[Congressional Record Volume 144, Number 130 (Friday, September 25, 1998)]
[House]
[Pages H8806-H8839]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
TAXPAYER RELIEF ACT OF 1998
Mr. ARCHER. Mr. Speaker, pursuant to House Resolution 552, I call up
the bill (H.R. 4579) to provide tax relief for individuals, families,
and farming and other small businesses, to provide tax incentives for
education, to extend certain expiring provisions, and for other
purposes, and ask for its immediate consideration in the House.
The Clerk read the title of the bill.
The SPEAKER pro tempore. Pursuant to House Resolution 552, the bill
is considered as having been read for amendment.
The text of H.R. 4579 is as follows:
H.R. 4579
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
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. Findings and purpose.
Subtitle A--Designation and Evaluation of Renewal Communities
Sec. 611. Short title.
Sec. 612. Statement of purpose.
Sec. 613. Designation of renewal communities.
Sec. 614. Evaluation and reporting requirements.
Sec. 615. Interaction with other Federal programs.
Subtitle B--Tax Incentives for Renewal Communities
Sec. 621. Tax treatment of renewal communities.
Sec. 622. Extension of work opportunity tax credit for renewal
communities.
Sec. 623. Conforming and clerical amendments.
[[Page H8807]]
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 Amendment.--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''.
(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) Distributions from regulated investment companies and
real estate investment trusts.--Subsection (a) shall apply
with respect to distributions by--
``(A) regulated investment companies subject to the
limitations provided in section 854(b), and
``(B) real estate investment trusts subject to the
limitations provided in section 857(c).
``(2) Distributions by a trust.--For purposes of subsection
(a), the amount of dividends and interest properly allocable
to a beneficiary under section 652 or 662 shall be deemed to
have been received by the beneficiary ratably on the same
date that the dividends and interest were received by the
estate or trust.
``(3) Certain nonresident aliens ineligible for
exclusion.--In the case of a nonresident alien individual,
subsection (a) shall apply only--
``(A) in determining the tax imposed for the taxable year
pursuant to section 871(b)(1) and only in respect of
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).
``(4) Dividends from employee stock ownership plans.--
Subsection (a) shall not apply to any dividend described in
section 404(k).''
(b) Conforming Amendments.--
(1) 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''.
(2) 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.''
(3) 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.''
(4) Section 854 is amended to read as follows:
``SEC. 854. LIMITATIONS APPLICABLE TO DIVIDENDS RECEIVED FROM
REGULATED INVESTMENT COMPANY.
``(a) Capital Gain Dividend.--For purposes of section 116
(relating to partial exclusion of dividends and interest
received by individuals) and section 243 (relating to
deductions for dividends received by corporations), a capital
gain dividend (as defined in section 852(b)(3)) received from
a regulated investment company shall not be considered as a
dividend.
``(b) Other Dividends.--
``(1) Amount treated as dividend.--
``(A) Deduction under section 243.--In any case in which--
``(i) a dividend is received from a regulated investment
company (other than a dividend to which subsection (a)
applies), and
``(ii) such investment company meets the requirements of
section 852(a) for the taxable year during which it paid such
dividend,
then, in computing any deduction under section 243, there
shall be taken into account only that portion of such
dividend designated under this subparagraph by the regulated
investment company and such dividend shall be treated as
received from a corporation which is not a 20-percent owned
corporation.
``(B) Exclusion under section 116.--If the aggregate
dividends and interest received by a regulated investment
company during any taxable year are less than 95 percent of
its gross income, then in computing the exclusion under
section 116, rules similar to the rules of subparagraph
(A) shall apply.
``(C) Limitations.--
``(i) Section 243.--The aggregate amount which may be
designated as dividends under subparagraph (A) shall not
exceed the aggregate dividends received by the company for
the taxable year.
``(ii) Section 116.--The aggregate amount which may be
designated as dividends under subparagraph (B) shall not
exceed the sum of the aggregate dividends and aggregate
interest received by the company for the taxable year.
``(2) Notice to shareholders.--The amount of any
distribution by a regulated investment company which may be
taken into account as a dividend for purposes of the
exclusion under section 116 and the deduction under section
243 shall not exceed the amount so designated by the company
in a written notice to its shareholders mailed not later than
60 days after the close of its taxable year.
``(3) Definitions.--For purposes of this subsection--
``(A) Gross income.--In the case of 1 or more sales or
other dispositions of stock or securities, the term `gross
income' includes only the excess of--
``(i) the net short-term capital gain from such sales or
dispositions, over
``(ii) the net long-term capital loss from such sales or
dispositions.
``(B) Aggregate dividends.--
``(i) In general.--The term `aggregate dividends' does not
include dividends described in section 116(b)(2) (relating to
dividends excluded from income).
``(ii) Distributions from real estate investment trusts and
other regulated investment companies.--In determining the
amount of any dividend for purposes of this subparagraph, the
rules of section 116(c)(1) shall apply; except that, for
purposes of applying subparagraph (C)(i) of paragraph (1),
aggregate dividends shall not include a distribution from a
real estate investment trust which, for the taxable year of
the trust in which the dividend is paid, qualifies under part
II of subchapter M (section 856 and following).
``(C) Aggregate interest.--The term `aggregate interest'
means only interest includible in gross income. Gross income
and aggregate interest received shall each be reduced by so
much of the deduction allowable by section 163 for the
taxable year as does not exceed aggregate interest received
for the taxable year.
``(4) Special rule for computing deduction under section
243.--For purposes of subparagraph (A) of paragraph (1), an
amount shall be treated as a dividend for the purpose of
paragraph (1) only if a deduction would have been allowable
under section 243 to the regulated investment company
determined--
``(A) as if section 243 applied to dividends received by a
regulated investment company,
``(B) after the application of section 246 (but without
regard to subsection (b) thereof), and
``(C) after the application of section 246A.''
(5) Subsection (c) of section 857 is amended to read as
follows:
``(c) Limitations Applicable to Dividends Received From
Real Estate Investment Trusts.--
``(1) Capital gain dividend.--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) Only portion of dividend excludable under section 116
in certain cases.--
``(A) In general.--In any case in which--
``(i) a dividend is received from a real estate investment
trust (other than a capital gain dividend, as defined in
subsection (b)(3)(C)),
``(ii) such trust meets the requirements of this part for
the taxable year during which it paid such dividend, and
``(iii) the aggregate interest received by such trust
during the taxable year is less than 95 percent of its gross
income,
then, in computing any exclusion under section 116, there
shall be taken into account
[[Page H8808]]
only that portion of such dividend designated under this
subparagraph as interest by the real estate investment trust.
``(B) Limitation.--The aggregate amount which may be
designated as interest under subparagraph (A) shall not
exceed the aggregate interest received by the trust for the
taxable year.
``(3) Adjustments to gross income and aggregate interest
received.--For purposes of this subsection--
``(A) gross income does not include net capital gain,
``(B) gross income and aggregate interest received shall
each be reduced by so much of the deduction allowable by
section 163 for the taxable year (other than for interest on
mortgages on real property owned by the real estate
investment trust) as does not exceed aggregate interest
received for the taxable year, and
``(C) gross income shall be reduced by the sum of the taxes
imposed by paragraphs (4), (5), and (6) of subsection (b).
``(4) Aggregate interest.--For purposes of this subsection,
the term `aggregate interest' means only interest includible
in gross income.
``(5) Notice to shareholders.--The amount of any
distribution by a real estate investment trust which may be
taken into account as interest for purposes of the exclusion
under section 116 shall not exceed the amount so designated
by the trust in a written notice to its shareholders mailed
not later than 60 days after the close of its taxable year.
``(6) Cross reference.--
``For restriction on dividends received by a corporation, see section
243(d)(3).''
(6) 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).''.
(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
subparagraph (A)--
``(i) In general.--For purposes of this paragraph, 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.--For purposes of clause (i), the
term `uniformed services' shall have 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 this paragraph.
``(iii) Foreign service of the united states.--For purposes
of clause (i), 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 this paragraph.
``(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 ``qualified
state tuition programs'' and inserting ``qualified tuition
programs''.
(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\, and
``(vii) for each month of any taxable year ending after
2001 and before 2003, $2,500.''.
[[Page H8809]]
(b) Conforming Amendment.--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) 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 that
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:
[[Page H8810]]
``(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.--Paragraph (1) shall
not require the disclosure of the name or address of any
contributor to the 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.--The amendments made by this subsection
shall apply to taxable years ending after December 31, 1998.
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, or
``(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).
``(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--
``(i) which 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) which 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 businesses.--No income of an
eligible controlled foreign corporation not described in
paragraph (2)(B)(ii) (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
subsection, 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) 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
[[Page H8811]]
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 with respect to any transaction or series
of transactions utilizing, or doing business with--
``(i) an entity which is not engaged in regular and
continuous transactions with customers which are not related
persons, or
``(ii) to the extent provided in regulations--
``(I) one or more entities in order to satisfy any home
country requirement under this subsection, or
``(II) a special purpose vehicle, including a
securitization vehicle, an intragroup financing arrangement,
or any similar entity or arrangement, and
``(C) 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.
``(7) 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).
``(8) 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
net premiums, 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 net premiums, 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 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 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)(6) shall apply,
``(B) 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),
``(C) 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
[[Page H8812]]
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,
``(D) 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
``(E) 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 (C), the determination of where
risks are located shall be made under the principles of
section 953.
``(8) Coordination with subsection (c).--This subsection
and section 954(i) shall not apply to related person
insurance income to which subsection (c) applies.
``(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's or branch's home country, 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's or branch's home country, 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) 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
[[Page H8813]]
(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.
(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 $6,000,000 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''.
[[Page H8814]]
(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 Amendment.--Clause (i) of section 51(d)(6)(B)
of the 1986 Code is amended by striking ``rehabilitation
plan'' and inserting ``plan for employment''.
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. FINDINGS AND PURPOSE.
(a) Findings.--The Congress makes the following findings:
(1) Many of the Nation's urban centers are places with high
levels of poverty, high rates of welfare dependency, high
crime rates, poor schools, and joblessness.
(2) Federal tax incentives and regulatory reforms can
encourage economic growth, job creation, and small business
formation in many urban centers.
(3) Encouraging private sector investment in America's
economically distressed urban and rural areas is essential to
breaking the cycle of poverty and the related ills of crime,
drug abuse, illiteracy, welfare dependency, and unemployment.
(b) Purpose.--The purpose of this title is to increase job
creation, small business expansion and formation, educational
opportunities, and homeownership, and to foster moral
renewal, in economically depressed areas by providing Federal
tax incentives, regulatory reforms, school reform pilot
projects, and homeownership incentives.
Subtitle A--Designation and Evaluation of Renewal Communities
SEC. 611. SHORT TITLE.
This subtitle may be cited as the ``Renewing American
Communities Act of 1998''.
SEC. 612. STATEMENT OF PURPOSE.
It is the purpose of this subtitle to provide for the
establishment of renewal communities in order to stimulate
the creation of new jobs, particularly for disadvantaged
workers and long-term unemployed individuals, and to promote
revitalization of economically distressed areas primarily by
providing or encouraging--
(1) tax relief at the Federal, State, and local levels;
(2) regulatory relief at the Federal, State, and local
levels; and
(3) improved local services and an increase in the economic
stake of renewal community residents in their own community
and its development, particularly through the increased
involvement of private, local, and neighborhood
organizations.
SEC. 613. DESIGNATION OF RENEWAL COMMUNITIES.
(a) In General.--Chapter 1 of the Act is amended by adding
at the end the following new subchapter:
``Subchapter X--Renewal Communities
``Part I. Designation.
``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,
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,
designates as a renewal community.
``(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 20 percent must be
areas--
``(i) which are within a local government jurisdiction or
jurisdictions with a population of less than 50,000 (as
determined under the most recent census data available),
``(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.
``(C) Additional designations to replace revoked
designations.--
``(i) In general.--The Secretary of Housing and Urban
Development may designate one additional area under
subparagraph (A) to replace each area for which the
designation is revoked under subsection (b)(2), but in no
event may more than 20 areas designated under this subsection
bear designations as renewal communities at any time.
``(ii) Extension of time limit on designations.--In the
case of any designation made under this subparagraph,
paragraph (4)(B) shall be applied by substituting `36-month'
for `24-month'.
``(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 (C), (D), and (E) 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
[[Page H8815]]
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 half of the designations made under this
section, the nominated areas designated as renewal
communities shall be chosen first from nominated areas which
are enterprise zones or empowerment communities (and are
otherwise eligible for designation under this section), and
then from other nominated areas which are so eligible.
``(D) Separate application to rural and other areas.--
Subparagraph (A) shall be applied separately with respect to
areas described in paragraph (2)(B) and to other areas.
``(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 State 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 pursuant to subsection
(a)(4)(C)(ii), or
``(C) the date the Secretary of Housing and Urban
Development revokes such designation under paragraph (2).
``(2) Revocation of designation.--The Secretary of Housing
and Urban Development may, after a hearing on the record
involving officials of the State or local government involved
(or both, if applicable), revoke the designation of an area
if the Secretary of Housing and Urban Development determines
that the local government or State in which the area is
located is not complying substantially with 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 any 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 a local
government,
``(B) the boundary of the area is continuous, and
``(C) the area--
``(i) has a population, as determined by the most recent
census data available, 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 appropriate 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 (as determined by the most recent
census data available) for each population census tract (or
where not tracted, the equivalent county division as defined
by the Bureau of the Census for the purpose of defining
poverty areas) within the area was at least 20 percent for
the period to which such data relate, 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 realty (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,
[[Page H8816]]
``(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.--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.''
SEC. 614. 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 accomplishing the
purposes of this title.
SEC. 615. INTERACTION WITH OTHER FEDERAL PROGRAMS.
(a) Tax Reductions.--Any reduction of taxes, with respect
to any renewal community designated under section 1400E of
the Internal Revenue Code of 1986 (as added by this
subtitle), under any plan of action under section 1400E(d) of
such Code shall be disregarded in determining the eligibility
of a State or local government for, or the amount or extent
of, any assistance or benefits under any law of the United
States (other than subchapter X of chapter 1 of such Code).
(b) Coordination With Relocation Assistance.--The
designation of a renewal community under section 1400E of
such Code (as added by this subtitle) shall not--
(1) constitute approval of a Federal or Federally assisted
program or project (within the meaning of the Uniform
Relocation Assistance and Real Property Acquisition Policies
Act of 1970 (42 U.S.C. 4601 et seq.)), or
(2) entitle any person displaced from real property located
in such community to any rights or any benefits under such
Act.
(c) Renewal Communities Treated as Labor Surplus Areas.--
Any area which is designated as a renewal community under
section 1400E of such Code (as added by this subtitle) shall
be treated for all purposes under Federal law as a labor
surplus area.
(d) Coordination With Job Training Programs.--Renewal
communities are encouraged to coordinate efforts with job
training providers who are public, private not-for-profit, or
private for-profit entities.
Subtitle B--Tax Incentives for Renewal Communities
SEC. 621. TAX TREATMENT OF RENEWAL COMMUNITIES.
Subchapter X of chapter 1 (as added by subtitle A) is
amended by adding at the end the following new parts:
``PART II--RENEWAL COMMUNITY CAPITAL GAIN
``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 business property, and
``(C) any qualified community partnership interest.
``(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 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.--
``(i) In general.--The requirements of clauses (i) and (ii)
of subparagraph (A) shall be treated as satisfied with
respect to--
``(I) property which is substantially improved by the
taxpayer before January 1, 2007, and
``(II) any land on which such property is located.
``(ii) Substantial improvement.--For purposes of clause
(i), property shall be treated as substantially improved by
the taxpayer only if, during any 24-month period beginning
after the date on which the designation of the renewal
community took effect, additions to basis with respect to
such property in the hands of the taxpayer exceed the greater
of--
``(I) an amount equal to the adjusted basis at the
beginning of such 24-month period in the hands of the
taxpayer, or
``(II) $5,000.
``(4) 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)(C) shall apply
for purposes of this paragraph.
``(5) Treatment of subsequent purchasers.--The term
`qualified community asset' includes any property which would
be a qualified community asset but for paragraph (2)(A)(i),
(3)(A)(ii), or (4)(A) in the hands of the taxpayer if such
property was a qualified community asset in the hands of all
prior holders.
``(6) 10-year safe harbor.--If any property ceases to be a
qualified community asset by reason of paragraph (2)(A)(iii),
(3)(A)(iii), or (4)(C) after the 10-year period beginning on
the date the taxpayer acquired such property, such property
shall continue to be treated as meeting the requirements of
such paragraph; except that the amount of gain to which
subsection (a) applies on any sale or exchange of such
property shall not exceed the amount which would be qualified
capital gain had such property been sold on the date of such
cessation.
``(7) Treatment of community designation terminations.--The
termination of any designation of an area as a renewal
community shall be disregarded for purposes of determining
whether any property is a qualified community asset.
``(c) Other Definitions and Special Rules.--For purposes of
this section--
``(1) Qualified capital gain.--Except as otherwise provided
in this subsection, the term `qualified capital gain' means
any long-term capital gain recognized on the sale or exchange
of a qualified community asset held for more than 5 years
(determined without regard to any period before the
designation of the renewal community).
``(2) Gain before 2000 or after 2006 not qualified.--The
term `qualified capital gain' shall not include any gain
attributable to periods before January 1, 2000, or after
December 31, 2006.
``(3) Certain gain not qualified.--The term `qualified
capital gain' shall not include any gain which would be
treated as ordinary income under section 1245 or under
section 1250 if section 1250 applied to all depreciation
rather than the additional depreciation.
``(4) Intangibles and land not integral part of DC Zone
business.--The term `qualified capital gain' shall not
include any gain which is attributable to real property, or
an intangible asset, which is not an integral part of a DC
Zone business.
[[Page H8817]]
``(5) Related party transactions.--The term `qualified
capital gain' shall not include any gain attributable,
directly or indirectly, in whole or in part, to a transaction
with a related person. For purposes of this paragraph,
persons are related to each other if such persons are
described in section 267(b) or 707(b)(1).
``(d) Certain Other Rules To Apply.--Rules similar to the
rules of subsections (g), (h), (i)(2), and (j) of section
1202 shall apply for purposes of this section.
``(e) Sales and Exchanges of Interests in Partnerships and
S Corporations Which Are Qualified Community Businesses.--In
the case of the sale or exchange of an interest in a
partnership, or of stock in an S corporation, which was a
renewal community business during substantially all of the
period the taxpayer held such interest or stock, the amount
of qualified capital gain shall be determined without regard
to--
``(1) any intangible, and any land, which is not an
integral part of any qualified business entity (as defined in
section 1400G(b)), and
``(2) gain attributable to periods before the designation
of an area as a renewal community.
``SEC. 1400G. RENEWAL COMMUNITY BUSINESS DEFINED.
``(a) In General.--For purposes of this part, the term
`renewal community business' means--
``(1) any qualified business entity, and
``(2) any qualified proprietorship.
Such term shall include any trades or businesses which would
qualify as a renewal community business if such trades or
businesses were separately incorporated. Such term shall not
include any trade or business of producing property of a
character subject to the allowance for depletion under
section 611.
``(b) Qualified Business Entity.--For purposes of this
section, the term `qualified business entity' means, with
respect to any taxable year, any corporation or partnership
if for such year--
``(1) every trade or business of such entity is the active
conduct of a qualified business within a renewal community,
``(2) at least 80 percent of the total gross income of such
entity is derived from the active conduct of such business,
``(3) substantially all of the use of the tangible property
of such entity (whether owned or leased) is within a renewal
community,
``(4) substantially all of the intangible property of such
entity is used in, and exclusively related to, the active
conduct of any such business,
``(5) substantially all of the services performed for such
entity by its employees are performed in a renewal community,
``(6) at least 35 percent of its employees are residents of
a renewal community,
``(7) less than 5 percent of the average of the aggregate
unadjusted bases of the property of such entity is
attributable to collectibles (as defined in section
408(m)(2)) other than collectibles that are held primarily
for sale to customers in the ordinary course of such
business, and
``(8) less than 5 percent of the average of the aggregate
unadjusted bases of the property of such entity is
attributable to nonqualified financial property.
``(c) Qualified Proprietorship.--For purposes of this
section, the term `qualified proprietorship' means, with
respect to any taxable year, any qualified business carried
on by an individual as a proprietorship if for such year--
``(1) at least 80 percent of the total gross income of such
individual from such business is derived from the active
conduct of such business in a renewal community,
``(2) substantially all of the use of the tangible property
of such individual in such business (whether owned or leased)
is within a renewal community,
``(3) substantially all of the intangible property of such
business is used in, and exclusively related to, the active
conduct of such business,
``(4) substantially all of the services performed for such
individual in such business by employees of such business are
performed in a renewal community,
``(5) at least 35 percent of such employees are residents
of a renewal community,
``(6) less than 5 percent of the average of the aggregate
unadjusted bases of the property of such individual which is
used in such business is attributable to collectibles (as
defined in section 408(m)(2)) other than collectibles that
are held primarily for sale to customers in the ordinary
course of such business, and
``(7) less than 5 percent of the average of the aggregate
unadjusted bases of the property of such individual which is
used in such business is attributable to nonqualified
financial property.
For purposes of this subsection, the term `employee' includes
the proprietor.
``(d) Qualified Business.--For purposes of this section--
``(1) In general.--Except as otherwise provided in this
subsection, the term `qualified business' means any trade or
business.
``(2) Rental of real property.--The rental to others of
real property located in a renewal community shall be treated
as a qualified business if and only if--
``(A) the property is not residential rental property (as
defined in section 168(e)(2)), and
``(B) at least 50 percent of the gross rental income from
the real property is from renewal community businesses.
``(3) Rental of tangible personal property.--The rental to
others of tangible personal property shall be treated as a
qualified business if and only if substantially all of the
rental of such property is by renewal community businesses or
by residents of a renewal community.
``(4) Treatment of business holding intangibles.--The term
`qualified business' shall not include any trade or business
consisting predominantly of the development or holding of
intangibles for sale or license.
``(5) Certain businesses excluded.--The term `qualified
business' shall not include--
``(A) any trade or business consisting of the operation of
any facility described in section 144(c)(6)(B), and
``(B) any trade or business the principal activity of which
is farming (within the meaning of subparagraph (A) or (B) of
section 2032A(e)(5)), but only if, as of the close of the
preceding taxable year, the sum of--
``(i) the aggregate unadjusted bases (or, if greater, the
fair market value) of the assets owned by the taxpayer which
are used in such a trade or business, and
``(ii) the aggregate value of assets leased by the taxpayer
which are used in such a trade or business,
exceeds $500,000.
``(6) Controlled groups.--For purposes of paragraph (5)(B),
all persons treated as a single employer under subsection (a)
or (b) of section 52 shall be treated as a single taxpayer.
``(e) Nonqualified Financial Property.--For purposes of
this section, the term `nonqualified financial property'
means debt, stock, partnership interests, options, futures
contracts, forward-contracts, warrants, notional principal
contracts, annuities, and other similar property specified in
regulations; except that such term shall not include--
``(1) reasonable amounts of working capital held in cash,
cash equivalents, or debt instruments with a term of 18
months or less, or
``(2) debt instruments described in section 1221(4).
``PART III--FAMILY DEVELOPMENT ACCOUNTS
``Sec. 1400H. Family development accounts.
``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.
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 allowable as a deduction to any person
for any taxable year by reason of paragraph (1)(B) shall not
exceed $1,000 with respect to any qualified individual.
``(3) Special rules for certain married individuals.--
``(A) In general.--In the case of an individual to whom
this subparagraph applies for the taxable year, the
limitation of subparagraph (A) of paragraph (2) shall be
equal to the lesser of--
``(i) the dollar amount in effect under paragraph (2)(A)(i)
for the taxable year, or
``(ii) the sum of--
``(I) the compensation includible in such individual's
gross income for the taxable year, plus--
``(II) the compensation includible in the gross income of
such individual's spouse for the taxable year reduced by the
amount allowed as a deduction under paragraph (1) to such
spouse for such taxable year.
``(B) Individuals to whom subparagraph (a) applies.--
Subparagraph (A) shall apply to any individual if--
``(i) such individual files a joint return for the taxable
year, and
``(ii) the amount of compensation (if any) includible in
such individual's gross income for the taxable year is less
than the compensation includible in the gross income of such
individual's spouse for the taxable year.
``(4) 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
[[Page H8818]]
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.
``(3) Special rules.--Rules similar to the rules of
paragraphs (4) and (5) of section 408(d) shall apply for
purposes of this section.
``(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 postsecondary educational expenses.
``(B) First-home purchase costs.
``(C) Qualified business capitalization costs.
``(D) Qualified medical expenses.
``(E) Qualified rollovers.
``(3) Qualified postsecondary educational expenses.--
``(A) In general.--The term `qualified postsecondary
educational expenses' means postsecondary educational
expenses paid to an eligible educational institution.
``(B) Postsecondary educational expenses.--The term
`postsecondary educational expenses' means tuition, fees,
room, board, books, supplies, and equipment required for the
enrollment or attendance of a student at an eligible
educational institution.
``(C) Eligible educational institution.--The term `eligible
educational institution' means the following:
``(i) Institution of higher education.--An institution
described in section 481(a)(1) or 1201(a) of the Higher
Education Act of 1965 (20 U.S.C. 1088(a)(1), 1141(a)), as
such sections are in effect on the date of the enactment of
this section.
``(ii) Postsecondary vocational education school.--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.
``(D) Coordination with savings bond provisions.--The
amount of qualified postsecondary educational expenses for
any taxable year shall be reduced by any amount excludable
from gross income under section 135.
``(4) First-home purchase costs.--
``(A) In general.--The term `first-home purchase costs'
means qualified acquisition costs with respect to a qualified
principal residence for a qualified first-time homebuyer.
``(B) Qualified acquisition costs.--The term `qualified
acquisition costs' means the costs of acquiring,
constructing, or reconstructing a residence. Such term
includes any usual or reasonable settlement, financing, or
other closing costs.
``(C) Qualified principal residence.--The term `qualified
principal residence' means a principal residence (within the
meaning of section 1034), the qualified acquisition costs of
which do not exceed 100 percent of the average area purchase
price applicable to such residence (determined in accordance
with paragraphs (2) and (3) of section 143(e)).
``(D) Qualified first-time homebuyer.--
``(i) In general.--The term `qualified first-time
homebuyer' means an individual if such individual (and, in
the case of a married individual, the individual's spouse)
has no present ownership interest in a principal residence
during the 3-year period ending on the date of acquisition of
the principal residence to which this subsection applies.
``(ii) Date of acquisition.--The term `date of acquisition'
means the date on which a binding contract to acquire,
construct, or reconstruct the principal residence to which
this subsection applies is entered into.
``(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 or public
policy (as determined by the Secretary).
``(D) Qualified plan.--The term `qualified plan' means a
business plan which--
``(i) is approved by a financial institution, or by a
nonprofit loan fund having demonstrated fiduciary integrity,
``(ii) includes a description of services or goods to be
sold, a marketing plan, and projected financial statements,
and
``(iii) may require the eligible individual to obtain the
assistance of an experienced entrepreneurial advisor.
``(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).
``(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.
``(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 $2,000 (determined without regard to any
contribution made under section 1400I (relating to
demonstration program to provide matching amounts in renewal
communities)).
``(2) The trustee is a bank (as defined in section 408(n))
or such other person who demonstrates to the satisfaction of
the Secretary that the manner in which such other person will
administer the trust will be consistent with the requirements
of this section.
``(3) No part of the trust funds will be invested in life
insurance contracts.
``(4) The interest of an individual in the balance in his
account is nonforfeitable.
``(5) The assets of the trust will not be commingled with
other property except in a common trust fund or common
investment fund.
``(6) Under regulations prescribed by the Secretary, rules
similar to the rules of section 401(a)(9) and the incidental
death benefit requirements of section 401(a) shall apply to
the distribution of the entire interest of an individual for
whose benefit the trust is maintained.
``(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.--For purposes of this title, any
amount paid by an employer to a family development account
shall be treated as payment of compensation to the employee
(other than a self-employed individual who is an employee
within the meaning of section 401(c)(1)) includible in his
gross income in the taxable year for which the amount was
contributed, whether or not a deduction for such payment is
allowable under this section to the employee.
``(5) Zero basis.--The basis of an individual in any family
development account of such individual shall be zero.
``(6) Custodial accounts.--For purposes of this section, a
custodial account shall be treated as a trust if the assets
of such account are held by a bank (as defined in section
408(n)) or another person who demonstrates, to the
satisfaction of the Secretary, that the manner in which such
person will administer the account will be consistent with
the requirements of this section, and if the custodial
account would, except for the fact that it is not a trust,
constitute a family development account described in this
section. For purposes of this title, in the case of a
custodial account treated as a trust by reason of the
preceding sentence, the custodian of such account shall be
treated as the trustee thereof.
[[Page H8819]]
``(7) 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.
``(8) 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 paragraph
(1).
For purposes of this subsection, the portion of a distributed
amount which is attributable to amounts contributed under
section 1400I is the amount which bears the same ratio to the
distributed amount as the aggregate amount contributed under
section 1400I to all family development accounts of the
individual bears to the aggregate amount contributed to such
accounts from all sources.
``(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 pursuant to subsection (e)(6),
``(C) made to a beneficiary (or the estate of the account
holder) on or after the death of the account holder, or
``(D) 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,
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,
designates as an FDA matching demonstration area.
``(2) Number of designations.--
``(A) In general.--The Secretary of Housing and Urban
Development may designate not more than 25 percent of the
renewal communities as FDA matching demonstration areas.
``(B) Minimum designation in rural areas.--Of the areas
designated under paragraph (1), 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)) who is
a resident throughout the taxable year of an FDA matching
demonstration area 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.
``(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) 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. 1400M. Expensing of renewal community environmental remediation
costs.
``SEC. 1400K. COMMERCIAL REVITALIZATION TAX 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.
[[Page H8820]]
``(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 the designation of such renewal
community under section 1400E,
``(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),
``(ii) in connection with the construction or substantial
rehabilitation or reconstruction of a qualified
revitalization building, or
``(iii) for the acquisition of land in connection with the
qualified revitalization building.
``(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.
``(5) Substantial rehabilitation or reconstruction.--For
purposes of this subsection, a rehabilitation or
reconstruction shall be treated as a substantial
rehabilitation or reconstruction only if the qualified
revitalization expenditures in connection with the
rehabilitation or reconstruction exceed 25 percent of the
fair market value of the building (and its structural
components) immediately before the rehabilitation or
reconstruction.
``(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 or reconstruction 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.--
``(i) In general.--The State commercial revitalization
credit ceiling applicable to any State for any calendar year
is $2,000,000 for each renewal community in the State.
``(ii) Special rule where community located in more than 1
state.--If a renewal community is located in more than 1
State, a State's share of the amount specified in clause (i)
with respect to such community shall be an amount that bears
the same ratio to $2,000,000 as the population in the State
bears to the population in all States in which such community
is located.
``(iii) Other special rules.--Rules similar to the rules of
subparagraphs (D), (E), (F), and (G) of section 42(h)(3)
shall apply for purposes of this subsection.
``(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, 2002.
``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.--
``(1) General rule.--For purposes of this section--
``(A) In general.--The term `qualified renewal property'
means any property to which section 168 applies (or would
apply but for section 179) 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 which in a renewal community
commences with the taxpayer, and
``(iii) substantially all of the use of which is in a
renewal community and is in the active conduct of a qualified
business (as defined in section 1400G(d)) by the taxpayer in
such renewal community.
``(B) Special rule for substantial renovations.--In the
case of any property which is substantially renovated by the
taxpayer, the requirements of clauses (i) and (ii) of
subparagraph (A) shall be treated as satisfied. For purposes
of the preceding sentence, property shall be treated as
substantially renovated by the taxpayer only if, during any
24-month period beginning after the date on which the
designation of the renewal community took effect, additions
to basis with respect to such property in the hands of the
taxpayer exceed the greater of (i) an amount equal to the
adjusted basis at the beginning of such 24-month period in
the hands of the taxpayer, or (ii) $5,000.
``(2) Special rules for sale-leasebacks.--For purposes of
paragraph (1)(A)(ii), if property is sold and leased back by
the taxpayer within 3 months after the date such property was
originally placed in service, such property shall be treated
as originally placed in service not earlier than the date on
which such property is used under the leaseback.
``SEC. 1400M. EXPENSING OF RENEWAL COMMUNITY ENVIRONMENTAL
REMEDIATION COSTS.
``(a) Treatment as Expense.--A taxpayer may elect to treat
any renewal community environmental remediation cost as an
expense which is not chargeable to capital account. Any cost
so treated shall be allowable as a deduction for the taxable
year in which the cost is paid or incurred.
[[Page H8821]]
``(b) Renewal Community Environmental Remediation Cost.--
For purposes of this section--
``(1) In general.--The term `renewal community
environmental remediation cost' means any cost which--
``(A) is chargeable to capital account (determined without
regard to this section),
``(B) is paid or incurred in connection with the abatement
or control of environmental contaminants at a site located
within a renewal community, and
``(C) is certified by the applicable Federal or State
authority as being required by, and in compliance with,
applicable Federal and State laws governing abatement and
control of environmental contaminants.
``(2) Exceptions.--Such term shall not include any amount
paid or incurred--
``(A) for equipment which is used in the environmental
remediation and which is of a character subject to an
allowance for depreciation or amortization, or
``(B) in connection with a site which is on the national
priorities list under section 105(a)(8)(B) of the
Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 (42 U.S.C. 9605(a)(8)(B)).
No deduction shall be allowed under this section for any
amount which is allowed as a deduction under any other
provision of this subtitle.
``(c) Special Rules.--For purposes of this section--
``(1) Limitation based on income from trade or business.--
The amount allowed as a deduction under subsection (a) for
any taxable year shall not exceed the aggregate amount of
taxable income of the taxpayer for such taxable year which is
derived from the active conduct by the taxpayer of any trade
or business during such taxable year. For purposes of this
paragraph, rules similar to the rules of subparagraphs (B)
and (C) of section 179(b)(3) shall apply. In the case of a
partnership, S corporation, trust or other pass thru entity,
this paragraph shall be applied at both the entity and owner
levels.
``(2) Recapture rules.--
``(A) Property not used in trade or business.--The
Secretary shall, by regulations, provide for recapturing the
benefit of any deduction allowable under subsection (a) with
respect to any property not used predominantly in a trade or
business at any time.
``(B) Treatment of gain as ordinary income.--For purposes
of section 1245--
``(i) the deduction allowable under subsection (a) shall be
treated as a deduction allowable to the taxpayer for
depreciation or amortization; and
``(ii) property (other than section 1245 property) to which
the deduction would otherwise have been chargeable shall be
treated as section 1245 property solely for purposes of
applying section 1245 to such deduction.
``(d) Termination.--This section shall not apply to any
cost paid or incurred after December 31, 2006.''
SEC. 622. 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 individual is a resident of 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. 623. 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(b)(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(b)(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)(7) (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 ``,
[[Page H8822]]
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(b)(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) 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''.
(10) 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.--
(1) The table of subchapters for chapter 1 is amended by
adding at the end the following new item:
``Subchapter X. Renewal Communities.''
(2) The table of parts for subchapter X of chapter 1 (as
added by subtitle A) is amended by adding at the end the
following new items:
``Part II. Renewal community capital gain and stock.
``Part III. Family development accounts.
``Part IV. Additional Incentives.''
The SPEAKER pro tempore. The amendment printed in the bill, modified
by the amendment printed in House report 105-744, is adopted.
The text of H.R. 4579 as amended by the amendment printed in the bill
and modified by the amendment printed in House Report 105-744 is as
follows:
H.R. 4579
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
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 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).
[[Page H8823]]
``(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).
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
[[Page H8824]]
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--
(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.
[[Page H8825]]
(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 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,
[[Page H8826]]
``(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)),
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--
[[Page H8827]]
``(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).''
(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).''
[[Page H8828]]
(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.
(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
[[Page H8829]]
``(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''.
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
[[Page H8830]]
``(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 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.
[[Page H8831]]
``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.--
``(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.
[[Page H8832]]
``(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 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
[[Page H8833]]
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 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).''
[[Page H8834]]
(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:
``(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
[[Page H8835]]
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.
SEC. . EXCLUSION OF EFFECTS OF THIS ACT FROM PAYGO
SCORECARD.
Upon the enactment of this Act, the Director of the Office
of Management and Budget shall not make any estimates of
changes in receipts under section 252(d) of the Balanced
Budget and Emergency Deficit Control Act of 1985 resulting
from the enactment of this Act.
The SPEAKER pro tempore. After 1 hour of debate on the bill, as
amended, it shall be in order to consider the further amendment printed
in the Congressional Record numbered 1, which shall be considered as
read and debatable for 1 hour, equally divided and controlled by the
proponent and an opponent.
Pursuant to the order of the House today, the gentleman from Texas
(Mr. Archer) and the gentleman from New York (Mr. Rangel) each will
control 15 minutes of debate on the bill.
The Chair recognizes the gentleman from Texas (Mr. Archer).
General Leave
Mr. ARCHER. Mr. Speaker, I ask unanimous consent that all Members may
have 5 legislative days within which to revise and extend their remarks
on H.R. 4579 and include extraneous matter.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Texas?
There was no objection.
Mr. ARCHER. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, the Federal Government is clearly too big, it spends too
much, and taxes are too high; in fact, the highest in peacetime
history.
Today we can do something about it. With this bill, we let the
American people keep more of their hard-earned money, and when they do,
there will be less money in Washington for the politicians to spend,
downsizing Washington in power and upsiding the power of people.
Earlier today we set aside 90 percent of the surplus until social
security can be saved. Today we can help overtaxed husbands and wives,
farmers and ranchers, small businesses, and senior citizens. Our tax
plan reduces the marriage penalty, makes health care more affordable
for small business owners, reduces death taxes, and it fixes an unfair
work penalty for senior citizens who decide that they would like to
continue to work. Five hundred thousand senior citizens will be
benefited by this provision.
It also eliminates all taxation on interest and dividends for 32
million people. Importantly, it provides badly needed help for farmers
and ranchers, who have been hit particularly hard this year.
Finally, the plan simplifies the tax code for millions of Americans.
Fewer forms will need to be filled out, making April 15 less of a
burden on millions of taxpayers.
This plan protects social security and it cuts taxes, but Mr.
Speaker, it also stops the politicians in Washington from wasting
taxpayer money by taking it away from them before they have a chance to
create new spending ideas.
Mr. Speaker, I reserve the balance of my time.
Mr. RANGEL. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I am not prepared to debate the distinguished chairman
of the Committee on Ways and Means. I have been hearing for the last
3\1/2\ years that the Republicans had a tax plan that was going to pull
up the IRS by the roots, so I have been studying that. I have been
studying the value-added tax, the VAT. I have been studying the sales
tax. Now they come up with a Democratic bill. It is really unfair to do
this at election time. It catches us at a complete disadvantage.
The only problem we have, of course, is that we had thought that we
had adopted rules in the budget which says that we do not spend what we
have not got. Now they are changing the rules on that and they are
saying, that is different if it is a tax cut, and it is especially
different if it is just before the election.
What are we going to believe? Are we going to pull up the tax code by
the roots and get rid of it with a simplified code that we can put on a
postal card, or are we going to single out special people and give them
tax cuts that we would want to give to them after we fix social
security first?
I suspect that we will do all of these things maybe next year with a
different Congress, but it surprises me how fluid we can be in terms of
tax policy. So much for deep-sixing the tax code. So much for another
attempt to raid the social security trust fund.
Mr. Speaker, I yield 2 minutes to my friend, the gentleman from
Tennessee (Mr. Clement).
Mr. CLEMENT. Mr. Speaker, I thank the gentleman for yielding time to
me.
Mr. Speaker, I have serious reservations, just like the gentleman
from New York (Mr. Rangel) and many others concerning the timing of
this particular bill, as well as the justification for it, because the
fact is, we had a significant tax cut last year in 1997.
{time} 1915
And it was so significant, it was very, very helpful to our society
and we needed it. But why do we want to come back at this particular
time? And the fact is, we are raiding the Social Security system. We
are raiding it because that is a contract between the government and
the people.
Like most Members, I support tax cuts. But the timing of this, even
though the provisions are good, and how could we be against it? And I
like what has been proposed, but there is no surplus unless we count
the Social Security surplus. The projected surplus may never
materialize. We need to reserve all the budget surplus for Social
Security reform and abandoning fiscal discipline is the wrong message
to send to financial markets.
Over the next 5 years, the total budget surplus is $520 billion, but
if one excludes the part of the surplus that belongs to Social
Security, there is, in fact, a deficit in the budget of $137 billion.
There is no significant budget surplus until 2006, 8 years from now.
Mr. Speaker, we did go through the numbers, and we know that this tax
plan sounds good, but it also is not going to solve our problems when
it comes to a solvent Social Security system.
We need the President working in concert with the U.S. House of
Representatives and the United States Senate to come up with something
that is workable and fair and to keep our contract with our senior
citizens.
Mr. ARCHER. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, it is like a broken record on the other side. Perhaps
the same speech writer writes the same speeches for every one of them,
and if they say ``raiding the Social Security trust fund'' over and
over again, perhaps people who do not know differently will believe it.
But it is unsupportable. It is false. And they know it is false.
So, every time that that phrase is used, it has been preprogrammed to
create an impression that is false. The administration representative
from Social Security, appointed by President Clinton, testified in our
committee that it was false.
I expect they will keep using it because they think they can convince
people as to something that is insupportable. I expect it will not be
last time, but hopefully this will be the last time that I have to
speak to this, and that those who listen to these speeches will
understand when the term ``raiding the Social Security trust fund'' is
used that it is insupportable, it cannot be documented, and they know
it.
Mr. Speaker, I yield 2\1/2\ minutes to the respected gentleman from
Louisiana (Mr. McCrery) a member of the Committee on Ways and Means.
(Mr. McCrery asked and was given permission to revise and extend his
remarks.)
Mr. McCRERY. Mr. Speaker, I commend the gentleman from Texas
(Chairman Archer) for the inclusion in this bill of the provision to
modify and extend the present law treatment of active financial
services income under subpart F of the Internal Revenue Code.
The provision permits United States-based insurance companies, banks,
financial institutions, and securities dealers to be treated like other
United States companies doing business abroad. It is critical to the
global competitiveness of the United States financial services
industry. And I might say,
[[Page H8836]]
in light of the just completed vote on fast track, perhaps a vital
necessity.
In particular, I commend Chairman Archer and the staff for the
resolution of the question relating to the interaction of this
provision with the use of so-called hybrid arrangements. In January of
this year, the Treasury Department issued Notice 98-11 attacking the
use of hybrid arrangements by United States-owned foreign companies.
Chairman Archer, along with a bipartisan majority of the Committee on
Ways and Means, strongly and rightly opposed Treasury's actions.
In response to the overwhelming concern expressed by the committee,
the Treasury Department issued Notice 98-35, which provided specific
rules with respect to the use of hybrid arrangements and allowed
Congress time to review the important policy issues involved.
Mr. Speaker, the United States financial services industry is a
critical component to United States productiveness both here and
abroad. We should not create or endorse policies that hamstring their
ability to compete in the global marketplace. This provision is
intended to improve the capability of the United States financial
services industry to compete with their foreign counterparts, and
because of the importance of this issue, I am very pleased that it was
included in this legislation.
At this time I would like to enter into a colloquy with the gentleman
from Texas (Mr. Archer), chairman of the Committee on Ways and Means.
Mr. Speaker, earlier this year, in response to concerns raised by the
gentleman from Texas and a bipartisan majority of our committee, the
Treasury Department announced its intentions to withdraw Notice 98-11
and the related temporary regulations on so-called hybrid entities.
Treasury agreed not to finalize future regulations in this area any
earlier than January 1, 2000, in order to allow Congress the
opportunity to fully consider the tax policy issues involved.
Mr. Speaker, I would ask the gentleman, am I correct that nothing in
the proposal before us would alter the Treasury Department's agreement
to allow Congress the opportunity to fully consider the tax policy
issues involved before finalizing any regulations in this area?
Mr. ARCHER. Mr. Speaker, will the gentleman yield?
Mr. McCRERY. I yield to the gentleman from Texas.
Mr. ARCHER. Mr. Speaker, the gentleman is correct. There is nothing
in the proposal that would alter the agreement with the Treasury
Department.
Mr. McCRERY. Mr. Speaker, reclaiming my time, I thank the gentleman
for that, and I would like to add that contrary to what we will
probably hear over and over here, not one penny of the money for this
tax cut will be taken from the Social Security trust fund. Please, let
us get off that and talk about the merits of this tax bill.
Mr. RANGEL. Mr. Speaker, I yield myself 30 seconds.
Mr. Speaker, we were able to go to C-SPAN and pick up the rest of Ms.
Chesser's remarks where she indicated that this tax cut would have a
negative impact in the future in bringing about the solvency of the
Social Security system.
Since there is such a widespread belief that our senior citizens have
no idea what we are doing, perhaps we can print up some educational
material for the Members tomorrow so that they would know that we only
are saying it over and over so that they will see that it is true.
Mr. Speaker, I yield 2 minutes to the gentleman from Pennsylvania
(Mr. Klink).
Mr. KLINK. Mr. Speaker, I thank the gentleman from New York (Mr.
Rangel), our ranking member, for yielding me this time.
Mr. Speaker, I think that we all know, or should all know, that if it
was not for excess Social Security taxes from the hard-earned paychecks
of Americans, there would be no surplus. We can play semantical games
with the term ``trust fund,'' but if it was not for those Social
Security taxes that are coming into the Federal Government, there would
be no surplus.
Let us not talk about the speeches that are emanating from this side
of the aisle. Let us talk about some other speeches, like that from
William Niskanen, the Chairman of the Cato Institute, who said though
House Republicans portray the tax cuts as an economic booster,
economists seem unimpressed with the package and not persuaded that it
was needed. ``It's entirely political. It's responsive to the narrow
constituencies of the Republican party. It makes no sense either on a
tax basis or a macro[economic] basis.''
Let us talk about Allen Sinai, the chief global economist for Primark
Decision Economics, who said that whatever small economic stimulus this
tax cut might provide, it could be costly in other ways. ``The economy
does not need domestic macroeconomic stimulus at this time. The economy
needs interest rate cuts that will help stabilize the world economy and
world markets [which are] the biggest threat to this economy.''
This is Republican hocus-pocus: We will give an election year tax cut
with one hand, but hand voters higher interest rates, so all their
payments, their house payments, their car payments, their credit card
payments are all a lot higher.
Let us talk about what the Concord Coalition said. ``Without dipping
into funds earmarked for Social Security, there is no budget surplus to
spend.''
Let us talk about Ohio Republican Governor George Voinovich who
called for segregating Social Security money from the rest of the
budget and said he agreed with President Clinton, and his Democrat
opponent, Mary Boyle, that any tax cuts must wait until the retirement
needs of baby boomers are guaranteed.
Let us talk about Pete Domenici, a Republican Senator in the other
body, and Phil Gramm, who agree with us. Social Security must be saved
first.
Mr. ARCHER. Mr. Speaker, I yield 2 minutes to the gentlewoman from
Connecticut (Mrs. Johnson), the chairman of the Subcommittee on
Oversight of the Committee on Ways and Means.
Mrs. JOHNSON of Connecticut. Mr. Speaker, I say to the gentleman from
Pennsylvania (Mr. Klink) I will take it. If this bill directs benefits
to the ``narrow base of the Republican party,'' absolutely. You bet it
does, because it directs itself to the interests of all the working
people of America. The great middle-class that has made this economic
boom possible.
Mr. Speaker, I rise in strong support of this important tax cut. I
thank the gentleman from Texas (Mr. Archer) for his determined
leadership to bring this bill to the floor that does provide middle-
class tax relief and strengthens our economy.
Last year, remember, we balanced the budget, cut taxes, invested
money in important programs such as children's health and health
research. With the surplus predicted to be over $1.6 trillion over the
next 10 years, we can both protect Social Security and cut taxes for
working class Americans.
Simplistic slogans like ``every dollar of the surplus should go to
Social Security'' sound politically correct, but ring hollow in the
face of facts. The President himself has supported spending billions of
surplus dollars on other items, including maintaining a military
presence to help the people of Bosnia. If we can use the surplus to
help the people of Bosnia, then we can certainly help the American
people by returning a small portion of the surplus to their
pocketbooks.
This legislation is about fairness for hard-working middle-class
families and protecting their economic future. It is sound, balanced
and needed tax policy which will have a sweeping impact on taxpayers
across the country.
It helps families by beginning the process of eliminating the
marriage penalty. Small businesses will get help to buy equipment and
create jobs. Communities that need to build new schools or repair
existing ones will receive a boost. And people needing affordable
housing will get help. Seniors too will be benefited by this strong
bill. Members' support is recommended.
Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentlewoman from
California (Ms. Lee).
Ms. LEE. Mr. Speaker, I thank the gentleman from New York (Mr.
Rangel) for yielding me some time today.
Mr. Speaker, I rise in strong opposition to the Republican tax cut
bill. Taxes really are like powerful medicine, and yet we take our
medicine as
[[Page H8837]]
we pay our taxes because we know it is key to survival.
I want tax cuts like everyone else. But when it comes to taxes, we
are the doctors. The patient is a vital and viable Social Security
system. And like any institution with longevity, the Social Security
system needs constant checkups and tuning. We are in the process of
tuning, of making adjustments so that Social Security can remain the
rock that this Nation created.
The Republican tax bill threatens the health and the life of Social
Security. The Republican tax cut is not only irresponsible, but the cut
really is a killer. The Republicans plan to pay for these cuts with a
budget surplus that really does not exist. The Congressional Budget
Office says 98 percent of this surplus is from the Social Security
trust fund. The tax cuts come from robbing Social Security.
Our social and physical health is really fundamental in this country
and our parents and our grandparents work, our children and our
grandchildren will work, and for those who have not had the opportunity
to work we must support job training and job creation as a national
commitment.
Most Americans believe in the work ethic, but 64 percent of Americans
also believe in avoiding cuts in Medicare and education, and they
believe that that is more important than cutting taxes.
Only 12 percent of Americans choose a tax cut before reforming the
Social Security and Medicare systems and reducing the national debt.
Americans care deeply about being leaders in inventiveness, in
creativity, in commercial acumen, in productivity. We must also become
leaders in caring for our seniors, our children, our families, and
being responsible.
We must stabilize Social Security before we start spending money we
do not have. Vote ``no'' on the Republican tax bill.
Mr. ARCHER. Mr. Speaker, I yield 2 minutes to the gentleman from
Illinois (Mr. Weller) a respected member of the Committee on Ways and
Means.
Mr. WELLER. Mr. Speaker, this is an exciting week, because this week
we are actually doing the people's business, something the folks back
home have asked us to do for a long time.
Today we have a great opportunity because not only have we passed
legislation which sets aside $1.4 trillion for the effort to save
Social Security, twice what the President originally asked for, but we
also address an issue which I have often raised. That is the issue of
answering the question: Is it right, is it fair that millions of
married working couples pay higher taxes just because they are married?
That married working couples with two incomes are forced under our Tax
Code to pay more just because they are married?
We have answered that issue by making an extra piece of the tax cut
included in this package the elimination of the marriage penalty for a
majority of those who suffer it. In fact, by doubling the standard
deduction, 28 million married working couples will see an extra $243
during a year because we eliminate the marriage penalty for majority of
those who suffer from it. Mr. Speaker, that is a car payment.
{time} 1930
Our opponents on the other side of the aisle keep raising a funny
statement. They keep saying somehow that we are eliminating the
marriage tax penalty for a majority of those who have suffered somehow
by taking money out of the Social Security trust fund. As Judith
Chesser, deputy commissioner of the Social Security Administration said
a week ago, this tax legislation has no impact on the Social Security
trust fund at all. She gave a definitive simple answer, no, when asked
that question.
The people of Illinois are big winners today because not only do we
set aside $1.4 trillion to save Social Security but we help married
working couples in Illinois. We help family farmers in Illinois. We
help small business in Illinois. We help schools in Illinois. We also
help parents who want to send their kids to college in Illinois.
This is a big winner for the taxpayer. Let us do the right thing. Let
us give bipartisan support to this effort to save Social Security, to
eliminate the marriage tax penalty, to help families, to help small
business, to help agriculture.
Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentlewoman from
Connecticut (Ms. DeLauro).
Ms. DeLAURO. Mr. Speaker, I rise in opposition to the Social Security
raid. I believe in tax cuts but not at the expense of Social Security.
The tax bill before us would drain $80 billion from the Social
Security trust fund. This is money which Americans have invested for
their retirement. It is money which Social Security needs for its long-
term solvency when the baby boomers retire. But do not take my word for
it. Take the word of economists and experts.
Henry Aaron, senior fellow at the Brookings Institution, believes
that it would be imprudent to use the surplus for tax cuts. Chairman
Alan Greenspan, when asked if he supports spending the Social Security
surplus tax for cuts replied, I have always emphasized that we should
be aiming for budgetary surpluses and using the proceeds to retire
outstanding Federal debt.
Listen to our Republican colleagues, the gentleman from Wisconsin
(Mr. Neumann) said it well when he stated on the floor of the House,
there is no business in America that would go to their pension fund,
take money out of the pension fund, and use it for pay raises. So why
does Congress think it can use Social Security surpluses for tax cuts?
This is a totally unreasonable proposal.
Unless, however, the Republican leadership does not truly believe in
Social Security.
I believe that they do not. Listen to their words. In 1984, Majority
Leader Armey said that Social Security was a bad retirement, a rotten
trick on the American people. I think we are going to have to bite the
bullet on Social Security and phase it out over a period of time.
Speaker of the House Newt Gingrich, on November 10, called for the
program to be replaced over time by mandatory individual retirement
accounts. This is in 1986.
Under his proposal the program's payroll tax, which he calls anti-
savings and anti-jobs, would be abolished and replaced with a value-
added tax. They do not believe in it.
However, the American public believes in it. And when questioned, 90
percent said that they did not want to spend Social Security surpluses
for tax cuts. Social Security is too important, too important a part of
our lives to be jeopardized for a short-term gain.
I urge my colleagues, oppose this tax bill which raids the Social
Security trust fund.
Mr. ARCHER. Mr. Speaker, I yield 2 minutes to the gentleman from
Pennsylvania (Mr. English), who does great work on the Committee on
Ways and Means.
Mr. ENGLISH. Mr. Speaker, I rise in strong support of the Taxpayer
Protection Act, which provides needed tax relief for working families
and middle class taxpayers or, as my fellow member from Pennsylvania
described it, the narrow base of the Republican Party.
H.R. 4579 contains a key provision that will enable students and
their parents to save for college in tax exempt accounts. Recently a
Republican Congress provided tax exempt status to state prepaid tuition
programs. This legislation awards the same preferential tax treatment
to private prepaid programs as well. These programs will allow families
to buy college credits at today's prices and bank them for the future,
avoiding tuition inflation and making a college education affordable
for many students.
Both the contributions and earnings on distributions from qualified
State and private tuition programs will now be tax free. By extending
the same tax exempt status to private colleges and universities, we
level the playing field and provide students additional choices and
opportunities to save for a college education without harming the
Social Security trust fund.
Mr. Speaker, I urge bipartisan support for this tax relief package to
help more Americans achieve the American dream.
Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentlewoman from
Florida (Mrs. Meek).
Mrs. MEEK of Florida. Mr. Speaker, this tax cut sounds so very
attractive, but it is really not as attractive as it seems in that what
it is doing is taking
[[Page H8838]]
from Peter to pay Paul. And what I am concerned about, Paul is made up
of seniors and people who will be seniors, those people who are young
now will soon be old. They have been paying into this system. It is
unfair to take some of their money and leave the rest of it for a tax
break.
Despite the fact that what you want to do is good, but you just do
not have the way to do it, so you are taking it out of Social Security
trust fund.
Now, this bill sets aside 90 percent of the total Federal budget
surplus for Social Security and permits the remaining 10 percent to be
used for a tax cut. But I want to look at how this formula would work
if it were the law today.
In the first 10 months of the current fiscal year, the total Federal
budget surplus is $43 billion. Under the Republican formula, only 90
percent or 39 billion would be saved for Social Security and the
remaining 4 billion would pay for a tax cut. But this year Social
Security is running a surplus of 167 billion. And the rest of the
Federal Government is running on a deficit of 124 billion. So under
this bill, I want Members to listen to me, we would be taking 4 billion
of this year's Social Security surplus and using it for a tax cut. Just
take that as an example to show my colleagues that we are using the
wrong pot of money. We are using money that is going to undermine the
Social Security surplus.
I want Members who think the people in this country are blind, they
are not here, but they are not blind. They hear this. They know what
you are doing, and they know who you are.
Mr. ARCHER. Mr. Speaker, I yield 2 minutes to the gentleman from
South Dakota (Mr. Thune).
Mr. THUNE. Mr. Speaker, let me just repeat one thing that I think the
American people need to hear over and over and over again. The other
side is going to continue to try and perpetuate this fraud that somehow
we are raiding Social Security for this tax relief plan. The fact of
the matter is that not one penny of this tax relief plan comes out of
the Social Security taxes. It is coming from people, income taxes that
people in this country, hard-working Americans have overpaid.
It is coming out of the income tax surplus that we have generated
from the hard work of the American people, not from Social Security.
The American people need to hear it over and over again because the
other side continues to perpetuate this fraud.
I just wanted to thank the chairman, distinguished chairman of the
House Committee on Ways and Means, the gentleman from Texas (Mr.
Archer), for structuring a tax package that is so beneficial to the
farmers and ranchers of South Dakota and across this country. There are
so many good things in this tax bill that are going to help the
economic crisis that we are facing in rural America, from death tax
relief to deductibility for self-employed people of health insurance
premiums to a loss carry-back provision that allows you to offset this
year's losses against profits in past years and gets tax money back
from the IRS, to the income averaging provisions that are made
permanent under this bill. This is a very positive tax relief package
for agriculture. It will do a great deal to assist our farmers and
ranchers who are trying to make a living out there right now.
I want to reiterate one point, because you are going to hear it over
and over again, that they are raiding Social Security. I just want to
ask the American people to think about who do you believe is going to
save Social Security. The people who are committing 90 percent of this
surplus or $1.4 trillion, or those who for years have not put a dime
into the Social Security trust fund?
We have a commitment to save Social Security. We have a commitment to
bring tax relief to the hard-working people, the families of this
country and to the farmers and ranchers in South Dakota and across
America. I want to ask that Members on both sides of the aisle support
this important tax relief bill.
Mr. RANGEL. Mr. Speaker, I yield 1\1/2\ minutes to the gentlewoman
from Texas (Ms. Jackson-Lee).
Ms. JACKSON-LEE of Texas. Mr. Speaker, it would certainly give me a
greater sense of collaboration if I could come to the floor of the
House and find some opportunity to support legislation that deals with
the question of taxes.
I have supported tax cuts in the past. I do believe there is merit to
providing relief in certain areas, particularly the marriage penalty.
But I do think that although there are some who will refute our
arguments, that you cannot get away from the truth. Social Security
claims the hearts and minds of many Americans. In fact, Social Security
is one that most Americans understand as a trust between them and this
government.
In fact, let me share with the Speaker an excerpt from a letter sent
out in 1936 as a mass mailing to people throughout the country. They
were referring to the Social Security law.
Under this law the United States Government will send checks every
month to retired workers, both men and women, after they have passed
their 65th birthday. This means that if you work in some factory, shop,
mine, mill, store, office or almost any other kind of business or
factory, notice we are talking about working men and women, you will be
earning benefits that will come to you later on. From the time you are
65 years old or more and stop working, you will get a government check
every month of the year.
I would just simply say that the tax bill does not answer the
question of the trust the American people have put in us. We need to
vote against this tax bill because we must save Social Security.
Mr. ARCHER. Mr. Speaker, I yield the balance of my time for this
evening to the gentleman from Michigan (Mr. Smith).
The SPEAKER pro tempore (Mr. Snowbarger). The gentleman from Michigan
(Mr. Smith) is recognized for 2 minutes.
Mr. SMITH of Michigan. Mr. Speaker, I just want to express my
emotions that it is so disconcerting to have Members stand up and say,
gosh, let us save Social Security. Why do they not do something to save
Social Security instead of just talking about it?
We have several bills introduced. The only Member on that side of the
aisle, the only Democrat that has come up with a plan to save Social
Security is the gentleman from Texas (Mr. Stenholm). On this side of
the aisle we have got several others. We have got the gentleman from
Arizona (Mr. Kolbe), the gentleman from South Carolina (Mr. Sanford),
the gentleman from Illinois (Mr. Porter).
If you do not like any of those bills, why in the world do you not
bring over a bill from the Senate? Over in the Senate we have Senator
Moynihan, Senator Kerrey, Senator Gregg, Senator Breaux, Senator Gramm,
Senator Domenici. Have you looked at any of those bills that would save
Social Security? Or do you just want to talk about it? Do you just want
to say, hey, let us not have any tax cuts, let us save Social Security.
I just urge my colleagues in this House to look at some of this
legislation. I introduced my first Social Security bill when I came
here in 1993. Then I introduced another bill last session, and H.R.
3082, the last year of this session.
{time} 1945
Social Security is a huge problem. It is an important program. And
you say this, I hear everybody say it, but I see so few do anything
about it.
If I would have one suggestion, it would be that everybody take this
very seriously, that you start looking at the bills that are now
proposed and you come up with improvements to that legislation so we
can really do it and quit talking about it, because it is an important
program that so many people depend on.
We developed a program in 1934 that was a pay-as-you-go program, that
as you run out of people working, paying their taxes in to provide the
benefits for existing retirees, it has developed a huge demographic
problem, it needs to be dealt with. The longer we put off the solution,
the more drastic that solution is going to have to be.
Mr. RANGEL. Mr. Speaker, I yield the balance of my time to the
gentleman from Mississippi (Mr. Taylor).
The SPEAKER pro tempore (Mr. Snowbarger). The gentleman from
Mississippi is recognized for 1\1/2\ minutes.
Mr. TAYLOR of Mississippi. Mr. Speaker, I want to thank the gentleman
for yielding time. I also want to
[[Page H8839]]
thank the gentleman from Mobile, AL (Mr. Callahan). We have agreed to
pair on this. Hurricane Georges will undoubtedly hit either his
congressional district or mine. We have reached the decision that the
best place for us to be tomorrow with is with our families and with our
constituents. The gentleman from Alabama is going to vote for it. I am
going to vote against it.
Our Nation is $5.5 trillion in debt. We owe the Social Security trust
fund $800 million. As a Nation we squander $365 billion a year, that is
$1 billion a day, on interest on the national debt. Yet because for the
first time in 30 years we are not borrowing money to make ends meet, we
are deciding to find all sorts of new ways to give it away. That is
wrong. It totally ignores national defense.
This year's Republican Congress will spend $30 billion less in real
dollars, in 1998 dollars, than they did in 1995 on defense. We are
sending kids out in 30-year-old warships, 30-year-old helicopters, 30-
year-old warplanes. The consequences of that can be dead young
Americans in some future war. If we have any money left over, we need
to take care of that.
We owe the Social Security trust fund $800 million. That is a pledge
that has to be fulfilled. Above all, if you have seen Private Ryan,
there is an entire generation of Americans who served this country in
the military who were promised free health care for life if they
fulfilled their end of the obligation and now when they are too old to
do anything about it, we are not fulfilling it. The defense health care
is underfunded by $600 million next year. Yet we can find time to give
big contributors a tax break but not keep the promises we have already
made.
For those reasons, I want to be recorded as voting ``no.''
Parliamentary Inquiry
Mr. TAYLOR of Mississippi. Parliamentary inquiry, Mr. Speaker.
The SPEAKER pro tempore. The gentleman will state his parliamentary
inquiry.
Mr. TAYLOR of Mississippi. Mr. Speaker, the gentleman from Alabama
(Mr. Callahan) and myself have agreed to pair tomorrow on the vote on
the tax package. I would like for my statement to be included in the
Record at that time, but I will not be here tomorrow to do so.
Therefore, I am asking if it would be in order to ask at this time that
that statement be included in the Record.
The SPEAKER pro tempore. The gentleman may ask unanimous consent to
do so.
Mr. TAYLOR of Mississippi. Mr. Speaker, I ask unanimous consent that
my statement be included in the Record at the appropriate place
tomorrow.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Mississippi?
There was no objection.
The SPEAKER pro tempore. Pursuant to the order of the House, the
Chair postpones further consideration of H.R. 4579 until tomorrow.
____________________