''
       (c) Tax on Prohibited Transactions.--Section 4975 is 
     amended--
       (1) by adding at the end of subsection (c) the following 
     new paragraph:
       ``(6) Special rule for family development accounts.--An 
     individual for whose benefit a family development account is 
     established and any contributor to such account shall be 
     exempt from the tax imposed by this section with respect to 
     any transaction concerning such account (which would 
     otherwise be taxable under this section) if, with respect to 
     such transaction, the account ceases to be a family 
     development account by reason of the application of section 
     1400H(d)(2) to such account.'', and
       (2) in subsection (e)(1), by striking ``or'' at the end of 
     subparagraph (E), by redesignating subparagraph (F) as 
     subparagraph (G), and by inserting after subparagraph (E) the 
     following new subparagraph:
       ``(F) a family development account described in section 
     1400H(e), or''.
       (d) Information Relating to Certain Trusts and Annuity 
     Plans.--Subsection (c) of section 6047 is amended--
       (1) by inserting ``or section 1400H'' after ``section 
     219'', and
       (2) by inserting ``, of any family development account 
     described in section 1400H(e),'', after ``section 408(a)''.
       (e) Inspection of Applications for Tax Exemption.--Clause 
     (i) of section 6104(a)(1)(B) is amended by inserting ``a 
     family development account described in section 1400H(e),'' 
     after ``section 408(a),''.
       (f) Failure To Provide Reports on Family Development 
     Accounts.--Paragraph (2) of section 6693(a) is amended by 
     striking ``and'' at the end of subparagraph (C), by striking 
     the period and inserting ``, and'' at the end of subparagraph 
     (D), and by adding at the end the following new subparagraph:
       ``(E) section 1400H(g)(6) (relating to family development 
     accounts).''
       (g) Conforming Amendments Regarding Commercial 
     Revitalization Credit.--
       (1) Section 46 (relating to investment credit) is amended 
     by striking ``and'' at the end of paragraph (2), by striking 
     the period at the end of paragraph (3) and inserting ``, 
     and'', and by adding at the end the following new paragraph:

[[Page H8655]]

       ``(4) the commercial revitalization credit provided under 
     section 1400K.''
       (2) Section 39(d) is amended by adding at the end the 
     following new paragraph:
       ``(9) No carryback of section 1400k credit before date of 
     enactment.--No portion of the unused business credit for any 
     taxable year which is attributable to any commercial 
     revitalization credit determined under section 1400K may be 
     carried back to a taxable year ending before the date of the 
     enactment of section 1400K.''
       (3) Subparagraph (B) of section 48(a)(2) is amended by 
     inserting ``or commercial revitalization'' after 
     ``rehabilitation'' each place it appears in the text and 
     heading.
       (4) Subparagraph (C) of section 49(a)(1) is amended by 
     striking ``and'' at the end of clause (ii), by striking the 
     period at the end of clause (iii) and inserting ``, and'', 
     and by adding at the end the following new clause:
       ``(iv) the portion of the basis of any qualified 
     revitalization building attributable to qualified 
     revitalization expenditures.''
       (5) Paragraph (2) of section 50(a) is amended by inserting 
     ``or 1400K(d)(2)'' after ``section 47(d)'' each place it 
     appears.
       (6) Subparagraph (A) of section 50(a)(2) is amended by 
     inserting ``or qualified revitalization building 
     (respectively)'' after ``qualified rehabilitated building''.
       (7) Subparagraph (B) of section 50(a)(2) is amended by 
     adding at the end the following new sentence: ``A similar 
     rule shall apply for purposes of section 1400K.''
       (8) Paragraph (2) of section 50(b) is amended by striking 
     ``and'' at the end of subparagraph (C), by striking the 
     period at the end of subparagraph (D) and inserting ``; 
     and'', and by adding at the end the following new 
     subparagraph:
       ``(E) a qualified revitalization building (as defined in 
     section 1400K) to the extent of the portion of the basis 
     which is attributable to qualified revitalization 
     expenditures (as defined in section 1400K).''
       (9) The last sentence of section 50(b)(3) is amended to 
     read as follows: ``If any qualified rehabilitated building or 
     qualified revitalization building is used by the tax-exempt 
     organization pursuant to a lease, this paragraph shall not 
     apply for purposes of determining the amount of the 
     rehabilitation credit or the commercial revitalization 
     credit.''
       (10) Subparagraph (C) of section 50(b)(4) is amended--
       (A) by inserting ``or commercial revitalization'' after 
     ``rehabilitated'' in the text and heading, and
       (B) by inserting ``or commercial revitalization'' after 
     ``rehabilitation''.
       (11) Subparagraph (C) of section 469(i)(3) is amended--
       (A) by inserting ``or section 1400K'' after ``section 42''; 
     and
       (B) by striking ``credit'' in the heading and inserting 
     ``and commercial revitalization credits''.
       (h) Clerical Amendments.--The table of subchapters for 
     chapter 1 is amended by adding at the end the following new 
     item:

``Subchapter X. Renewal Communities.''

     SEC. 606. EVALUATION AND REPORTING REQUIREMENTS.

       Not later than the close of the fourth calendar year after 
     the year in which the Secretary of Housing and Urban 
     Development first designates an area as a renewal community 
     under section 1400E of the Internal Revenue Code of 1986, and 
     at the close of each fourth calendar year thereafter, such 
     Secretary shall prepare and submit to the Congress a report 
     on the effects of such designations in stimulating the 
     creation of new jobs, particularly for disadvantaged workers 
     and long-term unemployed individuals, and promoting the 
     revitalization of economically distressed areas.

        TITLE VII--TAX REDUCTIONS CONTINGENT ON BALANCED BUDGET

     SEC. 701. TAX REDUCTIONS CONTINGENT ON BALANCED BUDGET.

       (a) In General.--Notwithstanding any other provision of 
     this Act, no provision of this Act (or amendment made 
     thereby) shall take effect before the first January 1 after 
     the date of the enactment of this Act that follows a calendar 
     year for which there is a balanced budget certification.
       (b) Exemption of Funded Provisions.--The following 
     provisions shall take effect without regard to subsection 
     (a):
       (1) Subtitle C of title I (relating to increase in social 
     security earnings limit and recomputation of benefits).
       (2) Section 213 (relating to production flexibility 
     contract payments).
       (3) Title III (relating to extension and modification of 
     certain expiring provisions).
       (4) Title IV (relating to revenue offset).
       (5) Title V (relating to technical corrections).
       (c) Balanced budget certification.--There is a balanced 
     budget certification if the Director of the Office of 
     Management and Budget certifies that--
       (1) there is a surplus in the budget of the United States 
     for the fiscal year ending in the calendar year (excluding 
     the receipts and disbursements of the Federal Old Age and 
     Survivors Insurance Trust Fund and the Federal Disability 
     Insurance Trust Fund), and
       (2) there will continue to be such a surplus in each of the 
     next 5 fiscal years even if the provisions of this Act were 
     in effect.