[Congressional Record Volume 145, Number 77 (Wednesday, May 26, 1999)]
[Senate]
[Pages S6061-S6066]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. ROTH:
  S. 1134. An original bill to amend the Internal Revenue Code of 1986 
to allow tax-free expenditures from education individual retirement 
accounts for elementary and secondary school expenses, to increase the 
maximum annual amount of contributions to such accounts, and for other 
purposes; from the Committee on Finance; placed on the calendar.


                    affordable education act of 1999

  Mr. ROTH. Mr. President, I ask unanimous consent that the text of the 
bill be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1134

         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 
     ``Affordable Education Act of 1999''.
         (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.--The table of contents for this 
     Act is as follows:

Sec. 1. Short title; amendment of 1986 Code; table of contents.

                 TITLE I--EDUCATION SAVINGS INCENTIVES

Sec. 101. Modifications to education individual retirement accounts.
Sec. 102. Modifications to qualified tuition programs.

                    TITLE II--EDUCATIONAL ASSISTANCE

Sec. 201. Extension of exclusion for employer-provided educational 
              assistance.
Sec. 202. Elimination of 60-month limit on student loan interest 
              deduction.
Sec. 203. Exclusion of certain amounts received under the National 
              Public Health Service Corps Scholarship Program and the 
              F. Edward Hebert Armed Forces Health Professions 
              Scholarship and Financial Assistance Program.

  TITLE III--LIBERALIZATION OF TAX-EXEMPT FINANCING RULES FOR PUBLIC 
                          SCHOOL CONSTRUCTION

Sec. 301. Additional increase in arbitrage rebate exception for 
              governmental bonds used to finance educational 
              facilities.
Sec. 302. Treatment of qualified public educational facility bonds as 
              exempt facility bonds.
Sec. 303. Federal guarantee of school construction bonds by Federal 
              Housing Finance Board.

                      TITLE IV--REVENUE PROVISIONS

Sec. 401. Modification to foreign tax credit carryback and carryover 
              periods.
Sec. 402. Limitation on use of non-accrual experience method of 
              accounting.
Sec. 403. Returns relating to cancellations of indebtedness by 
              organizations lending money.
Sec. 404. Extension of Internal Revenue Service user fees.
Sec. 405. Property subject to a liability treated in same manner as 
              assumption of liability.
Sec. 406. Charitable split-dollar life insurance, annuity, and 
              endowment contracts.
Sec. 407. Transfer of excess defined benefit plan assets for retiree 
              health benefits.
Sec. 408. Limitations on welfare benefit funds of 10 or more employer 
              plans.
Sec. 409. Modification of installment method and repeal of installment 
              method for accrual method taxpayers.
Sec. 410. Inclusion of certain vaccines against streptococcus 
              pneumoniae to list of taxable vaccines.
                 TITLE I--EDUCATION SAVINGS INCENTIVES

     SEC. 101. MODIFICATIONS TO EDUCATION INDIVIDUAL RETIREMENT 
                   ACCOUNTS.

         (a) Maximum Annual Contributions.--
         (1) In general.--Section 530(b)(1)(A)(iii) (defining 
     education individual retirement account) is amended by 
     striking ``$500'' and inserting ``the contribution limit for 
     such taxable year''.
         (2) Contribution limit.--Section 530(b) (relating to 
     definitions and special rules) is amended by adding at the 
     end the following new paragraph:
         ``(4) Contribution limit.--The term `contribution limit' 
     means $500 ($2,000 in the case of any taxable year beginning 
     after December 31, 1999, and ending before January 1, 
     2004).''
         (3) Conforming amendment.--Section 4973(e)(1)(A) is 
     amended by striking ``$500'' and inserting ``the contribution 
     limit (as defined in section 530(b)(4)) for such taxable 
     year''.
         (b) Tax-Free Expenditures for Elementary and Secondary 
     School Expenses.--
         (1) In general.--Section 530(b)(2) (defining qualified 
     higher education expenses) is amended to read as follows:
         ``(2) Qualified education expenses.--
         ``(A) In general.--The term `qualified education 
     expenses' means--
         ``(i) qualified higher education expenses (as defined in 
     section 529(e)(3)), and
         ``(ii) qualified elementary and secondary education 
     expenses (as defined in paragraph (5)).
     Such expenses shall be reduced as provided in section 
     25A(g)(2).
         ``(B) Qualified state tuition programs.--Such term shall 
     include any contribution to a qualified State tuition program 
     (as defined in section 529(b)) on behalf of the designated 
     beneficiary (as defined in section 529(e)(1)); but there 
     shall be no increase in the investment in the contract for 
     purposes of applying section 72 by reason of any portion of 
     such contribution which is not includible in gross income by 
     reason of subsection (d)(2).''
         (2) Qualified elementary and secondary education 
     expenses.--Section 530(b) (relating to definitions and 
     special rules), as amended by subsection (a)(2), is amended 
     by adding at the end the following new paragraph:
         ``(5) Qualified elementary and secondary education 
     expenses.--
         ``(A) In general.--The term `qualified elementary and 
     secondary education expenses' means--
         ``(i) expenses for tuition, fees, academic tutoring, 
     special needs services, books, supplies, computer equipment 
     (including related software and services), and other 
     equipment which are incurred in connection with the 
     enrollment or attendance of the designated beneficiary of the 
     trust as an elementary or secondary school student at a 
     public, private, or religious school, and
         ``(ii) expenses for room and board, uniforms, 
     transportation, and supplementary items and services 
     (including extended day programs) which are required or 
     provided by a public, private, or religious school in 
     connection with such enrollment or attendance.
         ``(B) Special rule for homeschooling.--Such term shall 
     include expenses described in subparagraph (A)(i) in 
     connection with education provided by homeschooling if the 
     requirements of any applicable State or local law are met 
     with respect to such education.
         ``(C) School.--The term `school' means any school which 
     provides elementary education or secondary education 
     (kindergarten through grade 12), as determined under State 
     law.''
         (3) Special rules for applying exclusion to elementary 
     and secondary expenses.--Section 530(d)(2) (relating to 
     distributions for qualified higher education expenses) is 
     amended by adding at the end the following new subparagraph:
         ``(E) Special rules for elementary and secondary 
     expenses.--

[[Page S6062]]

         ``(i) In general.--The aggregate amount of qualified 
     elementary and secondary education expenses taken into 
     account for purposes of this paragraph with respect to any 
     education individual retirement account for all taxable years 
     shall not exceed the sum of the aggregate contributions to 
     such account for taxable years beginning after December 31, 
     1999, and before January 1, 2004, and earnings on such 
     contributions.
         ``(ii) Special operating rules.--For purposes of clause 
     (i)--

         ``(I) the trustee of an education individual retirement 
     account shall keep separate accounts with respect to 
     contributions and earnings described in clause (i), and
         ``(II) if there are distributions in excess of qualified 
     elementary and secondary education expenses for any taxable 
     year, such excess distributions shall be allocated first to 
     contributions and earnings not described in clause (i).''

         (4) Conforming amendments.--Section 530 is amended--
         (A) by striking ``higher'' each place it appears in 
     subsections (b)(1) and (d)(2), and
         (B) by striking ``higher'' in the heading for subsection 
     (d)(2).
         (c) Waiver of Age Limitations for Children With Special 
     Needs.--Section 530(b)(1) (defining education individual 
     retirement account) is amended by adding at the end the 
     following flush sentence:
       ``The age limitations in the preceding sentence and 
     paragraphs (5) and (6) of subsection (d) shall not apply to 
     any designated beneficiary with special needs (as determined 
     under regulations prescribed by the Secretary).''
         (d) Entities Permitted To Contribute to Accounts.--
     Section 530(c)(1) (relating to reduction in permitted 
     contributions based on adjusted gross income) is amended by 
     striking ``The maximum amount which a contributor'' and 
     inserting ``In the case of a contributor who is an 
     individual, the maximum amount the contributor''.
         (e) Time When Contributions Deemed Made.--
         (1) In general.--Section 530(b) (relating to definitions 
     and special rules), as amended by subsection (b)(2), is 
     amended by adding at the end the following new paragraph:
         ``(6) Time when contributions deemed made.--An individual 
     shall be deemed to have made a contribution to an education 
     individual retirement account on the last day of the 
     preceding taxable year if the contribution is made on account 
     of such taxable year and is made not later than the time 
     prescribed by law for filing the return for such taxable year 
     (not including extensions thereof).''
         (2) Extension of time to return excess contributions.--
     Subparagraph (C) of section 530(d)(4) (relating to additional 
     tax for distributions not used for educational expenses) is 
     amended--
         (A) by striking clause (i) and inserting the following 
     new clause:
         ``(i) such distribution is made before the 1st day of the 
     6th month of the taxable year following the taxable year, 
     and'', and
         (B) by striking ``due date of return'' in the heading and 
     inserting ``june''.
         (f) Coordination With Hope and Lifetime Learning Credits 
     and Qualified Tuition Programs.--
         (1) In general.--Section 530(d)(2)(C) is amended to read 
     as follows:
         ``(C) Coordination with hope and lifetime learning 
     credits and qualified tuition programs.--
         ``(i) Credit coordination.--

         ``(I) In general.--Except as provided in subclause (II), 
     subparagraph (A) shall not apply for any taxable year to any 
     qualified higher education expenses with respect to any 
     individual if a credit is allowed under section 25A with 
     respect to such expenses for such taxable year.
         ``(II) Special coordination rule.--In the case of any 
     taxable year beginning after December 31, 1999, and before 
     January 1, 2004, subclause (I) shall not apply, but the total 
     amount of qualified higher education expenses otherwise taken 
     into account under subparagraph (A) with respect to an 
     individual for such taxable year shall be reduced (after the 
     application of the reduction provided in section 25A(g)(2)) 
     by the amount of such expenses which were taken into account 
     in determining the credit allowed to the taxpayer or any 
     other person under section 25A with respect to such expenses.

         ``(ii) Coordination with qualified tuition programs.--If 
     the aggregate distributions to which subparagraph (A) and 
     section 529(c)(3)(B) apply exceed the total amount of 
     qualified higher education expenses otherwise taken into 
     account under subparagraph (A) (after the application of 
     clause (i)) with respect to an individual for any taxable 
     year, the taxpayer shall allocate such expenses among such 
     distributions for purposes of determining the amount of the 
     exclusion under subparagraph (A) and section 529(c)(3)(B).''
         (2) Conforming amendments.--
         (A) Subsection (e) of section 25A is amended to read as 
     follows:
         ``(e) Election Not To Have Section Apply.--A taxpayer may 
     elect not to have this section apply with respect to the 
     qualified tuition and related expenses of an individual for 
     any taxable year.''
         (B) Section 135(d)(2)(A) is amended by striking 
     ``allowable'' and inserting ``allowed''.
         (C) Section 530(b)(2)(A) is amended by striking ``, 
     reduced as provided in section 25A(g)(2)''.
         (D) Section 530(d)(2)(D) is amended--
         (i) by striking ``or credit'', and
         (ii) by striking ``credit or'' in the heading.
         (E) Section 4973(e)(1) is amended by adding ``and'' at 
     the end of subparagraph (A), by striking subparagraph (B), 
     and by redesignating subparagraph (C) as subparagraph (B).
         (g) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.

     SEC. 102. MODIFICATIONS TO QUALIFIED TUITION PROGRAMS.

         (a) Eligible Educational Institutions Permitted To 
     Maintain Qualified Tuition Programs.--
       (1) In general.--Section 529(b)(1) (defining qualified 
     State tuition program) is amended by inserting ``or by 1 or 
     more eligible educational institutions'' after ``maintained 
     by a State or agency or instrumentality thereof ''.
         (2) Private qualified tuition programs limited to benefit 
     plans.--Clause (ii) of section 529(b)(1)(A) is amended by 
     inserting ``in the case of a program established and 
     maintained by a State or agency or instrumentality thereof,'' 
     before ``may make''.
         (3) Conforming amendments.--
         (A) Sections 72(e)(9), 135(c)(2)(C), 135(d)(1)(D), 529, 
     530(b)(2)(B), 4973(e), and 6693(a)(2)(C) are each amended by 
     striking ``qualified State tuition'' each place it appears 
     and inserting ``qualified tuition''.
         (B) The headings for sections 72(e)(9) and 135(c)(2)(C) 
     are each amended by striking ``qualified state tuition'' and 
     inserting ``qualified tuition''.
         (C) The headings for sections 529(b) and 530(b)(2)(B) are 
     each amended by striking ``Qualified state tuition'' and 
     inserting ``Qualified tuition''.
         (D) The heading for section 529 is amended by striking 
     ``state''.
         (E) The item relating to section 529 in the table of 
     sections for part VIII of subchapter F of chapter 1 is 
     amended by striking ``State''.
         (b) Exclusion From Gross Income of Education 
     Distributions From Qualified Tuition Programs.--
         (1) In general.--Section 529(c)(3)(B) (relating to 
     distributions) is amended to read as follows:
         ``(B) Distributions for qualified higher education 
     expenses.--
         ``(i) In general.--For purposes of this paragraph--

         ``(I) no amount shall be includible in gross income under 
     subparagraph (A) by reason of a distribution which consists 
     of providing a benefit to the distributee which, if paid for 
     by the distributee, would constitute payment of a qualified 
     higher education expense, and
         ``(II) the amount which (determined without regard to 
     subclause (I)) would be includible in gross income under 
     subparagraph (A) by reason of any other distribution shall 
     not be so includible in an amount which bears the same ratio 
     to the amount which would be so includible as the qualified 
     higher education expenses bear to such aggregate 
     distributions.

         ``(ii) Nonapplication of clause.--In the case of any 
     taxable year beginning before January 1, 2004, clause (i) 
     shall not apply with respect to any distribution in such 
     taxable year under a qualified tuition program established 
     and maintained by 1 or more eligible educational 
     institutions.
         ``(iii) In-kind distributions.--Any benefit furnished to 
     a designated beneficiary under a qualified tuition program 
     shall be treated as a distribution to the beneficiary for 
     purposes of this paragraph.
         ``(iv) Coordination with hope and lifetime learning 
     credits.--

         ``(I) In general.--Except as provided in subclause (II), 
     clause (i) shall not apply for any taxable year to any 
     qualified higher education expenses with respect to any 
     individual if a credit is allowed under section 25A with 
     respect to such expenses for such taxable year.
         ``(II) Special coordination rule.--In the case of any 
     taxable year beginning after December 31, 1999, and before 
     January 1, 2004, subclause (I) shall not apply, but the total 
     amount of qualified higher education expenses otherwise taken 
     into account under clause (i) with respect to an individual 
     for such taxable year shall be reduced (after the application 
     of the reduction provided in section 25A(g)(2)) by the amount 
     of such expenses which were taken into account in determining 
     the credit allowed to the taxpayer or any other person under 
     section 25A with respect to such expenses.

         ``(v) Coordination with education iras.--If the aggregate 
     distributions to which clause (i) and section 530(d)(2)(A) 
     apply exceed the total amount of qualified higher education 
     expenses otherwise taken into account under clause (i) (after 
     the application of clause (iv)) with respect to an individual 
     for any taxable year, the taxpayer shall allocate such 
     expenses among such distributions for purposes of determining 
     the amount of the exclusion under clause (i) and section 
     530(d)(2)(A).''
         (2) Conforming amendments.--
         (A) Section 135(d)(2)(B) is amended by striking ``section 
     530(d)(2)'' and inserting ``sections 529(c)(3)(B)(i) and 
     530(d)(2)''.
         (B) Section 221(e)(2)(A) is amended by inserting ``529,'' 
     after ``135,''.
         (c) Beneficiary May Change Program.--Section 529(c)(3)(C) 
     (relating to change in beneficiaries) is amended--
         (1) by striking ``transferred to the credit'' in clause 
     (i) and inserting ``transferred--

[[Page S6063]]

         ``(I) to another qualified tuition program for the 
     benefit of the designated beneficiary, or
         ``(II) to the credit'',

         (2) by adding at the end the following new clause:
         ``(iii) Limitation on certain rollovers.--Clause (i)(I) 
     shall only apply to the first 3 transfers with respect to a 
     designated beneficiary.'', and
         (3) by inserting ``or programs'' after ``beneficiaries'' 
     in the heading.
         (d) Member of Family Includes First Cousin.--Section 
     529(e)(2) (defining member of family) is amended by striking 
     ``and'' at the end of subparagraph (B), by striking the 
     period at the end of subparagraph (C) and by inserting ``; 
     and'', and by adding at the end the following new 
     subparagraph:
         ``(D) any first cousin of such beneficiary.''
         (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.
                    TITLE II--EDUCATIONAL ASSISTANCE

     SEC. 201. EXTENSION OF EXCLUSION FOR EMPLOYER-PROVIDED 
                   EDUCATIONAL ASSISTANCE.

         (a) In General.--Section 127(d) (relating to termination 
     of exclusion for educational assistance programs) is amended 
     by striking ``May 31, 2000'' and inserting ``June 30, 2004''.
         (b) Repeal of Limitation on Graduate Education.--
         (1) In general.--The last sentence of section 127(c)(1) 
     is amended by striking ``, and such term also does not 
     include any payment for, or the provision of any benefits 
     with respect to, any graduate level course of a kind normally 
     taken by an individual pursuing a program leading to a law, 
     business, medical, or other advanced academic or professional 
     degree''.
         (2) Effective date.--The amendment made by paragraph (1) 
     shall apply with respect to expenses relating to courses 
     beginning after December 31, 1999.

     SEC. 202. ELIMINATION OF 60-MONTH LIMIT ON STUDENT LOAN 
                   INTEREST DEDUCTION.

         (a) In General.--Section 221 (relating to interest on 
     education loans) is amended by striking subsection (d) and by 
     redesignating subsections (e), (f), and (g) as subsections 
     (d), (e), and (f), respectively.
         (b) Conforming Amendment.--Section 6050S(e) is amended by 
     striking ``section 221(e)(1)'' and inserting ``section 
     221(d)(1)''.
         (c) Effective Date.--The amendments made by this section 
     shall apply with respect to any loan interest paid after 
     December 31, 1999.

     SEC. 203. EXCLUSION OF CERTAIN AMOUNTS RECEIVED UNDER THE 
                   NATIONAL PUBLIC HEALTH SERVICE CORPS 
                   SCHOLARSHIP PROGRAM AND THE F. EDWARD HEBERT 
                   ARMED FORCES HEALTH PROFESSIONS SCHOLARSHIP AND 
                   FINANCIAL ASSISTANCE PROGRAM.

         (a) In General.--Section 117(c) (relating to the 
     exclusion from gross income amounts received as a qualified 
     scholarship) is amended--
         (1) by striking ``Subsections (a)'' and inserting the 
     following:
         ``(1) In general.--Except as provided in paragraph (2), 
     subsections (a)'', and
         (2) by adding at the end the following new paragraph:
         ``(2) Exceptions.--Paragraph (1) shall not apply to any 
     amount received by an individual under--
         ``(A) the National Public Health Service Corps 
     Scholarship Program under section 338A(g)(1)(A) of the Public 
     Health Service Act, or
         ``(B) the Armed Forces Health Professions Scholarship and 
     Financial Assistance program under subchapter I of chapter 
     105 of title 10, United States Code.''
         (b) Effective Date.--The amendments made by subsection 
     (a) shall apply to amounts received in taxable years 
     beginning after December 31, 1993.
  TITLE III--LIBERALIZATION OF TAX-EXEMPT FINANCING RULES FOR PUBLIC 
                          SCHOOL CONSTRUCTION

     SEC. 301. ADDITIONAL INCREASE IN ARBITRAGE REBATE EXCEPTION 
                   FOR GOVERNMENTAL BONDS USED TO FINANCE 
                   EDUCATIONAL FACILITIES.

         (a) In General.--Section 148(f)(4)(D)(vii) (relating to 
     increase in exception for bonds financing public school 
     capital expenditures) is amended by striking ``$5,000,000'' 
     the second place it appears and inserting ``$10,000,000''.
         (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to obligations issued in calendar years beginning 
     after December 31, 1999.

     SEC. 302. TREATMENT OF QUALIFIED PUBLIC EDUCATIONAL FACILITY 
                   BONDS AS EXEMPT FACILITY BONDS.

         (a) Treatment as Exempt Facility Bond.--Subsection (a) of 
     section 142 (relating to exempt facility bond) is amended by 
     striking ``or'' at the end of paragraph (11), by striking the 
     period at the end of paragraph (12) and inserting ``, or'', 
     and by adding at the end the following new paragraph:
         ``(13) qualified public educational facilities.''
         (b) Qualified Public Educational Facilities.--Section 142 
     (relating to exempt facility bond) is amended by adding at 
     the end the following new subsection:
         ``(k) Qualified Public Educational Facilities.--
         ``(1) In general.--For purposes of subsection (a)(13), 
     the term `qualified public educational facility' means any 
     school facility which is--
         ``(A) part of a public elementary school or a public 
     secondary school, and
         ``(B) owned by a private, for-profit corporation pursuant 
     to a public-private partnership agreement with a State or 
     local educational agency described in paragraph (2).
         ``(2) Public-private partnership agreement described.--A 
     public-private partnership agreement is described in this 
     paragraph if it is an agreement--
         ``(A) under which the corporation agrees--
         ``(i) to do 1 or more of the following: construct, 
     rehabilitate, refurbish, or equip a school facility, and
         ``(ii) at the end of the term of the agreement, to 
     transfer the school facility to such agency for no additional 
     consideration, and
         ``(B) the term of which does not exceed the term of the 
     issue to be used to provide the school facility.
         ``(3) School facility.--For purposes of this subsection, 
     the term `school facility' means--
         ``(A) school buildings,
         ``(B) functionally related and subordinate facilities and 
     land with respect to such buildings, including any stadium or 
     other facility primarily used for school events, and
         ``(C) any property, to which section 168 applies (or 
     would apply but for section 179), for use in the facility.
         ``(4) Public schools.--For purposes of this subsection, 
     the terms `elementary school' and `secondary school' have the 
     meanings given such terms by section 14101 of the Elementary 
     and Secondary Education Act of 1965 (20 U.S.C. 8801), as in 
     effect on the date of the enactment of this subsection.
         ``(5) Annual aggregate face amount of tax-exempt 
     financing.--
         ``(A) In general.--An issue shall not be treated as an 
     issue described in subsection (a)(13) if the aggregate face 
     amount of bonds issued by the State pursuant thereto (when 
     added to the aggregate face amount of bonds previously so 
     issued during the calendar year) exceeds an amount equal to 
     the greater of--
         ``(i) $10 multiplied by the State population, or
         ``(ii) $5,000,000.
         ``(B) Allocation rules.--
         ``(i) In general.--Except as otherwise provided in this 
     subparagraph, the State may allocate the amount described in 
     subparagraph (A) for any calendar year in such manner as the 
     State determines appropriate.
         ``(ii) Rules for carryforward of unused limitation.--A 
     State may elect to carry forward an unused limitation for any 
     calendar year for 3 calendar years following the calendar 
     year in which the unused limitation arose under rules similar 
     to the rules of section 146(f), except that the only purpose 
     for which the carryforward may be elected is the issuance of 
     exempt facility bonds described in subsection (a)(13).''
         (c) Exemption From General State Volume Caps.--Paragraph 
     (3) of section 146(g) (relating to exception for certain 
     bonds) is amended--
         (1) by striking ``or (12)'' and inserting ``(12), or 
     (13)'', and
         (2) by striking ``and environmental enhancements of 
     hydroelectric generating facilities'' and inserting 
     ``environmental enhancements of hydroelectric generating 
     facilities, and qualified public educational facilities''.
         (d) Exemption From Limitation on Use for Land 
     Acquisition.--Section 147(h) (relating to certain rules not 
     to apply to mortgage revenue bonds, qualified student loan 
     bonds, and qualified 501(c)(3) bonds) is amended by adding at 
     the end the following new paragraph:
         ``(3) Exempt facility bonds for qualified public-private 
     schools.--Subsection (c) shall not apply to any exempt 
     facility bond issued as part of an issue described in section 
     142(a)(13) (relating to qualified public educational 
     facilities).''
         (e) Conforming Amendment.--The heading for section 147(h) 
     is amended by striking ``Mortgage Revenue Bonds, Qualified 
     Student Loan Bonds, and Qualified 501(c)(3) Bonds'' and 
     inserting ``Certain Bonds''.
         (f) Effective Date.--The amendments made by this section 
     shall apply to bonds issued after December 31, 1999.

     SEC. 303. FEDERAL GUARANTEE OF SCHOOL CONSTRUCTION BONDS BY 
                   FEDERAL HOUSING FINANCE BOARD.

         (a) In General.--Section 149(b)(3) (relating to 
     exceptions) is amended by adding at the end the following new 
     subparagraph:
         ``(E) Certain guaranteed school construction bonds.--Any 
     bond issued as part of an issue 95 percent or more of the net 
     proceeds of which are used for public school construction 
     shall not be treated as federally guaranteed for any calendar 
     year by reason of any guarantee by the Federal Housing 
     Finance Board (through any Federal Home Loan Bank) under the 
     Federal Home Loan Bank Act (12 U.S.C. 1421 et seq.), as in 
     effect on the date of the enactment of this subparagraph, to 
     the extent the face amount of such bond, when added to the 
     aggregate face amount of such bonds previously so guaranteed 
     for such year, does not exceed $500,000,000.''
         (b) Effective Date.--The amendment made by this section 
     shall apply to bonds issued after December 31, 1999.
                      TITLE IV--REVENUE PROVISIONS

     SEC. 401. MODIFICATION TO FOREIGN TAX CREDIT CARRYBACK AND 
                   CARRYOVER PERIODS.

         (a) In General.--Section 904(c) (relating to limitation 
     on credit) is amended--

[[Page S6064]]

         (1) by striking ``in the second preceding taxable 
     year,'', and
         (2) by striking ``or fifth'' and inserting ``fifth, 
     sixth, or seventh''.
         (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to credits arising in taxable years beginning 
     after December 31, 2001.

     SEC. 402. LIMITATION ON USE OF NON-ACCRUAL EXPERIENCE METHOD 
                   OF ACCOUNTING.

         (a) In General.--Section 448(d)(5) (relating to special 
     rule for services) is amended--
         (1) by inserting ``in fields described in paragraph 
     (2)(A)'' after ``services by such person'', and
         (2) by inserting ``certain personal'' before ``services'' 
     in the heading.
         (b) Effective Date.--
         (1) In general.--The amendments made by this section 
     shall apply to taxable years ending after the date of the 
     enactment of this Act.
         (2) Change in method of accounting.--In the case of any 
     taxpayer required by the amendments made by this section to 
     change its method of accounting for its first taxable year 
     ending after the date of the enactment of this Act--
         (A) such change shall be treated as initiated by the 
     taxpayer,
         (B) such change shall be treated as made with the consent 
     of the Secretary of the Treasury, and
         (C) the net amount of the adjustments required to be 
     taken into account by the taxpayer under section 481 of the 
     Internal Revenue Code of 1986 shall be taken into account 
     over a period (not greater than 4 taxable years) beginning 
     with such first taxable year.

     SEC. 403. RETURNS RELATING TO CANCELLATIONS OF INDEBTEDNESS 
                   BY ORGANIZATIONS LENDING MONEY.

         (a) In General.--Paragraph (2) of section 6050P(c) 
     (relating to definitions and special rules) is amended by 
     striking ``and'' at the end of subparagraph (B), by striking 
     the period at the end of subparagraph (C) and inserting ``, 
     and'', and by inserting after subparagraph (C) the following 
     new subparagraph:
         ``(D) any organization a significant trade or business of 
     which is the lending of money.''
         (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to discharges of indebtedness after December 31, 
     1999.

     SEC. 404. EXTENSION OF INTERNAL REVENUE SERVICE USER FEES.

         (a) In General.--Chapter 77 (relating to miscellaneous 
     provisions) is amended by adding at the end the following new 
     section:

     ``SEC. 7527. INTERNAL REVENUE SERVICE USER FEES.

         ``(a) General Rule.--The Secretary shall establish a 
     program requiring the payment of user fees for--
         ``(1) requests to the Internal Revenue Service for ruling 
     letters, opinion letters, and determination letters, and
         ``(2) other similar requests.
         ``(b) Program Criteria.--
         ``(1) In general.--The fees charged under the program 
     required by subsection (a)--
         ``(A) shall vary according to categories (or 
     subcategories) established by the Secretary,
         ``(B) shall be determined after taking into account the 
     average time for (and difficulty of) complying with requests 
     in each category (and subcategory), and
         ``(C) shall be payable in advance.
         ``(2) Exemptions, etc.--The Secretary shall provide for 
     such exemptions (and reduced fees) under such program as the 
     Secretary determines to be appropriate.
         ``(3) Average fee requirement.--The average fee charged 
     under the program required by subsection (a) shall not be 
     less than the amount determined under the following table:

                                                                Average
``Category                                                          Fee
  Employee plan ruling and opinion............................$250 ....

  Exempt organization ruling..................................$350 ....

  Employee plan determination.................................$300 ....

  Exempt organization determination...........................$275 ....

  Chief counsel ruling........................................$200.....

         ``(c) Termination.--No fee shall be imposed under this 
     section with respect to requests made after September 30, 
     2009.''
         (b) Conforming Amendments.--
         (1) The table of sections for chapter 77 is amended by 
     adding at the end the following new item:

``Sec. 7527. Internal Revenue Service user fees.''

         (2) Section 10511 of the Revenue Act of 1987 is repealed.
         (c) Effective Date.--The amendments made by this section 
     shall apply to requests made after the date of the enactment 
     of this Act.

     SEC. 405. PROPERTY SUBJECT TO A LIABILITY TREATED IN SAME 
                   MANNER AS ASSUMPTION OF LIABILITY.

         (a) Repeal of Property Subject to a Liability Test.--
         (1) Section 357.--Section 357(a)(2) (relating to 
     assumption of liability) is amended by striking ``, or 
     acquires from the taxpayer property subject to a liability''.
         (2) Section 358.--Section 358(d)(1) (relating to 
     assumption of liability) is amended by striking ``or acquired 
     from the taxpayer property subject to a liability''.
         (3) Section 368.--
         (A) Section 368(a)(1)(C) is amended by striking ``, or 
     the fact that property acquired is subject to a liability,''.
         (B) The last sentence of section 368(a)(2)(B) is amended 
     by striking ``, and the amount of any liability to which any 
     property acquired from the acquiring corporation is 
     subject,''.
         (b) Clarification of Assumption of Liability.--
         (1) In general.--Section 357 is amended by adding at the 
     end the following new subsection:
         ``(d) Determination of Amount of Liability Assumed.--
         ``(1) In general.--For purposes of this section, section 
     358(d), section 362(d), section 368(a)(1)(C), and section 
     368(a)(2)(B), except as provided in regulations--
         ``(A) a recourse liability (or portion thereof) shall be 
     treated as having been assumed if, as determined on the basis 
     of all facts and circumstances, the transferee has agreed to, 
     and is expected to, satisfy such liability (or portion), 
     whether or not the transferor has been relieved of such 
     liability, and
         ``(B) except to the extent provided in paragraph (2), a 
     nonrecourse liability shall be treated as having been assumed 
     by the transferee of any asset subject to such liability.
         ``(2) Exception for nonrecourse liability.--The amount of 
     the nonrecourse liability treated as described in paragraph 
     (1)(B) shall be reduced by the lesser of--
         ``(A) the amount of such liability which an owner of 
     other assets not transferred to the transferee and also 
     subject to such liability has agreed with the transferee to, 
     and is expected to, satisfy, or
         ``(B) the fair market value of such other assets 
     (determined without regard to section 7701(g)).
         ``(3) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to carry out the purposes of 
     this subsection and section 362(d). The Secretary may also 
     prescribe regulations which provide that the manner in which 
     a liability is treated as assumed under this subsection is 
     applied, where appropriate, elsewhere in this title.''
         (2) Limitation on basis increase attributable to 
     assumption of liability.--Section 362 is amended by adding at 
     the end the following new subsection:
         ``(d) Limitation on Basis Increase Attributable to 
     Assumption of Liability.--
         ``(1) In general.--In no event shall the basis of any 
     property be increased under subsection (a) or (b) above the 
     fair market value of such property (determined without regard 
     to section 7701(g)) by reason of any gain recognized to the 
     transferor as a result of the assumption of a liability.
         ``(2) Treatment of gain not subject to tax.--Except as 
     provided in regulations, if--
         ``(A) gain is recognized to the transferor as a result of 
     an assumption of a nonrecourse liability by a transferee 
     which is also secured by assets not transferred to such 
     transferee, and
         ``(B) no person is subject to tax under this title on 
     such gain,
     then, for purposes of determining basis under subsections (a) 
     and (b), the amount of gain recognized by the transferor as a 
     result of the assumption of the liability shall be determined 
     as if the liability assumed by the transferee equaled such 
     transferee's ratable portion of such liability determined on 
     the basis of the relative fair market values (determined 
     without regard to section 7701(g)) of all of the assets 
     subject to such liability.''
         (c) Application to Provisions Other Than Subchapter C.--
         (1) Section 584.--Section 584(h)(3) is amended--
         (A) by striking ``, and the fact that any property 
     transferred by the common trust fund is subject to a 
     liability,'' in subparagraph (A), and
         (B) by striking clause (ii) of subparagraph (B) and 
     inserting:
         ``(ii) Assumed liabilities.--For purposes of clause (i), 
     the term `assumed liabilities' means any liability of the 
     common trust fund assumed by any regulated investment company 
     in connection with the transfer referred to in paragraph 
     (1)(A).
         ``(C) Assumption.--For purposes of this paragraph, in 
     determining the amount of any liability assumed, the rules of 
     section 357(d) shall apply.''
         (2) Section 1031.--The last sentence of section 1031(d) 
     is amended--
         (A) by striking ``assumed a liability of the taxpayer or 
     acquired from the taxpayer property subject to a liability'' 
     and inserting ``assumed (as determined under section 357(d)) 
     a liability of the taxpayer'', and
         (B) by striking ``or acquisition (in the amount of the 
     liability)''.
         (d) Conforming Amendments.--
         (1) Section 351(h)(1) is amended by striking ``, or 
     acquires property subject to a liability,''.
         (2) Section 357 is amended by striking ``or acquisition'' 
     each place it appears in subsection (a) or (b).
         (3) Section 357(b)(1) is amended by striking ``or 
     acquired''.
         (4) Section 357(c)(1) is amended by striking ``, plus the 
     amount of the liabilities to which the property is 
     subject,''.
         (5) Section 357(c)(3) is amended by striking ``or to 
     which the property transferred is subject''.
         (6) Section 358(d)(1) is amended by striking ``or 
     acquisition (in the amount of the liability)''.

[[Page S6065]]

         (e) Effective Date.--The amendments made by this section 
     shall apply to transfers after October 19, 1998.

     SECTION 406. CHARITABLE SPLIT-DOLLAR LIFE INSURANCE, ANNUITY, 
                   AND ENDOWMENT CONTRACTS.

         (a) In General.--Subsection (f) of section 170 (relating 
     to disallowance of deduction in certain cases and special 
     rules) is amended by adding at the end the following new 
     paragraph:
         ``(10) Split-dollar life insurance, annuity, and 
     endowment contracts.--
         ``(A) In general.--Nothing in this section or in section 
     545(b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2), or 2522 shall 
     be construed to allow a deduction, and no deduction shall be 
     allowed, for any transfer to or for the use of an 
     organization described in subsection (c) if in connection 
     with such transfer--
         ``(i) the organization directly or indirectly pays, or 
     has previously paid, any premium on any personal benefit 
     contract with respect to the transferor, or
         ``(ii) there is an understanding or expectation that any 
     person will directly or indirectly pay any premium on any 
     personal benefit contract with respect to the transferor.
         ``(B) Personal benefit contract.--For purposes of 
     subparagraph (A), the term `personal benefit contract' means, 
     with respect to the transferor, any life insurance, annuity, 
     or endowment contract if any direct or indirect beneficiary 
     under such contract is the transferor, any member of the 
     transferor's family, or any other person (other than an 
     organization described in subsection (c)) designated by the 
     transferor.
         ``(C) Application to charitable remainder trusts.--In the 
     case of a transfer to a trust referred to in subparagraph 
     (E), references in subparagraphs (A) and (F) to an 
     organization described in subsection (c) shall be treated as 
     a reference to such trust.
         ``(D) Exception for certain annuity contracts.--If, in 
     connection with a transfer to or for the use of an 
     organization described in subsection (c), such organization 
     incurs an obligation to pay a charitable gift annuity (as 
     defined in section 501(m)) and such organization purchases 
     any annuity contract to fund such obligation, persons 
     receiving payments under the charitable gift annuity shall 
     not be treated for purposes of subparagraph (B) as indirect 
     beneficiaries under such contract if--
         ``(i) such organization possesses all of the incidents of 
     ownership under such contract,
         ``(ii) such organization is entitled to all the payments 
     under such contract, and
         ``(iii) the timing and amount of payments under such 
     contract are substantially the same as the timing and amount 
     of payments to each such person under such obligation (as 
     such obligation is in effect at the time of such transfer).
         ``(E) Exception for certain contracts held by charitable 
     remainder trusts.--A person shall not be treated for purposes 
     of subparagraph (B) as an indirect beneficiary under any life 
     insurance, annuity, or endowment contract held by a 
     charitable remainder annuity trust or a charitable remainder 
     unitrust (as defined in section 664(d)) solely by reason of 
     being entitled to any payment referred to in paragraph (1)(A) 
     or (2)(A) of section 664(d) if--
         ``(i) such trust possesses all of the incidents of 
     ownership under such contract, and
         ``(ii) such trust is entitled to all the payments under 
     such contract.
         ``(F) Excise tax on premiums paid.--
         ``(i) In general.--There is hereby imposed on any 
     organization described in subsection (c) an excise tax equal 
     to the premiums paid by such organization on any life 
     insurance, annuity, or endowment contract if the payment of 
     premiums on such contract is in connection with a transfer 
     for which a deduction is not allowable under subparagraph 
     (A), determined without regard to when such transfer is made.
         ``(ii) Payments by other persons.--For purposes of clause 
     (i), payments made by any other person pursuant to an 
     understanding or expectation referred to in subparagraph (A) 
     shall be treated as made by the organization.
         ``(iii) Reporting.--Any organization on which tax is 
     imposed by clause (i) with respect to any premium shall file 
     an annual return which includes--

         ``(I) the amount of such premiums paid during the year 
     and the name and TIN of each beneficiary under the contract 
     to which the premium relates, and
         ``(II) such other information as the Secretary may 
     require.

     The penalties applicable to returns required under section 
     6033 shall apply to returns required under this clause. 
     Returns required under this clause shall be furnished at such 
     time and in such manner as the Secretary shall by forms or 
     regulations require.
         ``(iv) Certain rules to apply.--The tax imposed by this 
     subparagraph shall be treated as imposed by chapter 42 for 
     purposes of this title other than subchapter B of chapter 42.
         ``(G) Special rule where state requires specification of 
     charitable gift annuitant in contract.--In the case of an 
     obligation to pay a charitable gift annuity referred to in 
     subparagraph (D) which is entered into under the laws of a 
     State which requires, in order for the charitable gift 
     annuity to be exempt from insurance regulation by such State, 
     that each beneficiary under the charitable gift annuity be 
     named as a beneficiary under an annuity contract issued by an 
     insurance company authorized to transact business in such 
     State, the requirements of clauses (i) and (ii) of 
     subparagraph (D) shall be treated as met if--
         ``(i) such State law requirement was in effect on 
     February 8, 1999,
         ``(ii) each such beneficiary under the charitable gift 
     annuity is a bona fide resident of such State at the time the 
     obligation to pay a charitable gift annuity is entered into, 
     and
         ``(iii) the only persons entitled to payments under such 
     contract are persons entitled to payments as beneficiaries 
     under such obligation on the date such obligation is entered 
     into.
         ``(H) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this paragraph, including regulations to 
     prevent the avoidance of such purposes.''
         (b) Effective Date.--
         (1) In general.--Except as otherwise provided in this 
     section, the amendment made by this section shall apply to 
     transfers made after February 8, 1999.
         (2) Excise tax.--Except as provided in paragraph (3) of 
     this subsection, section 170(f)(10)(F) of the Internal 
     Revenue Code of 1986 (as added by this section) shall apply 
     to premiums paid after the date of the enactment of this Act.
         (3) Reporting.--Clause (iii) of such section 
     170(f)(10)(F) shall apply to premiums paid after February 8, 
     1999 (determined as if the tax imposed by such section 
     applies to premiums paid after such date).

     SEC. 407. TRANSFER OF EXCESS DEFINED BENEFIT PLAN ASSETS FOR 
                   RETIREE HEALTH BENEFITS.

         (a) Extension.--
         (1) In general.--Section 420(b)(5) (relating to 
     expiration) is amended by striking ``in any taxable year 
     beginning after December 31, 2000'' and inserting ``made 
     after September 30, 2009''.
         (2) Conforming amendments.--
         (A) Section 101(e)(3) of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1021(e)(3)) is amended by 
     striking ``1995'' and inserting ``2001''.
         (B) Section 403(c)(1) of such Act (29 U.S.C. 1103(c)(1)) 
     is amended by striking ``1995'' and inserting ``2001''.
         (C) Paragraph (13) of section 408(b) of such Act (29 
     U.S.C. 1108(b)(13)) is amended--
         (i) by striking ``in a taxable year beginning before 
     January 1, 2001'' and inserting ``made before October 1, 
     2009'', and
         (ii) by striking ``1995'' and inserting ``2001''.
         (b) Application of Minimum Cost Requirements.--
         (1) In general.--Section 420(c)(3) is amended to read as 
     follows:
         ``(3) Minimum cost requirements.--
         ``(A) In general.--The requirements of this paragraph are 
     met if each group health plan or arrangement under which 
     applicable health benefits are provided provides that the 
     applicable employer cost for each taxable year during the 
     cost maintenance period shall not be less than the higher of 
     the applicable employer costs for each of the 2 taxable years 
     immediately preceding the taxable year of the qualified 
     transfer.
         ``(B) Applicable employer cost.--For purposes of this 
     paragraph, the term `applicable employer cost' means, with 
     respect to any taxable year, the amount determined by 
     dividing--
         ``(i) the qualified current retiree health liabilities of 
     the employer for such taxable year determined--

         ``(I) without regard to any reduction under subsection 
     (e)(1)(B), and
         ``(II) in the case of a taxable year in which there was 
     no qualified transfer, in the same manner as if there had 
     been such a transfer at the end of the taxable year, by

         ``(ii) the number of individuals to whom coverage for 
     applicable health benefits was provided during such taxable 
     year.
         ``(C) Election to compute cost separately.--An employer 
     may elect to have this paragraph applied separately with 
     respect to individuals eligible for benefits under title 
     XVIII of the Social Security Act at any time during the 
     taxable year and with respect to individuals not so eligible.
         ``(D) Cost maintenance period.--For purposes of this 
     paragraph, the term `cost maintenance period' means the 
     period of 5 taxable years beginning with the taxable year in 
     which the qualified transfer occurs. If a taxable year is in 
     2 or more overlapping cost maintenance periods, this 
     paragraph shall be applied by taking into account the highest 
     applicable employer cost required to be provided under 
     subparagraph (A) for such taxable year.''
         (2) Conforming amendments.--
         (A) Section 420(b)(1)(C)(iii) is amended by striking 
     ``benefits'' and inserting ``cost''.
         (B) Section 420(e)(1)(D) is amended by striking ``and 
     shall not be subject to the minimum benefit requirements of 
     subsection (c)(3)'' and inserting ``or in calculating 
     applicable employer cost under subsection (c)(3)(B)''.
         (c) Effective Date.--The amendments made by this section 
     shall apply to qualified transfers occurring after December 
     31, 2000, and before October 1, 2009.

     SEC. 408. LIMITATIONS ON WELFARE BENEFIT FUNDS OF 10 OR MORE 
                   EMPLOYER PLANS.

         (a) Benefits to Which Exception Applies.--Section 
     419A(f)(6)(A) (relating to exception for 10 or more employer 
     plans) is amended to read as follows:

[[Page S6066]]

         ``(A) In general.--This subpart shall not apply to a 
     welfare benefit fund which is part of a 10 or more employer 
     plan if the only benefits provided through the fund are 1 or 
     more of the following:
         ``(i) Medical benefits.
         ``(ii) Disability benefits.
         ``(iii) Group term life insurance benefits which do not 
     provide for any cash surrender value or other money that can 
     be paid, assigned, borrowed, or pledged for collateral for a 
     loan.
     The preceding sentence shall not apply to any plan which 
     maintains experience-rating arrangements with respect to 
     individual employers.''
         (b) Limitation on Use of Amounts for Other Purposes.--
     Section 4976(b) (defining disqualified benefit) is amended by 
     adding at the end the following new paragraph:
         ``(5) Special rule for 10 or more employer plans exempted 
     from prefunding limits.--For purposes of paragraph (1)(C), 
     if--
         ``(A) subpart D of part I of subchapter D of chapter 1 
     does not apply by reason of section 419A(f)(6) to 
     contributions to provide 1 or more welfare benefits through a 
     welfare benefit fund under a 10 or more employer plan, and
         ``(B) any portion of the welfare benefit fund 
     attributable to such contributions is used for a purpose 
     other than that for which the contributions were made,
     then such portion shall be treated as reverting to the 
     benefit of the employers maintaining the fund.''
         (c) Effective Date.--The amendments made by this section 
     shall apply to contributions paid or accrued after the date 
     of the enactment of this Act, in taxable years ending after 
     such date.

     SEC. 409. MODIFICATION OF INSTALLMENT METHOD AND REPEAL OF 
                   INSTALLMENT METHOD FOR ACCRUAL METHOD 
                   TAXPAYERS.

         (a) Repeal of Installment Method for Accrual Basis 
     Taxpayers.--
         (1) In general.--Subsection (a) of section 453 (relating 
     to installment method) is amended to read as follows:
         ``(a) Use of Installment Method.--
         ``(1) In general.--Except as otherwise provided in this 
     section, income from an installment sale shall be taken into 
     account for purposes of this title under the installment 
     method.
         ``(2) Accrual method taxpayer.--The installment method 
     shall not apply to income from an installment sale if such 
     income would be reported under an accrual method of 
     accounting without regard to this section. The preceding 
     sentence shall not apply to a disposition described in 
     subparagraph (A) or (B) of subsection (l)(2).''
         (2) Conforming amendments.--Sections 453(d)(1), 
     453(i)(1), and 453(k) are each amended by striking ``(a)'' 
     each place it appears and inserting ``(a)(1)''.
         (b) Modification of Pledge Rules.--Paragraph (4) of 
     section 453A(d) (relating to pledges, etc., of installment 
     obligations) is amended by adding at the end the following: 
     ``A payment shall be treated as directly secured by an 
     interest in an installment obligation to the extent an 
     arrangement allows the taxpayer to satisfy all or a portion 
     of the indebtedness with the installment obligation.''
         (c) Effective Date.--The amendments made by this section 
     shall apply to sales or other dispositions occurring on or 
     after the date of the enactment of this Act.

     SEC. 410. INCLUSION OF CERTAIN VACCINES AGAINST STREPTOCOCCUS 
                   PNEUMONIAE TO LIST OF TAXABLE VACCINES.

         (a) In General.--Section 4132(a)(1) (defining taxable 
     vaccine) is amended by adding at the end the following new 
     subparagraph:
         ``(L) Any conjugate vaccine against streptococcus 
     pneumoniae.''
         (b) Effective Date.--
         (1) Sales.--The amendment made by this section shall 
     apply to vaccine sales beginning on the day after the date on 
     which the Centers for Disease Control makes a final 
     recommendation for routine administration to children of any 
     conjugate vaccine against streptococcus pneumoniae.
         (2) Deliveries.--For purposes of paragraph (1), in the 
     case of sales on or before the date described in such 
     paragraph for which delivery is made after such date, the 
     delivery date shall be considered the sale date.
                                 ______