[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.

                          ____________________