[Congressional Record Volume 144, Number 142 (Saturday, October 10, 1998)]
[Senate]
[Pages S12316-S12337]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. DOMENICI (for himself and Mr. Bingaman):
  S. 2621. A bill to authorize the acquisition of the Valles Caldera 
currently managed by the Baca Land and Cattle Company, to provide for 
an effective land and wildlife management program for this resource 
within the Department of Agriculture through the private sector, and 
for purposes; to the Committee on Energy and Natural Resources.


                  the valles caldera preservation act

  Mr. DOMENICI. Mr. President, the Valles Caldera in Northern New 
Mexico

[[Page S12317]]

is a place you visit for a day, and long to return to for a life time. 
It is nature at its most extraordinary--an almost perfectly round bowl 
formed by a collapsed volcano. It is a place with rolling meadows, 
crystal-clear streams, roaming elk, Ponderosa pines and quaking Aspen 
trees, and Golden eagles. This legislation guarantees that this very 
special place will be there for future generations to visit and 
remember.
  I am very proud to be introducing legislation that will authorize the 
Secretary of the Interior to acquire a truly unique 95,000 acre 
``working ranch'' in New Mexico, known alternatively as the Baca Ranch, 
the Valle Grande, and the Valles Caldera. Independently, but as 
importantly, this legislation also addresses longstanding problems 
encountered by Federal land managers in disposing of surplus federal 
property and the acquisition of private inholdings within federal 
management areas.
  The former provides a unique solution to the management of a unique 
property, while the latter builds on existing laws and provides 
resources dedicated to the consolidation of federal agency land 
holdings.
  In north-central New Mexico there is a truly unique working ranch on 
an historic Mexican land grant known as Baca Location No. 1. The Ranch 
is currently owned and managed by the Baca Land and Cattle Company, and 
it comprises most of a collapsed, extinct volcano known as the Valles 
Caldera. This ranch also contains innumerable significant cultural, 
historic, recreational, ecological, and productive resources.
  The bill I introduce today is the result of months of negotiation 
with the Administration, Senator Bingaman, and Congressman Redmond. We 
have incorporated ideas from groups interested in the acquisition of 
the truly unique Baca Ranch. Many Americans, especially New Mexicans 
have expressed a desire for the federal government to purchase the 
Ranch. After months of research and consideration, I met with President 
Clinton on Air Force One while we were both returning to Washington 
from New Mexico to discuss the possibility of this land acquisition. 
Because the nature of the property requires a unique operational 
program for appropriate development and preservation, I approached him 
with an innovative trust structure for the management of the Baca 
Ranch. This trust would manage the ranch with appropriate public input 
and governmental oversight. I indicated that I was not interested in 
having the ranch managed under current federal agency practices. The 
President expressed enthusiasm for making this concept a reality, and 
we agreed on a Statement of Principles to govern the acquisition of the 
Baca Ranch at the end of July.
  This unique working ranch has been well maintained and preserved by 
the current owners. In fact, if ever there was an example of sterling 
stewardship of a piece of property, this is it.
  The legislation introduced today certainly cannot pass this year: 
unfortunately, time has run out for the 105th Congress, but many 
concerns and ideas about federal purchase of the property will be 
discussed at hearings upon reintroduction in the 106th Congress. While 
there is consenus that this property should be acquired, we do not yet 
know the cost of the property. The Baca Ranch is estimated to be worth 
approximately $100 to $125 million, but the appraisal has not yet been 
given to the Forest Service or made public. Therefore, the exact cost 
of acquisition has yet to be determined.
  This is the largest purchase of public land by the Forest Service in 
at least 25 years, therefore, it is imperative that careful 
consideration is given to not only the purchase, but to the management 
of the property as well.
  In past years, federal land management agencies have been criticized 
for their stewardship of public lands. I find it ironic that many of 
the groups who wish to bring this ranch into government ownership are 
the same groups who, in recent years, have initiated relentless 
litigation against the Forest Service and BLM alleging poor management 
of federal lands. However, diverse interests have come together to 
reach agreement on the trust management of the Ranch, and Congressman 
Redmond and I have worked hard in both Houses of Congress to obtain 
funding for purchase. Any funding at this point should be viewed as 
earnest money, and will be subject to this authorization and agreement 
on the fair market value for the property.
  The parties have really worked hard in framing this legislation, and 
there are still a few issues we would like to work out. Not the least 
of which includes the interest expressed by the Santa Clara Pueblo in 
purchasing land outside the Caldera, but contains the headwaters of the 
Santa Clara Creek. Negotiations between the Pueblo, the Administration, 
the current owners of the property, and the congressional delegation on 
how to resolve this issue was not completed prior to today's 
introduction. However, all parties are interested in continuing 
discussion regarding a potential Santa Clara purchase of property 
adjacent to their pueblo. I also note that Congressman Redmond has 
expressed specific interest in addressing other Native American issues 
regarding the Ranch acquisition.
  I have visited the Baca Ranch, and I can tell you that it is one 
beautiful piece of property. The Valles Caldera is one of the world's 
largest resurgent lava domes with potential geothermal activity. The 
depression from a hugh volcanic eruption over a million years ago is 
more than a half-mile deep and fifteen miles across at its widest 
point. The land was originally granted to the heirs of Don Luis Maria 
Cabeza de Vaca under a settlement enacted by Congress in 1860. Since 
that time, the property has remained virtually intact as a single, 
large, tract of land.
  Historical evidence in the form of old logging camps and other 
artifacts, and a review of the history of territorial New Mexico 
clearly show the importance of this land over many generations for the 
rearing of domesticated livestock, and as a timber supply for local 
inhabitants. Several film sets have been left standing on the property, 
representing a significant part of the history of the American film 
industry and its depiction of the American West.
  The careful husbandry of the Ranch by the Dunigan family, the current 
owners, including selective harvesting of timber, limited grazing and 
hunting, and the use of proscribed fire, have preserved a mix of 
healthy range and timber land with significant species diversity 
providing a model for sustainable land development and use. The Ranch's 
natural beauty and abundant resources, and its proximity to large 
municipal populations could provide numerous recreational opportunities 
for hiking, fishing, camping, cross-country skiing, and hunting.
  Mr. President, the Baca Location is a unique working ranch. It is not 
a wilderness area, as in the words of the Wilderness Act, ``untrammeled 
by man, where man is a visitor who does not remain.'' Man has been 
there for many generations, and will remain for many to come. 
Similarly, it is not a resource that could be run well as a national 
park. This ranch can best be protected for future generations by 
continuing its operation as a working asset through a unique management 
structure. This legislation provides unique management under a trust 
that may allow for its eventual operation to become financially self-
sustaining.
  Mr. President, recent indication by the current owners of the Baca 
Location that they wish to sell the ranch has created an opportunity 
for us to acquire it into public ownership and allow for appropriate 
public access and enjoyment of these lands for the first time since 
1860. Because of the ranch's unique character, however, I am not 
interested in having it managed under the usual federal authorities, as 
is typical of the Forest Service, Bureau of Land Management, or the 
National Park Service. Under the current state of affairs on our public 
lands, Forest Service and BLM management is constantly hounded by 
litigation initiated by some of the same groups that wish to bring this 
ranch into government ownership. I do not want to take this property, 
put it in that situation, and then claim we have done a great thing.
  This legislation represents an opportunity to experiment with a 
different kind of public land management scheme. Burdensome 
regulations, and litigation resulting therefrom, have brought federal 
land management practices rapidly towards gridlock. The Valles Caldera 
National Preserve will

[[Page S12318]]

serve as a model to explore alternative means of federal management and 
will provide the American people with opportunities to enjoy the Valles 
Caldera and its many resources for generations to come.
  This trust idea, based on similar legislation for federal management 
of the Presidio in San Francisco, sets in motion a truly unique 
management scheme befitting this truly unique place. I am willing to 
take a chance on an innovative approach because I believe that the 
current quagmire of federal land management simply does not do justice 
to this very special place. The unique nature of the Valles Caldera, 
and its resources, requires a unique management program, dedicated to 
appropriate development and preservation under the principle of the 
highest and best use of the ranch in the interest of the public.
  Mr. President, title I of this legislation provides the framework 
necessary to fulfil that objective. It authorizes the acquisition of 
the Baca ranch by the appropriate Federal agency. At the same time, it 
establishes a government-owned corporation, called the Valles Caldera 
Trust, whose sole responsibility is to ensure that the ranch is managed 
in a manner that will preserve its current unique character, and 
provide enumerable opportunities for the American people to enjoy its 
splendor. Most importantly to me, however, the legislation will allow 
for the ranch's continued operation as a working asset for the people 
of north-central New Mexico, without further drawing on the thinly-
stretched resources of the Federal land management agencies.
  I am looking forward to hearings on this legislation next year, and 
know that the legislative process shall enlighten us further as to the 
complex nature of the Ranch. I, personally, am greatly looking forward 
to seeing an value estimate of the land prior to authorization. While 
valued between $37 and $55 million in 1980, I have heard that the Baca 
ranch is currently estimated to be worth approximately $100 to $125 
million. I do not know how such inflation will affect the likelihood of 
the location's federal acquisition. I do know that we have waited 
patiently for many months for a promised appraisal from the current 
owners, but an appraisal has not yet been complete nor have any other 
offers to purchase the land been made. Therefore, the exact cost of 
acquisition has yet to be determined. Before we commit large sums of 
federal taxpayer dollars to purchase new property, it seems prudent to 
provide a solution for the orderly disposal of surplus federal property 
and to meet our current obligations to those who hold lands within 
federal properties.
  I would like to emphasize that while both portions of this bill are 
important to federal land management, both in New Mexico and 
nationwide, my intention is not to tie federal acquisition of the Baca 
upon disposition of surplus federal land. Instead, I feel this 
legislation independently addresses the acquisition of this unique 
property for public use and enjoyment, while solving current land 
management problems.
  Currently, New Mexico has approximately one-third of its land in 
public ownership or management. I agree that these public lands are an 
important natural resource that require our most thoughtful management.
  In order to conserve our existing National treasures for future use 
and enjoyment, we must devise, with the concurrence of other members of 
Congress and the President, a definite plan and timetable to dispose of 
surplus land through sale or exchange into private ownership.
  Title II of this legislation addresses the orderly disposition of 
surplus federal property on a state by state basis. It also addresses 
the problem of what is known as ``inholdings'' within federally managed 
areas. There are currently more than 45 million acres of privately 
owned lands trapped within the boundaries of Federal land management 
units, including national parks, national forests, national monuments, 
national wildlife refuges, and wilderness areas. The location of these 
tracts, referred to as inholdings, makes the exercise of private 
property rights difficult for the land owner. In addition, management 
of the public lands is made more cumbersome for the federal land 
managers.
  In many cases, inholders have been waiting generations for the 
federal government to set aside funding and prioritize the acquisition 
of their property. With rapidly growing public demand for the use of 
public lands, it is increasingly difficult for federal managers to 
address problems created by the existence of inholdings in many areas.
  This legislation directs the Department of the Interior and the 
Department of Agriculture to survey inholdings existing within Federal 
land management units, and to establish a priority for their 
acquisition, on a willing seller basis, in the order of those which 
have existed as inholdings for the longest time to those most recently 
being incorporated into the Federal unit.
  Closely related to the problem created by inholdings within Federal 
land management units, is the abundance of public domain land which the 
Bureau of Land Management (BLM) has determined it no longer needs to 
fulfil its mission. Under the Federal Land Policy and Management Act of 
1976 (FLPMA), the BLM has identified an estimated four to six million 
acres of public domain lands for disposal, and the agency anticipates 
that additional public land will be similarly identified, with public 
input and consultation with State and local governments as required by 
law.
  Mr. President, let me simply clarify that point--the BLM already has 
authority under an existing law, FLPMA, to exchange or sell lands out 
of Federal ownership. Through its public process for land use planning, 
when the agency has determined that certain lands would be more useful 
to the public under private or local governmental control, it is 
already authorized to dispose of these lands, either by sale or 
exchange.
  The sale or exchange of this land which I have often referred to as 
``surplus,'' would be beneficial to local communities, adjoining land 
owners, and BLM land mangers, alike. First, it would allow for the 
reconfiguration of land ownership patterns to better facilitate 
resource management. Second, it would contribute to administrative 
efficiency within federal land management units, by allowing for better 
allocation of fiscal and human resources within the agency. Finally, in 
certain locations, the sale of public land which has been identified 
for disposal is the best way for the public to realize a fair value for 
this land.
  The problem, Mr. President, is that an orderly process for the 
efficient disposition of lands identified for disposal does not 
currently exist. This legislation addresses that problem by directing 
the BLM to fulfil all legal requirements for the transfer of these 
lands out of Federal ownership, and providing a dedicated source of 
funding generated from the sale of these lands to continue this 
process.
  Additionally, this legislation authorizes the use of the proceeds 
generated from these lands to purchase inholdings from willing sellers. 
This will enhance the ability of the Federal land management agencies 
to work cooperatively with private land owners, and with State and 
local governments, to consolidate the ownership of public and private 
land in a manner that would allow for better overall resource 
management.
  Mr. President, I want to make it clear that this program will in no 
way detract from other programs with similar purposes. The bill clearly 
states that proceeds generated from the disposal of public land, and 
dedicated to the acquisition of inholdings, will supplement, and not 
replace, funds appropriated for that purpose through the Land and Water 
Conservation Fund. In addition, the bill states that the Bureau of Land 
Management should rely on non-Federal entities to conduct appraisals 
and other research required for the sale or exchange of these lands, 
allowing for the least disruption of existing land and resource 
management programs.
  Mr. President, this bill has been a long time in the making. For over 
a year, now, I have been working with and talking to knowledgeable 
people, both inside and outside of the current administration, to 
develop many of the ideas embodied in this bill. In recent weeks, my 
staff and I have worked closely with the administration on this 
legislation. I feel comfortable in stating that by working together, we 
have

[[Page S12319]]

reached agreement in principle on the best way to proceed with these 
very important issues involving the management of public land 
resources, namely; the acquisition and unique management plan for the 
Baca ranch in New Mexico, and just as importantly, the disposition of 
surplus public lands in combination with a program to address problems 
associated with inholdings within our Federal land management units.
  Mr. President, I have committed to the administration to continue to 
work with them on three or four areas of this bill, where concerns 
remain. I have full confidence, however, that we can address these 
issues through the legislative process in the next Congress. For 
example, the need for additional roads, parking, visitor facilities, 
and water and mineral rights are also important issues that must be 
resolved. However, we are very luck to have the pleasure of a 
bipartisan, administration approved, legislative concept from which to 
work.
  The Senate Energy and Natural Resources Committee will schedule 
hearings to address the many issues regarding Federal purchase of the 
Baca Ranch early in the 106th Congress. Hopefully, by that time, an 
appraisal will be available for review. Congress has tried to resolve 
the difficult challenges in acquiring this property before, and failed; 
cooperation among the parties may bring success this time around. I 
believe that in the end, we will be able to stand together and tell the 
American people that we truly have accomplished two great and 
innovative things with this legislation.
  Mr. President, I ask unanimous consent that the text of the bill and 
Statement of Principles be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 2621

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

          TITLE I--VALLES CALDERA NATIONAL PRESERVE AND TRUST

     SECTION 101. SHORT TITLE.

       This title may be cited as the ``Valles Caldera 
     Preservation Act''.

     SEC. 102. FINDINGS AND PURPOSES.

       (a) Findings.--Congress finds that--
       (1) the Baca ranch, owned and managed by the Baca Land and 
     Cattle Company, comprises most of the Valles Caldera in 
     central New Mexico, and constitutes a unique land mass, with 
     significant scientific, cultural, historic, recreational, 
     ecological, wildlife, fisheries, and productive values;
       (2) the Valles Caldera is a large resurgent lava dome with 
     potential geothermal activity;
       (3) the land comprising the Baca ranch was originally 
     granted to the heirs of Don Luis Maria Cabeza de Vaca in 
     1860;
       (4) historical evidence in the form of old logging camps, 
     and other artifacts, and the history of territorial New 
     Mexico indicate the importance of this land over many 
     generations for domesticated livestock production and timber 
     supply;
       (5) the careful husbandry of the Baca ranch by the Dunigan 
     family, the current owners, including selective timbering, 
     limited grazing and hunting, and the use of prescribed fire, 
     have preserved a mix of healthy range and timber land with 
     significant species diversity, thereby serving as a model for 
     sustainable land development and use;
       (6) the Baca ranch's natural beauty and abundant resources, 
     and its proximity to large municipal populations, could 
     provide numerous recreational opportunities for hiking, 
     fishing, camping, cross-country skiing, and hunting;
       (7) the Forest Service documented the scenic and natural 
     values of the Baca ranch in its 1993 study entitled ``Report 
     on the Study of the Baca Location No. 1, Santa Fe National 
     Forest, New Mexico,'' as directed by Public Law 101-556;
       (8) the Baca ranch can be protected for current and future 
     generations by continued operation as a working ranch under a 
     unique management regime which would protect the land and 
     resource values of the property and surrounding ecosystem 
     while allowing and providing for the ranch to eventually 
     become financially self-sustaining;
       (9) the current owners have indicated that they wish to 
     sell the Baca ranch, creating an opportunity for federal 
     acquisition and public access and enjoyment of these lands;
       (10) certain features on the Baca ranch have historical and 
     religious significance to Native Americans which can be 
     preserved and protected through federal acquisition of the 
     property;
       (11) the unique nature of the Valles Caldera and the 
     potential uses of its resources with different resulting 
     impacts warrants a management regime uniquely capable of 
     developing an operational program for appropriate 
     preservation and development of the land and resources of the 
     Baca ranch in the interest of the public;
       (12) an experimental management regime should be provided 
     by the establishment of a Trust capable of using new methods 
     of public land management that may prove to be cost-effective 
     and environmentally sensitive; and
       (13) the Secretary may promote more efficient management of 
     the Valles Caldera and the watershed of the Santa Clara Creek 
     through the assignment of purchase rights of such watershed 
     to the Pueblo of Santa Clara.
       (b) Purposes.--The purposes of this title are--
       (1) to authorize Federal acquisition of the Baca ranch;
       (2) to protect and preserve for future generations the 
     scenic and natural values of the Baca ranch, associated 
     rivers and ecosystems, and archaeological and cultural 
     resources;
       (3) to provide opportunities for public recreation;
       (4) to establish a demonstration area for an experimental 
     management regime adapted to this unique property which 
     incorporates elements of public and private administration in 
     order to promote long term financial sustainability 
     consistent with the other purposes enumerated in this 
     subsection; and
       (5) to provide for sustained yield management of Baca ranch 
     for timber production and domesticated livestock grazing 
     insofar as is consistent with the other purposes stated 
     herein.

     SEC. 103. DEFINITIONS.

       In this title:
       (1) Baca ranch.--The term ``Baca ranch'' means the lands 
     and facilities described in section 104(a).
       (2) Board of trustees.--The terms ``Board of Trustees'' and 
     ``Board'' mean the Board of Trustees as described in section 
     107.
       (3) Committees of congress.--The term ``Committees of 
     Congress'' means the Committee on Energy and Natural 
     Resources of the United States Senate and the Committee on 
     Resources of the House of Representatives.
       (4) Financially self-sustaining.--The term ``financially 
     self-sustaining'' means management and operating expenditures 
     equal to or less than proceeds derived from fees and other 
     receipts for resource use and development and interest on 
     invested funds. Management and operating expenditures shall 
     include Trustee expenses, salaries and benefits of staff, 
     administrative and operating expenses, improvements to and 
     maintenance of lands and facilities of the Preserve, and 
     other similar expenses. Funds appropriated to the Trust by 
     Congress, either directly or through the Secretary, for the 
     purposes of this title shall not be considered.
       (5) Preserve.--The term ``Preserve'' means the Valles 
     Caldera National Preserve established under section 105.
       (6) Secretary.--Except where otherwise provided, the term 
     ``Secretary'' means the Secretary of Agriculture.
       (7) Trust.--The term ``Trust'' means the Valles Caldera 
     Trust established under section 106(a).

     SEC. 104. ACQUISITION OF LANDS.

       (a) Acquisition of Baca Ranch.--
       (1) In general.--In accordance with the Act of June 15, 
     1926 (16 U.S.C. 471a), the Secretary is authorized to acquire 
     all or part of the rights, title and interests in and to 
     approximately 94,812 acres of the Baca ranch, comprising the 
     lands, facilities, and structures referred to as the Baca 
     Location No. 1, and generally depicted on a plat entitled 
     ``Independent Resurvey of the Baca Location No. 1,'' made by 
     L.A. Osterhoudt, W.V. Hall and Charles W. Devendorf, U.S. 
     Cadastral Engineers, June 30, 1920--August 24, 1921, under 
     special instructions for Group No. 107 dated February 12, 
     1920, in New Mexico.
       (2) Source of Funds.--The acquisition pursuant to paragraph 
     (1) may be made by purchase through appropriated or donated 
     funds, by exchange, by contribution, or by donation of land. 
     Funds appropriated to the Secretary and the Secretary of the 
     Interior from the Land and Water Conservation Fund shall be 
     available for this purpose.
       (3) Basis of sale.--The acquisition pursuant to paragraph 
     (1) shall be based on appraisal done in conformity with the 
     Uniform Appraisal Standards for Federal Land Acquisitions 
     and--
       (A) in the case of purchase, such purchase shall be on a 
     willing seller basis for no more than the fair market value 
     of the land or interests therein acquired; and
       (B) in the case of exchange, such exchange shall be for 
     lands, or interests therein, of equal value, in conformity 
     with the existing exchange authorities of the Secretary.
       (4) Deed.--The conveyance of the offered lands to the 
     United States under this subsection shall be by general 
     warranty or other deed acceptable to the Secretary and in 
     conformity with applicable title standards of the Attorney 
     General.
       (b) Addition of Land to Bandelier National Monument.--
       (1) In general.--Upon acquisition of the Baca ranch 
     pursuant to subsection (a), the Secretary of the Interior 
     shall assume administrative jurisdiction over the 
     approximately 845 acres of the land acquired within the Upper 
     Alamo watershed as depicted on the Forest Service map 
     entitled ``Proposed Boundary Expansion Map Bandelier National 
     Monument'' dated October, 1998.
       (2) Management.--Upon assumption of administrative 
     jurisdiction pursuant to paragraph (1), the Secretary of the 
     Interior shall manage the added land as a part of Bandelier 
     National Monument, the boundaries of which

[[Page S12320]]

     are hereby adjusted to encompass such addition. The Secretary 
     of the Interior is authorized to utilize funds appropriated 
     for the National Park Service to acquire on a willing seller 
     basis, the Elk Meadows subdivision within such boundary 
     adjustment.
       (c) Plat and Maps.--
       (1) Plat and maps prevails.--In case of any conflict 
     between the plat referred to in subsection (a)(1) and the map 
     referred to in subsection (b)(1) and the acreages provided in 
     such subsections, the plat or map shall prevail.
       (2) Minor corrections.--The Secretary and the Secretary of 
     the Interior may make minor corrections in the boundaries of 
     the Upper Alamo watershed as depicted on the map referred 
     to in subsection (b)(1).
       (3) Boundary modification.--Upon the conveyance of any 
     lands to any entity other than the Secretary, the boundary of 
     the Preserve shall be modified to exclude such lands.
       (4) Final maps.--Within 180 days of the date of acquisition 
     of the Baca ranch pursuant to subsection (a), the Secretary 
     and the Secretary of the Interior shall prepare and submit to 
     the Committees of Congress a final map to the Valles Caldera 
     National Preserve and a final map of Bandelier National 
     Monument, respectively.
       (5) Public availability.--The plat and maps referred to in 
     the subsection shall be kept and made available for public 
     inspection in the offices of the Chief, Forest Service, and 
     Director, National Park Service, in Washington, D.C., and 
     Supervisor, Santa Fe National Forest, and Superintendent, 
     Bandelier National Monument, in the State of New Mexico.
       (d) Watershed Management Study.--The Secretary, acting 
     through the Forest Service, in cooperation with the Secretary 
     of the Interior, acting through the National Park Service, 
     shall--
       (1) develop a study of management alternatives which may--
       (A) provide more coordinated land management within the 
     area known as the Lower Alamo watershed;
       (B) allow for improved management of elk and other wildlife 
     populations ranging between the Santa Fe National Forest and 
     the Bandelier National Monument; and
       (C) include a proposed boundary adjustment between the 
     Santa Fe National Forest and the Bandelier National Monument 
     to facilitate the objectives under subparagraphs (A) and (B); 
     and
       (2) submit the study to the Committees of Congress within 
     120 days of the boundary adjustment pursuant to subsection 
     (b)(2).
       (e) Outstanding Mineral Interests.--The acquisition of the 
     Baca ranch by the Secretary shall be subject to all 
     outstanding valid existing mineral interests. The Secretary 
     is authorized and directed to negotiate with the owners of 
     any fractional interest in the subsurface estate for the 
     acquisition of such fractional interest on a willing seller 
     basis for their appraised fair market value. Any such 
     interests acquired within the boundaries of the Upper Alamo 
     watershed, as referred to in subsection (b)(1), shall be 
     administered by the Secretary of the Interior as part of 
     Bandelier National Monument.
       (f) Boundaries of the Baca Ranch.--For purposes of section 
     7 of the Land and Water Conservation Fund Act of 1965 (16 
     U.S.C. 4601-9), the boundaries of the Baca ranch shall be 
     treated as if they were National Forest boundaries existing 
     as of January 1, 1965.

     SEC. 105. THE VALLES CALDERA NATIONAL PRESERVE.

       (a) Establishment.--Upon the date of acquisition of the 
     Baca ranch pursuant to section 104(a) there is hereby 
     established the Valles Caldera National Preserve as a unit of 
     the National Forest System which shall include all Federal 
     lands and interest in land acquired pursuant to subsection 
     104(a), except those lands and interests in land administered 
     by the Secretary of the  Interior pursuant to section 
     104(b)(1), and shall be managed in accordance with the 
     purposes and requirements of this title.
       (b) Purposes.--The purposes for which the Preserve is 
     established are to protect and preserve the scenic, geologic, 
     watershed, fish, wildlife, historic, cultural, and 
     recreational values of the Preserve, and to provide for 
     multiple use and sustained yield of renewable resources 
     within the Preserve, consistent with this title.
       (c) Management Authority.--Except for the powers of the 
     Secretary enumerated in this title, the Preserve shall be 
     managed by the Valles Caldera Trust established by section 
     106.
       (d) Eligibility for Payment in Lieu of Taxes.--Lands 
     acquired by the United States pursuant to section 104(a) 
     shall constitute entitlement lands for purposes of the 
     Payment in Lieu of Taxes Act (31 U.S.C. 6901-6904).
       (e) Withdrawals.--
       (1) In general.--Upon acquisition of all interests in 
     minerals within the boundaries of the Baca ranch pursuant to 
     section 104(e), subject to valid existing rights, the lands 
     comprising the Preserve shall be withdrawn from disposition 
     under all laws pertaining to mineral leasing, including 
     geothermal leasing.
       (2) Materials for roads and facilities.--Nothing in this 
     title shall preclude the Secretary, prior to assumption of 
     management authority by the Trust, and the Trust thereafter, 
     from allowing the utilization of common varieties of mineral 
     materials such as sand, stone and gravel as necessary for 
     construction and maintenance of roads and facilities within 
     the Preserve.
       (f) Fish and Game.--Nothing in this title shall be 
     construed as affecting the responsibilities of the State of 
     New Mexico with respect to fish and wildlife, including the 
     regulation of hunting, fishing and trapping within the 
     Preserve, except that the Trust may, in consultation with the 
     Secretary and the State of New Mexico, designate zones where, 
     and establish periods when no hunting, fishing or trapping 
     shall be permitted for reasons of public safety, 
     administration, the protection of nongame species and their 
     habitats, or public use and enjoyment.

     SEC. 106. THE VALLES CALDERA TRUST.

       (a) Establishment.--There is hereby established a wholly 
     owned government corporation known as the Valles Caldera 
     Trust which is empowered to conduct business in the State of 
     New Mexico and elsewhere in the United States in furtherance 
     of its corporate purposes.
       (b) Corporate Purposes.--The purposes of the Trust are--
       (1) to provide management and administrative services for 
     the Preserve;
       (2) to establish and implement management policies which 
     will best achieve the purposes and requirements of this 
     title;
       (3) to receive and collect funds from private and public 
     sources and to make dispositions in support of the management 
     and administration of the Preserve; and
       (4) to cooperate with Federal, State, and local 
     governmental units, and with Indian tribes and Pueblos, to 
     further the purposes for which the Preserve was established.
       (c) Necessary Powers.--The Trust shall have all necessary 
     and proper powers for the exercise of the authorities vested 
     in it.
       (d) Staff.--
       (1) In general.--The Trust is authorized to appoint and fix 
     the compensation and duties of an executive director and such 
     other officers and employees as it deems necessary without 
     regard to the provisions of title 5, United States Code, 
     governing appointments in the competitive service, and may 
     pay them without regard to the provisions of chapter 51, and 
     subchapter III of chapter 53, title 5, United States Code, 
     relating to classification and General Schedule pay rates. No 
     employee of the Trust shall be paid at a rate in excess of 
     that paid the Supervisor of the Santa Fe National Forest or 
     the Superintendent of the Bandelier National Monument, 
     whichever is greater.
       (2) Federal employees.--
       (A) In general.--Except as provided in this title, 
     employees of the Trust shall be Federal employees as defined 
     by title 5, United States Code, and shall be subject to all 
     rights and obligations applicable thereto.
       (B) Use of forest service employees upon establishment of 
     the trust.--For the two year period from the date of the 
     establishment of the Trust, and upon the request of the 
     Trust, the Secretary may provide, on a nonreimbursable basis, 
     Forest Service personnel and technical expertise as necessary 
     or desirable to assist in the implementation of this title. 
     Thereafter, Forest Service employees may be provided to the 
     Trust as provided in paragraph (C).
       (C) Use of other federal employees.--At the request of the 
     Trust, the employees of any Federal agency may be provided 
     for implementation of this title. Such employees detailed to 
     the Trust for more than 30 days shall be provided on a 
     reimbursable basis.
       (e) Government Corporation.--
       (1) In general.--The Trust shall be a Government 
     Corporation subject to chapter 91 of title 31, United States 
     Code (commonly referred to as the Government Corporation 
     Control Act). Financial statements of the Trust shall be 
     audited annually in accordance with section 9105 of title 31 
     of the United States Code.
       (2) Reports.--The Trust shall submit, but not later than 
     January 15 of each year, to the Secretary and the Committees 
     of Congress a comprehensive and detailed report of its 
     operations, activities, and accomplishments for the prior 
     year. The report shall also include a section that describes 
     the Trust's goals for the current year.
       (f) Taxes.--The Trust and all properties administered by 
     the Trust shall be exempt from all taxes and special 
     assessments of every kind by the State of New Mexico, and its 
     political subdivisions including the Counties of Sandoval and 
     Rio Arriba.
       (g) Donations.--The Trust may solicit and accept donations 
     of funds, property, supplies, or services from individuals, 
     foundations, corporations and other private or public 
     entities for the purposes of carrying out its duties. The 
     Secretary, prior to assumption of management authority by 
     the Trust, and the Trust thereafter, may accept donations 
     from such entities notwithstanding that such donors may 
     conduct business with the Department of Agriculture or any 
     other Department or agency of the United States.
       (h) Proceeds.--
       (1) In general.--Notwithstanding section 1341 of title 31 
     of the United States Code, all monies received by the Trust 
     shall be retained by the Trust, and such monies shall be 
     available, without further appropriation, for the 
     administration, preservation, restoration, operation and 
     maintenance, improvement, repair and related expenses 
     incurred with respect to properties under its management 
     jurisdiction.
       (2) Fund.--There is hereby established in the Treasury of 
     the United States a special interest bearing fund entitled 
     ``Valles Caldera Fund'' which shall be available, without 
     further appropriation, to the Trust

[[Page S12321]]

     for any purpose consistent with the purposes of this title. 
     At the option of the Trust, the Secretary of the Treasury 
     shall invest excess monies of the Trust in such account, 
     which shall bear interest at rates determined by the 
     Secretary of the Treasury taking into consideration the 
     current average market yield on outstanding marketable 
     obligations of the United States of comparable maturity.
       (i) Suits.--The Trust may sue and be sued in its own name 
     to the same extent as the Federal Government. For purposes of 
     such suits, the residence of the Trust shall be the State of 
     New Mexico. The Trust shall be represented by the Attorney 
     General in any litigation arising out of the activities of 
     the Trust, except that the Trust may retain private attorneys 
     to provide advice and counsel.
       (j) Bylaws.--The Trust shall adopt necessary bylaws to 
     govern its activities.
       (k) Insurance and Bond.--The Trust shall require that all 
     holders of leases from, or parties in contract with, the 
     Trust that are authorized to occupy, use, or develop 
     properties under the management jurisdiction of the Trust 
     procure proper insurance against any loss in connection with 
     such properties, or activities authorized in such lease or 
     contract, as is reasonable and customary.

     SEC. 107. BOARD OF TRUSTEES.

       (a) In General.--The Trust shall be governed by a 7 member 
     Board of trustees consisting of the following:
       (1) Voting trustees.--The voting Trustees shall be--
       (A) the Supervisor of the Santa Fe National Forest, United 
     States Forest Service;
       (B) the Superintendent of the Bandelier National Monument, 
     National Park Service; and
       (C) 7 individuals, appointed by the President, in 
     consultation with the Congressional delegation from the State 
     of New Mexico. The 7 individuals shall have specific 
     expertise or represent an organization or government entity 
     as follows--
       (i) one trustee shall have expertise in all aspects of 
     domesticated livestock management, production and marketing,  
     including range management and livestock business 
     management;
       (ii) one trustee shall have expertise in the management of 
     game and non-game wildlife and fish populations, including 
     hunting, fishing and other recreational activities;
       (iii) one trustee shall have expertise in the sustainable 
     management of forest lands for commodity and non-commodity 
     purposes;
       (iv) one trustee shall be active in a non-profit 
     conservation organization concerned with the activities of 
     the Forest Service;
       (v) one trustee shall have expertise in financial 
     management, budgeting and programing;
       (vi) one trustee shall have expertise in the cultural and 
     natural history of the region; and
       (vii) one trustee shall be active in State or local 
     government in New Mexico, with expertise in the customs of 
     the local area.
       (2) Qualifications.--Of the trustees appointed by the 
     President--
       (A) none shall be employees of the Federal Government; and
       (B) at least five shall be residents of the State of New 
     Mexico.
       (b) Initial Appointments.--The President shall make the 
     initial appointments to the Board of Trustees within 90 days 
     after acquisition of the Baca ranch pursuant to section 
     104(a).
       (c) Terms.--
       (1) In general.--Appointed trustees shall each serve a term 
     of 4 years, except that of the trustees first appointed, 4 
     shall serve for a term of 4 years, and 3 shall serve for a 
     term of 2 years.
       (2) Vacancies.--Any vacancy among the appointed trustees 
     shall be filled in the same manner in which the original 
     appointment was made, and any trustee appointed to fill a 
     vacancy shall serve for the remainder of that term for which 
     his or her predecessor was appointed.
       (3) Limitations.--No appointed trustee may serve more than 
     8 years in consecutive terms.
       (d) Quorum.--A majority of trustees shall constitute a 
     quorum of the Board for the conduct of business.
       (e) Organization and Compensation.--
       (1) In general.--The Board shall organize itself in such a 
     manner as it deems most appropriate to effectively carry out 
     the activities of the Trust.
       (2) Compensation of trustees.--Trustees shall serve without 
     pay, but may be reimbursed from the funds of the Trust for 
     the actual and necessary travel and subsistence expenses 
     incurred by them in the performance of their duties.
       (3) Chair.--Trustees shall select a chair from the 
     membership of the Board.
       (f) Liability of Trustees.--Appointed trustees shall not be 
     considered Federal employees by virtue of their membership on 
     the Board, except for purposes of the Federal Tort Claims 
     Act, the Ethics in Government Act, and the provisions of 
     Chapter 11 of title 18, United States Code.
       (g) Meetings.--
       (1) Location and timing of meetings.--The Board shall meet 
     in sessions open to the public at least three times per year 
     in New Mexico. Upon a majority vote made in open session, and 
     a public statement of the reasons therefore, the Board may 
     close any other meetings to the public: Provided, That any 
     final decision of the Board to adopt or amend the 
     comprehensive management program pursuant to section 108(d) 
     or to approve any activity related to the management of the 
     land or resources of the Preserve shall be made in open 
     public session.
       (2) Public information--In addition to other requirements 
     of applicable law, the Board shall establish procedures for 
     providing appropriate public information and opportunities 
     for public comment regarding the management of the Preserve.

     SEC. 108. RESOURCE MANAGEMENT.

       (a) Assumption of Management.--The Trust shall assume all 
     authority provided by the title to manage the Preserve upon a 
     determination by the Secretary, which to the maximum extent 
     practicable shall be made within 60 days after the 
     appointment of the Board, that--
       (1) the Board is duly appointed, and able to conduct 
     business; and
       (2) provision has been made for essential management 
     services.
       (b) Management Responsibilities.--Upon assumption of 
     management of the Preserve pursuant to subsection (a), the 
     Trust shall manage the land and resources of the Preserve and 
     the use thereof including, but not limited to such activities 
     as--
       (1) administration of the operations of the Preserve;
       (2) preservation and development of the land and resources 
     of the Preserve;
       (3) interpretation of the Preserve and its history for the 
     public;
       (4) management of public use and occupancy of the Preserve; 
     and
       (5) maintenance, rehabilitation, repair and improvement of 
     property within the Preserve.
       (c) Authorities.--
       (1) In general.--The Trust shall develop programs and 
     activities at the Preserve, and shall have the authority to 
     negotiate directly and enter into such agreements, leases, 
     contracts and other arrangements with any person, firm, 
     association, organization, corporation on governmental 
     entity, including without limitation, entities of Federal, 
     State and local governments, and consultation with Indian 
     tribes and pueblos, as are necessary and appropriate to carry 
     out its authorized activities or fulfill the purposes of this 
     title. Any such agreements may be entered into without regard 
     to section 321 of the Act of June 30, 1932 (40 U.S.C. 303b).
       (2) Procedures.--The trust shall establish procedures for 
     entering into lease agreements and other agreements for the 
     use and occupancy of facilities of the Preserve. The 
     procedures shall ensure reasonable competition, and set 
     guidelines for determining reasonable fees, terms, and 
     conditions for such agreements.
       (3) Limitations.--The Trust may not dispose of to any real 
     property in, or convey any water rights appurtenant to the 
     Preserve. The Trust may not convey any easement, or enter 
     into any contract, lease or other agreement related to use 
     and occupancy of property within the Preserve for a period 
     greater than 10 years. Any such easement, contract, or 
     lease or other agreement shall provide that, upon 
     termination of the Trust, such easement, contract, lease 
     or agreement is terminate.
       (4) Application of procurement laws.--
       (A) In general.--Notwithstanding any other provision of 
     law, Federal laws and regulations governing procurement by 
     Federal agencies shall not apply to the Trust, with the 
     exception of laws and regulations relate to Federal 
     government contracts governing health and safety 
     requirements, wage rates, and civil rights.
       (B) Procedures.--The Trust, in consultation with the 
     Administrator of Federal Procurement Policy, Office of 
     Management and Budget, shall establish and adopt procedures 
     applicable to the Trust's procurement of goods and services, 
     including the award of contracts on the basis of contractor 
     qualifications, price, commercially reasonable buying 
     practices, and reasonable competition.
       (d) Management Program.--Within two years after assumption 
     of management responsibilities for the Preserve, the Trust 
     shall develop a comprehensive program for the management of 
     lands, resources, and facilities within the Preserve. Such 
     program shall provide for--
       (1) operation of the Preserve as a working ranch, 
     consistent with paragraphs (2) through (4);
       (2) the protection and preservation of the scenic, 
     geologic, watershed, fish, wildlife, historic, cultural and 
     recreational values of the Preserve;
       (3) multiple use and sustained yield, as defined under the 
     Multiple-Use Sustained Yield Act of 1960 (16 U.S.C. 531), of 
     renewable resources within the Preserve;
       (4) public use of and access to the Preserve for 
     recreation;
       (5) preparation of an annual budget with the goal of 
     achieving a financially self-sustaining operation within 15 
     full fiscal years after the date of acquisition of the Baca 
     ranch pursuant to section 104(a); and
       (6) optimizing the generation of income based on existing 
     market conditions, but without unreasonably diminishing the 
     long-term scenic and natural values of the area, or 
     diminishing the multiple use, sustained yield capability of 
     the land.
       (e) Public Use and Recreation.--
       (1) In general.--The Trust shall give thorough 
     consideration to the provision of provide appropriate 
     opportunities for public use and recreation that are 
     consistent with the other purposes under section 105(b). The

[[Page S12322]]

     Trust is expressly authorized to construct and upgrade roads 
     and bridges, and provide other facilities for activities 
     including, but not limited to camping and picnicking, hiking, 
     cross country skiing, and snowmobiling. Roads, trails, 
     bridges, and recreational facilities constructed within the 
     Preserve shall meet public safety standards applicable to 
     units of the National Forest System and the State of New 
     Mexico.
       (2) Fees.--Notwithstanding any other provision of law, the 
     Trust is authorized to assess reasonable fees for admission 
     to, and the use and occupancy of, the Preserve: Provided, 
     That admission fees and any fees assessed for recreational 
     activities shall be implemented only after public notice and 
     a period of not less than 60 days for public comment.
       (3) Public access.--Upon the acquisition of the Baca ranch 
     pursuant to section 104(a), and after an interim planning 
     period of no more than two years, the public shall have 
     reasonable access to the Preserve for recreation purposes. 
     The Secretary, prior to assumption of management of the 
     Preserve by the Trust, and the Trust thereafter, may 
     reasonably limit the number and types of recreational 
     admissions to the Preserve, or any part thereof, based on the 
     capability of the land, resources, and facilities. The use of 
     reservation or lottery systems is expressly authorized to 
     implement this paragraph.
       (f) Applicable Laws.--
       (1) In General.--The Trust shall administer the Preserve in 
     conformity with this title and all laws pertaining to the 
     National Forest System, except the Forest and Rangeland 
     Renewable Resources Planning Act of 1974, as amended (16 
     U.S.C. 1600 et seq.).
       (2) Environmental laws.--The Trust shall be deemed a 
     federal agency for the purposes of compliance with federal 
     environmental laws.
       (3) Criminal laws.--All criminal laws relating to Federal 
     property shall apply to the same extent as on adjacent units 
     of the National Forest System.
       (4) Reports on applicable rules and regulations.--The Trust 
     may submit to the Secretary and the Committees of Congress a 
     compilation of applicable rules and regulations which in the 
     view of the Trust are inappropriate, incompatible with this 
     title, or unduly burdensome.
       (5) Consultation with tribes and pueblos.--The Trust is 
     authorized and directed to cooperate and consult with Indian 
     tribes and pueblos on management policies and practices for 
     the Preserve which may affect them. The Trust is authorized 
     to make lands available within the Preserve for religious and 
     cultural uses by Native Americans and, in so doing, may set 
     aside places and times of exclusive use consistent with the 
     American Indian Religious Freedom Act (42 U.S.C. 1996 (note)) 
     and other applicable statutes.
       (6) No administrative appeal.--The administrative appeals 
     regulations of the Secretary shall not apply to activities of 
     the Trust and decisions of the Board.
       (g) Law Enforcement and Fire Suppression.--The Secretary 
     shall provide law enforcement services under a cooperative 
     agreement with the Trust to the extent generally authorized 
     in other units of the National Forest System. At the request 
     of the Trust, the Secretary may provide fire suppression 
     services: Provided, That the Trust shall reimburse the 
     Secretary for salaries and expenses of fire suppression 
     personnel, commensurate with services provided.

     SEC. 109. AUTHORITIES OF THE SECRETARY.

       (a) In General.--Notwithstanding the assumption by the 
     Trust of management authority, the Secretary is authorized 
     to--
       (1) issue any rights-of-way, as defined in the Federal Land 
     Policy and Management Act of 1976, of over 5-10 years 
     duration, in cooperation with the Trust, including, but not 
     limited to, road and utility rights-of-way, and communication 
     sites;
       (2) issue orders pursuant to and enforce prohibitions 
     generally applicable on other units of the National Forest 
     System, in cooperation with the Trust;
       (3) exercise the authorities of the Secretary under the 
     Wild and Scenic Rivers Act (16 U.S.C. 1278, et seq.) and the 
     Federal Power Act (16 U..S.C. 797, et seq.), in cooperation 
     with the Trust;
       (4) acquire the mineral rights referred to in section 
     104(e);
       (5) provide law enforcement and fire suppression services 
     pursuant to section 108(h);
       (6) at the request of the Trust, exchange or otherwise 
     dispose of land or interests in land within the Preserve;
       (7) in consultation with the Trust, refer civil and 
     criminal cases pertaining to the Preserve to the Department 
     of Justice for prosecution;
       (8) retain title to and control over fossils and 
     archaeological artifacts found with the Preserve;
       (9) at the request of the Trust, construct and operate a 
     visitors' center in or near the Preserve, subject to the 
     availability of appropriated funds;
       (10) conduct the assessment of the Trust's performance, 
     and, if the Secretary determines it necessary, recommend to 
     Congress the termination of the Trust, pursuant to section 
     110(b)(2); and
       (11) conduct such other activities for which express 
     authorization is provided to the Secretary by this title.
       (b) Secretarial Authority.--the Secretary retains the 
     authority to suspend any decision of the Board with respect 
     to the management of the Preserve if he finds that the 
     decision is clearly inconsistent with this title. Such 
     authority shall only be exercised personally by the 
     Secretary, and may not be delegated. Any exercise of this 
     authority shall be in writing to the Board, and notification 
     of the decision shall be given to the Committees of Congress. 
     Any suspended decision shall be referred back to the Board 
     for reconsideration.
       (c) Access.--The Secretary shall at all times have access 
     to the Preserve for administrative purposes.

     SEC. 110. TERMINATION OF THE TRUST.

       (a) In General.--The Valles Caldera Trust shall terminate 
     at the end of the twentieth full fiscal year following 
     acquisition of the Baca ranch pursuant to section 104(a).
       (b) Recommendations.--
       (1) Board.--
       (A) If after the fourteenth full fiscal years from the date 
     of acquisition of the Baca ranch pursuant to section 104(a), 
     the Board believes the Trust has met the goals and objectives 
     of the comprehensive management program under section 108(d), 
     but has not become financially self-sufficent, the Board may 
     submit to the Committees of Congress, a recommendation for 
     authorization of appropriations beyond that provided under 
     this title.
       (B) During the eighteenth full fiscal year from the date of 
     acquisition of the Baca ranch pursuant to section 104(a), the 
     Board shall submit to the Secretary its recommendation that 
     the Trust be either extended or terminated including the 
     reasons for such recommendation.
       (2) Secretary.--Within 120 days after receipt of the 
     recommendation of the Board under paragraph (1)(B), the 
     Secretary shall submit to the Committees of Congress the 
     Board's recommendation on extension or termination along with 
     the recommendation of the Secretary with respect to the same 
     and stating the reasons for such recommendation.
       (c) Effect of Termination.--In the event of termination of 
     the Trust, the Secretary shall assume all management and 
     administrative functions over the Preserve, and it shall 
     thereafter be managed as a part of the Santa Fe National 
     Forest, subject to all laws applicable to the National Forest 
     System.
       (d) Assets.--In the event of termination of the Trust, all 
     assets of the Trust shall be used to satisfy any outstanding 
     liabilities, and any funds remaining shall be transferred to 
     the Secretary for use, without further appropriation, for the 
     management of the Preserve.
       (e) Valles Caldera Fund.--In the event of termination, the 
     Secretary shall assume the powers of the Trust over funds 
     pursuant to section 106(h), and the Valles Caldera Fund shall 
     not terminate. Any balances remaining in the fund shall be 
     available to the Secretary, without further appropriation, 
     for any purpose consistent with the purposes of this title.

     SEC. 111. LIMITATIONS ON FUNDING.

       (a) Authorzation of Appropriations.--There is hereby 
     authorized to be appropriated to the Secretary and the Trust 
     such funds as are necessary for them to carry out the 
     purposes of this title for each of the 15 full fiscal years 
     after the date of acquisition of the Baca ranch pursuant to 
     section 104(a).
       (b) Schedule of Appropriations.--Within two years after the 
     first meeting of the Board, the Trust shall submit to 
     Congress a plan which includes a schedule of annual 
     decreasing federally appropriated funds that will achieve, at 
     a minimum, the financially self-sustained operation of the 
     Trust within 15 full fiscal years after the date of 
     acquisition of the Baca ranch pursuant to section 104(a).
       (c) Annual Budget Request.--The Secretary shall provide 
     necessary assistance, including detailees as necessary, to 
     the Trust in the formulation and submission of the annual 
     budget request for the administration, operation, and 
     maintenance of the Preserve.

     SEC. 112. GENERAL ACCOUNTING OFFICE STUDY.

       (a) Initial Study.--Three years after the assumption of 
     management by the Trust, the General Accounting Office shall 
     conduct an interim study of the activities of the Trust and 
     shall report the results of the study to the Committees of 
     Congress. The study shall include, but shall not be limited 
     to, details of programs and activities operated by the Trust 
     and whether it met its obligations under this title.
       (b) Second Study.--Seven years after the assumption of 
     management by the Trust, the General Accounting Office shall 
     conduct a study of the activities of the Trust and shall 
     report the results of the study to the Committees of 
     Congress. The study shall provide an assessment of any 
     failure to meet obligations that may be identified under 
     subsection (a), and further evaluation on the ability of the 
     Trust to meet its obligations under this title.

    TITLE II--ACQUISITION OF INHOLDINGS AND DISPOSAL OF SURPLUS LAND

     SEC. 201. SHORT TITLE.

       This title may be cited as the ``Acquisition of Inholdings 
     and Disposal of Surplus Lands Facilitation Act''.

     SEC. 202. FINDINGS.

       Congress finds that--
       (1) many private individuals own land within the boundaries 
     of Federal land management units and wish to sell this land 
     to the Federal government;
       (2) these lands lie within national parks, national 
     forests, national monuments, Bureau of Land Management 
     special areas, and national wildlife refuges;

[[Page S12323]]

       (3) in many cases, inholders on these lands and the Federal 
     government would mutually benefit by acquiring on a priority 
     basis these lands;
       (4) Federal land management agencies are facing increased 
     workloads from rapidly growing public demand for the use of 
     public lands, making it difficult for federal managers to 
     address problems created by the existence of inholdings in 
     many areas;
       (5) through land use planning under the Federal Land Policy 
     and Management Act of 1976 the Bureau of Land Management has 
     identified certain public lands for disposal;
       (6) the Bureau of Land Management has authority under the 
     Federal Land Policy and Management Act of 1976 to exchange or 
     sell lands identified for disposal under its land use 
     planning;
       (7) a more expeditious process for disposition of public 
     lands identified for disposal would benefit the public 
     interest;
       (8) the sale or exchange of land identified for disposal 
     would--
       (A) allow for the reconfiguration of land ownership 
     patterns to better facilitate resource management;
       (B) contribute to administrative efficiency within the 
     federal land management unit; and
       (C) allow for increased effectiveness of the allocation of 
     fiscal and human resources within the agency;
       (9) in certain locations, the sale of public land which has 
     been identified for disposal is the best way for the public 
     to receive a fair market value for the land;
       (10) using proceeds generated from the disposal of public 
     land to purchase inholdings from willing sellers would 
     enhance the ability of the Federal land management agencies 
     to work cooperatively with private land owners, and State and 
     local governments and promote consolidation of the ownership 
     of public and private land in a manner that would allow 
     for better overall resource management;
       (11) proceeds generated from the disposal of public land 
     may be properly dedicated to the acquisition of inholdings; 
     and
       (12) to allow for the least disruption of existing land and 
     resource management programs, the Bureau of Land Management 
     may use non-Federal entities to prepare appraisal documents 
     for agency review and approval in accordance with the 
     applicable appraisal standards.

     SEC. 203. DEFINITIONS.

       In this title:
       (1) Federally designated areas.--The term ``Federally 
     designated areas'' means land in Alaska and the eleven 
     contiguous Western States as defined in section 103(o) of the 
     Federal Land Policy and Management Act (43 U.S.C. 1702(o)) 
     that on the date of enactment of this title was within the 
     boundary of--
       (A) a unit of the National Park System;
       (B) National Monuments, Areas of Critical Environmental 
     Concern, National Conservation Areas, National Riparian 
     Conservation Areas, Research Natural Areas, Outstanding 
     Natural Areas, and National Natural Landmarks managed by the 
     Bureau of Land Management.
       (C) National Recreation Areas, National Scenic Areas, 
     National Monuments, National Volcanic Areas, and other areas 
     within the National Forest System designated for special 
     management by an Act of Congress;
       (D) a unit of the National Wildlife Refuge System; and
       (E) a wilderness area designated under the Wilderness Act 
     of 1964, as amended (16 U.S.C. 1131 et seq.); an area 
     designated under the Wild and Scenic Rivers Act, as amended 
     (16 U.S.C. 1271 et seq.); and an area designated under the 
     National Trails System Act, as amended (16 U.S.C. 1241 et 
     seq.).
       (2) Inholding.--The term ``inholding'' means any right, 
     title, or interest, held by a non-Federal entity, in or to a 
     tract of land which lies within the boundary of a Federally 
     designated area; the term ``inholding'' does not include 
     lands or interests in lands for which clear title has not 
     been established (except where waved by the Federal 
     government), rights-of-way (including railroad rights-of-
     way), and existing easements; and
       (3) Public land.--The term ``public land'' means public 
     lands as defined in section 103 of the Federal Land Policy 
     and Management Act of 1976 (43 U.S.C. 1702).

     SEC. 204. IDENTIFICATION OF INHOLDINGS WITHIN FEDERALLY 
                   DESIGNATED AREAS.

       (a) Multi-agency Evaluation Team.--
       (1) In general.--Jointly, the Secretary of the Interior and 
     the Secretary of Agriculture (the Secretaries) shall 
     establish a multi-agency evaluation team composed of agency 
     personnel to conduct a program to identify, by state, 
     inholdings within Federally designated areas and establish 
     the dates upon which the lands or interests therein 
     became inholdings. Inholdings shall be identified using 
     the means set forth under subsection (d). Inholdings shall 
     be deemed established as of the latter of--
       (A) the date the Federal land was withdrawn from the public 
     domain, or established or designated for special management, 
     whichever is earlier; or
       (B) the date on which the inholding was acquired by the 
     current owner.
       (2) Public notice.--The Secretaries shall provide notice to 
     the public in the Federal Register (and through other such 
     means as the Secretaries may determine to be appropriate) of 
     a program of identification of inholdings within Federally 
     designated areas by which any owner who wants to sell such an 
     inholding to the United States shall provide to the 
     Secretaries such information regarding that inholding as is 
     required by the notice.
       (b) Composition of the Evaluation Team.--The team shall be 
     composed of employees of the National Park Service, the Fish 
     and Wildlife Service, the Bureau of Land Management, the 
     Department of Agriculture, Forest Service, and other agencies 
     as appropriate.
       (c) Timing.--The Secretaries shall establish the Evaluation 
     Team within 90 days after the enactment of this title.
       (d) Duties of the Evaluation Team.--The team shall be 
     charged with the identification of inholdings within 
     Federally designated areas, by state, and by the date upon 
     which the lands or interests therein became inholdings. 
     Inholdings will be identified using--
       (1) the list of inholdings identified by owners pursuant to 
     subsection (a)(2); and
       (2) tracts of land identified through existing agency 
     planning processes.
       (e) Report.--The Secretaries shall submit a report to the 
     Committee on Energy and Natural Resources and the Committee 
     on Appropriations of the Senate, and the Committee on 
     Resources and the Committee on Appropriations of the House of 
     Representatives on the status of their evaluations within one 
     year after the enactment of this title, and at the end of 
     each 180 days increment thereafter until such time as 
     reasonable efforts to identify inholdings have been made or 
     the program established in section 205 terminates.
       (f) Funding.--Funding to carry out this section shall be 
     taken from operating funds of the agencies involved and shall 
     be reimbursed from the account established under section 206.

     SEC. 205. DISPOSAL OF SURPLUS PUBLIC LAND.

       (a) In General.--The Secretary of the Interior (in this 
     section, the ``Secretary'') shall establish a program, 
     utilizing funds available under section 207, to complete 
     appraisals and other legal requirements for the sale or 
     exchange of land identified for disposal under approved land 
     use plans maintained under section 202 of the Federal Land 
     Policy and Management Act of 1976 (43 U.S.C. 1712) and in 
     effect on the date of enactment of this title.
       (b) Sale of Public Land.--The sale of public land so 
     identified shall be conducted in accordance with section 203 
     and section 209 of the Federal Land Policy and Management Act 
     of 1976 (43 U.S.C. 1713, 1719). It is the intent of Congress 
     that the exceptions to competitive bidding requirements 
     under section 203(f) of the Federal Land Policy and 
     Management Act of 1976 (43 U.S.C. 1713(f) apply under this 
     title, where the Secretary of the Interior determines it 
     necessary and proper.
       (c) Report in Public Land Statistics.--The Secretary shall 
     provide in the annual publication of Public Land Statistics, 
     a report of activities related to the program established 
     under this section.
       (d) Termination of Program.--The program established by 
     this section shall terminate ten years from the date of 
     enactment of this title.

     SEC. 206. DISTRIBUTION OF RECEIPTS.

       Notwithstanding any other Act, except that specifically 
     providing for a proportion of the proceeds to be distributed 
     to any trust funds of any States, gross proceeds generated by 
     the sale or exchange of public land under this title shall be 
     deposited in a separate account in the Treasury of the United 
     States to be known as the ``Federal Land Disposal Account'', 
     for use as provided under section 207.

     SEC. 207. FEDERAL LAND DISPOSAL ACCOUNT.

       (a) In General.--Amounts in the Federal Land Disposal 
     Account shall be available to the Secretary of the Interior 
     and the Secretary of Agriculture, without further act of 
     appropriation, to carry out this title.
       (b) Use of the Federal Land Disposal Account.--Funds 
     deposited in the Federal Land Disposal Account may be 
     expended as follows--
       (1) except as authorized under paragraph (7), proceeds from 
     the disposal of lands under this title shall be used to 
     purchase inholdings contained within Federal designated 
     areas;
       (2) acquisition priority shall be given to those lands 
     which have existed as inholdings for the longest period of 
     time, except that the Secretaries may develop criteria for 
     priority of acquisition considering the following additional 
     factors--
       (A) limits in size or cost in order to maximize the 
     utilization of funds among eligible inholdings; and
       (B) other relevant factors including, but not limited to, 
     the condition of title and the existence of hazardous 
     substances;
       (3) acquisition of any inholding under this section shall 
     be on a willing seller basis contingent upon the conveyance 
     of title acceptable to the appropriate Secretary utilizing 
     title standards of the Attorney General;
       (4) all proceeds, including interest, from the disposal of 
     lands under section 205 shall be expended within the state in 
     which they were generated until a reasonable effort has been 
     made to acquire all inholdings identified by the evaluation 
     team pursuant to section 204 within that state;
       (5) upon the acquisition of all inholdings under paragraph 
     (4), proceeds may be expended in other states, and a priority 
     shall be established in order of those states having the 
     greatest inventory of unacquired inholdings as of the 
     beginning of the fiscal year in which the excess proceeds 
     become available;

[[Page S12324]]

       (6) the acquisition of inholdings under this section shall 
     be at fair market value;
       (7) an amount not to exceed 20 percent of the funds in the 
     Federal Land Disposal Account shall be used for 
     administrative and other expenses necessary to carry out 
     the land disposal program under section 205;
       (c) Contaminated Sites and Sites Difficult and Uneconomic 
     To Manage.--Funds in the account established by section 206 
     shall not be used to purchase or lands or interests in lands 
     which, as determined by the agency, contain hazardous 
     substances or are otherwise contaminated, or which, because 
     of their location or other characteristics, would be 
     difficult or uneconomic to manage as Federal land.
       (d) Investment of Principal.--Funds deposited as principal 
     in the Federal Land Disposal Account shall earn interest in 
     the amount determined by the Secretary of the Treasury based 
     on the current average market yield on outstanding marketable 
     obligations of the United States of comparable maturities.
       (e) Land and Water Conservation Fund Act.--Funds made 
     available under this section shall be supplemental to any 
     funds appropriated under the Land and Water Conservation Fund 
     Act (16 U.S.C. 460l-4 through 460l-6a, 460l-7 through 460l-
     10, 460l-10a-d, 460l-11).
       (f) Termination.--On termination of the program under 
     section 205--
       (1) the Federal Land Disposal Account shall be terminated; 
     and
       (2) any remaining balance in such account shall become 
     available for appropriation under section 3 of the Land and 
     Water Conservation Fund Act (16 U.S.C. 460l-6).

     SEC. 208. SPECIAL PROVISIONS.

       (a) In General.--Nothing in this title shall be construed 
     as an exemption from any existing limitation on the 
     acquisition of lands of interests therein under any Federal 
     law.
       (b) Santini-Burton Act.--The provisions of this title shall 
     not apply to lands eligible for sale pursuant to the Santini-
     Burton Act (94 Stat. 3381).
       (c) Exchanges.--Nothing in this title shall be construed as 
     precluding, pre-empting, or limiting the authority to 
     exchange lands under the Federal Land Policy and Management 
     Act of 1976 (43 U.S.C. 1701 et seq.), or the Federal Land 
     Exchange Facilitation Act of 1988 (site).
       (d) Right or Benefit.--This title is intended to provide 
     direction regarding Federal land management. Nothing herein 
     is intended to, or shall create a right or benefit, 
     substantive or procedural, enforceable at law or in equity by 
     a party against the United States, its agencies, its 
     officers, or any other person.
                                  ____


                        Statement of Principles


                             i. baca ranch

       The Baca ranch in New Mexico is a unique land area, with 
     significant scientific, cultural, historic, recreational, 
     ecological, and production values. Management of this working 
     ranch by the current owners has included limited grazing, 
     hunting, and timber harvesting, and it depicts a model for 
     sustainable land development and use. It is our intention to 
     continue to follow this model. The unique nature of the Baca 
     ranch requires a unique program for appropriate preservation, 
     operation and maintenance of the ranch.
       Legislation to authorize the Federal acquisition and 
     establish a unique management framework will:
       (1) Provide for federal acquisition of the Baca Ranch 
     property by the U.S. Forest Service, assuming agreement with 
     the current owners on a fair price based on an objective 
     appraisal;
       (2) Provide for innovative management by a Trust, being a 
     wholly owned government corporation comprised of individuals, 
     (appointed by the President with New Mexican input), with 
     appropriate and varied expertise relevant to the unique 
     management issues. These individuals will administer the 
     operation, maintenance, management, and use of the ranch, 
     based on appropriate public input and with governmental 
     oversight;
       (3) Provide management principles including protection of 
     the unique values of the property in all of the areas listed 
     above, and demonstration of sustainable land use including 
     recreational opportunities, selective timbering, limited 
     grazing and hunting, and the use of appropriate range and 
     silvicultural management with significant species diversity. 
     Management shall be in furtherance of these goals and provide 
     for the eventual financial self-sufficiency of the operation 
     without violating other management goals;
       (4) Provide an opportunity for the Trust, should it not 
     achieve financial self-sufficiency by its ninth year of 
     operation, to continue operating upon agreement between 
     Congress and the President, after showing rationale for not 
     attaining a financially self-sufficient operation; and
       (5) Provide for an initial appropriation in an amount 
     necessary for management of the property.
       The parties further agree to work together to make 
     available the $20 million appropriated in the 1998 Land and 
     Water Conservation Fund, the $20 million in FY99 requested by 
     the President for use to purchase the Baca ranch, and 
     additional funds necessary to complete the purchase following 
     an acceptable and reasonable appraisal and agreement on price 
     between buyer and seller.


             ii. inholder relief and surplus land disposal

       Millions of acres of private land lie within the boundaries 
     of Federal land management units. BLM currently has authority 
     to exchange or sell lands identified for disposal in its 
     planning process. Using proceeds generated from the disposal 
     of these public lands to purchase inholdings in federally 
     designated areas from willing sellers would supplement funds 
     appropriated under the Land and Water Conservation Fund. 
     Legislation to address these interrelated land management 
     problems will--
       (1) Establish a program to conduct appraisals and other 
     legal requirements for the disposal of public land identified 
     in existing BLM management plans as surplus;
       (2) Establish a special account for the receipts generated 
     from the disposal of these lands, available to the 
     Secretaries to acquire inholdings without further 
     appropriation, provided--
       The acquisition will be from willing sellers, with priority 
     given to lands existing as inholdings for the longest time;
       Proceeds from the sale of surplus lands must be spent 
     within the state in which they were generated until all 
     available inholdings are purchased;
       The proceeds in the special account are to supplement, not 
     supplant, appropriations to the Land and Water Conservation 
     Fund; and
       An appropriate amount of the proceeds will be used to 
     conduct appraisal and other administrative steps necessary to 
     complete the sale of surplus lands; and
       (3) Terminates the land disposal program and account after 
     ten years.
      By Mr. ROTH (for himself, Mr. Moynihan, Mr. Chafee, Mr. Baucus, 
        Mr. Grassley, Mr. Rockefeller, Mr. Hatch, Mr. Breaux, Mr. 
        D'Amato, Mr. Conrad, Mr. Murkowski, Mr. Graham, Mr. Jeffords, 
        Ms. Moseley-Braun, Mr. Mack, Mr. Bryan, and Mr. Kerrey):
  S. 2622. A bill to amend the Internal Revenue Code of 1986 to extend 
certain expiring provisions, and for other purposes; to the Committee 
on Finance.


                  the tax relief extension act of 1998

  Mr. ROTH. Mr. President, I rise to introduce the ``Tax Relief 
Extension Act of 1998''. I am pleased to have as my principal cosponsor 
my distinguished friend and Ranking Member of the Finance Committee, 
Daniel Patrick Moynihan. Fifteen Finance Committee Members have joined 
Senator Moynihan and myself on this bill.

  Before I discuss the Finance Committee bill, I'd like to comment on 
the House bill.
  Chairman Archer and I attempted to negotiate a bill that would 
address expiring tax and trade provisions.
  Chairman Archer and I had many discussions and made a lot of progress 
in trying to resolve differences on extenders, but we were unable to 
reach agreement. Let me say the House bill has many worthwhile 
proposals that we in the Senate should support.
  Mr. President, we find ourselves in a difficult situation. Although 
the House bill has many good proposals, it is unlikely the House bill 
will move by unanimous consent in the Senate in its present form. We 
will not be able to obtain unanimous consent because the House resisted 
negotiations on expiring provisions important to Members of the Senate.
  I remain hopeful that the House and Senate can reach agreement on an 
extenders bill. I believe the Finance Committee is taking a step today 
that can lead us to that agreement.
  Mr. President, this bill is the product of a Finance Committee 
meeting yesterday. At that meeting, a bi-partisan majority of the 
committee agreed on a package to address expiring tax and trade 
provisions--the so-called extenders. This bill is meant to be offered 
as a substitute to H.R. 4738, the House extender bill.
  We expect to consider the House bill together with the Finance 
Committee bill shortly.
  This Finance Committee bill follows three principles:

       All non-controversial expiring provisions are covered;
       No policy changes are made to the extenders--only date 
     changes; and
       The package is fully offset.

  The purpose of this bill is to leave tax policy on the expiring 
provisions settled until the next Congress. At that time, hopefully, we 
will be considering a major tax cut bill. When we are considering that 
tax cut bill next year, we will be able to address the policy and long-
term period of the various provisions.
  This bill is necessarily narrow. There are no Member provisions in 
this bill, including some I am interested in. In order to expedite this 
bill, the Finance Committee Members on this bill agreed to forego 
Member issues.

[[Page S12325]]

  This bill extends several important provisions in the tax and trade 
areas, including:

       The research and development tax credit;
       The work opportunity tax credit;
       The welfare to work tax credit;
       The full deductibility of contributions of appreciated 
     stock to private foundations;
       The active financing exception to Subpart F for financial 
     services operations overseas;
       The tax information reporting access for the Department of 
     Education for the Federal student aid programs;
       The Generalized System of Preferences (``GSP''); and
       The trade adjustment assistance (``TAA'') program.

  In addition to extenders, the Finance Committee bill speeds up the 
full deductibility of health insurance deduction for self-employed 
persons. This bill also addresses time sensitive farm-related issues.
  The final provision in this bill would correct an upcoming problem 
for millions of middle income taxpayers. The Taxpayer Relief Act of 
1997 included tax relief for America's working families in the form of 
the $500 per child tax credit and the Hope Scholarship tax credit, and 
other benefits. Taxpayers will expect to see these benefits when they 
file their returns on April 15th.
  What some of these families will find is that the tax relief they 
expected will not materialize because of the alternative minimum tax 
(``AMT''). That is, these tax credits do not count against the 
alternative minimum tax. The final provision in the Finance Committee 
bill would provide that benefits such as the $500 per child tax credit 
would count against the alternative minimum tax.
  This point deserves emphasis. We can correct this problem for 
millions of taxpayers in this bill. As Chairman of the Finance 
Committee, I consider it my responsibility to simplify the tax code 
whenever possible. This last provision provides us with that 
opportunity. I am pleased the Members of the Finance Committee back me 
in this effort.
  Finally, I'd like return to the Senate's procedures, schedule, and 
the prospects for extender legislation.
  It is important to recognize that the House and Senate are very 
different bodies governed by starkly different rules and traditions. 
Unlike the House, the Senate Rules and schedule do not allow us to move 
this bill at this point in any other way than by unanimous consent. If 
we are to address these tax and trade provisions, we will need the 
cooperation of every Senator.
  If we can get every Senator's cooperation, and resolve our 
differences with the House, I believe we can deliver an extenders bill 
the President will sign.
  I urge my colleagues to support this Finance Committee bill.
  Mr. President, I ask unanimous consent that the text of the bill, a 
section-by-section analysis, and revenue table of the legislation, be 
printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 2622

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

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

       (a) Short Title.--This Act may be cited as the ``Tax Relief 
     Extension 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; amendment of 1986 Code; table of contents.

               TITLE I--EXTENSION OF EXPIRING PROVISIONS

                       Subtitle A--Tax Provisions

Sec. 101. Research credit.
Sec. 102. Work opportunity credit.
Sec. 103. Welfare-to-work credit.
Sec. 104. Contributions of stock to private foundations.
Sec. 105. Subpart F exemption for active financing income.
Sec. 106. Credit for producing fuel from a nonconventional source.
Sec. 107. Disclosure of return information on income contingent student 
              loans.

                      Subtitle B--Trade Provisions

Sec. 111. Extension of duty-free treatment under General System of 
              Preferences.
Sec. 112. Trade adjustment assistance.

                     TITLE II--OTHER TAX PROVISIONS

Sec. 201. 100-percent deduction for health insurance costs of self-
              employed individuals.
Sec. 202. Production flexibility contract payments.
Sec. 203. Income averaging for farmers made permanent.
Sec. 204. Nonrefundable personal credits fully allowed against regular 
              tax liability during 1998.

                       TITLE III--REVENUE OFFSET

Sec. 301. Treatment of certain deductible liquidating distributions of 
              regulated investment companies and real estate investment 
              trusts.

                    TITLE IV--TECHNICAL CORRECTIONS

Sec. 401. Definitions; coordination with other titles.
Sec. 402. Amendments related to Internal Revenue Service Restructuring 
              and Reform Act of 1998.
Sec. 403. Amendments related to Taxpayer Relief Act of 1997.
Sec. 404. Amendments related to Tax Reform Act of 1984.
Sec. 405. Other amendments.
Sec. 406. Amendments related to Uruguay Round Agreements Act.

               TITLE I--EXTENSION OF EXPIRING PROVISIONS

                       Subtitle A--Tax Provisions

     SEC. 101. 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 ``June 30, 
     1999'',
       (B) by striking ``24-month'' and inserting ``36-month'', 
     and
       (C) by striking ``24 months'' and inserting ``36 months''.
       (2) Technical amendment.--Subparagraph (D) of section 
     45C(b)(1) is amended by striking ``June 30, 1998'' and 
     inserting ``June 30, 1999''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to amounts paid or incurred after June 30, 1998.

     SEC. 102. 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 ``June 30, 1999''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to individuals who begin work for the employer 
     after June 30, 1998.

     SEC. 103. WELFARE-TO-WORK CREDIT.

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

     SEC. 104. CONTRIBUTIONS OF STOCK TO PRIVATE FOUNDATIONS.

       (a) In General.--Subparagraph (D)(ii) of section 170(e)(5) 
     is amended by striking ``June 30, 1998'' and inserting ``June 
     30, 1999''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to contributions made after June 30, 1998.

     SEC. 105. SUBPART F EXEMPTION FOR ACTIVE FINANCING INCOME.

       (a) In General.--Paragraph (9) of section 954(h) (relating 
     to application) is amended to read as follows:
       ``(9) Application.--This subsection shall apply to--
       ``(A)(i) the first full taxable year of a foreign 
     corporation beginning after December 31, 1997, and before 
     January 1, 1999, and the taxable year of such corporation 
     immediately following such taxable year, or
       ``(ii) if a foreign corporation has no such first full 
     taxable year, the first taxable year of such corporation 
     beginning after December 31, 1998, and before January 1, 
     2000, and
       ``(B) taxable years of United States shareholders of a 
     foreign corporation with or within which the corporation's 
     taxable years described in subparagraph (A) end.''
       (b) Conforming Amendment.--Section 1175(c) of the Taxpayer 
     Relief Act of 1997 is repealed.

     SEC. 106. CREDIT FOR PRODUCING FUEL FROM A NONCONVENTIONAL 
                   SOURCE.

       (a) In General.--Section 29(g)(1)(A) is amended by striking 
     ``July 1, 1998'' and inserting ``July 1, 1999''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to facilities placed in service after June 30, 
     1998.

     SEC. 107. DISCLOSURE OF RETURN INFORMATION ON INCOME 
                   CONTINGENT STUDENT LOANS.

       Subparagraph (D) of section 6103(l)(13) (relating to 
     disclosure of return information to carry out income 
     contingent repayment of student loans) is amended by striking 
     ``September 30, 1998'' and inserting ``September 30, 2004''.

           Subtitle B--Extension of Expired Trade Provisions

     SEC. 111. EXTENSION OF DUTY-FREE TREATMENT UNDER GENERAL 
                   SYSTEM OF PREFERENCES.

       (a) In General.--Section 505 of the Trade Act of 1974 (19 
     U.S.C. 2465) is amended by striking ``June 30, 1998'' and 
     inserting ``December 31, 1999''.
       (b) Effective Date.--
       (1) In general.--The amendments made by this section apply 
     to articles entered on or after October 1, 1998.
       (2) Retroactive application for certain liquidations and 
     reliquidations.--
       (A) General rule.--Notwithstanding section 514 of the 
     Tariff Act of 1930 or any other

[[Page S12326]]

     provision of law and subject to paragraph (3), any article 
     that was entered--
       (i) after June 30, 1998, and
       (ii) before October 1, 1998, and

     to which duty-free treatment under title V of the Trade Act 
     of 1974 would have applied if the entry had been made on June 
     30, 1998, shall be liquidated or reliquidated as free of 
     duty, and the Secretary of the Treasury shall refund any duty 
     paid with respect to such entry.
       (B) Limitations on refunds.--No refund shall be made 
     pursuant to this paragraph before October 1, 1998.
       (C) Entry.--As used in this paragraph, the term ``entry'' 
     includes a withdrawal from warehouse for consumption.
       (3) Requests.--Liquidation or reliquidation may be made 
     under paragraph (2) with respect to an entry only if a 
     request therefor is filed with the Customs Service, within 
     180 days after the date of enactment of this Act, that 
     contains sufficient information to enable the Customs 
     Service--
       (A) to locate the entry; or
       (B) to reconstruct the entry if it cannot be located.

     SEC. 112. TRADE ADJUSTMENT ASSISTANCE.

       (a) Authorization of Appropriations.--
       (1) In general.--Section 245 of the Trade Act of 1974 (19 
     U.S.C. 2317) is amended--
       (A) in subsection (a), by striking ``1993, 1994, 1995, 
     1996, 1997, and 1998,'' and inserting ``1998 and 1999,''; and
       (B) in subsection (b), by striking ``1994, 1995, 1996, 
     1997, and 1998,'' and inserting ``1998 and 1999,''.
       (2) Assistance for firms.--Section 256(b) of the Trade Act 
     of 1974 (19 U.S.C. 2346(b)) is amended by striking ``1993, 
     1994, 1995, 1996, 1997, and'' and inserting ``, and 1999,'' 
     after ``1998''.
       (b) Termination.--Section 285(c) of the Trade Act of 1974 
     (19 U.S.C. 2271 note preceding) is amended--
       (1) in paragraph (1), by striking ``September 30, 1998'' 
     and inserting ``June 30, 1999''; and
       (2) in paragraph (2)(A), by striking ``the day that is'' 
     and all that follows through ``effective'' and inserting 
     ``June 30, 1999''.

                     TITLE II--OTHER TAX PROVISIONS

     SEC. 201. 100-PERCENT DEDUCTION FOR HEALTH INSURANCE COSTS OF 
                   SELF-EMPLOYED INDIVIDUALS.

       (a) In General.--Subparagraph (B) of section 162(l)(1) 
     (relating to special rules for health insurance costs of 
     self-employed individuals) is amended to read as follows:
       ``(B) Applicable percentage.--For purposes of subparagraph 
     (A), the applicable percentage shall be--
       ``(i) 45 percent for taxable years beginning in 1999 and 
     2000,
       ``(ii) 70 percent for taxable years beginning in 2001, and
       ``(iii) 100 percent for taxable years beginning after 
     December 31, 2001.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1998.

     SEC. 202. PRODUCTION FLEXIBILITY CONTRACT PAYMENTS.

       (a) In General.--The options under paragraphs (2) and (3) 
     of section 112(d) of the Federal Agriculture Improvement and 
     Reform Act of 1996 (7 U.S.C. 7212(d) (2) and (3)), as in 
     effect on the date of the enactment of this Act, shall be 
     disregarded in determining the taxable year for which any 
     payment under a production flexibility contract under 
     subtitle B of title I of such Act (as so in effect) is 
     properly includible in gross income for purposes of the 
     Internal Revenue Code of 1986.
       (b) Effective Date.--Subsection (a) shall apply to taxable 
     years ending after December 31, 1995.

     SEC. 203. 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. 204. NONREFUNDABLE PERSONAL CREDITS FULLY ALLOWED 
                   AGAINST REGULAR TAX LIABILITY DURING 1998.

       (a) In General.--Subsection (a) of section 26 is amended by 
     adding at the end the following flush sentence:

     ``For purposes of paragraph (2), the taxpayer's tentative 
     minimum tax for any taxable year beginning during 1998 shall 
     be treated as being zero.''
       (b) Conforming Amendment.--Section 24(d)(2) is amended by 
     striking ``The credit'' and ``For taxable years beginning 
     after December 31, 1998, the credit''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1997.

                       TITLE III--REVENUE OFFSET

     SEC. 301. TREATMENT OF CERTAIN DEDUCTIBLE LIQUIDATING 
                   DISTRIBUTIONS OF REGULATED INVESTMENT COMPANIES 
                   AND REAL ESTATE INVESTMENT TRUSTS.

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

                    TITLE IV--TECHNICAL CORRECTIONS

     SEC. 401. DEFINITIONS; COORDINATION WITH OTHER TITLES.

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

     SEC. 402. AMENDMENTS RELATED TO INTERNAL REVENUE SERVICE 
                   RESTRUCTURING AND REFORM ACT OF 1998.

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

     ``Subparagraph (C) shall not apply to any qualified revocable 
     trust (as defined in section 645(b)(1)) with respect to 
     liability for tax for any taxable year ending after the date 
     of the decedent's death and before the applicable date (as 
     defined in section 645(b)(2)).''.
       (c) Amendments Related to Section 3201 of 1998 Act.--
       (1) Section 7421(a) of the 1986 Code is amended by striking 
     ``6015(d)'' and inserting ``6015(e)''.
       (2) Subparagraph (A) of section 6015(e)(3) is amended by 
     striking ``of this section'' and inserting ``of subsection 
     (b) or (f)''.
       (d) Amendment Related to Section 3301 of 1998 Act.--
     Paragraph (2) of section 3301(c) of the 1998 Act is amended 
     by striking ``The amendments'' and inserting ``Subject to any 
     applicable statute of limitation not having expired with 
     regard to either a tax underpayment or a tax overpayment, the 
     amendments''.
       (e) Amendment Related to Section 3401 of 1998 Act.--Section 
     3401(c) of the 1998 Act is amended--
       (1) in paragraph (1), by striking ``7443(b)'' and inserting 
     ``7443A(b)''; and
       (2) in paragraph (2), by striking ``7443(c)'' and inserting 
     ``7443A(c)''.
       (f) Amendment Related to Section 3433 of 1998 Act.--Section 
     7421(a) of the 1986 Code is amended by inserting ``6331(i),'' 
     after ``6246(b),''.
       (g) Amendment Related to Section 3467 of 1998 Act.--The 
     subsection (d) of section 6159 of the 1986 Code relating to 
     cross reference is redesignated as subsection (e).
       (h) Amendment Related to Section 3708 of 1998 Act.--
     Subparagraph (A) of section 6103(p)(3) of the 1986 Code is 
     amended by inserting ``(f)(5),'' after ``(c), (e),''.
       (i) Amendments Related to Section 5001 of 1998 Act.--
       (1) Subparagraph (B) of section 1(h)(13) of the 1986 Code 
     is amended by striking ``paragraph (7)(A)'' and inserting 
     ``paragraph (7)(A)(i)''.
       (2)(A) Subparagraphs (A)(i)(II), (A)(ii)(II), and (B)(ii) 
     of section 1(h)(13) of the 1986 Code shall not apply to any 
     distribution after December 31, 1997, by a regulated 
     investment company or a real estate investment trust with 
     respect to--
       (i) gains and losses recognized directly by such company or 
     trust, and
       (ii) amounts properly taken into account by such company or 
     trust by reason of holding (directly or indirectly) an 
     interest in another such company or trust to the extent that 
     such subparagraphs did not apply to such other company or 
     trust with respect to such amounts.
       (B) Subparagraph (A) shall not apply to any distribution 
     which is treated under section 852(b)(7) or 857(b)(8) of the 
     1986 Code as received on December 31, 1997.
       (C) For purposes of subparagraph (A), any amount which is 
     includible in gross income of its shareholders under section 
     852(b)(3)(D) or 857(b)(3)(D) of the 1986 Code after December 
     31, 1997, shall be treated as distributed after such date.
       (D)(i) For purposes of subparagraph (A), in the case of a 
     qualified partnership with respect to which a regulated 
     investment company meets the holding requirement of clause 
     (iii)--
       (I) the subparagraphs referred to in subparagraph (A) shall 
     not apply to gains and losses recognized directly by such 
     partnership for purposes of determining such company's 
     distributive share of such gains and losses, and
       (II) such company's distributive share of such gains and 
     losses (as so determined) shall be treated as recognized 
     directly by such company.


[[Page S12327]]


     The preceding sentence shall apply only if the qualified 
     partnership provides the company with written documentation 
     of such distributive share as so determined.
       (ii) For purposes of clause (i), the term ``qualified 
     partnership'' means, with respect to a regulated investment 
     company, any partnership if--
       (I) the partnership is an investment company registered 
     under the Investment Company Act of 1940,
       (II) the regulated investment company is permitted to 
     invest in such partnership by reason of section 12(d)(1)(E) 
     of such Act or an exemptive order of the Securities and 
     Exchange Commission under such section, and
       (III) the regulated investment company and the partnership 
     have the same taxable year.
       (iii) A regulated investment company meets the holding 
     requirement of this clause with respect to a qualified 
     partnership if (as of January 1, 1998)--
       (I) the value of the interests of the regulated investment 
     company in such partnership is 35 percent or more of the 
     value of such company's total assets, or
       (II) the value of the interests of the regulated investment 
     company in such partnership and all other qualified 
     partnerships is 90 percent or more of the value of such 
     company's total assets.
       (3) Paragraph (13) of section 1(h) of the 1986 Code is 
     amended by adding at the end the following new subparagraph:
       ``(D) Charitable remainder trusts.--Subparagraphs (A) and 
     (B)(ii) shall not apply to any capital gain distribution made 
     by a trust described in section 664.''
       (j) Amendment Related to Section 7004 of 1998 Act.--Clause 
     (i) of section 408A(c)(3)(C) of the 1986 Code, as amended by 
     section 7004 of the 1998 Act, is amended by striking the 
     period at the end of subclause (II) and inserting ``, and''.
       (k) Effective Date.--The amendments made by this section 
     shall take effect as if included in the provisions of the 
     1998 Act to which they relate.

     SEC. 403. AMENDMENTS RELATED TO TAXPAYER RELIEF ACT OF 1997.

       (a) Amendments Related to Section 202 of 1997 Act.--
       (1) Paragraph (2) of section 163(h) of the 1986 Code is 
     amended by striking ``and'' at the end of subparagraph (D), 
     by striking the period at the end of subparagraph (E) and 
     inserting ``, and'', and by adding at the end the following 
     new subparagraph:
       ``(F) any interest allowable as a deduction under section 
     221 (relating to interest on educational loans).''
       (2)(A) Subparagraph (C) of section 221(b)(2) of the 1986 
     Code is amended--
       (i) by striking ``135, 137,'' in clause (i),
       (ii) by inserting ``135, 137,'' after ``sections 86,'' in 
     clause (ii), and
       (iii) by striking the last sentence.
       (B) Sections 86(b)(2)(A), 135(c)(4)(A), and 
     219(g)(3)(A)(ii) of the 1986 Code are each amended by 
     inserting ``221,'' after ``137,''.
       (C) Subparagraph (A) of section 137(b)(3) of the 1986 Code 
     is amended by inserting ``221,'' before ``911,''.
       (D) Clause (iii) of section 469(i)(3)(E) of the 1986 Code 
     is amended to read as follows:
       ``(iii) the amounts allowable as a deduction under sections 
     219 and 221, and''.
       (3) The last sentence of section 221(e)(1) of the 1986 Code 
     is amended by inserting before the period ``or to any person 
     by reason of a loan under any qualified employer plan (as 
     defined in section 72(p)(4)) or under any contract referred 
     to in section 72(p)(5)''.
       (b) Provision Related to Section 311 of 1997 Act.--In the 
     case of any capital gain distribution made after 1997 by a 
     trust to which section 664 of the 1986 Code applies with 
     respect to amounts properly taken into account by such trust 
     during 1997, paragraphs (5)(A)(i)(I), (5)(A)(ii)(I), and 
     (13)(A) of section 1(h) of the 1986 Code (as in effect for 
     taxable years ending on December 31, 1997) shall not apply.
       (c) Amendment Related to Section 506 of 1997 Act.--Section 
     2001(f)(2) of the 1986 Code is amended by adding at the end 
     the following:

     ``For purposes of subparagraph (A), the value of an item 
     shall be treated as shown on a return if the item is 
     disclosed in the return, or in a statement attached to the 
     return, in a manner adequate to apprise the Secretary of the 
     nature of such item.''.
       (d) Amendments Related to Section 904 of 1997 Act.--
       (1) Paragraph (1) of section 9510(c) of the 1986 Code is 
     amended to read as follows:
       ``(1) In general.--Amounts in the Vaccine Injury 
     Compensation Trust Fund shall be available, as provided in 
     appropriation Acts, only for--
       ``(A) the payment of compensation under subtitle 2 of title 
     XXI of the Public Health Service Act (as in effect on August 
     5, 1997) for vaccine-related injury or death with respect to 
     any vaccine--
       ``(i) which is administered after September 30, 1988, and
       ``(ii) which is a taxable vaccine (as defined in section 
     4132(a)(1)) at the time compensation is paid under such 
     subtitle 2, or
       ``(B) the payment of all expenses of administration (but 
     not in excess of $9,500,000 for any fiscal year) incurred by 
     the Federal Government in administering such subtitle.''.
       (2) Section 9510(b) of the 1986 Code is amended by adding 
     at the end the following new paragraph:
       ``(3) Limitation on transfers to vaccine injury 
     compensation trust fund.--No amount may be appropriated to 
     the Vaccine Injury Compensation Trust Fund on and after the 
     date of any expenditure from the Trust Fund which is not 
     permitted by this section. The determination of whether an 
     expenditure is so permitted shall be made without regard to--
       ``(A) any provision of law which is not contained or 
     referenced in this title or in a revenue Act, and
       ``(B) whether such provision of law is a subsequently 
     enacted provision or directly or indirectly seeks to waive 
     the application of this paragraph.''.
       (e) Amendments Related to Section 915 of 1997 Act.--
       (1) Section 915 of the 1997 Act is amended--
       (A) in subsection (b), by inserting ``or 1998'' after 
     ``1997'', and
       (B) by amending subsection (d) to read as follows:
       ``(d) Effective Date.--This section shall apply to taxable 
     years ending with or within calendar year 1997.''.
       (2) Paragraph (2) of section 6404(h) of the 1986 Code is 
     amended by inserting ``Robert T. Stafford'' before 
     ``Disaster''.
       (f) Amendments Related to Section 1012 of 1997 Act.--
       (1) Paragraph (2) of section 351(c) of the 1986 Code, as 
     amended by section 6010(c) of the 1998 Act, is amended by 
     inserting ``, or the fact that the corporation whose stock 
     was distributed issues additional stock,'' after ``dispose of 
     part or all of the distributed stock''.
       (2) Clause (ii) of section 368(a)(2)(H) of the 1986 Code, 
     as amended by section 6010(c) of the 1998 Act, is amended by 
     inserting ``, or the fact that the corporation whose stock 
     was distributed issues additional stock,'' after ``dispose of 
     part or all of the distributed stock''.
       (g) Provision Related to Section 1042 of 1997 Act.--Rules 
     similar to the rules of section 1.1502-75(d)(5) of the 
     Treasury Regulations shall apply with respect to any 
     organization described in section 1042(b) of the 1997 Act.
       (h) Amendment Related to Section 1082 of 1997 Act.--
     Subparagraph (F) of section 172(b)(1) of the 1986 Code is 
     amended by adding at the end the following new clause:
       ``(iv) Coordination with paragraph (2).--For purposes of 
     applying paragraph (2), an eligible loss for any taxable year 
     shall be treated in a manner similar to the manner in which a 
     specified liability loss is treated.''
       (i) Amendment Related to Section 1084 of 1997 Act.--
     Paragraph (3) of section 264(f) of the 1986 Code is amended 
     by adding at the end the following flush sentence:

     ``If the amount described in subparagraph (A) with respect to 
     any policy or contract does not reasonably approximate its 
     actual value, the amount taken into account under 
     subparagraph (A) shall be the greater of the amount of the 
     insurance company liability or the insurance company reserve 
     with respect to such policy or contract (as determined for 
     purposes of the annual statement approved by the National 
     Association of Insurance Commissioners) or shall be such 
     other amount as is determined by the Secretary.''
       (j) Amendment Related to Section 1175 of 1997 Act.--
     Subparagraph (C) of section 954(e)(2) of the 1986 Code is 
     amended by striking ``subsection (h)(8)'' and inserting 
     ``subsection (h)(9)''.
       (k) Amendment Related to Section 1205 of 1997 Act.--
     Paragraph (2) of section 6311(d) of the 1986 Code is amended 
     by striking ``under such contracts'' in the last sentence and 
     inserting ``under any such contract for the use of credit, 
     debit, or charge cards for the payment of taxes imposed by 
     subtitle A''.
       (l) Effective Date.--The amendments made by this section 
     shall take effect as if included in the provisions of the 
     1997 Act to which they relate.

     SEC. 404. AMENDMENTS RELATED TO TAX REFORM ACT OF 1984.

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

[[Page S12328]]

     SEC. 405. OTHER AMENDMENTS.

       (a) Amendments Related to Section 6103 of 1986 Code.--
       (1) Subsection (j) of section 6103 of the 1986 Code is 
     amended by adding at the end the following new paragraph:
       ``(5) Department of agriculture.--Upon request in writing 
     by the Secretary of Agriculture, the Secretary shall furnish 
     such returns, or return information reflected thereon, as the 
     Secretary may prescribe by regulation to officers and 
     employees of the Department of Agriculture whose official 
     duties require access to such returns or information for the 
     purpose of, but only to the extent necessary in, structuring, 
     preparing, and conducting the census of agriculture pursuant 
     to the Census of Agriculture Act of 1997 (Public Law 105-
     113).''.
       (2) Paragraph (4) of section 6103(p) of the 1986 Code is 
     amended by striking ``(j)(1) or (2)'' in the material 
     preceding subparagraph (A) and in subparagraph (F) and 
     inserting ``(j)(1), (2), or (5)''.
       (3) The amendments made by this subsection shall apply to 
     requests made on or after the date of the enactment of this 
     Act.
       (b) Amendment Related to Section 9004 of Transportation 
     Equity Act for the 21st Century.--
       (1) Paragraph (2) of section 9503(f) of the 1986 Code is 
     amended to read as follows:
       ``(2) notwithstanding section 9602(b), obligations held by 
     such Fund after September 30, 1998, shall be obligations of 
     the United States which are not interest-bearing.''
       (2) The amendment made by paragraph (1) shall take effect 
     on October 1, 1998.
       (c) Amendment Related to Treasury and General Government 
     Appropriations Act, 1999.--
       (1) The Treasury and General Government Appropriations Act, 
     1999 is amended by striking section 804 (relating to 
     technical and clarifying amendments relating to judicial 
     retirement program).
       (2) The amendment made by paragraph (1) shall take effect 
     as if such section 804 had never been enacted.
       (d) Clerical Amendments.--
       (1) Clause (i) of section 51(d)(6)(B) of the 1986 Code is 
     amended by striking ``rehabilitation plan'' and inserting 
     ``plan for employment''. The reference to ``plan for 
     employment'' in such clause shall be treated as including a 
     reference to the rehabilitation plan referred to in such 
     clause as in effect before the amendment made by the 
     preceding sentence.
       (2) Paragraph (3) of section 56(a) of the 1986 Code is 
     amended by striking ``section 460(b)(2)'' and inserting 
     ``section 460(b)(1)'' and by striking ``section 460(b)(4)'' 
     and inserting ``section 460(b)(3)''.
       (3) Paragraph (10) of section 2031(c) of the 1986 Code is 
     amended by striking ``section 2033A(e)(3)'' and inserting 
     ``section 2057(e)(3)''.
       (4) Subparagraphs (C) and (D) of section 6693(a)(2) of the 
     1986 Code are each amended by striking ``Section'' and 
     inserting ``section''.

     SEC. 406. AMENDMENTS RELATED TO URUGUAY ROUND AGREEMENTS ACT.

       (a) Inapplicability of Assignment Prohibition.--Section 207 
     of the Social Security Act (42 U.S.C. 407) is amended by 
     adding at the end the following new subsection:
       ``(c) Nothing in this section shall be construed to 
     prohibit withholding taxes from any benefit under this title, 
     if such withholding is done pursuant to a request made in 
     accordance with section 3402(p)(1) of the Internal Revenue 
     Code of 1986 by the person entitled to such benefit or such 
     person's representative payee.''.
       (b) Proper Allocation of Costs of Withholding Between the 
     Trust Funds and the General Fund.--Section 201(g) of such Act 
     (42 U.S.C. 401(g)) is amended--
       (1) by inserting before the period in paragraph (1)(A)(ii) 
     the following: ``and the functions of the Social Security 
     Administration in connection with the withholding of taxes 
     from benefits, as described in section 207(c), pursuant to 
     requests by persons entitled to such benefits or such 
     persons' representative payee'';
       (2) by inserting before the period at the end of paragraph 
     (1)(A) the following: ``and the functions of the Social 
     Security Administration in connection with the withholding of 
     taxes from benefits, as described in section 207(c), pursuant 
     to requests by persons entitled to such benefits or such 
     persons' representative payee'';
       (3) in paragraph (1)(B)(i)(I), by striking ``subparagraph 
     (A)),'' and inserting ``subparagraph (A)) and the functions 
     of the Social Security Administration in connection with the 
     withholding of taxes from benefits, as described in section 
     207(c), pursuant to requests by persons entitled to such 
     benefits or such persons' representative payee,'';
       (4) in paragraph (1)(C)(iii), by inserting before the 
     period the following: ``and the functions of the Social 
     Security Administration in connection with the withholding of 
     taxes from benefits, as described in section 207(c), pursuant 
     to requests by persons entitled to such benefits or such 
     persons' representative payee'';
       (5) in paragraph (1)(D), by inserting after ``section 232'' 
     the following: ``and the functions of the Social Security 
     Administration in connection with the withholding of taxes 
     from benefits as described in section 207(c)''; and
       (6) in paragraph (4), by inserting after the first sentence 
     the following: ``The Board of Trustees of such Trust Funds 
     shall prescribe the method of determining the costs which 
     should be borne by the general fund in the Treasury of 
     carrying out the functions of the Social Security 
     Administration in connection with the withholding of taxes 
     from benefits, as described in section 207(c), pursuant to 
     requests by persons entitled to such benefits or such 
     persons' representative payee.''.
       (c) Effective Date.--The amendments made by subsection (b) 
     shall apply to benefits paid on or after the first day of the 
     second month beginning after the month in which this Act is 
     enacted.
                                  ____


 DESCRIPTION OF PROVISIONS IN S. 2622, THE TAX RELIEF EXTENSION ACT OF 
                                  1998

       (Prepared by the Staff of the Joint Committee on Taxation)

                              Introduction

       S. 2622, the Tax (Relief) Extension Act of 1998 (``the Tax 
     Extension Act''), was introduced by Senator William V. Roth, 
     Jr., Senator Daniel Patrick Moynihan, and others on October 
     10, 1998.
       This document, \1\ prepared by the staff of the Joint 
     Committee on Taxation, describes the proposals contained in 
     the Tax Extension Act. Part I of this document contains the 
     expiring provision proposals, Part II contains other 
     proposals, Part III contains a revenue offset proposal, and 
     Part IV contains tax technical corrections.
---------------------------------------------------------------------------
     \1\ Footnotes at end of article.
---------------------------------------------------------------------------

               Title I. Extension of Expiring Provisions

                       Subtitle A--Tax Provisions


 A. Extension of Research Tax Credit (sec. 101 of the bill and sec. 41 
                              of the Code)

                              Present Law

     General rule
       Section 41 provides for a research tax credit equal to 20 
     percent of the amount by which a taxpayer's qualified 
     research expenditures for a taxable year exceeded its base 
     amount for that year. The research tax credit expired and 
     generally does not apply to amounts paid or incurred after 
     June 30, 1998.
       A 20-percent research tax credit also applied to the excess 
     of (1) 100 percent of corporate cash expenditures (including 
     grants or contributions) paid for basic research conducted by 
     universities (and certain nonprofit scientific research 
     organizations) over (2) the sum of (a) the greater of two 
     minimum basic research floors plus (b) an amount reflecting 
     any decrease in nonresearch giving to universities by the 
     corporation as compared to such giving during a fixed-base 
     period, as adjusted for inflation. This separate credit 
     computations is commonly referred to as the ``university 
     basic research credit'' (see sec. 41(e)).
     Computation of allowable credit
       Except for certain university basic research payments made 
     by corporations, the research tax credit applies only to the 
     extent that the taxpayer's qualifed research expenditures for 
     current taxable year exceed its base amount. The base amount 
     for the current year generally is computed by multiplying the 
     taxpayer's ``fixed-base percentage'' by the average amount of 
     the taxpayer's gross receipts for the four preceding years. 
     If a taxpayer both incurred qualified research expenditures 
     and had gross receipts during each of at least three years 
     from 1984 through 1988, then its ``fixed-base percentage'' is 
     the ratio that its total qualified research expenditures for 
     the 1984-1988 period bears to its total gross receipts for 
     that period (subject to a maximum ratio of .16). All other 
     taxpayers (so-called ``start-up firms'') are assigned a 
     fixed-base percentage of 3 percent. \2\
       In computing the credit, a taxpayer's base amount may not 
     be less than 50 percent of its current-year qualified 
     research expenditures.
     Alternative incremental research credit regime
       Taxpayers are allowed to elect an alternative incremental 
     research credit regime. If a taxpayer elects to be subject to 
     this alternative regime, the taxpayer is assigned a three-
     tiered fixed-base percentage (that is lower than the fixed-
     base percentage otherwise applicable under present law) and 
     the credit rate likewise is reduced. Under the alternative 
     credit regime, a credit rate of 1.65 percent applies to the 
     extent that a taxpayer's current-year research expenses 
     exceed a base amount computed by using a fixed-base 
     percentage of 1 percent (i.e, the base amount equals 1 
     percent of the taxpayer's average gross receipts for the four 
     preceding years) but do not exceed a base amount computed by 
     using a fixed-base percentage of 1.5 percent. A credit rate 
     of 2.2 percent applies to the extent that a taxpayer's 
     current-year research expenses exceed a base amount computed 
     by using a fixed-base percentage of 1.5 percent but do not 
     exceed a base amount computed by using a fixed-base 
     percentage of 2 percent. A credit rate of 2.75 percent 
     applies to the extent that a taxpayer's current-year research 
     expenses exceed a base amount computed by using a fixed-base 
     percentage of 2 percent. An election to be subject to this 
     alternative incremental credit regime may be made for any 
     taxable year beginning after June 30, 1996, and such an 
     election applies to that taxable year and all subsequent 
     years (in the event that the credit subsequently is extended 
     by Congress) unless revoked with the consent of the Secretary 
     of the Treasury.
     Eligible expenditures
       Qualified research expenditures eligible for the research 
     tax credit consist of: (1) ``in-

[[Page S12329]]

     house'' expenses of the taxpayer for wages and supplies 
     attributable to qualified research; (2) certain time-sharing 
     costs for computer use in qualified research; and (3) 65 
     percent of amounts paid by the taxpayer for qualified 
     conducted on the taxpayer's behalf (so-called ``contract 
     research expenses''). \3\
       To be eligible for the credit, the research must not only 
     satisfy the requirements of present-law section 174 but must 
     be undertaken for the purpose of discovering information that 
     is technological in nature, the application of which is 
     intended to be useful in the development of a new or improved 
     business component of the taxpayer, and must involve a 
     process of experimentation related to functional aspects, 
     performance, reliability, or quality of a business component.
       Expenditures attributable to research that is conducted 
     outside the United States do not enter into the credit 
     computation. In addition, the credit is not available for 
     research in the social sciences, arts, or humanities, nor is 
     it available for research to the extent funded by any grant, 
     contract, or otherwise by another person (or governmental 
     entity).
     Relation to deduction
       Deductions allowed to a taxpayer under section 174 (or any 
     other section) are reduced by an amount equal to 100 percent 
     of the taxpayer's research tax credit determined for the 
     taxable year. Taxpayers may alternatively elect to claim a 
     reduced research tax credit amount under section 41 in lieu 
     of reducing deductions otherwise allowed (sec. 280C(c)(3)).

                        Description of Proposal

       The bill extends the research tax credit for 12 months--
     i.e., generally, for the period July 1, 1998, through June 
     30, 1999.
       In extending the credit, the scope of the term ``qualified 
     research'' is reaffirmed. Section 41 targets the credit to 
     research which is undertaken for the purpose of discovering 
     information which is technological in nature and the 
     application of which is intended to be useful in the 
     development of a new or improved business component of the 
     taxpayer. However, eligibility for the credit does not 
     require that the research be successful--i.e., the research 
     need not achieve its desired result. Moreover, evolutionary 
     research activities intended to improve functionality, 
     performance, reliability, or quality are eligible for the 
     credit, as are research activities intended to achieve a 
     result that has already been achieved by other persons but is 
     not yet within the common knowledge (e.g., freely available 
     to the general public) of the field (provided that the 
     research otherwise meets the requirements of section 41, 
     including not being excluded by subsection (d)(4)).
       Activities constitute a process of experimentation, as 
     required for credit eligibility, if they involve evaluation 
     of more than one alternative to achieve a result where the 
     means of achieving the result are uncertain at the outset, 
     even if the taxpayer knows at the outset that it may 
     be technically possible to achieve the result. Thus, even 
     though a researcher may know of a particular method of 
     achieving an outcome, the use of the process of 
     experimentation to effect a new or better method of 
     achieving that outcome may be eligible for the credit 
     (provided that the research otherwise meets the 
     requirements of section 41, including not being excluded 
     by subsection (d)(4)).
       Lastly, the lack of clarity in the interpretation of the 
     distinction between internal-use software, the costs of which 
     may be eligible for the credit if additional tests are met, 
     and other software has been observed. The application of the 
     definition of internal-use software should fully reflect 
     Congressional intent.

                             Effective Date

       The extension of the research credit is effective for 
     qualified research expenditures paid or incurred during the 
     period July 1, 1998, through June 30, 1999.


 b. extension of the work opportunity tax credit (sec. 102 of the bill 
                        and sec. 51 of the Code)

                              Present Law

     In general
       The work opportunity tax credit (``WOTC''), which expired 
     on June 30, 1998, was available on an elective basis for 
     employers hiring individuals from one or more of eight 
     targeted groups. The credit equals 40 percent (25 percent for 
     employment of 400 hours or less) of qualified wages. 
     Qualified wages are wages attributable to service rendered by 
     a member of a targeted group during the one-year period 
     beginning with the day the individual began work for the 
     employer. For a vocational rehabilitation referral, however, 
     the period begins on the day the individual began work for 
     the employer on or after the beginning of the individual's 
     vocational rehabilitation plan.
       The maximum credit per employee if $2,400 (40% of the first 
     $6,000 of qualified first-year wages). With respect to 
     qualified summer youth employees, the maximum credit is 
     $1,200 (40% of the first $3,000 of qualified first-year 
     wages).
       The employer's deduction for wages is reduced by the amount 
     of the credit
     Targeted groups eligible for the credit.
       The eight targeted groups are: (1) families eligible to 
     receive benefits under the Temporary Assistance for Needy 
     Families (TANF) Program; (2) high-risk youth; (3) qualified 
     ex-felons; (4) vocational rehabilitation referrals; (5) 
     qualified summer youth employees; (6) qualified veterans; (7) 
     families receiving food stamps; and (8) persons receiving 
     certain Supplemental Security Income (SSI) benefits.
     Minimum employment period
       No credit is allowed for wages paid to employees who work 
     less than 120 hours in the first year of employment.
     Expiration date
       The credit is effective for wages paid or incurred to a 
     qualified individual who began work for an employer before 
     July 1, 1998.

                        Description of Proposal

       The proposal extends the work opportunity tax credit, for 
     12 months, through June 30, 1999.

                             Effective Date

       The proposal is effective for wages paid or incurred to a 
     qualified individual who begins work for any employer on or 
     after July 1, 1998, and before July 1, 1999.


 C. Extension of the Welfare-To-Work Tax Credit (sec. 103 of the bill 
                       and sec. 51A of the Code)

                              Present Law

       The Code provides to employers a tax credit on the first 
     $20,000 of eligible wages paid to qualified long-term family 
     assistance (AFDC) or its successor program) recipients during 
     the first two years of employment. The credit is 35 percent 
     of the first $10,000 of eligible wages in the first year of 
     employment and 50 percent of the first $10,000 of eligible 
     wages in the second year of employment. The maximum credit is 
     $8,500 per qualified employee.
       Qualified long-term family assistance recipients are: (1) 
     members of a family that has received family assistance for 
     at least 18 consecutive months ending on the hiring date; (2) 
     members of a family that has received family assistance for a 
     total of at least 18 months (whether or not consecutive) 
     after the date of enactment of this credit if they are hired 
     within 2 years after the date that the 18-month total is 
     reached; and (3) members of a family who are no longer 
     eligible for family assistance because of either Federal or 
     State time limits, if they are hired within 2 years after the 
     Federal or State time limits made the family ineligible for 
     family assistance.
       Eligible wages include cash wages paid to an employee plus 
     amounts paid by the employer for the following: (1) 
     educational assistance excludable under a section 127 program 
     (or that would be excludable but for the expiration of sec. 
     127); (2) health plan coverage for the employee, but not more 
     than the applicable premium defined under section 
     4980B(f)(4); and (3) dependent care assistance excludable 
     under section 129.
       The welfare to work credit is effective for wages paid or 
     incurred to a qualified individual who begins work for an 
     employer on or after January 1, 1998, and before May 1, 1999.

                        Description of Proposal

       The proposal extends the welfare-to-work credit effective 
     for wages paid or incurred to a qualified individual who 
     begins work for an employer on or after May 1, 1999, and 
     before July 1, 1999.

                             Effective Date

       The proposal is effective for wages paid or incurred to a 
     qualified individual who begins work for an employer on or 
     after May 1, 1999, and before July 1, 1999.


D. Extend the Deduction Provided for Contributions of Appreciated Stock 
to Private Foundations (sec. 104 of the bill and sec. 170(e)(5) of the 
                                 Code)

                              Present Law

       In computing taxable income, a taxpayer who itemizes 
     deductions generally is allowed to deduct the fair market 
     value of property contributed to a charitable 
     organization.\4\ However, in the case of a charitable 
     contribution of short-term gain, inventory, or other ordinary 
     income property, the amount of the deduction generally is 
     limited to the taxpayer's basis in the property. In the case 
     of a charitable contribution of tangible personal property, 
     the deduction is limited to the taxpayer's basis in such 
     property if the use by the recipient charitable organization 
     is unrelated to the organization's tax-exempt purpose.
       In cases involving contributions to a private foundation 
     (other than certain private operating foundations), the 
     amount of the deduction is limited to the taxpayer's basis in 
     the property. However, under a special rule contained in 
     section 170(e)(5), taxpayers are allowed a deduction equal to 
     the fair market value of ``qualified appreciated stock'' 
     contributed to a private foundation prior to July 1, 1998. 
     Qualified appreciated stock is defined as publicly traded 
     stock which is capital gain property. The fair-market-value 
     deduction for qualified appreciated stock donations applies 
     only to the extent that total donations made by the donor to 
     private foundations of stock in a particular corporation did 
     not exceed 10 percent of the outstanding stock of that 
     corporation. For this purpose, an individual is treated as 
     making all contributions that were made by any member of the 
     individual's family.

                        Description of Proposal

       The proposal extends the special rule contained in section 
     170(e)(5) for one year--for contributions of qualified 
     appreciated stock made to private foundations during the 
     period July 1, 1998, through June 30, 1999.

                             Effective Date

       The proposal is effective for contributions of qualified 
     appreciated stock to private

[[Page S12330]]

     foundations made during the period July 1, 1998, through June 
     30, 1999.


e. exceptions under subpart f for certain active financing income (sec. 
           105 of the bill and secs. 953 and 954 of the code)

                              Present Law

     In general
       Under the subpart F rules, certain U.S. shareholders of a 
     controlled foreign corporation (``CFC'') are subject to U.S. 
     tax currently on certain income earned by the CFC, whether or 
     not such income is distributed to the shareholders. The 
     income subject to current inclusion under the subpart F rules 
     includes, among other things, ``foreign personal holding 
     company income'' and insurance income. The U.S. 10-percent 
     shareholders of a CFC also are subject to current inclusion 
     with respect to their shares of the CFC's foreign base 
     company services income (i.e., income derived from services 
     performed for a related person outside the country in which 
     the CFC is organized).
       Foreign personal holding company income generally consists 
     of the following: (1) dividends, interest, royalties, rents 
     and annuities; (2) net gains from the sale or exchange of (a) 
     property that gives rise to the preceding types of income, 
     (b) property that does not give rise to income, and (c) 
     interests in trusts, partnerships, and REMICs; (3) net gains 
     from commodities transactions; (4) net gains from foreign 
     currency transactions; (5) income that is equivalent to 
     interest; (6) income from notional principal contracts; and 
     (7) payments in lieu of dividends.
       Insurance income subject to current inclusion under the 
     subpart F rules includes any income of a CFC attributable to 
     the issuing or reinsuring of any insurance or annuity 
     contract in connection with risks located in a country other 
     than the CFC's country of organization. Subpart F insurance 
     income also includes income attributable to an insurance 
     contract in connection with risks located within the CFC's 
     country of organization, as the result of an arrangement 
     under which another corporation receives a substantially 
     equal amount of consideration for insurance of other-country 
     risks. Investment income of a CFC that is allocable to any 
     insurance or annuity contract related to risks located 
     outside the CFC's country of organization is taxable as 
     subpart F insurance income (Prop. Treas. Reg. sec. 1.953-
     1(a)).
       Temporary exceptions from foreign personal holding company 
     income and foreign base company services income apply for 
     subpart F purposes for certain income that is derived in the 
     active conduct of a banking, financing, insurance, or similar 
     business.\5\ These exceptions (described below) are 
     applicable only for taxable years beginning in 1998.
     Income from the active conduct of a banking, financing, or 
         similar business
       A temporary exception from foreign personal holding company 
     income applies to income that is derived in the active 
     conduct of a banking, financing, or similar business by a CFC 
     that is predominantly engaged in the active conduct of such 
     business. For this purpose, income derived in the active 
     conduct of a banking, financing, or similar business 
     generally is determined under the principles applicable in 
     determining financial services income for foreign tax credit 
     limitation purposes. However, in the case of a corporation 
     that is engaged in the active conduct of a banking or 
     securities business, the income that is eligible for this 
     exception is determined under the principles applicable in 
     determining the income which is treated as nonpassive income 
     for purposes of the passive foreign investment company 
     provisions. In this regard, the income of a corporation 
     engaged in the active conduct of banking or securities 
     business that is eligible for this exception is the income 
     that is treated as nonpassive under the regulations proposed 
     under section 1296(b) (as in effect prior to the enactment of 
     the Taxpayer Relief Act of 1997). See Prop. Treas. Reg. secs. 
     1.1296-4 and 1.1296-6. The Secretary of the Treasury is 
     directed to prescribe regulations applying look-through 
     treatment in characterizing for this purpose dividends, 
     interest, income equivalent to interest, rents and royalties 
     from related persons.
       For purposes of the temporary exception, a corporation is 
     considered to be predominantly engaged in the active conduct 
     of banking, financing, or similar business if it is engaged 
     in the active conduct of a banking or securities business or 
     is a qualified bank affiliate or qualified securities 
     affiliate. In this regard, a corporation is considered to be 
     engaged in the active conduct of a banking or securities 
     business if the corporation would be treated as so engaged 
     under the regulations proposed under prior law section 
     1296(b) (as in effect prior to the enactment of the Taxpayer 
     Relief Act of 1997); qualified bank affiliates and qualified 
     securities affiliates are as determined under such proposed 
     regulations. See Prop. Treas. Reg. secs. 1.1296-4 and 1.1296-
     6.
       Alternatively, a corporation is considered to be engaged in 
     the active conduct of a banking, financing, or similar 
     business if more than 70 percent of its gross income is 
     derived from such business from transactions with unrelated 
     persons located within the country under the laws of which 
     the corporation is created or organized. For this purpose, 
     income derived by a qualified business unit (``QBU'') of a 
     corporation from transactions with unrelated persons located 
     in the country in which the QBU maintains its principal 
     office and conducts substantial business activity is treated 
     as derived by the corporation from transactions with 
     unrelated persons located within the country in which the 
     corporation is created or organized. A person other than a 
     natural person is considered to be located within the country 
     in which it maintains an office through which it engages in a 
     trade or business and by which the transaction is effected. A 
     natural person is treated as located within the country in 
     which such person is physically located when such person 
     enters into the transaction.
     Income from the active conduct of an insurance business
       A temporary exception from foreign personal holding company 
     income applies for certain investment income of a qualifying 
     insurance company with respect to risks located within the 
     CFC's country of creation or organization. These rules differ 
     from the rules of section 953 of the Code, which determines 
     the subpart F inclusions of a U.S. shareholder relating to 
     insurance income of a CFC. Such insurance income under 
     section 953 generally is computed in accordance with the 
     rules of subchapter L of the Code.
       A temporary exception applies for income (received from a 
     person other than a related person) from investments made by 
     a qualifying insurance company of its reserves or 80 percent 
     of its unearned premiums. For this purpose, in the case of 
     contracts regulated in the country in which sold as property, 
     casualty or health insurance contracts, unearned premiums and 
     reserves are defined as unearned premiums and reserves for 
     losses incurred determined using the methods and interest 
     rates that would be used if the qualifying insurance company 
     were subject to tax under subchapter L of the Code. Thus, for 
     this purposed, unearned premiums are determined in accordance 
     with section 832(b)(4), and reserves for losses incurred are 
     determined in accordance with section 832(b)(5) and 846 of 
     the Code (as well as any other rules applicable to a U.S. 
     property and casualty insurance company with respect to such 
     amounts).
       In the case of a contract regulated in the country in which 
     sold as a life insurance or annuity contract, the following 
     three alternative rules for determining reserves apply. Any 
     one of the three rules can be elected with respect to a 
     particular line of business.
       First, reserves for such contracts can be determined 
     generally under the rules applicable to domestic life 
     insurance companies under subchapter L of the Code, using the 
     methods there specified, but substituting for the interest 
     rates in Code section 807(d)(2)(B) an interest rate 
     determined for the country in which the qualifying insurance 
     company was created or organized, calculated in the same 
     manner as the mid-term applicable Federal interest rate 
     (``AFR``) (within the meaning of section 1274(d)).
       Second, the reserves for such contracts can be determined 
     using a preliminary term foreign reserve method, except that 
     the interest rate to be used is the interest rate determined 
     for the country in which the qualifying insurance company was 
     created or organized, calculated in the same manner as the 
     mid-term AFR. If a qualifying insurance company uses such a 
     preliminary term method with respect to contracts insuring 
     risks located in the country in which the company is created 
     or organized, then such method is the method that applies for 
     purposes of this election.
       Third, reserves for such contracts can be determined to be 
     equal to the net surrender value of the contract (as defined 
     in section 807(e)(1)(A).
       In no event can the reserve for any contract at any time 
     exceed the foreign statement reserve for the contract, 
     reduced by any catastrophe or deficiency reserve. This rule 
     applies whether the contract is regulated as a property, 
     casualty, health, life insurance, annuity or any other type 
     of contract.
       A temporary exception from foreign personal holding company 
     income also applies for income from investment of assets 
     equal to: (1) one-third of premiums earned during the taxable 
     year on insurance contracts regulated in the country in which 
     sold as property, casualty, or health insurance contracts; 
     and (2) the greater of 10 percent of reserves, or, in the 
     case of qualifying insurance company that is a startup 
     company, $10 million. For this purpose, a startup company is 
     a company (including any predecessor) that has not been 
     engaged in the active conduct of an insurance business for 
     more than 5 years. In general, the 5-year period commences 
     when the foreign company first is engaged in the active 
     conduct of an insurance business. If the foreign company was 
     formed before being acquired by the U.S. shareholder, the 5-
     year period commences when the acquired company first was 
     engaged in the active conduct of an insurance business. In 
     the event of the acquisition of a book of business from 
     another company through an assumption or indemnity 
     reinsurance transaction, the 5-year period commences when the 
     acquiring company first engaged in the active conduct of an 
     insurance business, except that if more than a substantial 
     part (e.g., 80 percent) of the business of the ceding company 
     is acquired, then the 5-year period commences when the ceding 
     company first engaged in the active conduct of an insurance 
     business. Reinsurance transactions among related persons may 
     not be used to multiply the number of 5-year periods.
       Under rules prescribed by the Secretary, income is 
     allocated to contracts as follows.

[[Page S12331]]

     In the case of contracts that are separate account-type 
     contracts (including variable contracts not meeting the 
     requirements of sec. 817), only the income specifically 
     allocable to such contracts are taken into account. In the 
     case of other contracts, income not specifically allocable is 
     allocated ratably among such contracts.
       A qualifying insurance company is defined as any entity 
     which: (1) is regulated as an insurance company under the 
     laws of the country in which it is incorporated; (2) derived 
     at least 50 percent of its net written premiums from the 
     insurance or reinsurance of risks situated within its country 
     of incorporation; and (3) is engaged in the active conduct of 
     an insurance business and would be subject to tax under 
     subchapter L if it were a domestic corporation.
       The temporary exceptions do not apply to investment income 
     (includable in the income of a U.S. shareholder of a CFC 
     pursuant to sec. 953) allocable to contracts that insure 
     related party risks or risks located in a country other than 
     the country in which the qualifying insurance company is 
     created or organized.
     Anti-abuse rule
       An anti-abuse rule applies for purposes of these temporary 
     exceptions. For purposes of applying these exceptions, items 
     with respect to a transaction or series of transactions are 
     disregarded if one of the principal purposes of the 
     transaction or transactions is to qualify income or gain for 
     these exceptions, including any change in the method of 
     computing reserves or any other transaction or transactions 
     one of the principal purposes of which is the acceleration or 
     deferral of any item in order to claim the benefits of these 
     exceptions.
     Foreign base company services income
       A temporary exception from foreign base company services 
     income applies for income derived from services performed in 
     connection with the active conduct of a banking, financing, 
     insurance or similar business by a CFC that is predominantly 
     engaged in the active conduct of such business or is a 
     qualifying insurance company.

                        Description of Proposal

       The proposal extends for one year the present-law temporary 
     exceptions from foreign personal holding company income and 
     foreign base company services income for income that is 
     derived in the active conduct of a banking, financing, 
     insurance or similar business.

                             Effective Date

       The proposal applies only to the first full taxable year of 
     a foreign corporation beginning in 1998 and to the taxable 
     year of such corporation immediately following such first 
     full taxable year, and to taxable years of U.S. shareholders 
     with or within which such taxable years of such foreign 
     corporation end. If a foreign corporation does not have such 
     a first full taxable year beginning in 1998, the proposal 
     applies only to the first taxable year of the foreign 
     corporation beginning in 1999, and to taxable years of U.S. 
     shareholders with or within which such taxable year of such 
     foreign corporation ends.


  f. extend placed in service date for certain nonconventional fuels 
       facilities (sec. 106 of the bill and sec. 29 of the Code)

                              Present Law

       Under present law, certain fuels produced from 
     ``nonconventional sources'' and sold to unrelated parties are 
     eligible for an inflation-adjusted income tax credit (equal 
     to $6.10 in 1997) per barrel of oil or British Thermal Unit 
     barrel oil equivalent. The credit is available for qualified 
     fuels produced through December 31, 2007, by coal or biomass 
     facilities placed in service before July 1, 1998, pursuant to 
     a binding written contract in effect before January 1, 1997.

                        Description of Proposal

       The proposal extends the placed in service date, but not 
     the binding contract date, for facilities producing 
     nonconventional fuels from coal and biomass through June 30, 
     1999.

                             Effective Date

       This proposal is effective on the date of enactment (i.e., 
     applies to facilities placed in service after June 30, 1998 
     and before July 1, 1999).


   g. disclosure of return information to department of education in 
connection with income contingent loans (sec. 107 of the bill and sec. 
                        6103(l)(13) of the Code)

                              Present Law

       Under section 6103(l)(13) of the Code, the Secretary of the 
     Treasury was authorized to disclose to the Department of 
     Education certain return information with respect to any 
     taxpayer who has received an ``applicable student loan.'' An 
     ``applicable student loan'' is any loan made under (1) part D 
     of title IV of the Higher Education Act of 1965 or (2) parts 
     B or E of title IV of the Higher Education Act of 1965 which 
     is in default and has been assigned to the Department of 
     Education, if the loan repayment amounts are based in whole 
     or in part on the taxpayer's income. The Secretary is 
     permitted to disclose only taxpayer identity information and 
     the adjusted gross income of the taxpayer. The Department of 
     Education may use the information only to establish the 
     appropriate income contingent repayment amount for an 
     applicable student loan.
       The disclosure authority under section 6103(l)(13) 
     terminated with respect to requests made after September 30, 
     1998.

                        Description of Proposal

       The provision reinstates the disclosure authority under 
     section 6103(l)(13) with respect to requests made after the 
     date of enactment and before October 1, 2004.

                             Effective Date

       The disclosure authority under section 6103(l)(13) applies 
     to requests made after the date of enactment and before 
     October 1, 2004.

                      Subtitle B--Trade Provisions


A. Extension of the Generalized System of Preferences (sec. 111 of the 
              bill and sec. 505 of the Trade Act of 1974)

                              Present Law

       Title V of the Trade Act of 1974, as amended, grants 
     authority to the President to provide duty-free treatment on 
     imports of certain articles from beneficiary developing 
     countries subject to certain conditions and limitations. To 
     qualify for GSP privileges, each beneficiary country is 
     subject to various mandatory and discretionary eligible 
     criteria. Import sensitive products are ineligible for GSP. 
     The GSP program, which is designed to promote development 
     through trade rather than traditional aid programs, expired 
     after June 30, 1998.

                        Description of Proposal

       The proposal reauthorizes the GSP program to terminate 
     after December 31, 1999. Refunds are authorized, upon request 
     of the importer, for duties paid between July 1, 1998, and 
     the date of enactment of the bill.

                             Effective Date

       The proposed is effective for duties paid on or after July 
     1, 1998, and before December 31, 1999.


 B. Extension of the Trade Adjustment Assistance Program (sec. 112 of 
            the bill and sec. 245 of the Trade Act of 1974)

                              Present Law

       Title II of the Trade Act of 1974, as amended, authorizes 
     three trade adjustment assistance (TAA) programs for the 
     purpose of providing assistance to individual workers and 
     firms that are adversely affected by the reduction of 
     barriers to foreign trade. Those programs include--
       (1) The general TAA program for workers provides training 
     and income support for workers adversely affected by import 
     competition.
       (2) The TAA program for firms provides technical assistance 
     by qualifying firms.
       (3) The third program, the North American Free Trade 
     Agreement (``NAFTA'') program for workers (established by the 
     North American Free Trade Agreement Implementation Act of 
     1993) provides training and income support for workers 
     adversely affected by trade with or production shifts to 
     Canada and/or Mexico.
       All three TAA programs expired on September 30, 1998. The 
     TAA program for firms is also subject to annual 
     appropriations.

                        Description of Proposal

       The proposal reauthorizes each of the three TAA programs 
     through June 30, 1999.

                             Effective Date

       The proposal is effective on the date of enactment.

                     Title II. Other Tax Provisions


 a. increase deduction for health insurance expenses of self-employed 
     individuals (sec. 201 of the bill and sec. 162(l) of the Code)

                              Present Law

       Under present law, self-employed individuals are entitled 
     to deduct a portion of the amount paid for health insurance 
     for the self-employed individual and the individual's spouse 
     and dependents. The deduction for health insurance expenses 
     of self-employed individuals is not available for any month 
     in which the taxpayer is eligible to participate in a 
     subsidized health plan maintained by the employer of the 
     taxpayer or the taxpayer's spouse. The deduction is available 
     in the case of self insurance as well as commercial 
     insurance. The self-insured plan must in fact be insurance 
     (e.g., there must be appropriate risk shifting) and not 
     merely a reimbursement arrangement.
       The portion of health insurance expenses of self-employed 
     individuals that is deductible is 45 percent for taxable 
     years beginning in 1998 and 1999, 50 percent for taxable 
     years beginning in 2000 and 2001, 60 percent for taxable 
     years beginning in 2002, 80 percent for taxable years 
     beginning in 2003, 2004, and 2005, 90 percent for taxable 
     years beginning in 2006, and 100 percent for taxable years 
     beginning in 2007 and thereafter.
       Under present law, employees can exclude from income 100 
     percent of employer-provided health insurance.

                        Description of Proposal

       The proposal increases the deduction for health insurance 
     of self-employed individuals to 70 percent for taxable years 
     beginning in 2001 and to 100 percent for taxable years 
     beginning in 2002 and thereafter.

                             Effective Date

       The proposal is effective for taxable years beginning after 
     December 31, 2000.


b. farm production flexibility contract payments (sec. 202 of the bill)

                              Present Law

       A taxpayer generally is required to include an item in 
     income no later than the time of its actual or constructive 
     receipt, unless such amount properly is accounted for in a 
     different period under the taxpayer's method of accounting. 
     If a taxpayer has an unrestricted right to demand the payment 
     of an amount, the taxpayer is in constructive receipt of that 
     amount whether or not the taxpayer makes the demand and 
     actually receives the payment.

[[Page S12332]]

       The Federal Agriculture Improvement and Reform Act of 1996 
     (the ``FAIR Act'') provides for production flexibility 
     contracts between certain eligible owners and producers and 
     the Secretary of Agriculture. These contracts generally cover 
     crop years from 1996 through 2002. Annual payments are made 
     under such contracts at specific times during the Federal 
     government's fiscal year. Section 112(d)(2) of the FAIR Act 
     provides that one-half of each annual payment is to be made 
     on either December 15 or January 15 of the fiscal year, at 
     the option of the recipient.\6\ This option to receive the 
     payment on December 15 potentially results in the 
     constructive receipt (and thus potential inclusion in income) 
     of one-half of the annual payment at that time, even if the 
     option to receive the amount on January 15 is elected.
       The remaining one-half of the annual payment must be made 
     no later than September 30 of the fiscal year. The Emergency 
     Farm Financial Relief Act of 1998 added section 112(d)(3) to 
     the FAIR Act which provides that all payments for fiscal year 
     1999 are to be paid at such time or times during fiscal year 
     1999 as the recipient may specify. Thus, the one-half of the 
     annual amount that would otherwise be required to be paid no 
     later than September 30, 1999 can be specified for payment in 
     calendar year 1998. This potentially results in the 
     constructive receipt (and thus required inclusion in taxable 
     income) of such amounts in calendar year 1998, whether or not 
     the amounts actually are received or the right to their 
     receipt is fixed.

                        Description of Proposal

       The time a production flexibility contract payment under 
     the FAIR Act properly is includable in income is determined 
     without regard to the options granted by section 112(d)(2) 
     (allowing receipt of one-half of the annual payment on either 
     December 15 or January 15 of the fiscal year) or section 
     112(d)(3) (allowing the acceleration of all payments for 
     fiscal year 1999) of that Act.

                             Effective Date

       The proposal is effective for production flexibility 
     contract payments made under the FAIR Act in taxable years 
     ending after December 31, 1995.


C. Permanent Extension of Income Averaging for Farmers (sec. 203 of the 
                    bill and sec. 1301 of the Code)

                              Present Law

       An individual engaged in a farming business may elect to 
     compute his or her current year tax liability by averaging, 
     over the prior three-year period, all or a portion of the 
     taxable income that is attributable to the farming business.
       In general, an individual who makes the election (1) 
     designates all or a portion of his or her taxable income 
     attributable to any farming business from the current year as 
     ``elected farm income;'' \7\ (2) allocates one-third of the 
     elected farm income to each of the three prior taxable years; 
     and (3) determines the current year section 1 tax liability 
     by combining (a) his or her current year section 1 tax 
     liability excluding the elected farm income allocated to the 
     three prior taxable years, plus (b) the increases in the 
     section 1 tax liability for each of the three prior taxable 
     years caused by including one-third of the elected farm 
     income in each such year. Any allocation of elected farm 
     income pursuant to the election applies for purposes of any 
     election in a subsequent taxable year.
       The provision does not apply for employment tax purposes, 
     or to an estate or a trust. The provision also does not apply 
     for purposes of the alternative minimum tax. The provision is 
     effective for taxable years beginning after December 31, 
     1997, and before January 1, 2001.

                        Description of Proposal

       The proposal permanently extends the income averaging 
     provision for farmers.

                             Effective Date

       The proposal is effective for taxable years beginning after 
     December 31, 2000.


D. Personal Credits Fully Allowed Against Regular Tax Liability During 
          1998 (sec. 204 of the bill and sec. 26 of the Code)

       Present law provides for certain nonrefundable personal tax 
     credits (i.e., the dependent care credit, the credit for the 
     elderly and disabled, the adoption credit, the child tax 
     credit, the credit for interest on certain home mortgages, 
     the HOPE Scholarship and Lifetime Learning credits, and the 
     D.C. homebuyer's credit). Generally, these credits are 
     allowed only to the extent that the individual's regular 
     income tax liability exceeds the individual's tentative 
     minimum tax (determined without regard to the AMT foreign tax 
     credit).
       The tentative minimum tax is an amount equal to (1) 26 
     percent of the first $175,000 ($87,500 in the case of a 
     married individual filing a separate return) of alternative 
     minimum taxable income (``AMTI'') in excess of a phased-out 
     exemption amount and (2) 28 percent of the remaining AMTI. 
     The maximum tax rates on net capital gain used in computing 
     the tentative minimum tax are the same as under the regular 
     tax. AMTI is the individual's taxable income adjusted to take 
     account of specified preferences and adjustments. The 
     exemption amounts are: (1) $45,000 in the case of married 
     individuals filing a joint return and surviving spouses; (2) 
     $33,750 in the case of other unmarried individuals; and (3) 
     $22,500 in the case of married individuals filing a separate 
     return, estates and trusts. The exemption amounts are phased 
     out by an amount equal to 25 percent of the amount by which 
     the individual's AMTI exceeds (1) $150,000 in the case of 
     married individuals filing a joint return and surviving 
     spouses, (2) $112,500 in the case of other unmarried 
     individuals, and (3) $75,000 in the case of married 
     individuals filing separate returns or an estate or a trust. 
     These amounts are not indexed for inflation.
       For families with three or more qualifying children, an 
     additional child credit is provided which may offset the 
     liability for social security taxes to the extent that tax 
     liability exceeds the amount of the earned income credit. The 
     additional child credit is reduced by the amount of the 
     individual's minimum tax liability (i.e., the amount by which 
     the tentative minimum tax exceeds the regular tax liability).

                        Description of Proposal

       The proposal allows the nonrefundable personal credits to 
     offset the individual's regular tax in full for taxable years 
     beginning in 1998 (as opposed to only the amount by which the 
     regular tax exceeds the tentative minimum tax, as under 
     present law).
       The provision of present law that reduces the additional 
     child credit by the amount of an individual's AMT will not 
     apply for taxable years beginning in 1998.

                             Effective Date

       The proposal is effective for taxable years beginning in 
     1998.

                  Title III. Revenue Offset Provision


    A. treatment of certain deductible liquidating distributions of 
regulated investment companies and real estate investment trusts (sec. 
           301 of the bill and secs. 332 and 334 of the code)

                              Present Law

       Regulated investment companies (``RICs'') and real estate 
     investment trusts (``REITs'') are allowed a deduction for 
     dividends paid to their shareholders. The deduction for 
     dividends paid includes amounts distributed in liquidation 
     which are properly chargeable to earnings and profits, as 
     well as, in the case of a complete liquidation occurring 
     within 24 months after the adoption of a plan of complete 
     liquidation, any distribution made pursuant to such plan to 
     the extent of earnings and profits. Rules that govern the 
     receipt of dividends from RICs and REITs generally provide 
     for including the amount of the dividend in the income of the 
     shareholder receiving the dividend that was deducted by the 
     RIC or REIT. Generally, any shareholder realizing gain from a 
     liquidating distribution of a RIC or REIT includes the amount 
     of gain in the shareholder's income. However, in the case of 
     a liquidating distribution to a corporation owning 80-percent 
     of the stock of the distributing corporation, a separate rule 
     generally provides that the distribution is tax-free to the 
     parent corporation. The parent corporation succeeds to the 
     tax attributes, including the adjusted basis of assets, of 
     the distributing corporation. Under these rules, a 
     liquidating RIC or REIT might be allowed a deduction for 
     amounts paid to its parent corporation, without a 
     corresponding inclusion in the income of the parent 
     corporation, resulting in income being subject to no tax.
       A RIC or REIT may designate a portion of a dividend as a 
     capital gain dividend to the extent the RIC or REIT itself 
     has a net capital gain, and a RIC may designate a portion of 
     the dividend paid to a corporate shareholder as eligible for 
     the 70-percent dividends-received deduction to the extent the 
     RIC itself received dividends from other corporations. If 
     certain conditions are satisfied, a RIC also is permitted to 
     pass through to its shareholders the tax-exempt character of 
     the RIC's net income from tax-exempt obligations through the 
     payment of ``exempt interest dividends,'' though no deduction 
     is allowed for such dividends.

                        Description of Proposal

       Any amount which a liquidating RIC or REIT may take as a 
     deduction for dividends paid with respect to an otherwise 
     tax-free liquidating distribution to an 80-percent corporate 
     owner is includible in the income of the recipient 
     corporation. The includible amount is treated as a dividend 
     received from the RIC or REIT. The liquidating corporation 
     may designate the amount distributed as a capital gain 
     dividend or, in the case of a RIC, a dividend eligible for 
     the 70-percent dividends received deduction or an exempt 
     interest dividend, to the extent provided by the RIC or REIT 
     provisions of the Code.
       The provision does not otherwise change the tax treatment 
     of the distribution to the parent corporation or to the RIC 
     or REIT. Thus, for example, the liquidating corporation will 
     not recognize gain (if any) on the liquidating distribution 
     and the recipient corporation will hold the assets at a 
     carryover basis, even where the amount received is treated as 
     a dividend.

                             Effective Date

       The provision is effective for distributions on or after 
     May 22, 1998, regardless of when the plan of liquidation was 
     adopted.
       No inference is intended regarding the treatment of such 
     transactions under present law.

                  Title IV. Tax Technical Corrections

       Except as otherwise provided, the technical corrections 
     contained in the bill generally are effective as if included 
     in the originally enacted related legislation.

[[Page S12333]]

                a. technical corrections to the 1998 act

     1. Burden of proof (sec. 402(b) of the bill, sec. 3001 of the 
         1998 Act, and sec. 7491(a)(2)(C) of the Code)

                              Present Law

       The Treasury Secretary has the burden of proof in any court 
     proceeding with respect to a factual issue if the taxpayer 
     introduces credible evidence with respect to any factual 
     issue relevant to ascertaining the taxpayer's tax liability, 
     provided specified conditions are satisfied (sec. 7491). One 
     of these conditions if that corporations, trust, and 
     partnerships must meet certain net worth limitations. These 
     net worth limitations do not apply to individuals or to 
     estates.

                        Description of Proposal

       The proposal removes that net worth limitation from certain 
     revocable trusts for the same period of time that the trust 
     would have been treated as part of the estate had the trust 
     made the election under section 645 to be treated as part of 
     the estate.
     2. Relief for innocent spouses (sec. 402(c) of the bill, sec. 
         3201 of the 1998 Act, and secs. 6015(e) and 7421(a) of 
         the Code)

                              Present Law

       A taxpayer who is no longer married to, is separated from, 
     or has been living apart for at least 12 months from the 
     person with whom he or she originally joined in filing a 
     joint Federal income tax return may elect to limit his or her 
     liability for a deficiency arising from such joint return to 
     the amount of the deficiency that is attributable to items 
     that are allocable to such electing spouse. The election is 
     limited to deficiency situations and only affects the amount 
     of the deficiency for which the electing spouse is liable. 
     Thus, the election cannot be used to generate a refund, to 
     direct a refund to one spouse or the other, or to allocate 
     responsibility for payment where a balance due is reported 
     on, but not paid with, a joint return.
       In addition to the election to limit the liability for 
     deficiencies, a taxpayer may be eligible for innocent spouse 
     relief. Innocent spouse relief allows certain taxpayers who 
     joined in the filing of a joint return to be relieved of 
     liability for an understatement of tax that is attributable 
     to items of the other spouse to the extent that the taxpayer 
     did not know or have reason to know of the understatement. 
     The Secretary is also authorized to provide equitable relief 
     in situations where, taking into account all of the facts and 
     circumstances, it is inequitable to hold an individual 
     responsible for all or part of any unpaid tax or deficiency 
     arising from a joint return. Under certain circumstances, it 
     is possible that a refund could be obtained under this 
     authority.

                        Description of Proposal

       The proposal clarifies that the ability to obtain a credit 
     or refund of Federal income tax is limited to situations 
     where the taxpayer qualifies for innocent spouse relief or 
     where the Secretary exercises his authority to provide 
     equitable relief.
     3. Interest netting (sec. 402(d) of the bill and sec. 
         3301(c)(2) of the 1998 Act)

                              Present Law

       Fro calendar quarters beginning after July 22, 1998, a net 
     interest rate of zero applies where interest is payable and 
     allowable on equivalent amounts of overpayment and 
     underpayment of any tax imposed by the Internet Revenue Code. 
     In addition, the net interest rate of zero applies to periods 
     on or before July 22, 1998, providing (1) the statute of 
     limitations has not expired with respect to either the 
     underpayment or overpayment, (2) the taxpayer identifies the 
     periods of underpayment and overpayment where interest is 
     payable and allowable for which the net interest rate of zero 
     would apply, and (3) on or before December 31, 1999, the 
     taxpayer asks the Secretary to apply the net zero rate.

                        Description of Proposal

       The proposal restores language originally included in the 
     Senate amendment that clarifies that the applicability of the 
     zero net interest rate for periods on or before July 22, 1998 
     is subject to any applicable statute of limitations not 
     having expired with regard to either a tax underpayment or 
     overpayment.
     4. Effective date for elimination of 18-month holding period 
         for capital gains (sec. 402(i) of the bill, sec. 5001 of 
         the 1998 Act, and sec. 1(h) of the Code)

                              Present Law

       The 1998 Act repealed the provision in the 1997 Act 
     providing a maximum 28-percent rate for the long-term capital 
     gain attributable to property held more than one year but not 
     more than 18 months. Instead, the 1998 Act treated this gain 
     in the same manner as gain from property held more than 18 
     months. The provision in the 1998 Act is effective for 
     amounts properly taken into account after December 31, 1997. 
     For gains taken into account by a pass-thru entity, such as a 
     partnership, S corporation, trust, estate, RCI or REIT, the 
     date that the entity properly took the gain into account is 
     the appropriate date in applying this provision. Thus, for 
     example, amounts properly taken into account by a pass-thru 
     entity after July 28, 1997, and before January 1, 1998, 
     with respect to property held more than one year but not 
     more than 18 months which are included in income on an 
     individual's 1998 return are taken into account in 
     computing 28-percent rate gain.

                        Description of Proposal

       Under the proposal, in the case of a capital gain dividend 
     made by a RIC or REIT after 1997, no amount will be taken 
     into account in computing the net gain or loss in the 28-
     percent rate gain category by reason of property being held 
     more than one year but not more than 18 months, other than 
     amounts taken into account by the RIC or REIT from other 
     pass-thru entities (other than in structures, such as a 
     ``master-feeder structure'', in which the RIC invests a 
     substantial portion of its assets in one or more partnerships 
     holding portfolio securities and having the same taxable year 
     as the RIC). A similar rule applies to amounts properly taken 
     into account by a RIC or REIT by reason of holding, directly 
     or indirectly, an interest in another RIC or REIT to which 
     the rule in the preceding sentence applies.
       For example, if a RIC sold stock held more than one year 
     but not more than 18 months on November 15, 1997, for a gain, 
     and makes a capital gain dividend in 1998, the gain is not 
     taken into account in computing 28-percent rate gain for 
     purposes of determining the taxation of the 1998 dividend. 
     (Thus, all the netting and computations made by the RIC need 
     to be redone with respect to all post-1997 capital gain 
     dividends, whether or not dividends of 28-percent rate gain.) 
     If, however, the gain was taken into account by a RIC by 
     reason of holding an interest in a calendar year 1997 
     partnership which itself sold the stock, the gain will not be 
     recharacterized by reason of this proposal (unless the RIC's 
     investment in the partnership satisfies the exception for 
     master-feeder structures). If the gain was taken into account 
     by a RIC by reason of holding an interest in a REIT and the 
     gain was excluded from 28-percent rate gain by reason of the 
     application of this proposal to the REIT, the gain will be 
     excluded from 28-percent rate gain in determining the tax of 
     the RIC shareholders.
       The proposal also corrects a cross reference.


                b. technical corrections to the 1997 act

     1. Treatment of interest on qualified education loans (sec. 
         403(a) of the bill, sec. 202 of the 1997 Act, and secs. 
         221 and 163(h) of the Code)

                              Present Law

       Present law, as modified by the 1997 Act, provides that 
     certain individuals who have paid interest on qualified 
     education loans may claim an above-the-line deduction for 
     such interest expense, up to a maximum dollar amount per year 
     ($1,000 for taxable years beginning in 1998), subject to 
     certain requirements (sec. 221). The maximum deduction is 
     phased out ratably for individual taxpayers with modified AGI 
     between $40,000 and $55,000 ($60,000 and $75,000 for joint 
     returns). Present law also provides that in the case of a 
     taxpayer other than a corporation, no deduction is allowed 
     for personal interest (sec. 163(h)). For this purpose, 
     personal interest means any interest allowable as a 
     deduction, other than certain types of interest listed in the 
     statute. This proposal does not specifically provide that 
     otherwise deductible qualified education loan interest is not 
     treated as personal interest.
       Present law provides that a qualified education loan does 
     not include any indebtedness owed to a person who is related 
     (within the meaning of sec. 267(b) or 707(b)) to the taxpayer 
     (sec. 221(e)(1)).

                        Description of Proposal

       The proposal clarifies that otherwise deductible qualified 
     education loan interest is not treated as nondeductible 
     personal interest.
       The proposal also clarifies that, for purposes of section 
     221, modified AGI is determined after application of section 
     135 (relating to income from certain U.S. savings bonds) and 
     section 137 (relating to adoption assistance programs).
       The proposal also provides that a qualified education loan 
     does not include any indebtedness owed to any person by 
     reason of a loan under any qualified employer plan (as 
     defined in section 72(p)(4)) or under any contract purchased 
     under a qualified employer plan (as described in sec. 
     72(p)(5)).
     2. Capital gain distributions of charitable remainder trusts 
         (secs. 402(i)(3) and 403(b) of the bill, sec. 311 of the 
         1997 Act and sec. 5001 of the 1998 Act, and sec. 1(h) of 
         the Code)

                              Present Law

       Under present law, the income beneficiary of a charitable 
     remainder trust (``CRT'') includes the trust's capital gain 
     in income when the gains are distributed to the beneficiary 
     (sec. 664(b)(2)). Internal Revenue Service Notice 98-20 
     provides guidance with respect to the categorization of 
     long-term gain distributions from a CRT under the capital 
     gain rules enacted by the 1997 Act. Under the Notice, 
     long-term capital gains properly taken into account by the 
     trust before January 1, 1997, are treated as falling in 
     the 20-percent group of gain (i.e., gain not in the 28-
     percent rate gain or unrecaptured sec. 1250 gain). Long-
     term capital gains properly taken into account by the 
     trust after December 31, 1996, and before May 7, 1997, are 
     included in 28-percent rate gain. Long-term capital gains 
     properly taken into account by the trust after May 6, 
     1997, are treated as falling into the category which would 
     apply if the trust itself were subject to tax.

                        Description of Proposal

       The proposal provides that, in the case of a capital gain 
     distribution by a CRT after December 31, 1997, with respect 
     to amounts

[[Page S12334]]

     properly taken into account by the trust during 1997, amounts 
     will not be included in the 28-percent rate gain category 
     solely by reason of being properly taken into account by the 
     trust before May 7, 1997, or by reason of the property being 
     held not more than 18 months. Thus, for example, gain on the 
     sale of stock by a CRT on February 1, 1997, will not be taken 
     into account in determining 28-percent rate gain where the 
     gain is distributed after 1997.\8\

                             Effective Date

       The proposal applies to taxable years beginning after 
     December 31, 1997.
     3. Gifts may not be revalued for estate tax purposes after 
         expiration of statute of limitations (sec. 403(c) of the 
         bill, sec. 504 of the 1997 Act, and sec. 2001(f)(2) of 
         the Code)

                              Present Law

       Basic structure of Federal estate and gift taxes.--The 
     Federal estate and gift taxes are unified so that a single 
     progressive rate schedule is applied to an individual's 
     cumulative gifts and bequests. The tax on gifts made in a 
     particular year is computed by determining the tax on the sum 
     of the taxable gifts made in that year and in all prior years 
     and then subtracting the tax on the prior years taxable gifts 
     and the unified credit. Similarly, the estate tax is computed 
     by determining the tax on the sum of the taxable estate and 
     prior taxable gifts and then subtracting the tax on taxable 
     gifts, the unified credit, and certain other credits.
       This structure raises two different, but related, issues: 
     (1) what is the period beyond which additional gift taxes 
     cannot be assessed or collected--generically referred to as 
     the ``period of limitations''--and (2) what is the period 
     beyond which the amount of prior transfers cannot be revalued 
     for the purpose of determining the amount of tax on 
     subsequent transfers.
       Gift and estate tax period of limitations.--Section 6501(a) 
     provides the general rule that any tax (including gift and 
     estate tax) must be assessed, or a proceeding begun in a 
     court for the collection of such tax without assessment, 
     within three years after the return is filed by the taxpayer. 
     Under section 6501(e)(2), the period for assessments of gift 
     or estate tax is increased to six years where there is more 
     than a 25 percent omission in the amount of the total gifts 
     or gross estate disclosed on the gift or estate tax return. 
     Section 6501(c)(9) provides an exception to these rules under 
     which gift tax may be assessed, or a proceeding in a court 
     for collection of gift tax may be begun, at any time unless 
     the gift is disclosed on a gift tax return or a statement 
     attached to a gift tax return.
       Revaluation of gifts for estate tax purposes.--The value of 
     a gift is its value as finally determined under the rules for 
     purposes of determining the applicable estate tax bracket and 
     available unified credit. The value of a gift is finally 
     determined if (1) the value of the gift is shown on a gift 
     tax return for that gift and that value is not contested by 
     the Treasury Secretary before the expiration of the period of 
     limitations on assessment of gift tax even where the value of 
     the gift as shown on the return does not result in any gift 
     tax being owned (e.g., through use of the unified credit), 
     (2) the value is specified by the Treasury Secretary pursuant 
     to a final notice of redetermination of value (a ``final 
     notice'') within the period of limitations applicable to the 
     gift for gift tax purposes (generally, three years) and the 
     taxpayer does not timely contest that value, or (3) the value 
     is determined by a court or pursuant of a settlement 
     agreement between the taxpayer and the Treasury Secretary 
     under an administrative appeals process whereby a taxpayer 
     can challenge a redetermination of value by the IRS prior to 
     issuance of a final notice. In the event the taxpayer and the 
     IRS cannot agree on the value of a gift, the 1997 Act 
     provided the U.S. Tax Court with jurisdiction to issue a 
     declaratory judgment on the value of a gift (section 7477). A 
     taxpayer who is mailed a final notice may challenge the 
     redetermined value of the gift (as contained in the final 
     notice) by filing a motion for a declaratory judgment with 
     the U.S. Tax Court. The motion must be filed on or before 90 
     days from the date that the final notice was mailed. The 
     statute of limitations is tolled during the pendency of the 
     Tax Court proceeding.
       Revaluation of gifts for gift tax purposes.--Similarly, 
     under a rule applicable to the computation of the gift tax 
     (sec. 2504(c)), the value of gifts made in prior years is its 
     value as finally determined if the period of limitations for 
     assessment of gift tax on the prior gifts has expired.

                        Description of Proposal

       The bill clarifies the rules relating to revaluations of 
     prior transfers for computation of the estate or gift tax to 
     provide that the value of a prior transfer cannot be 
     redetermined after the period of limitations if the transfer 
     was disclosed in a statement attached to the gift tax return, 
     as well as on a gift tax return, in a manner to adequately 
     apprise the Treasury Secretary of the nature the transfer, 
     even if there was no gift tax imposed on that transfer.
     4. Coordinate Vaccine Injury Compensation Trust Fund 
         expenditure purposes with list of taxable vaccines (sec. 
         403(d) of the bill, sec. 904 of the 1997 Act, and sec. 
         9510(c) of the Code)

                              Present Law

       A manufacturer's excise tax is imposed on certain vaccines 
     routinely recommended for administration to children (sec. 
     4131). The tax is imposed at a rate of $0.75 per dose on any 
     listed vaccine component. Taxable vaccine components are 
     vaccines against diphtheria, tetanus, pertussis, measles, 
     mumps, rubella, polio, HIB (haemophilus influenza type B), 
     hepatitis B, and varicella (chicken pox). Tax was imposed on 
     vaccines against diphtheria, tetanus, pertussis, measles, 
     mumps, rubella, and polio by the Omnibus Budget 
     Reconciliation Act of 1987. Tax was imposed on vaccines 
     against HIB, hepatitis B, and varicella by the 1997 Act.
       Amounts equal to net revenues from this excise tax are 
     deposited in the Vaccine Injury Compensation Trust Fund 
     (``Vaccine Trust Fund'') to finance compensation awards under 
     the Federal Vaccine Injury Compensation Program for 
     individuals who suffer certain injuries following 
     administration of the taxable vaccines. Present law provides 
     that payments from the Vaccine Trust Fund may be made only 
     for vaccines eligible under the program as of December 22, 
     1987 (sec. 9510(c)(1)). Thus, payments may not be made for 
     injuries related to the HIB, hepatitis B or varicella 
     vaccines.

                        Description of Proposal

       The proposal provides that payments are permitted from the 
     Vaccine Trust Fund for injuries related to the administration 
     of the HIB, hepatitis B, and varicella vaccines. The proposal 
     also clarifies that expenditures from the Vaccine Trust Fund 
     may occur only as provided in the Code and makes conforming 
     amendments.
     5. Abatement of interest by reason of Presidentially declared 
         disaster (sec. 403(e) of the bill, sec. 915 of the 1997 
         Act, and sec. 6404(h) of the Code)

                              Present Law

       The Taxpayer Relief Act of 1997 (``1997 Act'') provided 
     that, if the Secretary of the Treasury extends the filing 
     date of an individual tax return for 1997 for individuals 
     living in an area that has been declared a disaster area by 
     the President during 1997, no interest shall be charged as a 
     result of the failure of an individual taxpayer to file an 
     individual tax return, or pay the taxes shown on such return, 
     during the extension.
       The Internal Revenue Service Restructuring and Reform Act 
     of 1998 (``1998 Act'') contains a similar rule applicable to 
     all taxpayers for tax years beginning after 1997 for 
     disasters declared after 1997. The status of disasters 
     declared in 1998 but that relate to the 1997 tax year is 
     unclear.

                        Description of Proposal

       The proposal amends the 1997 Act rule so that it is 
     available for disasters declared in 1997 or in 1998 with 
     respect to the 1997 tax year.
     6. Treatment of certain corporate distributions (sec. 403(f) 
         of the bill, sec. 1012 of the 1997 Act, and secs. 351(c) 
         and 368(a)(2)(H) of the Code)

                              Present Law

       The 1997 Act (sec. 1012(a)) requires a distributing 
     corporation to recognize corporate level gain on the 
     distribution of stock of a controlled corporation under 
     section 355 of the Code if, pursuant to a plan or series of 
     related transactions, one or more persons acquire a 50-
     percent or greater interest (defined as 50 percent or more of 
     the voting power or value of the stock) of either the 
     distributing or controlled corporation (Code sec. 355(e)). 
     Certain transactions are excepted from the definition of 
     acquisition for this purpose. Under the technical corrections 
     included in the Internal Revenue Service Restructuring and 
     Reform Act of 1998, in the case of acquisitions under section 
     355(e)(3)(A)(iv), the acquisition of stock in the 
     distributing corporation or any controlled corporation is 
     disregarded to the extent that the percentage of stock owned 
     directly or indirectly in such corporation by each person 
     owning stock in such corporation immediately before the 
     acquisition does not decrease.\9\
       In the case of a 50-percent or more acquisition of either 
     the distributing corporation or the controlled corporation, 
     the amount of gain recognized is the amount that the 
     distributing corporation would have recognized had the stock 
     of the controlled corporation been sold for fair market value 
     on the date of the distribution. No adjustment to the basis 
     of the stock or assets of either corporation is allowed by 
     reason of the recognition of the gain.\10\
       The 1997 Act (as amended by the technical corrections 
     contained in the Internal Revenue Service Restructuring and 
     Reform Act of 1998) also modified certain rules for 
     determining control immediately after a distribution in the 
     case of certain divisive transactions in which a controlled 
     corporation is distributed and the transaction meets the 
     requirements of section 355. In such cases, under section 351 
     and modified section 368(a)(2)(H) with respect to 
     reorganizations under section 368(a)(1)(D), the fact that the 
     shareholders of the distributing corporation dispose of part 
     or all of the distributed stock shall not be taken into 
     account.
       The effective date (Act section 1012(d)(1)) states that the 
     relevant provisions of the 1997 Act apply to distributions 
     after April 16, 1997, pursuant to a plan (or series of 
     related transactions) which involves an acquisition occurring 
     after such date (unless certain transition provisions apply).

                        Description of Proposal

       The proposal clarifies the ``control immediately after'' 
     requirement of section 351(c) and section 368(a)(2)(H) in the 
     case of certain

[[Page S12335]]

     divisive transactions in which a corporation contributes 
     assets to a controlled corporation and then distributes the 
     stock of the controlled corporation in a transaction that 
     meets the requirements of section 355 (or so much of section 
     356 as related to section 355). In such cases, not only the 
     fact that the shareholders of the distributing corporation 
     dispose of part or all of the distributed stock, but also the 
     fact that the corporation whose stock was distributed issues 
     additional stock, shall not be taken into account.
     7. Treatment of affiliated group including formerly tax-
         exempt organization (sec. 403(g) of the bill and sec. 
         1042 of the 1997 Act)

                              Present Law

       Present law provides that an organization described in 
     sections 501(c) (3) or (4) of the Code is exempt from tax 
     only if no substantial part of its activities consists of 
     providing commercial-type insurance. When this rule was 
     enacted in 1986, certain treatment applied to Blue Cross and 
     Blue Shield organizations providing health insurance that 
     were submitted to this rule and that met certain 
     requirements. Treasury regulations were promulgated providing 
     rules for filing consolidated returns for affiliated groups 
     including such organizations (Treas. Reg. sec. 1.1502-
     75(d)(5)).
       The 1997 act repealed the grandfather rules provided in 
     1986 (permitting the retention of tax-exempt status) that 
     were applicable to that portion of the business of the 
     Teachers Insurance Annuity Association and College Retirement 
     Equities Fund which is attributable to pension business and 
     to the portion of the business of Mutual of America which is 
     attributable to pension business. The 1997 Act did not 
     specifically provide rules for filing consolidated returns 
     for affiliated groups including such organizations.
       Present law with respect to consolidated returns provides 
     for an election to treat a life insurance company as an 
     includable corporation, and also provides that a life 
     insurance company may not be treated as an includable 
     corporation for the 5 taxable years immediately preceding the 
     taxable year for which the consolidated return is filed (sec. 
     1504(c)(2)). Present law also provides that a corporation 
     that is exempt from taxation under Code section 501 is not an 
     includable corporation (sec. 1504(b)(1)).

                        Description of Proposal

       The proposal provides rules for filing consolidated returns 
     for affiliated groups including any organization with respect 
     to which the grandfather rule under Code section 501(m) was 
     repealed by section 1042 of the 1997 Act. The proposal 
     provides that rules similar to the rules of Treasury 
     Regulation section 1.1502-75(d)(5) apply in the case of such 
     an organization. Thus, an affiliated group including such an 
     organization may make the election described in section 
     1504(c)(2) (relating to a 5-year period) without regard to 
     whether the organization was previously exempt from tax under 
     Code section 501.
     8. Treatment of net operating losses arising from certain 
         eligible losses (sec. 403(h) of the bill, sec. 1082 of 
         the 1997 Act, and sec. 172(b)(1)(F) of the Code)

                              Present Law

       The 1997 Act changed the general net operating loss 
     (``NOL'') carryback period of a taxpayer from three years to 
     two years. The three-year carryback period was retained in 
     the case of an NOL attributable to an eligible loss. An 
     eligible loss is defined as (1) a casualty or theft loss of 
     an individual taxpayer, or (2) an NOL attributable to a 
     Presidentially declared disaster area by a taxpayer engaged 
     in a farming business or a small business. Other special 
     rules apply to real estate investment trusts (REITs) (no 
     carrybacks), specified liability losses (10-year carryback), 
     and excess interest losses (no carrybacks).

                        Description of Proposal

       The proposal coordinates the use of eligible losses with 
     the general rule for NOLs in the same manner as a loss 
     arising from a specified liability loss. Thus, an eligible 
     loss for any year is treated as a separate net operating loss 
     and is taken into account after the remaining portion of the 
     net operating loss for the taxable year.
     9. Determination of unborrowed policy cash value under COLI 
         pro rata interest disallowance rules (sec. 403(i) of the 
         bill, sec. 1084 of the 1997 Act, and sec. 246(f) of the 
         Code)

                              Present Law

       In the case of a taxpayer other than a natural person, no 
     deduction is allowed for the portion of the taxpayer's 
     interest expense that is allocable to unborrowed policy cash 
     surrender values with respect to any life insurance policy or 
     annuity or endowment contract issued after June 8, 1997. 
     Interest expense is allocable to unborrowed policy cash 
     values based on the ratio of (1) the taxpayer's average 
     unborrowed policy cash values of life insurance policies and 
     annuity and endowment contracts, issued after June 8, 1997, 
     to (2) the sum of (a) in the case of assets that are life 
     insurance policies or annuity or endowment contracts, the 
     average unborrowed policy cash values and (b) in the case of 
     other assets the average adjusted bases for all such other 
     assets of the taxpayer. The unborrowed policy cash values 
     means the cash surrender value of the policy or contract 
     determined without regard to any surrender charge, reduced by 
     the amount of any loan with respect to the policy or 
     contract. The cash surrender value is to be determined 
     without regard to any other contractual or noncontractual 
     arrangement that artificially depresses the unborrowed policy 
     cash value of a contract.

                        Description of Proposal

       The proposal clarifies the meaning of ``unborrowed policy 
     cash value'' under section 264(f)(3), with respect to any 
     life insurance, annuity or endowment contract. The technical 
     correction clarifies that under section 264(f)(3), if the 
     cash surrender value (determined without regard to any 
     surrender charges) with respect to any policy or contract 
     does not reasonably approximate its actual value, then the 
     amount taken into account for this purpose is the greater of 
     (1) the amount of the insurance company's liability with 
     respect to the policy or contract, as determined for purposes 
     of he annual statement approved by the National Association 
     of Insurance Commissioners, (2) the amount of the insurance 
     company's reserve with respect to the policy or contract for 
     purposes of such annual statement; or such other amount as is 
     determined by the Treasury Secretary. No inference is 
     intended that such amounts may not be taken into account in 
     determining the cash surrender value of a policy or contract 
     in such circumstances for purposes of any other provision of 
     the Code.
     10. Payment of taxes by commercially acceptable means (sec. 
         403(k) of the bill, sec. 1205 of the 1997 Act, and sec. 
         6311 (d)(2) of the Code)

                              Present Law

       The Code generally permits the payment of taxes by 
     commercially acceptable means (such as credit cards) (sec. 
     6311(d)). The Treasury Secretary may not pay any fee or 
     provide any other consideration in connection with this 
     provision. This fee prohibition may have an unintended impact 
     on Treasury contracts for the provision of services unrelated 
     to the payment of income taxes by commercially acceptable 
     means.

                        Description of Proposal

       The proposal clarifies that the prohibition on paying any 
     fees or providing any other consideration applies to the use 
     of credit, debit, or charge cards for the payment of income 
     taxes.


                C. Technical Corrections to the 1984 Act

     1. Casualty loss deduction (sec. 404 of the bill, sec. 711(c) 
         of the 1984 Act, and secs. 172(d)(4), 67(b)(3), 68(c)(3), 
         and 873(b) of the Code)

                              Present Law

       The Tax Reform Act of 1984 (``1984 Act'') deleted casualty 
     and theft losses from property connected with a nonbusiness 
     transaction entered into for profit from the list of losses 
     set forth in section 165(c)(3). This amendment was made in 
     order to provide that these losses were deductible in full 
     and not subject to the $100 per casualty limitation or the 
     10-percent adjusted gross income floor applicable to personal 
     casualty losses. However, the amendment inadvertently 
     eliminated the deduction for these losses from the 
     computation of the net operating loss. Also, the Tax Reform 
     Act of 1986 provided that casualty losses described in 
     section 165(c)(3) are not miscellaneous itemized deductions 
     subject to the 2-percent adjusted gross income floor, and the 
     Revenue Reconciliation Act of 1990 provided that these losses 
     are not treated as itemized deductions in computing the 
     overall limitation on itemized deductions. The losses of 
     nonresident aliens are limited to deductions described in 
     section 165(c)(3). Because of the change made by the 1984 
     Act, the reference to section 165(c)(3) does not include 
     casualty and theft losses from nonbusiness transActions 
     entered into for profit.

                        Description of Proposal

       The proposal provides that all deductions for nonbusiness 
     casualty and theft losses are taken into account in computing 
     the net operating loss. Also, these deductions are not 
     treated as miscellaneous itemized deductions subject to the 
     2-percent adjusted gross income floor, or as itemized 
     deductions subject to the overall limitation on itemized 
     deductions, and are allowed to nonresident aliens.

                            Effective Dates

       The proposal relating to the net operating loss and the 
     deduction for nonresident aliens applies to taxable years 
     beginning after December 31, 1983.
       The proposal relating to miscellaneous itemized deduction 
     applies taxable years beginning after December 31, 1986.
       The proposal relating to the overall limitation on itemized 
     deductions applies to taxable years beginning after December 
     31, 1990.


     D. DISCLOSURE OF TAX RETURN INFORMATION TO THE DEPARTMENT OF 
   AGRICULTURE (SEC. 405(A) OF THE BILL AND SEC. 6103(J) OF THE cODE)

                              Present Law

       Tax return information generally may not be disclosed, 
     except as specifically provided by statute. Disclosure is 
     permitted to the Bureau of the Census for specified purposes, 
     which included the responsibility of structuring, conducting, 
     and preparing the census of agriculture (sec. 6103(j)(1)). 
     The Census of Agriculture Act of 1997 (P.L. 105-113) 
     transferred this responsibility from the Bureau of the Census 
     to the Department of Agriculture.

                        Description of Proposal

       The proposal permits the continuation of disclosure of tax 
     return information for the

[[Page S12336]]

     purpose of structuring, conducting, and preparing the census 
     of agriculture by authorizing the Department of Agriculture 
     to receive this information.

                             Effective Date

       The proposal is effective on the date of enactment of this 
     technical correction.


e. technical corrections to the transportation equity act for the 21st 
   century (sec. 405(b) of the bill, sec. 9004 of the Act, and sec. 
                          9503(f) of the Code)

                              Present Law

       The Transportation Equity Act for the 21st Century 
     (``Transportation Equity Act'') (P.L. 105-178) extended the 
     Highway Trust Fund and accompanying highway excise taxes. The 
     Transportation Equity Act also changed the budgetary 
     treatment of Highway Trust Fund expenditures, including 
     repeal of a provision that balances maintained in the Highway 
     Trust Fund pending expenditure earn interest from the General 
     Fund of the Treasury.

                        Description of Proposal

       The proposal clarifies that the Secretary of the Treasury 
     is not required to invest Highway Trust Fund balances in 
     interest-bearing obligations (because any interest paid to 
     the Trust Fund by the General Fund would be immediately 
     returned to the General Fund).


   f. repeal of provisions relating to district of columbia judicial 
              retirement program (sec. 405(c) of the bill)

                              Present Law

       Section 804 of the Treasury and General Government 
     Appropriations Act, 1999, makes certain technical and 
     clarifying amendments to the Judicial Retirement Program of 
     the District of Columbia. Included in these amendments were 
     certain amendments that applied for purposes of the Internal 
     Revenue Code of 1986.

                        Description of Proposal

       Section 804 of the Treasury and General Government 
     Appropriations Act, 1999, is repealed.

                             Effective Date

       The proposal is effective on the date of enactment.


 g. perfecting amendments related to withholding from social security 
benefits and other federal payments (sec. 406 of the bill and secs. 201 
                  and 207 of the Social Security Act)

                              Present Law

       The Uruguay Round Agreements Act (P.L. 103-465) contained a 
     provision requiring that U.S. taxpayers who receive specified 
     Federal payments (including Social Security benefits) be 
     given the option of requesting that the Federal agency making 
     the payments withhold Federal income taxes from the payments.

                        Description of Proposal

       Due to a drafting oversight, the Uruguay Round Agreements 
     Act included only the necessary changes to the Internal 
     Revenue Code (``Code'') and failed to make certain conforming 
     changes to the Social Security Act (specifically a section 
     that prohibits assignments of benefits). The proposal amends 
     the Social Security Act anti-assignment section to allow the 
     Code provisions to be implemented. The proposal also 
     allocates funding for the Social Security Administration to 
     administer the tax-withholding provisions.

                             Effective Date

       The proposal applies to benefits paid on or after the first 
     day of the second month beginning after the month of 
     enactment.


                               FOOTNOTES

     \1\ This document may be cited as follows: Joint Committee on 
     Taxation, Description of Provisions in S. 2622, the Tax 
     Relief Extension Act of 1998 (JCX-70-98), October 10, 1998. 
     (References in this document to the ``1997 Act'' refer to the 
     Taxpayer Relief Act of 1997.)
     \2\ A special rule is designed to gradually recompute a 
     start-up firm's fixed-base percentage based on its actual 
     research experience. Under this special rule, a start-up firm 
     will be assigned a fixed-base percentage of 3 percent for 
     each of its first five taxable years after 1993 in which it 
     incurs qualified research expenditures. In the event that the 
     research credit is extended beyond the scheduled expiration 
     date, a start-up firm's fix-based percentage for its sixth 
     through tenth taxable years after 1993 in which it incurs 
     qualified research expenditures will be a phased-in ratio 
     based on its actual research experience. For all subsequent 
     taxable years, the taxpayer's fixed-based percentage will be 
     its actual ratio of qualified research expenditures to gross 
     receipts for any five years selected by the taxpayer from its 
     fifth through tenth taxable years after 1993 (sec. 
     41(c)(3)(B)).
     \3\ Under a special rule, 75 percent of amounts paid to a 
     research consortium for qualified research is treated as 
     qualified research expenses eligible for the research credit 
     (rather than 65 percent under the general rule under sec. 
     41(b)(3) governing contract research expenses) if (1) such 
     research consortium is a tax-exempt organization that is 
     described in section 501(c)(3) (other than a private 
     foundation) or section 501(c)(6) and is organized and 
     operated primarily to conduct scientific research, and (2) 
     such qualified research is conducted by the consortium on 
     behalf of the taxpayer and one or more persons not related to 
     the taxpayer.
     \4\ The amount of the deduction allowable for a taxable year 
     with respect to a charitable contribution may be reduced 
     depending on the type of property contributed, the type of 
     charitable organization to which the property is contributed, 
     and the income of the taxpayer (secs. 170(b) and 170(e)).
     \5\ The President canceled these exceptions in 1997 pursuant 
     to the Line Item Veto Act. On June 25, 1998, the U.S. Supreme 
     Court held that the cancellation procedures set forth in the 
     Line Item Veto Act are unconstitutional Clinton v. City of 
     New York, 118 S. Ct. 2091 (June 25, 1998).
     \6\ This rule applies to fiscal years after 1996. For fiscal 
     year 1996, this payment was to be made not later than 30 days 
     after the production flexibility contract was entered into.
     \7\ The amount of elected farm income of a taxpayer for a 
     taxable year may not exceed the taxable income attributable 
     to any farming business for the year.
     \8\ The bill contains a similar amendment to section 
     1(h)(13), as amended by section 5001 of the 1998 Act, to 
     provide that, for purposes of taxing the recipient of a 
     distribution made after 1997 by a CRT, amounts will not be 
     taken into account in computing 28-percent rate gain by 
     reason of being properly taken into account before May 7, 
     1997, or by reason of the property being held for not more 
     than 18 months. Thus, no amount distributed by a CRT after 
     1997 will be treated as in the 28-percent category (other 
     than by reason of the disposition of collectibles or small 
     business stock).
     \9\ This exception (as certain other exceptions) does not 
     apply if the stock held before the acquisition was acquired 
     pursuant to a plan (or series of related transactions) to 
     acquire a 50-percent or greater interest in the distributing 
     or a controlled corporation.
     \10\ The 1997 Act does not limit the otherwise applicable 
     Treasury regulatory authority under section 336(e) of the 
     Code. Nor does it limit the otherwise applicable provisions 
     of section 1367 with respect to the effect on shareholder 
     stock basis of gain recognized by an S corporation under this 
     provision.
                                  ____


                                                      ESTIMATED REVENUE EFFECTS OF S. 2626, THE ``TAX RELIEF EXTENSION RELIEF ACT OF 1998''
                                                                        [Fiscal years 1999-2007, in millions of dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                 Provision                              Effective                1999      2000     2001     2002     2003     2004     2005     2006     2007    1999-02    2003-07    1999-07
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
I. EXTENSION OF EXPIRING PROVISIONS:
 
Subtitle A. Expiring Tax Provisions:
    A. Extend the R&E Credit (through 6/30/ 7/1/98...........................    -1,126     -505     -258     -184      -94      -20  .......  .......  .......      2,073       -114     -2,187
     99).
    B. Extend the Work Opportunity Tax      wpoifibwa 6/30/98................      -191     -140      -73      -29      -10       -2  .......  .......  .......       -434        -11       -445
     Credit (through 6/30/99).
    C. Extend the Welfare-to-Work Tax       wpoifibwa 4/30/99................        -4      -10       -7       -3       -1  .......  .......  .......  .......        -24         -1        -25
     Credit (through 6/30/99).
    D. Extend Contributions of Appreciated  7/1/98...........................       -63      -13       -4  .......  .......  .......  .......  .......  .......         80  .........        -80
     Stock to Private Foundations (through
     6/30/99).
    E. 1-Year Extension of Exemption from   tybi 1999........................       -80     -180  .......  .......  .......  .......  .......  .......  .......       -260  .........       -260
     Subpart F for Active Financing Income.
    F. Extension of Placed-in-Service Date  DOE..............................        -7      -26      -27      -38      -39      -40      -41      -42      -43       -109       -207       -315
     For Certain Nonconventional Fuels
     Facilities (though 6/30/99).
    G. Extension of Tax Information         (\2\)............................                                               NEGLIGIBLE BUDGET EFFECT
     Reporting for Income Contingent
     Student Loan Program (through 9/30/
     04) \1\.
        Subtotal of Extension of Expiring   .................................    -1,471     -874     -379     -254     -144      -62      -41      -42      -43     -2,980       -333     -3,312
         Tax Provisions.
                                           =====================================================================================================================================================
SUBTITLE B. EXPIRING TRADE PROVISIONS:
 
    A. Extend the Generalized System of     dpo/a 7/1/98.....................      -393      -84  .......  .......  .......  .......  .......  .......  .......       -477  .........       -477
     Preferences (through 12/31/99/) \1\.
    B. Extend Trade Adjustment Assistance   DOE..............................       -34      -15       -1  .......  .......  .......  .......  .......  .......        -50  .........        -50
     (through 6/30/99)\1\.
                                           -----------------------------------------------------------------------------------------------------------------------------------------------------
        Subtotal of Extension of Expiring   .................................      -427      -99       -1        -        -        -        -        -        -       -527          -       -527
         Trade Provisions.
                                           =====================================================================================================================================================
II. OTHER TAX PROVISIONS
 
    A. Increase Deduction for Health        tyba 12/31/00....................  ........  .......     -163     -702     -959     -637     -680     -602     -257       -864     -3,134     -3,998
     Insurance Expenses of Self-Employed
     Individuals--70% in 2001 and 100% in
     2002 and thereafter.
    B. Production Flexibility Contract      tyea 12/31/95....................                                               NEGLIGIBLE BUDGET EFFECT
     Payments to Farmers Not Included in
     Income Prior to Receipt.
    C. Permanent Extension of Income        tyba 12/31/00....................  ........  .......       -2      -21      -22      -22      -23      -24      -24        -23       -115       -138
     Averaging for Farmers.
    D. Treatment of Nonrefundable Personal  tybi 1998........................      -474  .......  .......  .......  .......  .......  .......  .......  .......       -474  .........       -474
     Credits (child credit, adoption,
     credit, HOPE and Lifetime Learning
     credits, etc.) Under the Alternative
     Individual Minimum Tax (for 1998
     only).
                                           -----------------------------------------------------------------------------------------------------------------------------------------------------
        Subtotal of Other Tax Provisions..  .................................      -474  .......     -165     -723     -981     -659     -703     -626     -281     -1,361     -3,249     -4,610
                                           =====================================================================================================================================================
REVENUE OFFSET PROVISION
 
    A. Change the Treatment of Certain      dma 5/21/98......................     2,425    1,109      723      640      672      705      741      778      817      4,897      3,713      8,610
     Deductible Liquidating Distributions
     of RICs and REITs.

[[Page S12337]]

 
        Subtotal of Revenue Offset          .................................     2,425    1,109      723      640      672      705      741      778      817      4,897      3,713      8,610
         Provision.
V. TAX TECHNICAL CORRECTIONS PROVISIONS     .................................                                                  NO REVENUE EFFECT
        Net total.........................  .................................        53      136      178     -337     -453      -16       -3      110      493         29        131        161
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Estimate provided by the Congressional Budget Office.
\2\ Effective for requests made after the date of enactment and before 10/1/03.
NOTES: Details may not add to totals due to rounding. Legend for ``Effective'' column: dma = distributions made after; DOE = Date of enactment; dpo/a = duties paid on or after; tyba = taxable
  years beginning after; tybi = taxable years beginning in; tyea = taxable years ending after; wpoifibwa = wages paid or incurred for individuals beginning work after.
Prepared by Joint Committee on Taxation.

  Mr. MOYNIHAN. Mr. President, I am pleased to cosponsor, along with 
our esteemed Chairman, Senator Roth, a Senate Finance Committee bill to 
extend a package of expired tax provisions. Unfortunately, dealing with 
this group of expired tax items has become a routine annual event for 
the Committee and for the Congress. This bill extends universally 
popular items such as the credit for increasing research activities, 
the Work Opportunity Credit, and the deduction for gifts of appreciated 
stock to private foundations through June of next year. It is my hope 
that 1999 will be the year that the entire group of ``extenders'' are 
finally made permanent.
  We thank Senator Roth for ensuring that the Finance Committee is 
heard on this matter. Our action is a reminder that the United States 
Congress does not act, on tax bills or any other measures, as a 
unicameral legislature. Indeed, this Finance committee measure improves 
in several ways on the bill passed by the House Ways and Means 
Committee yesterday:
  First, we extend the Trade Assistance Program from October 1, 1998 
through June 30, 1999. This is an important program established in the 
Trade Expansion Act of 1962 that provides training and income support 
for workers adversely affected by import competition. It is a 
commitment we have made to workers, and it ought to be kept.
  Second, the bill includes a provision that prevents the tax benefit 
of nonrefundable personal credits such as the $500 per child credit and 
the adoption credit from being eroded by the Alternative Minimum Tax. 
This was to have been included as part of the Taxpayer Relief Act of 
1997, but was dropped for some unknown reason as part of the final 
compromise. Without the ``fix'' included in this bill, we will trap 
many unsuspecting taxpayers who sit down to prepare their 1998 Federal 
income tax returns next spring.
  I applaud the work of the chairman and the committee in moving 
quickly to agree on this bill and, for the greater good, deferring 
action on a number of very important narrower items until next year.
                                 ______