[Congressional Record Volume 145, Number 109 (Thursday, July 29, 1999)]
[Senate]
[Pages S9765-S9771]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                          AMENDMENTS SUBMITTED

                                 ______
                                 

                      TAXPAYERS REFUND ACT OF 1999

                                 ______
                                 

                       STEVENS AMENDMENT NO. 1403

  (Ordered to lie on the table)
  Mr. STEVENS submitted an amendment intended to be proposed by him to 
the bill (S. 1429) to provide for reconciliation pursuant to section 
104 of the concurrent resolution on the budget for fiscal year 2000; as 
follows:

       At page 180, line 18 before the period insert the following 
     new phrase: ``and passengers

[[Page S9766]]

     permitted to utilize otherwise empty seats on aircraft''.
       At page 180, between lines 21 and 22 insert the following 
     new subsection:
       ``(b) Subsection (j) of section 132 of the Internal Revenue 
     Code of 1986 (relating to certain fringe benefits) is amended 
     by adding at the end thereof the following new paragraph:
       ``(9) Special rule for certain noncommercial air 
     transportation.--Notwithstanding any other provision of this 
     section, the term ``no-additional-cost service'' includes the 
     value of transportation provided to any person on a 
     noncommercially operated aircraft if--
       ``(A) such transportation is provided on a flight made in 
     the ordinary course of the trade or business of the taxpayer 
     owning or leasing such aircraft for use in such trade or 
     business,
       (B) the flight on which the transportation is provided 
     would have been made whether or not such person was 
     transported on the flight, and
       ``(C) no substantial additional cost is incurred in 
     providing such transportation to such person.

     For purposes of this paragraph, an aircraft is 
     noncommercially operated if transportation thereon is not 
     provided or made available to the general public by purchase 
     of a ticket or other fare.''
       At page 180 line 22 strike ``(b)'' and insert in lieu 
     thereof ``(c)''.
                                 ______
                                 

                      LANDRIEU AMENDMENT NO. 1404

  (Ordered to lie on the table)
  Ms. LANDRIEU submitted an amendment to be proposed by her to the 
bill, S. 1429, supra, as follows:

       At the end of title II, insert the following:

     SEC. ____. EXPANSION DEPENDENT TO INCLUDE SPECIAL NEEDS 
                   ADOPTED CHILDREN.

       (a) In General.--Section 152 (relating to definition of 
     dependent) is amended by adding at the end the following new 
     subsection:
       ``(f) Special Rule for Support Received for Special Needs 
     Adopted Child.--For purposes of subsection (a), in the case 
     of a legally adopted son or daughter of a taxpayer, who is a 
     child with special needs (as defined in section 23(d)(3)), 
     support of the child received from funds under a Federal, 
     State, or local program for special needs expenses shall be 
     treated as received from the taxpayer.''
       (b) Conforming amendment.--Section 152(a) is amended by 
     striking ``subsection (c) or (e)'' and inserting ``subsection 
     (c), (e), or (f)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.
                                 ______
                                 

                 GRAMM (AND OTHERS) AMENDMENT NO. 1405

  Mr. GRAMM (for himself, Mr. Lott, Mr. Nickles, Mr. Mack, Mr. 
Coverdell, Mr. Craig, Mr. McConnell, Mr. Inhofe, Mrs. Hutchison, Mr. 
Bunning, Mr. Kyl, Mr. Smith of New Hampshire, Mr. Allard, and Mr. 
Hagel) proposed an amendment to the bill, S. 1429, supra; as follows:

       Strike all after the enacting clause and insert:

     SECTION 1. SHORT TITLE; ETC.

       (a) Short Title.--This Act may be cited as the ``Taxpayer 
     Refund 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) Section 15 Not To Apply.--No amendment made by this Act 
     shall be treated as a change in a rate of tax for purposes of 
     section 15 of the Internal Revenue Code of 1986.
       (d) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; etc.

                   TITLE I--ACROSS-THE-BOARD TAX CUTS

Sec. 101. 10-percent reduction in individual income tax rates.

               TITLE II--MARRIAGE TAX PENALTY ELIMINATION

Sec. 201. Marriage tax penalty elimination.
Sec. 202. Reduction in marriage tax penalty during transition.
Sec. 203. Marriage tax penalty relief for earned income credit.

                      TITLE III--DEATH TAX REPEAL

  Subtitle A--Repeal of Estate, Gift, and Generation-Skipping Taxes; 
                  Repeal of Step Up in Basis At Death

Sec. 301. Repeal of estate, gift, and generation-skipping taxes.
Sec. 302. Termination of step up in basis at death.
Sec. 303. Carryover basis at death.

  Subtitle B--Reductions of Estate and Gift Tax Rates Prior to Repeal

Sec. 311. Additional reductions of estate and gift tax rates.

   Subtitle C--Unified Credit Replaced With Unified Exemption Amount

Sec. 321. Unified credit against estate and gift taxes replaced with 
              unified exemption amount.

                      TITLE IV--CAPITAL FORMATION

Sec. 401. Indexing of capital assets for purposes of determining gain 
              or loss.

              TITLE V--FULL DEDUCTION FOR HEALTH INSURANCE

Sec. 501. Deduction for 100 percent of health insurance costs of self-
              employed individuals.
Sec. 502. Deduction for health insurance costs of individuals not 
              participating in employer-subsidized health plans.

                   TITLE I--ACROSS-THE-BOARD TAX CUTS

     SEC. 101. 10-PERCENT REDUCTION IN INDIVIDUAL INCOME TAX 
                   RATES.

       (a) Regular Income Tax Rates.--
       (1) In general.--Subsection (f) of section 1 is amended by 
     adding at the end the following new paragraph:
       ``(8) Rate reductions.--In prescribing the tables under 
     paragraph (1) which apply with respect to taxable years 
     beginning in a calendar year after 2000, each rate in such 
     tables (without regard to this paragraph) shall be reduced by 
     the number of percentage points (rounded to the next lowest 
     tenth) equal to the applicable percentage (determined in 
     accordance with the following table) of such rate:

``For taxable years beginning in calendarThe applicable percentage is--
      2001..........................................................-- 
      2002 through 2004............................................2.5 
      2005 through 2006............................................5.0 
      2007..........................................................-- 
      2008 and thereafter......................................10.0.'' 
       (2) Technical amendments.--
       (A) Subparagraph (B) of section 1(f)(2) is amended by 
     inserting ``except as provided in paragraph (8),'' before 
     ``by not changing''.
       (B) Subparagraph (C) of section 1(f)(2) is amended by 
     inserting ``and the reductions under paragraph (8) in the 
     rates of tax'' before the period.
       (C) The heading for subsection (f) of section 1 is amended 
     by inserting ``Rate Reductions;'' before ``Adjustments''.
       (D) Section 1(g)(7)(B)(ii)(II) is amended by striking ``15 
     percent'' and inserting ``the percentage applicable to the 
     lowest income bracket in subsection (c)''.
       (E) Subparagraphs (A)(ii)(I) and (B)(i) of section 1(h)(1) 
     are each amended by striking ``28 percent'' and inserting 
     ``25.2 percent''.
       (F) Section 531 is amended by striking ``39.6 percent of 
     the accumulated taxable income'' and inserting ``the product 
     of the accumulated taxable income and the percentage 
     applicable to the highest income bracket in section 1(c)''.
       (G) Section 541 is amended by striking ``39.6 percent of 
     the undistributed personal holding company income'' and 
     inserting ``the product of the undistributed personal holding 
     company income and the percentage applicable to the highest 
     income bracket in section 1(c)''.
       (H) Section 3402(p)(1)(B) is amended by striking 
     ``specified is 7, 15, 28, or 31 percent'' and all that 
     follows and inserting ``specified is--
       ``(i) 7 percent,
       ``(ii) a percentage applicable to 1 of the 3 lowest income 
     brackets in section 1(c), or
       ``(iii) such other percentage as is permitted under 
     regulations prescribed by the Secretary.''
       (I) Section 3402(p)(2) is amended by striking ``15 percent 
     of such payment'' and inserting ``the product of such payment 
     and the percentage applicable to the lowest income bracket in 
     section 1(c)''.
       (J) Section 3402(q)(1) is amended by striking ``28 percent 
     of such payment'' and inserting ``the product of such payment 
     and the percentage applicable to the next to the lowest 
     income bracket in section 1(c)''.
       (K) Section 3402(r)(3) is amended by striking ``31 
     percent'' and inserting ``the rate applicable to the third 
     income bracket in such section''.
       (L) Section 3406(a)(1) is amended by striking ``31 percent 
     of such payment'' and inserting ``the product of such payment 
     and the percentage applicable to the third income bracket in 
     section 1(c)''.
       (b) Minimum Tax Rates.--Subparagraph (A) of section 
     55(b)(1) is amended by adding at the end the following new 
     clause:
       ``(iv) Rate reduction.--In the case of taxable years 
     beginning after 2000, each rate in clause (i) (without regard 
     to this clause) shall be reduced by the number of percentage 
     points (rounded to the next lowest tenth) equal to the 
     applicable percentage (determined in accordance with section 
     1(f)(8)) of such rate.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

               TITLE II--MARRIAGE TAX PENALTY ELIMINATION

     SEC. 201. MARRIAGE TAX PENALTY ELIMINATION.

       (a) In General.--Subpart B of part II of subchapter A of 
     chapter 61 (relating to income tax returns) is amended by 
     inserting after section 6013 the following new section:

     ``SEC. 6013A. COMBINED RETURN WITH SEPARATE RATES.

       ``(a) General Rule.--A husband and wife may make a combined 
     return of income taxes under subtitle A under which--
       ``(1) a separate taxable income is determined for each 
     spouse by applying the rules provided in this section, and
       ``(2) the tax imposed by section 1 is the aggregate amount 
     resulting from applying the separate rates set forth in 
     section 1(c) to each such taxable income.

[[Page S9767]]

       ``(b) Determination of Taxable Income.--
       ``(1) In general.--For purposes of subsection (a)(1), the 
     taxable income for each spouse shall be one-half of the 
     taxable income computed as if the spouses were filing a joint 
     return.
       ``(2) Nonitemizers.--For purposes of paragraph (1), if an 
     election is made not to itemize deductions for any taxable 
     year, the basic standard deduction shall be equal to the 
     amount which is twice the basic standard deduction under 
     section 63(c)(2)(C) for the taxable year.
       ``(c) Treatment of Credits.--Credits shall be determined 
     (and applied against the joint liability of the couple for 
     tax) as if the spouses had filed a joint return.
       ``(d) Treatment as Joint Return.--Except as otherwise 
     provided in this section or in the regulations prescribed 
     hereunder, for purposes of this title (other than sections 1 
     and 63(c)) a combined return under this section shall be 
     treated as a joint return.
       ``(e) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     this section.''
       (b) Unmarried Rate Made Applicable.--So much of subsection 
     (c) of section 1 as precedes the table is amended to read as 
     follows:
       ``(c) Separate or Unmarried Return Rate.--There is hereby 
     imposed on the taxable income of every individual (other than 
     a married individual (as defined in section 7703) filing a 
     joint return or a separate return, a surviving spouse as 
     defined in section 2(a), or a head of household as defined in 
     section 2(b)) a tax determined in accordance with the 
     following table:''.
       (c) Clerical Amendment.--The table of sections for subpart 
     B of part II of subchapter A of chapter 61 is amended by 
     inserting after the item relating to section 6013 the 
     following:

``Sec. 6013A. Combined return with separate rates.''
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2006.

     SEC. 202. REDUCTION IN MARRIAGE TAX PENALTY DURING 
                   TRANSITION.

       (a) In General.--Subpart A of part IV of subchapter A of 
     chapter 1 is amended by inserting after section 25A the 
     following new section:

     ``SEC. 25B. CREDIT TO REDUCE MARRIAGE PENALTY.

       ``(a) Allowance of Credit.--In the case of a joint return 
     for the taxable year, there shall be allowed as a credit 
     against the tax imposed by this chapter for such taxable year 
     an amount equal to the marriage penalty reduction credit.
       ``(b) Credit Disallowed for Individuals Claiming Section 
     911, Etc.--No credit shall be allowed under this section for 
     any taxable year if either spouse claims the benefits of 
     section 911, 931, or 933 for such taxable year.
       ``(c) Marriage Penalty Reduction Credit.--For purposes of 
     this section--
       ``(1) In general.--The marriage penalty reduction credit is 
     an amount equal to the product of--
       ``(A) the excess (if any) of--
       ``(i) the amount of tax determined for such taxable year 
     before the application of this section, over
       ``(ii) the amount of tax which would be determined for the 
     taxable year if section 6013A (as added by section 201 of the 
     Taxpayer Refund Act of 1999) were in effect, and
       ``(B) the applicable percentage for such taxable year.
       ``(2) Applicable percentage.--For purposes of this 
     subsection, the applicable percentage shall be determined in 
     accordance with the following table:

    ``For taxable years                                  The applicable
      beginning in:                                      percentage is:
      2000, 2001, and 2002..........................................25 
      2003, 2004, and 2005..........................................50 
      2006 and thereafter..........................................75. 
       ``(3) Sunset upon implementation of combined return.--The 
     credit allowed under this section shall not apply to any 
     taxable year for which section 6013A (as added by section 201 
     of the Taxpayer Refund Act of 1999) is in effect.
       ``(d) Amount of Credit To Be Determined By Using Tables.--
       ``(1) In general.--The amount of the credit allowed by this 
     section shall be determined by using tables prescribed by the 
     Secretary.
       ``(2) Requirements for tables.--The tables prescribed under 
     paragraph (1) shall reflect the provisions of subsection 
     (c).''
       (b) Clerical Amendment.--The table of sections for subpart 
     A of part IV of subchapter A of chapter 1 is amended by 
     inserting after the item relating to section 25A the 
     following new item:

``Sec. 25B. Credit to reduce marriage tax penalty.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.

     SEC. 203. MARRIAGE TAX PENALTY RELIEF FOR EARNED INCOME 
                   CREDIT.

       (a) In General.--Paragraph (2) of section 32(b) (relating 
     to percentages and amounts) is amended--
       (1) by striking ``Amounts.--The earned'' and inserting 
     ``Amounts.--
       ``(A) In general.--Subject to subparagraph (B), the 
     earned'', and
       (2) by adding at the end the following new subparagraph:
       ``(B) Joint returns.--In the case of a joint return for 
     taxable years beginning after December 31, 2004, the phaseout 
     amount determined under subparagraph (A) shall be increased 
     by $2,000.''
       (b) Inflation adjustment.--Paragraph (1)(B) of section 
     32(j) (relating to inflation adjustments) is amended to read 
     as follows:
       ``(B) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, determined--
       ``(i) in the case of amounts in subsections (b)(1)(A) and 
     (i)(1), by substituting `calendar year 1995' for `calendar 
     year 1992' in subparagraph (B) thereof, and
       ``(ii) in the case of the $2,000 amount in subsection 
     (b)(1)(B), by substituting `calendar year 2004' for `calendar 
     year 1992' in subparagraph (B) of such section 1.''
       (c) Rounding.--Section 32(j)(2)(A) (relating to rounding) 
     is amended by striking ``subsection (b)(2)'' and inserting 
     ``subsection (b)(2)(A) (after being increased under 
     subparagraph (B) thereof)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2004.

                      TITLE III--DEATH TAX REPEAL

  Subtitle A--Repeal of Estate, Gift, and Generation-Skipping Taxes; 
                  Repeal of Step Up in Basis At Death

     SEC. 301. REPEAL OF ESTATE, GIFT, AND GENERATION-SKIPPING 
                   TAXES.

       (a) In General.--Subtitle B is hereby repealed.
       (b) Effective Date.--The repeal made by subsection (a) 
     shall apply to the estates of decedents dying, and gifts and 
     generation-skipping transfers made, after December 31, 2008.

     SEC. 302. TERMINATION OF STEP UP IN BASIS AT DEATH.

       (a) Termination of Application of Section 1014.--Section 
     1014 (relating to basis of property acquired from a decedent) 
     is amended by adding at the end the following:
       ``(f) Termination.--In the case of a decedent dying after 
     December 31, 2008, this section shall not apply to property 
     for which basis is provided by section 1022.''
       (b) Conforming Amendment.--Subsection (a) of section 1016 
     (relating to adjustments to basis) is amended by striking 
     ``and'' at the end of paragraph (26), by striking the period 
     at the end of paragraph (27) and inserting ``; and'', and by 
     adding at the end the following:
       ``(28) to the extent provided in section 1022 (relating to 
     basis for certain property acquired from a decedent dying 
     after December 31, 2008).''

     SEC. 303. CARRYOVER BASIS AT DEATH.

       (a) General Rule.--Part II of subchapter O of chapter 1 
     (relating to basis rules of general application), as amended 
     by title IV, is amended by redesignating section 1023 as 
     section 1024 and inserting after section 1022 the following:

     ``SEC. 1023. CARRYOVER BASIS FOR CERTAIN PROPERTY ACQUIRED 
                   FROM A DECEDENT DYING AFTER DECEMBER 31, 2008.

       ``(a) Carryover Basis.--Except as otherwise provided in 
     this section, the basis of carryover basis property in the 
     hands of a person acquiring such property from a decedent 
     shall be determined under section 1015.
       ``(b) Carryover Basis Property Defined.--
       ``(1) In general.--For purposes of this section, the term 
     `carryover basis property' means any property--
       ``(A) which is acquired from or passed from a decedent who 
     died after December 31, 2008, and
       ``(B) which is not excluded pursuant to paragraph (2).
     The property taken into account under subparagraph (A) shall 
     be determined under section 1014(b) without regard to 
     subparagraph (A) of the last sentence of paragraph (9) 
     thereof.
       ``(2) Certain property not carryover basis property.--The 
     term `carryover basis property' does not include--
       ``(A) any item of gross income in respect of a decedent 
     described in section 691,
       ``(B) property which was acquired from the decedent by the 
     surviving spouse of the decedent, the value of which would 
     have been deductible from the value of the taxable estate of 
     the decedent under section 2056, as in effect on the day 
     before the date of enactment of this section, and
       ``(C) any includible property of the decedent if the 
     aggregate adjusted fair market value of such property does 
     not exceed $2,000,000.
     For purposes of this paragraph and paragraph (3), the term 
     `adjusted fair market value' means, with respect to any 
     property, fair market value reduced by any indebtedness 
     secured by such property.
       ``(3) Phasein of carryover basis if includible property 
     exceeds $1,300,000.--
       ``(A) In general.--If the adjusted fair market value of the 
     includible property of the decedent exceeds $1,300,000, but 
     does not exceed $2,000,000, the amount of the increase in the 
     basis of such property which would (but for this paragraph) 
     result under section 1014 shall be reduced by the amount 
     which bears the same ratio to such increase as such excess 
     bears to $700,000.
       ``(B) Allocation of reduction.--The reduction under 
     subparagraph (A) shall be allocated among only the includible 
     property having net appreciation and shall be allocated in 
     proportion to the respective amounts of such net 
     appreciation. For purposes of the preceding sentence, the 
     term `net appreciation' means the excess of the adjusted fair 
     market value over the decedent's adjusted basis immediately 
     before such decedent's death.

[[Page S9768]]

       ``(4) Includible property.--
       ``(A) In general.--For purposes of this subsection, the 
     term `includible property' means property which would be 
     included in the gross estate of the decedent under any of the 
     following provisions as in effect on the day before the date 
     of the enactment of this section:
       ``(i) Section 2033.
       ``(ii) Section 2038.
       ``(iii) Section 2040.
       ``(iv) Section 2041.
       ``(v) Section 2042(a)(1).
       ``(B) Exclusion of property acquired by spouse.--Such term 
     shall not include property described in paragraph (2)(B).
       ``(c) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to carry out the purposes of 
     this section.''
       (b) Miscellaneous Amendments Related To Carryover Basis.--
       (1) Capital gain treatment for inherited art work or 
     similar property.--
       (A) In general.--Subparagraph (C) of section 1221(3) 
     (defining capital asset) is amended by inserting ``(other 
     than by reason of section 1023)'' after ``is determined''.
       (B) Coordination with section 170.--Paragraph (1) of 
     section 170(e) (relating to certain contributions of ordinary 
     income and capital gain property) is amended by adding at the 
     end the following: ``For purposes of this paragraph, the 
     determination of whether property is a capital asset shall be 
     made without regard to the exception contained in section 
     1221(3)(C) for basis determined under section 1023.''
       (2) Definition of executor.--Section 7701(a) (relating to 
     definitions) is amended by adding at the end the following:
       ``(47) Executor.--The term `executor' means the executor or 
     administrator of the decedent, or, if there is no executor or 
     administrator appointed, qualified, and acting within the 
     United States, then any person in actual or constructive 
     possession of any property of the decedent.''
       (3) Clerical amendment.--The table of sections for part II 
     of subchapter O of chapter 1 is amended by adding after the 
     item relating to section 1022 the following new item:

``Sec. 1023. Carryover basis for certain property acquired from a 
              decedent dying after December 31, 2008.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to estates of decedents dying after December 31, 
     2008.

  Subtitle B--Reductions of Estate and Gift Tax Rates Prior to Repeal

     SEC. 311. ADDITIONAL REDUCTIONS OF ESTATE AND GIFT TAX RATES.

       (a) Maximum Rate of Tax Reduced to 50 Percent.--The table 
     contained in section 2001(c)(1) is amended by striking the 2 
     highest brackets and inserting the following:

$1,025,800, plus 50% of the excess over $2,500,000.''..................
       (b) Repeal of Phaseout of Graduated Rates.--Subsection (c) 
     of section 2001 is amended by striking paragraph (2).
       (c) Additional Reductions of Rates of Tax.--Subsection (c) 
     of section 2001, as amended by subsection (b), is amended by 
     adding at the end the following new paragraph:
       ``(2) Phasedown of tax.--In the case of estates of 
     decedents dying, and gifts made, during any calendar year 
     after 2001 and before 2009--
       ``(A) In general.--Except as provided in subparagraph (C), 
     the tentative tax under this subsection shall be determined 
     by using a table prescribed by the Secretary (in lieu of 
     using the table contained in paragraph (1)) which is the same 
     as such table; except that--
       ``(i) each of the rates of tax shall be reduced by the 
     number of percentage points determined under subparagraph 
     (B), and
       ``(ii) the amounts setting forth the tax shall be adjusted 
     to the extent necessary to reflect the adjustments under 
     clause (i).
       ``(B) Percentage points of reduction.--

                                                        The number of  
    ``For calendar year:                          percentage points is:
      2002..........................................................1  
      2003..........................................................2  
      2004..........................................................3  
      2005..........................................................5  
      2006..........................................................7  
      2007..........................................................9  
      2008........................................................11.  
       ``(C) Coordination with income tax rates.--The reductions 
     under subparagraph (A)--
       ``(i) shall not reduce any rate under paragraph (1) below 
     the lowest rate in section 1(c), and
       ``(ii) shall not reduce the highest rate under paragraph 
     (1) below the highest rate in section 1(c).
       ``(D) Coordination with credit for state death taxes.--
     Rules similar to the rules of subparagraph (A) shall apply to 
     the table contained in section 2011(b) except that the 
     Secretary shall prescribe percentage point reductions which 
     maintain the proportionate relationship (as in effect before 
     any reduction under this paragraph) between the credit under 
     section 2011 and the tax rates under subsection (c).''
       (d) Effective Dates.--
       (1) Subsections (a) and (b).--The amendments made by 
     subsections (a) and (b) shall apply to estates of decedents 
     dying, and gifts made, after December 31, 2000.
       (2) Subsection (c).--The amendment made by subsection (c) 
     shall apply to estates of decedents dying, and gifts made, 
     after December 31, 2001.

   Subtitle C--Unified Credit Replaced With Unified Exemption Amount

     SEC. 321. UNIFIED CREDIT AGAINST ESTATE AND GIFT TAXES 
                   REPLACED WITH UNIFIED EXEMPTION AMOUNT.

       (a) In General.--
       (1) Estate tax.--Part IV of subchapter A of chapter 11 is 
     amended by inserting after section 2051 the following new 
     section:

     ``SEC. 2052. EXEMPTION.

       ``(a) In general.--For purposes of the tax imposed by 
     section 2001, the value of the taxable estate shall be 
     determined by deducting from the value of the gross estate an 
     amount equal to the excess (if any) of--
       ``(1) the exemption amount for the calendar year in which 
     the decedent died, over
       ``(2) the sum of--
       ``(A) the aggregate amount allowed as an exemption under 
     section 2521 with respect to gifts made by the decedent after 
     December 31, 2000, and
       ``(B) the aggregate amount of gifts made by the decedent 
     for which credit was allowed by section 2505 (as in effect on 
     the day before the date of the enactment of this section).
     Gifts which are includible in the gross estate of the 
     decedent shall not be taken into account in determining the 
     amounts under paragraph (2).
       ``(b) Exemption Amount.--For purposes of subsection (a), 
     the term `exemption amount' means the amount determined in 
     accordance with the following table:

                                                       ``IThe exemption
                                                         caleamount is:
      2001....................................................$675,000 
      2002 and 2003...........................................$700,000 
      2004....................................................$850,000 
      2005....................................................$950,000 
      2006 or thereafter..................................$1,000,000.''
       (2) Gift tax.--Subchapter C of chapter 12 (relating to 
     deductions) is amended by inserting before section 2522 the 
     following new section:

     ``SEC. 2521. EXEMPTION.

       ``(a) In General.--In computing taxable gifts for any 
     calendar year, there shall be allowed as a deduction in the 
     case of a citizen or resident of the United States an amount 
     equal to the excess of--
       ``(1) the exemption amount determined under section 2052 
     for such calendar year, over
       ``(2) the sum of--
       ``(A) the aggregate amount allowed as an exemption under 
     this section for all preceding calendar years after 2000, and
       ``(B) the aggregate amount of gifts for which credit was 
     allowed by section 2505 (as in effect on the day before the 
     date of the enactment of this section).''
       (b) Repeal of Unified Credits.--
       (1) Section 2010 (relating to unified credit against estate 
     tax) is hereby repealed.
       (2) Section 2505 (relating to unified credit against gift 
     tax) is hereby repealed.
       (c) Conforming Amendments.--
       (1)(A) Subparagraph (B) of section 2001(b)(1) is amended by 
     inserting before the comma ``reduced by the amount of 
     described in section 2052(a)(2)''.
       (B) Subsection (b) of section 2001 is amended by adding at 
     the end the following new sentence: ``For purposes of 
     paragraph (2), the amount of the tax payable under chapter 12 
     shall be determined without regard to the credit provided by 
     section 2505 (as in effect on the day before the date of the 
     enactment of section 2052).''
       (2) Subsection (f) of section 2011 is amended by striking 
     ``, reduced by the amount of the unified credit provided by 
     section 2010''.
       (3) Subsection (a) of section 2012 is amended by striking 
     ``and the unified credit provided by section 2010''.
       (4) Subsection (b) of section 2013 is amended by inserting 
     before the period at the end of the first sentence ``and 
     increased by the exemption allowed under section 2052 or 
     2106(a)(4) (or the corresponding provisions of prior law) in 
     determining the taxable estate of the transferor for purposes 
     of the estate tax''.
       (5) Subparagraph (A) of section 2013(c)(1) is amended by 
     striking ``2010,''.
       (6) Paragraph (2) of section 2014(b) is amended by striking 
     ``2010,''.
       (7) Clause (ii) of section 2056A(b)(12)(C) is amended to 
     read as follows:
       ``(ii) to treat any reduction in the tax imposed by 
     paragraph (1)(A) by reason of the credit allowable under 
     section 2010 (as in effect on the day before the date of the 
     enactment of section 2052) or the exemption allowable under 
     section 2052 with respect to the decedent as such a credit or 
     exemption (as the case may be) allowable to such surviving 
     spouse for purposes of determining the amount of the 
     exemption allowable under section 2521 with respect to 
     taxable gifts made by the surviving spouse during the year in 
     which the spouse becomes a citizen or any subsequent year,''.
       (8) Section 2102 is amended by striking subsection (c).
       (9) Subsection (a) of section 2106 is amended by adding at 
     the end the following new paragraph:
       ``(4) Exemption.--
       ``(A) In general.--An exemption of $60,000.
       ``(B) Residents of possessions of the United States.--In 
     the case of a decedent who is considered to be a nonresident 
     not a citizen of the United States under section 2209, the 
     exemption under this paragraph shall be the greater of--
       ``(i) $60,000, or

[[Page S9769]]

       ``(ii) that proportion of $175,000 which the value of that 
     part of the decedent's gross estate which at the time of his 
     death is situated in the United States bears to the value of 
     his entire gross estate wherever situated.
       ``(C) Special rules.--
       ``(i) Coordination with treaties.--To the extent required 
     under any treaty obligation of the United States, the 
     exemption allowed under this paragraph shall be equal to the 
     amount which bears the same ratio to the exemption amount 
     under section 2052 (for the calendar year in which the 
     decedent died) as the value of the part of the decedent's 
     gross estate which at the time of his death is situated in 
     the United States bears to the value of his entire gross 
     estate wherever situated. For purposes of the preceding 
     sentence, property shall not be treated as situated in the 
     United States if such property is exempt from the tax imposed 
     by this subchapter under any treaty obligation of the United 
     States.
       ``(ii) Coordination with gift tax exemption and unified 
     credit.--If an exemption has been allowed under section 2521 
     (or a credit has been allowed under section 2505 as in effect 
     on the day before the date of the enactment of section 2052) 
     with respect to any gift made by the decedent, each dollar 
     amount contained in subparagraph (A) or (B) or the exemption 
     amount applicable under clause (i) of this subparagraph 
     (whichever applies) shall be reduced by the exemption so 
     allowed under 2521 (or, in the case of such a credit, by the 
     amount of the gift for which the credit was so allowed).''
       (10) Subsection (c) of section 2107 is amended--
       (A) by striking paragraph (1) and by redesignating 
     paragraphs (2) and (3) as paragraphs (1) and (2), 
     respectively, and
       (B) by striking the second sentence of paragraph (2) (as so 
     redesignated).
       (11) Section 2206 is amended by striking ``the taxable 
     estate'' in the first sentence and inserting ``the sum of the 
     taxable estate and the amount of the exemption allowed under 
     section 2052 or 2106(a)(4) in computing the taxable estate''.
       (12) Section 2207 is amended by striking ``the taxable 
     estate'' in the first sentence and inserting ``the sum of the 
     taxable estate and the amount of the exemption allowed under 
     section 2052 or 2106(a)(4) in computing the taxable estate''.
       (13) Subparagraph (B) of section 2207B(a)(1) is amended to 
     read as follows:
       ``(B) the sum of the taxable estate and the amount of the 
     exemption allowed under section 2052 or 2106(a)(4) in 
     computing the taxable estate.''
       (14) Subsection (a) of section 2503 is amended by striking 
     ``section 2522'' and inserting ``section 2521''.
       (15) Paragraph (1) of section 6018(a) is amended by 
     striking ``$600,000'' and inserting ``the exemption amount 
     under section 2052 for the calendar year which includes the 
     date of death''.
       (16) Subparagraph (A) of section 6601(j)(2) is amended to 
     read as follows:
       ``(A) the amount of the tax which would be imposed by 
     chapter 11 on an amount of taxable estate equal to the excess 
     of $1,000,000 over the exemption amount allowable under 
     section 2052, or''.
       (17) The table of sections for part II of subchapter A of 
     chapter 11 is amended by striking the item relating to 
     section 2010.
       (18) The table of sections for subchapter A of chapter 12 
     is amended by striking the item relating to section 2505.
       (d) Effective Date.--The amendments made by this section--
       (1) insofar as they relate to the tax imposed by chapter 11 
     of the Internal Revenue Code of 1986, shall apply to estates 
     of decedents dying after December 31, 2000, and
       (2) insofar as they relate to the tax imposed by chapter 12 
     of such Code, shall apply to gifts made after December 31, 
     2000.

                      TITLE IV--CAPITAL FORMATION

     SEC. 401. INDEXING OF CAPITAL ASSETS FOR PURPOSES OF 
                   DETERMINING GAIN OR LOSS.

       (a) In General.--Part II of subchapter O of chapter 1 
     (relating to basis rules of general application) is amended 
     by inserting after section 1021 the following new section:

     ``SEC. 1022. INDEXING OF CAPITAL ASSETS FOR PURPOSES OF 
                   DETERMINING GAIN OR LOSS.

       ``(a) General Rule.--
       ``(1) Indexed basis substituted for adjusted basis.--Except 
     as provided in paragraph (2), if an indexed asset which has 
     been held for more than 1 year is sold or otherwise disposed 
     of, then, for purposes of this title, the indexed basis of 
     the asset shall be substituted for its adjusted basis.
       ``(2) Exception for depreciation, etc.--The deduction for 
     depreciation, depletion, and amortization shall be determined 
     without regard to the application of paragraph (1) to the 
     taxpayer or any other person.
       ``(b) Indexed Asset.--
       ``(1) In general.--For purposes of this section, the term 
     `indexed asset' means--
       ``(A) stock in a corporation, and
       ``(B) tangible property (or any interest therein), which is 
     a capital asset or property used in the trade or business (as 
     defined in section 1231(b)).
       ``(2) Certain property excluded.--For purposes of this 
     section, the term `indexed asset' does not include--
       ``(A) Creditor's interest.--Any interest in property which 
     is in the nature of a creditor's interest.
       ``(B) Options.--Any option or other right to acquire an 
     interest in property.
       ``(C) Net lease property.--In the case of a lessor, net 
     lease property (within the meaning of subsection (h)(1)).
       ``(D) Certain preferred stock.--Stock which is preferred as 
     to dividends and does not participate in corporate growth to 
     any significant extent.
       ``(E) Stock in certain corporations.--Stock in--
       ``(i) an S corporation (within the meaning of section 
     1361),
       ``(ii) a personal holding company (as defined in section 
     542), and
       ``(iii) a foreign corporation.
       ``(3) Exception for stock in foreign corporation which is 
     regularly traded on national or regional exchange.--Clause 
     (iii) of paragraph (2)(E) shall not apply to stock in a 
     foreign corporation the stock of which is listed on the New 
     York Stock Exchange, the American Stock Exchange, or any 
     domestic regional exchange for which quotations are published 
     on a regular basis other than--
       ``(A) stock of a foreign investment company (within the 
     meaning of section 1246(b)), and
       ``(B) stock in a foreign corporation held by a United 
     States person who meets the requirements of section 
     1248(a)(2).
       ``(c) Indexed Basis.--For purposes of this section--
       ``(1) General rule.--The indexed basis for any asset is--
       ``(A) the adjusted basis of the asset, increased by
       ``(B) the applicable inflation adjustment.
       ``(2) Applicable inflation adjustment.--The applicable 
     inflation adjustment for any asset is an amount equal to--
       ``(A) the adjusted basis of the asset, multiplied by
       ``(B) the percentage (if any) by which--
       ``(i) the chain-type price index for GDP for the last 
     calendar quarter ending before the asset is disposed of, 
     exceeds
       ``(ii) the chain-type price index for GDP for the last 
     calendar quarter ending before the asset was acquired by the 
     taxpayer.
     The percentage under subparagraph (B) shall be rounded to the 
     nearest \1/10\ of 1 percentage point.
       ``(3) Chain-type price index for GDP.--The chain-type price 
     index for GDP for any calendar quarter is such index for such 
     quarter (as shown in the last revision thereof released by 
     the Secretary of Commerce before the close of the following 
     calendar quarter).
       ``(d) Special Rules.--For purposes of this section--
       ``(1) Treatment as separate asset.--In the case of any 
     asset, the following shall be treated as a separate asset:
       ``(A) a substantial improvement to property,
       ``(B) in the case of stock of a corporation, a substantial 
     contribution to capital, and
       ``(C) any other portion of an asset to the extent that 
     separate treatment of such portion is appropriate to carry 
     out the purposes of this section.
       ``(2) Assets which are not indexed assets throughout 
     holding period.--
       ``(A) In general.--The applicable inflation ratio shall be 
     appropriately reduced for calendar months at any time during 
     which the asset was not an indexed asset.
       ``(B) Certain short sales.--For purposes of applying 
     subparagraph (A), an asset shall be treated as not an indexed 
     asset for any short sale period during which the taxpayer or 
     the taxpayer's spouse sells short property substantially 
     identical to the asset. For purposes of the preceding 
     sentence, the short sale period begins on the day after the 
     substantially identical property is sold and ends on the 
     closing date for the sale.
       ``(3) Treatment of certain distributions.--A distribution 
     with respect to stock in a corporation which is not a 
     dividend shall be treated as a disposition.
       ``(4) Section cannot increase ordinary loss.--To the extent 
     that (but for this paragraph) this section would create or 
     increase a net ordinary loss to which section 1231(a)(2) 
     applies or an ordinary loss to which any other provision of 
     this title applies, such provision shall not apply. The 
     taxpayer shall be treated as having a long-term capital loss 
     in an amount equal to the amount of the ordinary loss to 
     which the preceding sentence applies.
       ``(5) Acquisition date where there has been prior 
     application of subsection (a)(1) with respect to the 
     taxpayer.--If there has been a prior application of 
     subsection (a)(1) to an asset while such asset was held by 
     the taxpayer, the date of acquisition of such asset by the 
     taxpayer shall be treated as not earlier than the date of the 
     most recent such prior application.
       ``(6) Collapsible corporations.--The application of section 
     341(a) (relating to collapsible corporations) shall be 
     determined without regard to this section.
       ``(e) Certain Conduit Entities.--
       ``(1) Regulated investment companies; real estate 
     investment trusts; common trust funds.--
       ``(A) In general.--Stock in a qualified investment entity 
     shall be an indexed asset for any calendar month in the same 
     ratio as the fair market value of the assets held by such 
     entity at the close of such month which are indexed assets 
     bears to the fair market value of all assets of such entity 
     at the close of such month.
       ``(B) Ratio of 90 percent or more.--If the ratio for any 
     calendar month determined under subparagraph (A) would (but 
     for this

[[Page S9770]]

     subparagraph) be 90 percent or more, such ratio for such 
     month shall be 100 percent.
       ``(C) Ratio of 10 percent or less.--If the ratio for any 
     calendar month determined under subparagraph (A) would (but 
     for this subparagraph) be 10 percent or less, such ratio for 
     such month shall be zero.
       ``(D) Valuation of assets in case of real estate investment 
     trusts.--Nothing in this paragraph shall require a real 
     estate investment trust to value its assets more frequently 
     than once each 36 months (except where such trust ceases to 
     exist). The ratio under subparagraph (A) for any calendar 
     month for which there is no valuation shall be the trustee's 
     good faith judgment as to such valuation.
       ``(E) Qualified investment entity.--For purposes of this 
     paragraph, the term `qualified investment entity' means--
       ``(i) a regulated investment company (within the meaning of 
     section 851),
       ``(ii) a real estate investment trust (within the meaning 
     of section 856), and
       ``(iii) a common trust fund (within the meaning of section 
     584).
       ``(2) Partnerships.--In the case of a partnership, the 
     adjustment made under subsection (a) at the partnership level 
     shall be passed through to the partners.
       ``(3) Subchapter s corporations.--In the case of an 
     electing small business corporation, the adjustment under 
     subsection (a) at the corporate level shall be passed through 
     to the shareholders.
       ``(f) Dispositions Between Related Persons.--
       ``(1) In general.--This section shall not apply to any sale 
     or other disposition of property between related persons 
     except to the extent that the basis of such property in the 
     hands of the transferee is a substituted basis.
       ``(2) Related persons defined.--For purposes of this 
     section, the term `related persons' means--
       ``(A) persons bearing a relationship set forth in section 
     267(b), and
       ``(B) persons treated as single employer under subsection 
     (b) or (c) of section 414.
       ``(g) Transfers To Increase Indexing Adjustment or 
     Depreciation Allowance.--If any person transfers cash, debt, 
     or any other property to another person and the principal 
     purpose of such transfer is--
       ``(1) to secure or increase an adjustment under subsection 
     (a), or
       ``(2) to increase (by reason of an adjustment under 
     subsection (a)) a deduction for depreciation, depletion, or 
     amortization,
     the Secretary may disallow part or all of such adjustment or 
     increase.
       ``(h) Definitions.--For purposes of this section--
       ``(1) Net lease property defined.--The term `net lease 
     property' means leased real property where--
       ``(A) the term of the lease (taking into account options to 
     renew) was 50 percent or more of the useful life of the 
     property, and
       ``(B) for the period of the lease, the sum of the 
     deductions with respect to such property which are allowable 
     to the lessor solely by reason of section 162 (other than 
     rents and reimbursed amounts with respect to such property) 
     is 15 percent or less of the rental income produced by such 
     property.
       ``(2) Stock includes interest in common trust fund.--The 
     term `stock in a corporation' includes any interest in a 
     common trust fund (as defined in section 584(a)).
       ``(i) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this section.''
       (b) Clerical Amendment.--The table of sections for part II 
     of subchapter O of such chapter 1 is amended by inserting 
     after the item relating to section 1021 the following new 
     item:

``Sec. 1022. Indexing of capital assets for purposes of determining 
              gain or loss.''
       (c) Adjustment To Apply for Purposes of Determining 
     Earnings and Profits.--Subsection (f) of section 312 
     (relating to effect on earnings and profits of gain or loss 
     and of receipt of tax-free distributions) is amended by 
     adding at the end thereof the following new paragraph:
       ``(3) Effect on earnings and profits of indexed basis.--

  ``For substitution of indexed basis for adjusted basis in the case of 
the disposition of capital assets after December 31, 1999, see section 
1022(a)(1).''
       (d) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to the disposition of any property the holding period 
     of which begins after December 31, 1999.
       (2) Certain transactions between related persons.--The 
     amendments made by this section shall not apply to the 
     disposition of any property acquired after December 31, 1999, 
     from a related person (as defined in section 1022(f)(2) of 
     the Internal Revenue Code of 1986, as added by this section) 
     if--
       (A) such property was so acquired for a price less than the 
     property's fair market value, and
       (B) the amendments made by this section did not apply to 
     such property in the hands of such related person.

              TITLE V--FULL DEDUCTION FOR HEALTH INSURANCE

     SEC. 501. DEDUCTION FOR 100 PERCENT OF HEALTH INSURANCE COSTS 
                   OF SELF-EMPLOYED INDIVIDUALS.

       (a) In General.--Paragraph (1) of section 162(l) is amended 
     to read as follows:
       ``(1) Allowance of deduction.--In the case of an individual 
     who is an employee within the meaning of section 401(c)(1), 
     there shall be allowed as a deduction under this section an 
     amount equal to 100 percent of the amount paid during the 
     taxable year for insurance which constitutes medical care for 
     the taxpayer, his spouse, and dependents.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.

     SEC. 502. DEDUCTION FOR HEALTH INSURANCE COSTS OF INDIVIDUALS 
                   NOT PARTICIPATING IN EMPLOYER-SUBSIDIZED HEALTH 
                   PLANS.

       (a) In General.--Part VII of subchapter B of chapter 1 is 
     amended by redesignating section 222 as section 223 and by 
     inserting after section 221 the following new section:

     ``SEC. 222. HEALTH INSURANCE COSTS.

       ``(a) In General.--In the case of an individual, there 
     shall be allowed as a deduction an amount equal to the 
     applicable percentage of the amount paid during the taxable 
     year for insurance (including amounts paid as premiums under 
     part B of title XVIII of the Social Security Act) which 
     constitutes medical care (as defined in section 213(d)(1) (A) 
     and (B)) for the taxpayer and the taxpayer's spouse and 
     dependents.
       ``(b) Applicable Percentage.--For purposes of subsection 
     (a), the applicable percentage shall be determined in 
     accordance with the following table:

``For taxable years beginning                            The applicable
  in calendar year--                                    percentage is--
  2001, 2002, 2003.................................................25  
  2004 and 2005....................................................50  
  2006 and thereafter............................................100.  
       ``(c) Limitation Based on Other Coverage.--
       ``(1) Coverage under certain subsidized employer plans.--
       ``(A) In general.--Subsection (a) shall not apply to any 
     taxpayer for any calendar month for which the taxpayer 
     participates in any health plan maintained by any employer of 
     the taxpayer or of the spouse of the taxpayer if 50 percent 
     or more of the cost of coverage under such plan (determined 
     under section 4980B and without regard to payments made with 
     respect to any coverage described in subsection (e)) is paid 
     or incurred by the employer.
       ``(B) Employer contributions to cafeteria plans, flexible 
     spending arrangements, and medical savings accounts.--
     Employer contributions to a cafeteria plan, a flexible 
     spending or similar arrangement, or a medical savings account 
     which are excluded from gross income under section 106 shall 
     be treated for purposes of subparagraph (A) as paid by the 
     employer.
       ``(C) Aggregation of plans of employer.--A health plan 
     which is not otherwise described in subparagraph (A) shall be 
     treated as described in such subparagraph if such plan would 
     be so described if all health plans of persons treated as a 
     single employer under subsections (b), (c), (m), or (o) of 
     section 414 were treated as one health plan.
       ``(2) Coverage under certain federal programs.--
       ``(A) In general.--Subsection (a) shall not apply to any 
     amount paid for any coverage for an individual for any 
     calendar month if, as of the first day of such month, the 
     individual is covered under any medical care program 
     described in--
       ``(i) title XVIII, XIX, or XXI of the Social Security Act,
       ``(ii) chapter 55 of title 10, United States Code,
       ``(iii) chapter 17 of title 38, United States Code,
       ``(iv) chapter 89 of title 5, United States Code, or
       ``(v) the Indian Health Care Improvement Act.
       ``(B) Exception for continuation coverage of fehbp.--
     Subparagraph (A)(iv) shall not apply to coverage which is 
     comparable to continuation coverage under section 4980B.
       ``(d) Deduction Not Available for Payment of Ancillary 
     Coverage Premiums.--Any amount paid as a premium for 
     insurance which provides for--
       ``(1) coverage for accidents, disability, dental care, 
     vision care, or a specified illness, or
       ``(2) making payments of a fixed amount per day (or other 
     period) by reason of being hospitalized.
     shall not be taken into account under subsection (a).
       ``(e) Special Rules.--
       ``(1) Coordination with deduction for health insurance 
     costs of self-employed individuals.--The amount taken into 
     account by the taxpayer in computing the deduction under 
     section 162(l) shall not be taken into account under this 
     section.
       ``(2) Coordination with medical expense deduction.--The 
     amount taken into account by the taxpayer in computing the 
     deduction under this section shall not be taken into account 
     under section 213.
       ``(f) Regulations.--The Secretary shall prescribe such 
     regulations as may be appropriate to carry out this section, 
     including regulations requiring employers to report to their 
     employees and the Secretary such information as the Secretary 
     determines to be appropriate.''
       (b) Deduction Allowed Whether or Not Taxpayer Itemizes 
     Other Deductions.--Subsection (a) of section 62 is amended by 
     inserting after paragraph (17) the following new item:
       ``(18) Health insurance costs.--The deduction allowed by 
     section 222.''

[[Page S9771]]

       (c) Clerical Amendment.--The table of sections for part VII 
     of subchapter B of chapter 1 is amended by striking the last 
     item and inserting the following new items:

``Sec. 222. Health insurance costs.
``Sec. 223. Cross reference.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.
                                 ______
                                 

                   NICKLES AMENDMENTS NOS. 1406-1407

  (Ordered to lie on the table.)
  Mr. NICKLES submitted two amendments intended to be proposed by him 
to the bill, S. 1429, supra; as follows:

                           Amendment No. 1406

       At the end of title VI, insert:

     SEC. ____. DEFINITION OF FACILITIES FOR AGENT-DRIVERS AND 
                   COMMISSION-DRIVERS.

       (a) Internal Revenue Code.--The flush language at the end 
     of section 3121(d)(3) is amended by inserting ``(including 
     distribution routes or territories)'' after ``facilities'' 
     the first place it appears.
       (b) Social Security Act.--The flush language at the end of 
     section 210(j)(3) of the Social Security Act is amended by 
     inserting ``(including distribution routes or territories) 
     after ``facilities'' the first place it appears.
       (c) Effective Date.--The amendments made by this section 
     shall apply to services performed after December 31, 1999.
                                  ____


                           Amendment No. 1407

       On page 432, line 12, after the end period, insert the 
     following: ``For purposes of the preceding sentence, an 
     entity shall be treated as such a controlled entity on July 
     14, 1999, if it becomes such an entity after such date in a 
     transaction--
       ``(A) made pursuant to a written agreement which was 
     binding on such date and at all times thereafter, or
       ``(B) described on or before such date in a filing with the 
     Securities and Exchange Commission required solely by reason 
     of the transaction.''

                          ____________________