[Congressional Record Volume 144, Number 138 (Tuesday, October 6, 1998)]
[Senate]
[Pages S11614-S11628]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      TAXPAYER RELIEF ACT OF 1998

                                 ______
                                 

                     LAUTENBERG AMENDMENT NO. 3747

  (Ordered to lie on the table.)
  Mr. LAUTENBERG submitted an amendment intended to be proposed by him 
to 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 provisions, and for other 
purposes; as follows:

       In lieu of the matter proposed to be inserted, insert:

     SECTION 1. SHORT TITLE, ETC.

       (a) Short Title.--This Act may be cited as the ``Tax Cut 
     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--FAMILY TAX RELIEF PROVISIONS

                     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.

                   Subtitle B--Affordable Child Care

Sec. 111. Expanding the dependent care tax credit.
Sec. 112. Minimum credit allowed for stay-at-home parents.
Sec. 113. Credit made refundable.
Sec. 114. Allowance of credit for employer expenses for child care 
              assistance.

                 TITLE II--EDUCATION AND INFRASTRUCTURE

                     Subtitle A--General Provisions

Sec. 201. Eligible educational institutions permitted to maintain 
              qualified tuition programs.
Sec. 202. Increase in volume cap on private activity bonds.

           Subtitle B--American Community Renewal Act of 1998

Sec. 211. Short title.
Sec. 212. Designation of and tax incentives for renewal communities.
Sec. 213. Extension of expensing of environmental remediation costs to 
              renewal communities.
Sec. 214. Extension of work opportunity tax credit for renewal 
              communities
Sec. 215. Conforming and clerical amendments.
Sec. 216. Evaluation and reporting requirements.

                Subtitle C--Tax Incentives for Education

Sec. 221. Expansion of incentives for public schools.

            TITLE III--SMALL BUSINESS AND FARMER TAX RELIEF

Sec. 301. Acceleration of unified estate and gift tax credit increase.
Sec. 302. 100 percent deduction for health insurance costs of self-
              employed individuals.
Sec. 303. Income averaging for farmers made permanent.
Sec. 304. 5-year net operating loss carryback for farming losses.
Sec. 305. Increase in expense treatment for small businesses.
Sec. 306. Research credit.
Sec. 307. Work opportunity credit.
Sec. 308. Welfare-to-work credit.
Sec. 309. Contributions of stock to private foundations; expanded 
              public inspection of private foundations' annual returns.

                TITLE IV--SOCIAL SECURITY EARNINGS LIMIT

Sec. 401. Increases in the social security earnings limit for 
              individuals who have attained retirement age.

                        TITLE V--REVENUE OFFSET

Sec. 501. Treatment of certain deductible liquidating distributions of 
              regulated investment companies and real estate investment 
              trusts.

                 TITLE VI--SAVING SOCIAL SECURITY FIRST

Sec. 601. Effective date of provisions contingent on saving social 
              security first.

                 TITLE I--FAMILY TAX RELIEF PROVISIONS

                     Subtitle A--General Provisions

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

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

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

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

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

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

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

  ``For treatment of capital gain dividends, see sections 854(a) and 
857(c).
       ``(2) Certain nonresident aliens ineligible for 
     exclusion.--In the case of a nonresident alien individual, 
     subsection (a) shall apply only--
       ``(A) in determining the tax imposed for the taxable year 
     pursuant to section 871(b)(1) and only in respect of 
     dividends and interest which are effectively connected with 
     the conduct of a trade or business within the United States, 
     or
       ``(B) in determining the tax imposed for the taxable year 
     pursuant to section 877(b).
       ``(3) Dividends from employee stock ownership plans.--
     Subsection (a) shall not apply to any dividend described in 
     section 404(k).''

[[Page S11615]]

       (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.

                   Subtitle B--Affordable Child Care

     SEC. 111. EXPANDING THE DEPENDENT CARE TAX CREDIT.

       (a) Percentage of Employment-Related Expenses Determined by 
     Taxpayer Status.--Section 21(a)(2) (defining applicable 
     percentage) is amended to read as follows:
       ``(2) Applicable percentage defined.--For purposes of 
     paragraph (1), the term `applicable percentage' means--
       ``(A) except as provided in subparagraph (B), 50 percent 
     reduced (but not below 20 percent) by 1 percentage point for 
     each $1,000, or fraction thereof, by which the taxpayers's 
     adjusted gross income for the taxable year exceeds $30,000, 
     and
       ``(B) in the case of employment-related expenses described 
     in subsection (e)(11), 50 percent reduced (but not below 
     zero) by 1 percentage point for each $800, or fraction 
     thereof, by which the taxpayers's adjusted gross income for 
     the taxable year exceeds $30,000.''.
       (b) Inflation Adjustment for Allowable Expenses.--Section 
     21(c) (relating to dollar limit on amount creditable) is 
     amended by striking ``The amount determined'' and inserting 
     ``In the case of any taxable year beginning after 1998, each 
     dollar amount referred to in paragraphs (1) and (2) shall be 
     increased by an amount equal to such dollar amount multiplied 
     by the cost-of-living adjustment determined under section 
     1(f)(3) for the calendar year in which the taxable year 
     begins, by substituting `calendar year 1997' for `calendar 
     year 1992' in subparagraph (B) thereof. If any dollar amount 
     after being increased under the preceding sentence is not a 
     multiple of $10, such dollar amount shall be rounded to the 
     nearest multiple of $10. The amount determined''.
       (c) Effective Date.--The amendments made by this section 
     apply to taxable years beginning after December 31, 1998.

     SEC. 112. MINIMUM CREDIT ALLOWED FOR STAY-AT-HOME PARENTS.

       (a) In General.--Section 21(e) (relating to special rules) 
     is amended by adding at the end the following:
       ``(11) Minimum credit allowed for stay-at-home parents.--
     Notwithstanding subsection (d), in the case of any taxpayer 
     with one or more qualifying individuals described in 
     subsection (b)(1)(A) under the age of 1 at any time during 
     the taxable year, such taxpayer shall be deemed to have 
     employment-related expenses with respect to such qualifying 
     individuals in an amount equal to the sum of--
       ``(A) $90 for each month in such taxable year during which 
     at least one of such qualifying individuals is under the age 
     of 1, and
       ``(B) the amount of employment-related expenses otherwise 
     incurred for such qualifying individuals for the taxable year 
     (determined under this section without regard to this 
     paragraph).''.
       (b) Effective Date.--The amendments made by this section 
     apply to taxable years beginning after December 31, 1998.

     SEC. 113. CREDIT MADE REFUNDABLE.

       (a) In General.--Part IV of subchapter A of chapter 1 
     (relating to credits against tax) is amended--
       (1) by redesignating section 35 as section 36, and
       (2) by redesignating section 21 as section 35.
       (b) Advance Payment of Credit.--Chapter 25 (relating to 
     general provisions relating to employment taxes) is amended 
     by inserting after section 3507 the following:

     ``SEC. 3507A. ADVANCE PAYMENT OF DEPENDENT CARE CREDIT.

       ``(a) General Rule.--Except as otherwise provided in this 
     section, every employer making payment of wages with respect 
     to whom a dependent care eligibility certificate is in effect 
     shall, at the time of paying such wages, make an additional 
     payment equal to such employee's dependent care advance 
     amount.
       ``(b) Dependent Care Eligibility Certificate.--For purposes 
     of this title, a dependent care eligibility certificate is a 
     statement furnished by an employee to the employer which--
       ``(1) certifies that the employee will be eligible to 
     receive the credit provided by section 35 for the taxable 
     year,
       ``(2) certifies that the employee reasonably expects to be 
     an applicable taxpayer for the taxable year,
       ``(3) certifies that the employee does not have a dependent 
     care eligibility certificate in effect for the calendar year 
     with respect to the payment of wages by another employer,
       ``(4) states whether or not the employee's spouse has a 
     dependent care eligibility certificate in effect,
       ``(5) states the number of qualifying individuals in the 
     household maintained by the employee, and
       ``(6) estimates the amount of employment-related expenses 
     for the calendar year.
       ``(c) Dependent Care Advance Amount.--
       ``(1) In general.--For purposes of this title, the term 
     `dependent care advance amount' means, with respect to any 
     payroll period, the amount determined--
       ``(A) on the basis of the employee's wages from the 
     employer for such period,
       ``(B) on the basis of the employee's estimated employment-
     related expenses included in the dependent care eligibility 
     certificate, and
       ``(C) in accordance with tables provided by the Secretary.
       ``(2) Advance amount tables.--The tables referred to in 
     paragraph (1)(C) shall be similar in form to the tables 
     prescribed under section 3402 and, to the maximum extent 
     feasible, shall be coordinated with such tables and the 
     tables prescribed under section 3507(c).
       ``(d) Other Rules.--For purposes of this section, rules 
     similar to the rules of subsections (d) and (e) of section 
     3507 shall apply.
       ``(e) Definitions.--For purposes of this section, terms 
     used in this section which are defined in section 35 shall 
     have the respective meanings given such terms by section 
     35.''.
       (c) Conforming Amendments.--
       (1) Section 35(a)(1), as redesignated by paragraph (1), is 
     amended by striking ``chapter'' and inserting ``subtitle''.
       (2) Section 35(e), as so redesignated and amended by 
     subsection (c), is amended by adding at the end the 
     following:
       ``(12) Coordination with advance payments and minimum 
     tax.--Rules similar to the rules of subsections (g) and (h) 
     of section 32 shall apply for purposes of this section.''.
       (3) Sections 23(f)(1) and 129(a)(2)(C) are each amended by 
     striking ``section 21(e)'' and inserting ``section 35(e)''.
       (4) Section 129(b)(2) is amended by striking ``section 
     21(d)(2)'' and inserting ``section 35(d)(2)''.
       (5) Section 129(e)(1) is amended by striking ``section 
     21(b)(2)'' and inserting ``section 35(b)(2)''.
       (6) Section 213(e) is amended by striking ``section 21'' 
     and inserting ``section 35''.
       (7) Section 995(f)(2)(C) is amended by striking ``and 34'' 
     and inserting ``34, and 35''.
       (8) Section 6211(b)(4)(A) is amended by striking ``and 34'' 
     and inserting ``, 34, and 35''.

[[Page S11616]]

       (9) Section 6213(g)(2)(H) is amended by striking ``section 
     21'' and inserting ``section 35''.
       (10) The table of sections for subpart C of part IV of 
     subchapter A of chapter 1 is amended by striking the item 
     relating to section 35 and inserting the following:

``Sec. 35. Dependent care services.
``Sec. 36. Overpayments of tax.''.

       (11) The table of sections for subpart A of such part IV is 
     amended by striking the item relating to section 21.
       (12) The table of sections for chapter 25 is amended by 
     adding after the item relating to section 3507 the following:

``Sec. 3507A. Advance payment of dependent care credit.''.

       (13) Section 1324(b)(2) of title 31, United States Code, is 
     amended by inserting before the period ``, or enacted by the 
     Tax Cut Act of 1998''.
       (d) Effective Date.--The amendments made by this section 
     apply to taxable years beginning after December 31, 1998.

     SEC. 114. ALLOWANCE OF CREDIT FOR EMPLOYER EXPENSES FOR CHILD 
                   CARE ASSISTANCE.

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

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

       ``(a) Allowance of Credit.--For purposes of section 38, the 
     employer-provided child care credit determined under this 
     section for the taxable year is an amount equal to 25 percent 
     of the qualified child care expenditures of the taxpayer for 
     such taxable year.
       ``(b) Dollar Limitation.--The credit allowable under 
     subsection (a) for any taxable year shall not exceed 
     $150,000.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Qualified child care expenditure.--
       ``(A) In general.--The term `qualified child care 
     expenditure' means any amount paid or incurred--
       ``(i) to acquire, construct, rehabilitate, or expand 
     property--

       ``(I) which is to be used as part of a qualified child care 
     facility of the taxpayer,
       ``(II) with respect to which a deduction for depreciation 
     (or amortization in lieu of depreciation) is allowable, and
       ``(III) which does not constitute part of the principal 
     residence (within the meaning of section 1034) of the 
     taxpayer or any employee of the taxpayer,

       ``(ii) for the operating costs of a qualified child care 
     facility of the taxpayer, including costs related to the 
     training of employees of the child care facility, to 
     scholarship programs, to the providing of differential 
     compensation to employees based on level of child care 
     training, and to expenses associated with achieving 
     accreditation,
       ``(iii) under a contract with a qualified child care 
     facility to provide child care services to employees of the 
     taxpayer, or
       ``(iv) under a contract to provide child care resource and 
     referral services to employees of the taxpayer.
       ``(B) Exclusion for amounts funded by grants, etc.--The 
     term `qualified child care expenditure' shall not include any 
     amount to the extent such amount is funded by any grant, 
     contract, or otherwise by another person (or any governmental 
     entity).
       ``(C) Limitation on allowable operating costs.--The term 
     `qualified child care expenditure' shall not include any 
     amount described in subparagraph (A)(ii) if such amount is 
     paid or incurred after the third taxable year in which a 
     credit under this section is taken by the taxpayer, unless 
     the qualified child care facility of the taxpayer has 
     received accreditation from a nationally recognized 
     accrediting body before the end of such third taxable year.
       ``(2) Qualified child care facility.--
       ``(A) In general.--The term `qualified child care facility' 
     means a facility--
       ``(i) the principal use of which is to provide child care 
     assistance, and
       ``(ii) which meets the requirements of all applicable laws 
     and regulations of the State or local government in which it 
     is located, including, but not limited to, the licensing of 
     the facility as a child care facility.

     Clause (i) shall not apply to a facility which is the 
     principal residence (within the meaning of section 1034) of 
     the operator of the facility.
       ``(B) Special rules with respect to a taxpayer.--A facility 
     shall not be treated as a qualified child care facility with 
     respect to a taxpayer unless--
       ``(i) enrollment in the facility is open to employees of 
     the taxpayer during the taxable year,
       ``(ii) the facility is not the principal trade or business 
     of the taxpayer unless at least 30 percent of the enrollees 
     of such facility are dependents of employees of the taxpayer, 
     and
       ``(iii) the costs to employees of child care services at 
     such facility are determined on a sliding fee scale.
       ``(d) Recapture of Acquisition and Construction Credit.--
       ``(1) In general.--If, as of the close of any taxable year, 
     there is a recapture event with respect to any qualified 
     child care facility of the taxpayer, then the tax of the 
     taxpayer under this chapter for such taxable year shall be 
     increased by an amount equal to the product of--
       ``(A) the applicable recapture percentage, and
       ``(B) the aggregate decrease in the credits allowed under 
     section 38 for all prior taxable years which would have 
     resulted if the qualified child care expenditures of the 
     taxpayer described in subsection (c)(1)(A) with respect to 
     such facility had been zero.
       ``(2) Applicable recapture percentage.--
       ``(A) In general.--For purposes of this subsection, the 
     applicable recapture percentage shall be determined from the 
     following table:

                                                         The applicable
                                                              recapture
                                    ``If the recapture evpercentage is:
    Years 1-3....................................................100   
    Year 4........................................................85   
    Year 5........................................................70   
    Year 6........................................................55   
    Year 7........................................................40   
    Year 8........................................................25   
    Years 9 and 10................................................10   
    Years 11 and thereafter........................................0.  
       ``(B) Years.--For purposes of subparagraph (A), year 1 
     shall begin on the first day of the taxable year in which the 
     qualified child care facility is placed in service by the 
     taxpayer.
       ``(3) Recapture event defined.--For purposes of this 
     subsection, the term `recapture event' means--
       ``(A) Cessation of operation.--The cessation of the 
     operation of the facility as a qualified child care facility.
       ``(B) Change in ownership.--
       ``(i) In general.--Except as provided in clause (ii), the 
     disposition of a taxpayer's interest in a qualified child 
     care facility with respect to which the credit described in 
     subsection (a) was allowable.
       ``(ii) Agreement to assume recapture liability.--Clause (i) 
     shall not apply if the person acquiring such interest in the 
     facility agrees in writing to assume the recapture liability 
     of the person disposing of such interest in effect 
     immediately before such disposition. In the event of such an 
     assumption, the person acquiring the interest in the facility 
     shall be treated as the taxpayer for purposes of assessing 
     any recapture liability (computed as if there had been no 
     change in ownership).
       ``(4) Special rules.--
       ``(A) Tax benefit rule.--The tax for the taxable year shall 
     be increased under paragraph (1) only with respect to credits 
     allowed by reason of this section which were used to reduce 
     tax liability. In the case of credits not so used to reduce 
     tax liability, the carryforwards and carrybacks under section 
     39 shall be appropriately adjusted.
       ``(B) No credits against tax.--Any increase in tax under 
     this subsection shall not be treated as a tax imposed by this 
     chapter for purposes of determining the amount of any credit 
     under subpart A, B, or D of this part.
       ``(C) No recapture by reason of casualty loss.--The 
     increase in tax under this subsection shall not apply to a 
     cessation of operation of the facility as a qualified child 
     care facility by reason of a casualty loss to the extent such 
     loss is restored by reconstruction or replacement within a 
     reasonable period established by the Secretary.
       ``(e) Special Rules.--For purposes of this section--
       ``(1) Aggregation rules.--All persons which are treated as 
     a single employer under subsections (a) and (b) of section 52 
     shall be treated as a single taxpayer.
       ``(2) Pass-thru in the case of estates and trusts.--Under 
     regulations prescribed by the Secretary, rules similar to the 
     rules of subsection (d) of section 52 shall apply.
       ``(3) Allocation in the case of partnerships.--In the case 
     of partnerships, the credit shall be allocated among partners 
     under regulations prescribed by the Secretary.
       ``(f) No Double Benefit.--
       ``(1) Reduction in basis.--For purposes of this subtitle--
       ``(A) In general.--If a credit is determined under this 
     section with respect to any property by reason of 
     expenditures described in subsection (c)(1)(A), the basis of 
     such property shall be reduced by the amount of the credit so 
     determined.
       ``(B) Certain dispositions.--If during any taxable year 
     there is a recapture amount determined with respect to any 
     property the basis of which was reduced under subparagraph 
     (A), the basis of such property (immediately before the event 
     resulting in such recapture) shall be increased by an amount 
     equal to such recapture amount. For purposes of the preceding 
     sentence, the term `recapture amount' means any increase in 
     tax (or adjustment in carrybacks or carryovers) determined 
     under subsection (d).
       ``(2) Other deductions and credits.--No deduction or credit 
     shall be allowed under any other provision of this chapter 
     with respect to the amount of the credit determined under 
     this section.''.
       (b) Conforming Amendments.--
       (1) Section 38(b) is amended--
       (A) by striking out ``plus'' at the end of paragraph (11),
       (B) by striking out the period at the end of paragraph 
     (12), and inserting a comma and ``plus'', and
       (C) by adding at the end the following new paragraph:
       ``(13) the employer-provided child care credit determined 
     under section 45D.''.
       (2) The table of sections for subpart D of part IV of 
     subchapter A of chapter 1 is amended by adding at the end the 
     following new item:

``Sec. 45D. Employer-provided child care credit.''.


[[Page S11617]]


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

                 TITLE II--EDUCATION AND INFRASTRUCTURE

                     Subtitle A--General Provisions

     SEC. 201. 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. 202. 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.

           Subtitle B--American Community Renewal Act of 1998

     SEC. 211. SHORT TITLE.

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

     SEC. 212. DESIGNATION OF AND TAX INCENTIVES FOR RENEWAL 
                   COMMUNITIES.

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

                  ``Subchapter X--Renewal Communities

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

                         ``PART I--DESIGNATION

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

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

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

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

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

       ``(I) 4,000 if any portion of such area (other than a rural 
     area described in subsection (a)(2)(B)(i)) is located within 
     a metropolitan

[[Page S11618]]

     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.

 ``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,

[[Page S11619]]

       ``(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.
       ``(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.

[[Page S11620]]

       ``(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 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

[[Page S11621]]

       ``(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. 213. EXTENSION OF EXPENSING OF ENVIRONMENTAL REMEDIATION 
                   COSTS TO RENEWAL COMMUNITIES.

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

     SEC. 214. 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

[[Page S11622]]

     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. 215. 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. 216. EVALUATION AND REPORTING REQUIREMENTS.

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

                Subtitle C--Tax Incentives for Education

     SEC. 221. EXPANSION OF INCENTIVES FOR PUBLIC SCHOOLS.

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

[[Page S11623]]

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

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

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

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

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

       ``(a) Qualified Zone Academy Bond.--For purposes of this 
     part--
       ``(1) In general.--The term `qualified zone academy bond' 
     means any bond issued as part of an issue if--
       ``(A) 95 percent or more of the proceeds of such issue are 
     to be used for a qualified purpose with respect to a 
     qualified zone academy established by a local educational 
     agency,
       ``(B) the bond is issued by a State or local government 
     within the jurisdiction of which such academy is located,
       ``(C) the issuer--
       ``(i) designates such bond for purposes of this section,
       ``(ii) certifies that it has written assurances that the 
     private business contribution requirement of paragraph (2) 
     will be met with respect to such academy, and
       ``(iii) certifies that it has the written approval of the 
     local educational agency for such bond issuance, and
       ``(D) the term of each bond which is part of such issue 
     does not exceed 15 years.
       ``(2) Private business contribution requirement.--
       ``(A) In general.--For purposes of paragraph (1), the 
     private business contribution requirement of this paragraph 
     is met with respect to any issue if the local educational 
     agency that established the qualified zone academy has 
     written commitments from private entities to make qualified 
     contributions having a present value (as of the date of 
     issuance of the issue) of not less than 10 percent of the 
     proceeds of the issue.
       ``(B) Qualified contributions.--For purposes of 
     subparagraph (A), the term `qualified contribution' means any 
     contribution (of a type and quality acceptable to the local 
     educational agency) of--
       ``(i) equipment for use in the qualified zone academy 
     (including state-of-the-art technology and vocational 
     equipment),
       ``(ii) technical assistance in developing curriculum or in 
     training teachers in order to promote appropriate market 
     driven technology in the classroom,
       ``(iii) services of employees as volunteer mentors,
       ``(iv) internships, field trips, or other educational 
     opportunities outside the academy for students, or
       ``(v) any other property or service specified by the local 
     educational agency.
       ``(3) Qualified zone academy.--The term `qualified zone 
     academy' means any public school (or academic program within 
     a public school) which is established by and operated under 
     the supervision of a local educational agency to provide 
     education or training below the postsecondary level if--
       ``(A) such public school or program (as the case may be) is 
     designed in cooperation with business to enhance the academic 
     curriculum, increase graduation and employment rates, and 
     better prepare students for the rigors of college and the 
     increasingly complex workforce,
       ``(B) students in such public school or program (as the 
     case may be) will be subject to the same academic standards 
     and assessments as other students educated by the local 
     educational agency,
       ``(D) the comprehensive education plan of such public 
     school or program is approved by the local educational 
     agency, and
       ``(E)(i) such public school is located in an empowerment 
     zone or enterprise community (including any such zone or 
     community designated after the date of the enactment of this 
     section), or
       ``(ii) there is a reasonable expectation (as of the date of 
     issuance of the bonds) that at least 35 percent of the 
     students attending such school or participating in such 
     program (as the case may be) will be eligible for free or 
     reduced-cost lunches under the school lunch program 
     established under the National School Lunch Act.
       ``(4) Qualified purpose.--The term `qualified purpose' 
     means, with respect to any qualified zone academy--
       ``(A) constructing, rehabilitating, or repairing the public 
     school facility in which the academy is established,
       ``(B) providing equipment for use at such academy,
       ``(C) developing course materials for education to be 
     provided at such academy, and
       ``(D) training teachers and other school personnel in such 
     academy.
       ``(5) Temporary period exception.--A bond shall not be 
     treated as failing to meet the requirement of paragraph 
     (1)(A) solely by reason of the fact that the proceeds of the 
     issue of which such bond is a part are invested for a 
     reasonable temporary period (but not more than 36 months) 
     until such proceeds are needed for the purpose for which such 
     issue was issued. Any earnings on such proceeds during such 
     period shall be treated as proceeds of the issue for purposes 
     of applying paragraph (1)(A).
       ``(b) Limitations on Amount of Bonds Designated.--
       ``(1) In general.--There is a national zone academy bond 
     limitation for each calendar year. Such limitation is--
       ``(A) $400,000,000 for 1998,
       ``(B) $700,000,000 for 1999,
       ``(C) $700,000,000 for 2000,
       ``(D) $700,000,000 for 2001,
       ``(C) $700,000,000 for 2002, and
       ``(D) except as provided in paragraph (3), zero after 2002.
       ``(2) Allocation of limitation.--
       ``(A) Allocation among states.--
       ``(i) 1998 limitation.--The national zone academy bond 
     limitation for calendar year 1998 shall be allocated by the 
     Secretary among the States on the basis of their respective 
     populations of individuals below the poverty line (as defined 
     by the Office of Management and Budget).
       ``(ii) Limitation after 1998.--The national zone academy 
     bond limitation for any calendar year after 1998 shall be 
     allocated by the Secretary among the States in the manner 
     prescribed by section 1397G(d); except that, in making the 
     allocation under this clause, the Secretary shall take into 
     account Basic Grants attributable to large local educational 
     agencies (as defined in section 1397G(e)).
       ``(B) Allocation to local educational agencies.--The 
     limitation amount allocated to a State under subparagraph (A) 
     shall be allocated by the State education agency to qualified 
     zone academies within such State.
       ``(C) Designation subject to limitation amount.--The 
     maximum aggregate face amount of bonds issued during any 
     calendar year which may be designated under subsection (a) 
     with respect to any qualified zone

[[Page S11624]]

     academy shall not exceed the limitation amount allocated to 
     such academy under subparagraph (B) for such calendar year.
       ``(3) Carryover of unused limitation.--If for any calendar 
     year--
       ``(A) the limitation amount under this subsection for any 
     State, exceeds
       ``(B) the amount of bonds issued during such year which are 
     designated under subsection (a) with respect to qualified 
     zone academies within such State,

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

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

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

     Rules similar to the rules of section 1397F(a)(5) shall apply 
     for purposes of paragraph (1).
       ``(b) Limitation on Amount of Bonds Designated.--The 
     maximum aggregate face amount of bonds issued during any 
     calendar year which may be designated under subsection (a) by 
     any issuer shall not exceed the sum of--
       ``(1) the limitation amount allocated under subsection (d) 
     for such calendar year to such issuer, and
       ``(2) if such issuer is a large local educational agency 
     (as defined in subsection (e)) or is issuing on behalf of 
     such an agency, the limitation amount allocated under 
     subsection (e) for such calendar year to such agency.
       ``(c) National Limitation on Amount of Bonds Designated.--
       ``(1) In general.--There is a national qualified school 
     construction bond limitation for each calendar year equal to 
     the dollar amount specified in paragraph (2) for such year, 
     reduced, in the case of calendar years 1999 and 2000, by 1.5 
     percent of such amount.
       ``(2) Dollar amount specified.--The dollar amount specified 
     in this paragraph is--
       ``(A) $9,700,000,000 for 1999,
       ``(B) $9,700,000,000 for 2000, and
       ``(C) except as provided in subsection (f), zero after 
     2000.

       ``(d) 65-Percent of Limitation Allocated Among States.--
       ``(1) In general.--Sixty-five percent of the limitation 
     applicable under subsection (c) for any calendar year shall 
     be allocated among the States under paragraph (2) by the 
     Secretary. The limitation amount allocated to a State under 
     the preceding sentence shall be allocated by the State 
     education agency to issuers within such State and such 
     allocations may be made only if there is an approved State 
     application.
       ``(2) Allocation formula.--The amount to be allocated under 
     paragraph (1) for any calendar year shall be allocated among 
     the States in proportion to the respective amounts each such 
     State received for Basic Grants under subpart 2 of part A of 
     title I of the Elementary and Secondary Education Act of 1965 
     (20 U.S.C. 6331 et seq.) for the most recent fiscal year 
     ending before such calendar year. For purposes of the 
     preceding sentence, Basic Grants attributable to large local 
     educational agencies (as defined in subsection (e)) shall be 
     disregarded.
       ``(3) Minimum allocations to states.--
       ``(A) In general.--The Secretary shall adjust the 
     allocations under this subsection for any calendar year for 
     each State to the extent necessary to ensure that the sum 
     of--
       ``(i) the amount allocated to such State under this 
     subsection for such year, and
       ``(ii) the aggregate amounts allocated under subsection (e) 
     to large local educational agencies in such State for such 
     year,

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

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

     A rule similar to the rule of the last sentence of subsection 
     (d)(5) shall apply for purposes of this paragraph.
       ``(f) Carryover of Unused Limitation.--If for any calendar 
     year--
       ``(1) the amount allocated under subsection (d) to any 
     State, exceeds

[[Page S11625]]

       ``(2) the amount of bonds issued during such year which are 
     designated under subsection (a) pursuant to such allocation,

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

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

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

            TITLE III--SMALL BUSINESS AND FARMER TAX RELIEF

     SEC. 301. ACCELERATION OF UNIFIED ESTATE AND GIFT TAX CREDIT 
                   INCREASE.

       The table in section 2010(c) (relating to applicable credit 
     amount) is amended by striking the item relating to calendar 
     year 1999 and by striking ``2000 and 2001'' and inserting 
     ``1999, 2000, and 2001''.

     SEC. 302. 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. 303. 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. 304. 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. 305. 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.

     SEC. 306. 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. 307. 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. 308. 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. 309. CONTRIBUTIONS OF STOCK TO PRIVATE FOUNDATIONS; 
                   EXPANDED PUBLIC INSPECTION OF PRIVATE 
                   FOUNDATIONS' ANNUAL RETURNS.

       (a) Special Rule for Contributions of Stock Made 
     Permanent.--

[[Page S11626]]

       (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).

                TITLE IV--SOCIAL SECURITY EARNINGS LIMIT

     SEC. 401. 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.

                        TITLE V--REVENUE OFFSET

     SEC. 501. 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.
       (d) Transfer of Increased Revenues to Social Security Trust 
     Funds.--
       (1) Estimate by secretary.--The Secretary of the Treasury 
     shall periodically estimate the increase in Federal revenues 
     for each fiscal year beginning after September 30, 1997, by 
     reason of the amendments made by this section. The Secretary 
     shall adjust any estimate to the extent necessary to correct 
     any error in a prior estimate.
       (2) Transfer of funds.--The Secretary of the Treasury 
     shall, not less frequently than quarterly, transfer to the 
     trust funds established under section 201 of the Social 
     Security Act (42 U.S.C. 401) from the general fund of the 
     Treasury an amount equal to the increase in Federal revenues 
     estimated under paragraph (1) for the period covered by the 
     transfer. Such transfer shall be allocated among the trust 
     funds in the same manner as other revenues.

                 TITLE VI--SAVING SOCIAL SECURITY FIRST

     SEC. 601. EFFECTIVE DATE OF PROVISIONS CONTINGENT ON SAVING 
                   SOCIAL SECURITY FIRST.

       (a) Findings.--The Senate finds that--
       (1) the social security program, created in 1935 to provide 
     old-age, survivors, and disability insurance benefits, is one 
     the most successful and important social insurance programs 
     in the United States, and has played an essential role in 
     reducing poverty among seniors;
       (2) the social security program will face significant 
     pressures when the baby boom generation retires, which could 
     threaten the long-term viability of the program;
       (3) Congress needs to act promptly to ensure that social 
     security benefits will be available when today's younger 
     Americans retire; and
       (4) current budget law and rules that were established to 
     ensure fiscal discipline, including the pay-as-you-go system 
     (which requires tax cuts to be fully offset), prevent 
     Congress from using projected budget surpluses to pay for tax 
     cuts, except by a supermajority vote by three-fifths of the 
     membership of the Senate.
       (b) Requirement for Social Security Solvency.--
     Notwithstanding any other provision of, or amendment made by, 
     this Act, no

[[Page S11627]]

     such provision or amendment shall take effect before the 
     first January 1 after the date of enactment of this Act that 
     follows a calendar year for which there is a social security 
     solvency designation pursuant to subsection (c).
       (c) Social Security Solvency Designation.--For purposes of 
     subsection (b), there is a social security solvency 
     designation for a calendar year if, during such year--
       (1) the Board of Trustees of the social security trust 
     funds certifies in its annual report that both the Federal 
     Old-Age and Survivors Insurance Trust Fund and the Federal 
     Disability Insurance Trust Fund are in long-range actuarial 
     balance pursuant to section 201(c)(2) of the Social Security 
     Act (42 U.S.C. 401(c)(2)); and
       (2) Congress, upon review of the Board of Trustees' 
     determination that the trust funds are in long-range 
     actuarial balance, so certifies by statute.

 Mr. LAUTENBERG. Mr. President, today I am submitting an 
amendment to the House-passed tax bill on the calendar. This amendment 
would improve the House bill by directing more of its tax relief to 
middle income taxpayers, and by protecting Social Security.
  The amendment would provide relief from the marriage penalty, help 
parents afford child care, promote the modernization of our schools, 
allow self-employed individuals to deduct the costs of health 
insurance, encourage savings and investment by establishing new 
exclusions for interest and dividends for all Americans, promote 
research by reinstating the research and experimentation tax credit, 
provide relief from the estate and gift tax, promote the revitalization 
of depressed areas, expand support for small businesses, and modify 
rules that discourage seniors from working.
  The amendment differs from the House bill in two primary respects. 
First, it would target tax relief to middle income families, largely by 
providing additional relief for families with children in child care, 
and by promoting the modernization of our nation's schools. Second, the 
bill protects Social Security, by deferring the effective date of the 
tax cuts until the Social Security Trust Fund is actuarially sound.
  Mr. President, let me briefly review the items that are included in 
my proposal.
  First, the amendment would provide relief from the marriage penalty. 
As proposed in the House-passed bill, the amendment would increase the 
standard deduction for married couples so that each spouse would have 
the same deduction as a single filer.
  Second, the amendment would help families handle the costs of child 
care. It would increase the child care and dependent tax credit to a 
maximum allowable expense for inflation. It would make the credit 
refundable, so that it benefits those with lower incomes. And it would 
provide a new tax credit worth $90 per month for stay-at-home parents 
of children under one year of age.
  Third, the amendment would promote education, by supporting the 
modernization of our schools, and allowing schools of higher education 
to establish prepaid tuition programs.
  Fourth, the amendment would allow self-employed individuals to fully 
deduct the costs of health insurance.
  Fifth, the amendment would promote savings and investment, by 
establishing a new exclusion for dividends and interest. Individuals 
could exclude up to $200, and couples could exclude up to $400 in 
dividends and interest.
  Sixth, the amendment would extend several provisions of the tax code 
that expired this year or would expire next year. These include the 
credits for research, work opportunity and welfare-to-work, would be 
extended through Feb. 29, 2000. The credit for contributions of stock 
to private foundations would be extended permanently.
  Seventh, the amendment would provide immediate relief from the estate 
and gift tax. Under the legislation, an additional $25,000 of estates 
would, in effect, be excludable from this tax in 1999. This would 
increase the total credit against this tax to $675,000.
  Eighth, the amendment would encourage the revitalization of depressed 
areas, by providing a variety of tax incentives to businesses and 
individuals in 20 so-called renewal communities. These low-income areas 
would be designated by the Secretary of Housing and Urban Development.
  Ninth, the amendment includes various provisions to assist small 
businesses. For example, the legislation would allow small-business 
owners to deduct up to $25,000 of the cost of business-related 
equipment.
  Finally, the amendment would allow seniors to work more without 
suffering a reduction in their Social Security benefits. Under the 
proposal, seniors would be able to earn up to $17,000 in 1999 without 
losing a portion of their Social Security benefits. That limit would 
increase to $39,750 in 2008.
  Mr. President, there also are other provisions in this amendment, and 
I will not detail each one. Suffice it to say that, to a very large 
extent, this proposal tracks the tax cuts included in legislation 
approved by the House. However, as I have noted, the amendment is more 
targeted to middle income taxpayers, largely because it includes 
support for child care and school modernization. Also, its estate tax 
provisions are somewhat modified from the House version, to help us 
afford these other provisions, and to ensure that the bulk of the 
relief provided in the bill goes to middle class and moderate-income 
Americans.
  The second key difference from the House Mr. President, it that this 
proposal includes significant tax relief while fully protecting Social 
Security. Under the proposal, all tax cuts would become effective when 
the Social Security Trust Fund is in long-range actuarial balance. This 
ensures that we will not squander our opportunity to reform Social 
Security next year, and that we will not force unnecessary cuts in 
Social Security benefits for today's younger Americans. It also 
reflects a commitment to abide by the Balanced Budget Agreement and to 
maintain fiscal discipline.
  I hope my colleagues will support this proposal, and I ask unanimous 
consent that a summary of the amendment be printed in the Record.
  There being no objection, the summary was ordered to be printed in 
the Record, as follows:

       The Lautenberg Amendment includes approximately $85 billion 
     in tax relief that would be available when the Social 
     Security Trust Fund is actuarially sound. The tax cuts are 
     largely the same as those proposed in the House-passed tax 
     bill (though the Amendment also includes tax cuts for child 
     care and school modernization so that its benefits are more 
     targeted to the middle class). Unlike the House-passed bill, 
     the Amendment would not reduce any budget surplus before 
     Congress saves Social Security first.
       The main elements of the proposal (and cost in $ billions/5 
     years) are:
       From House bill: (1) Marriage penalty relief, 28; (2) 
     Interest and dividends exclusion, 15; (3) Self-employed 
     health deduction, 5; (4) Expiring provisions (e.g., R&E 
     credit), 6; (5) Social Security earnings test, 0.5.
       Items not in House bill: (1) Child care, 17; (2) School 
     modernization, 5.
       Item modified from House bill: Estate tax relief, 2 (House: 
     18).


                           amendment summary

      1. Family Tax Relief Provisions
       A. Marriage Penalty Relief--Increase the standard deduction 
     for married couples so that each spouse would have the same 
     deduction as a single filer. The deduction for married 
     couples would increase from $7200 to $8600 in 1999, reducing 
     their taxes by an average of $243 per return. Cost: $28 
     billion (House tax bill)
       B. Interest and Dividends--Individuals, regardless of 
     income, would be able to exclude up to $200 of combined 
     interest and dividends from taxes. Married couples could 
     exclude $400. Cost: $15 billion (House tax bill)
       C. AMT Relief--Individuals would not have to pay the 
     alternative minimum tax as a result of claiming certain tax 
     credits, such as the dependent care credit, the adoption 
     credit, and the child tax credit. Cost: $8.1 billion (House 
     tax bill)
       D. Affordable Child Care--Increase the maximum credit rate 
     to 50% from the current 30%, index the maximum allowable 
     expense for inflation, and make the current dependent care 
     tax credit refundable. Provides a new tax credit worth $90 
     per month for stay-at-home parents of children under 1. 
     Creates an employer tax credit for child care services. Cost: 
     $17.0 billion. (From S. 1610, Sen. Dodd's Affordable Child 
     Care for Early Success and Security Act)
     2. Education and Infrastructure
       A. Permit Schools of Higher Education to Establish 
     Qualified Prepaid Tuition Programs--These programs allow 
     parents to make contributions which are held for use when 
     their children attend college. Contributions accumulate on a 
     tax-deferred basis. Cost: $572 million (House tax bill)
       B. Government Bonds--States would be able to issue more 
     private activity tax-exempt bonds, which typically finance 
     privately owned transportation facilities, municipal 
     services, economic development projects and social programs. 
     The current annual limits of $50 per resident or $150 million 
     (whichever is greater) would be increased to $75 per resident 
     or $225 million. Cost $1.1 billion (House tax bill)
       C. Renewal Communities--To promote the revitalization of 
     depressed areas, the bill

[[Page S11628]]

     would provide a variety of tax incentives in 20 ``removal 
     communities.''--Cost: $1 billion (House tax bill)
       D. School Modernization--Bond holders would receive tax 
     credits (a standard amount for all bonds) worth the full 
     interest cost on the bonds, allowing localities to construct 
     or renovate schools without paying any interest. Cost $5 
     billion (President's budget proposal)
     3. Small Business and Farmer Tax Relief
       A. Estate and Gift Tax Unified Credit--The proposal would 
     accelerate from 2000 to 1999 an increase in the Estate and 
     Gift tax credit (increasing the credit from $650,000 to 
     $675,000). Cost: $1.8 billion (Revised provision from House 
     tax bill)
       B Deduction for Health Insurance Premiums of the Self-
     Employed.--Full deductibility is now scheduled to be phased 
     in by 2007. The bill would make the change effective in 1999. 
     Cost: $5.1 billion (House tax bill)
       C. Agriculture--The bill would permanently extend ``income 
     averaging'' for farmers, which is scheduled to expire in 
     2000. Rather than pay high taxes in good years, a farmer 
     would have the option of paying taxes based on a three year 
     average. Farmers also could reduce their tax burden by 
     applying an operating loss in one year to their taxable 
     income in any one of five past years, or to a future year. 
     Under current law, they can apply it to two past years or to 
     a future year. Cost $126 million. (House tax bill)
       D. Business Expensing--Starting in 1999, small-business 
     owners and farmers would be able to deduct up to $25,000 of 
     the cost of business-related equipment. Under current law, 
     the deduction is limited to $18,500 and is slated to rise to 
     $25,000 in 2003. Cost $1.1 billion. (House tax bill)
       E. Expired Credits. Several tax credits that expired this 
     year or would expire next year, including credits for 
     research, work opportunity and welfare-to-work, would be 
     extended through Feb. 29, 2000. The credit for contributions 
     of stock to private foundations would be extended 
     permanently. Cost: $6.2 billion (House tax bill)
     4. Social Security Earnings Test
       Senior citizens ages 65 to 69 would be able to earn up to 
     $17,000 in 1999 without losing a portion of their Social 
     Security benefits. The earnings limit would gradually rise to 
     $30,000 in 2002 and $39,750 in 2008. Current law permits the 
     earnings limit to increase to $37,948 in 2008, but at a 
     slower pace. Cost: $550 million (House tax bill)
     5. House Loophole Closer
       The amendment retains a provision in the House bill that 
     closes tax loopholes related to certain liquidations of real 
     estate investment trusts and regulated investment companies.
     6. Tax Reductions Effective When Social Security is Saved
       The bill's provisions would become effective when the 
     Social Security Trust Fund achieves long-range actuarial 
     balance.

                          ____________________