[Congressional Record Volume 146, Number 26 (Thursday, March 9, 2000)]
[House]
[Pages H792-H879]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
WAGE AND EMPLOYMENT GROWTH ACT OF 1999
Mr. ARCHER. Mr. Speaker, pursuant to House Resolution 434, I call up
the bill (H.R. 3081) to increase the Federal minimum wage and to amend
the Internal Revenue Code of 1986 to provide tax benefits for small
businesses, and for other purposes, and ask for its immediate
consideration in the House.
The Clerk read the title of the bill.
The SPEAKER pro tempore (Mr. Pease). Pursuant to House Resolution
434, the bill is considered read for amendment.
The text of H.R. 3081 is as follows:
H.R. 3081
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Wage and
Employment Growth 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.--
Sec. 1. Short title; references; table of contents.
TITLE I--AMENDMENTS TO FAIR LABOR STANDARDS ACT OF 1938
Sec. 101. Minimum wage.
[[Page H793]]
Sec. 102. Exemption for computer professionals.
Sec. 103. Exemption for certain sales employees.
Sec. 104. Exemption for funeral directors.
TITLE II--SMALL BUSINESS PROVISIONS
Sec. 201. Deduction for 100 percent of health insurance costs of self-
employed individuals.
Sec. 202. Increase in expense treatment for small businesses.
Sec. 203. Small businesses allowed increased deduction for meal
expenses.
Sec. 204. Increased deductibility of business meal expenses for
individuals subject to Federal limitations on hours of
service.
Sec. 205. Repeal of occupational taxes relating to distilled spirits,
wine, and beer.
TITLE III--PENSION PROVISIONS
Subtitle A--Expanding Coverage
Sec. 301. Increase in benefit and contribution limits.
Sec. 302. Plan loans for subchapter S owners, partners, and sole
proprietors.
Sec. 303. Modification of top-heavy rules.
Sec. 304. Elective deferrals not taken into account for purposes of
deduction limits.
Sec. 305. Repeal of coordination requirements for deferred compensation
plans of State and local governments and tax-exempt
organizations.
Sec. 306. Elimination of user fee for requests to IRS regarding pension
plans.
Sec. 307. Deduction limits.
Sec. 308. Option to treat elective deferrals as after-tax
contributions.
Sec. 309. Reduced PBGC premium for new plans of small employers.
Sec. 310. Reduction of additional PBGC premium for new and small plans.
Subtitle B--Enhancing Fairness for Women
Sec. 321. Catchup contributions for individuals age 50 or over.
Sec. 322. Equitable treatment for contributions of employees to defined
contribution plans.
Sec. 323. Faster vesting of certain employer matching contributions.
Sec. 324. Simplify and update the minimum distribution rules.
Sec. 325. Clarification of tax treatment of division of section 457
plan benefits upon divorce.
Sec. 326. Modification of safe harbor relief for hardship withdrawals
from cash or deferred arrangements.
Subtitle C--Increasing Portability for Participants
Sec. 331. Rollovers allowed among various types of plans.
Sec. 332. Rollovers of IRAs into workplace retirement plans.
Sec. 333. Rollovers of after-tax contributions.
Sec. 334. Hardship exception to 60-day rule.
Sec. 335. Treatment of forms of distribution.
Sec. 336. Rationalization of restrictions on distributions.
Sec. 337. Purchase of service credit in governmental defined benefit
plans.
Sec. 338. Employers may disregard rollovers for purposes of cash-out
amounts.
Sec. 339. Minimum distribution and inclusion requirements for section
457 plans.
Subtitle D--Strengthening Pension Security and Enforcement
Sec. 341. Repeal of 150 percent of current liability funding limit.
Sec. 342. Maximum contribution deduction rules modified and applied to
all defined benefit plans.
Sec. 343. Missing participants.
Sec. 344. Periodic pension benefits statements.
Sec. 345. Civil penalties for breach of fiduciary responsibility.
Sec. 346. Excise tax relief for sound pension funding.
Sec. 347. Excise tax on failure to provide notice by defined benefit
plans significantly reducing future benefit accruals.
Sec. 348. Protection of investment of employee contributions to 401(k)
plans.
Sec. 349. Treatment of multiemployer plans under section 415.
Sec. 350. Technical corrections to Saver Act.
Sec. 351. Model spousal consent language and qualified domestic
relations order.
Sec. 352. Elimination of ERISA double jeopardy.
Subtitle E--Reducing Regulatory Burdens
Sec. 361. Modification of timing of plan valuations.
Sec. 362. ESOP dividends may be reinvested without loss of dividend
deduction.
Sec. 363. Repeal of transition rule relating to certain highly
compensated employees.
Sec. 364. Employees of tax-exempt entities.
Sec. 365. Clarification of treatment of employer-provided retirement
advice.
Sec. 366. Reporting simplification.
Sec. 367. Improvement of employee plans compliance resolution system.
Sec. 368. Substantial owner benefits in terminated plans.
Sec. 369. Modification of exclusion for employer provided transit
passes.
Sec. 370. Repeal of the multiple use test.
Sec. 371. Flexibility in nondiscrimination, coverage, and line of
business rules.
Sec. 372. Extension to international organizations of moratorium on
application of certain nondiscrimination rules applicable
to State and local plans.
Sec. 373. Notice and consent period regarding distributions.
Sec. 374. Annual report dissemination.
Sec. 375. Excess benefit plans.
Sec. 376. Benefit suspension notice.
Sec. 377. Clarification of church welfare plan status under State
insurance law.
Subtitle F--Plan Amendments
Sec. 381. Provisions relating to plan amendments.
TITLE IV--EXTENSION OF WORK OPPORTUNITY CREDIT AND WELFARE-TO-WORK
CREDIT
Sec. 401. Work opportunity credit and welfare-to-work credit.
TITLE V--ESTATE TAX RELIEF
Subtitle A--Reductions of Estate and Gift Tax Rates
Sec. 501. Reductions of estate and gift tax rates.
Subtitle B--Unified Credit Replaced With Unified Exemption Amount
Sec. 511. Unified credit against estate and gift taxes replaced with
unified exemption amount.
Subtitle C--Modifications of Generation-skipping Transfer Tax
Sec. 521. Deemed allocation of GST exemption to lifetime transfers to
trusts; retroactive allocations.
Sec. 522. Severing of trusts.
Sec. 523. Modification of certain valuation rules.
Sec. 524. Relief provisions.
Subtitle D--Conservation Easements
Sec. 531. Expansion of estate tax rule for conservation easements.
TITLE VI--TAX RELIEF FOR DISTRESSED COMMUNITIES AND INDUSTRIES
Subtitle A--American Community Renewal Act of 1999
Sec. 601. Short title.
Sec. 602. Designation of and tax incentives for renewal communities.
Sec. 603. Extension of expensing of environmental remediation costs to
renewal communities.
Sec. 604. Extension of work opportunity tax credit for renewal
communities.
Sec. 605. Conforming and clerical amendments.
Subtitle B--Timber Incentives
Sec. 611. Temporary suspension of maximum amount of amortizable
reforestation expenditures.
TITLE VII--REAL ESTATE PROVISIONS
Subtitle A--Improvements in Low-Income Housing Credit
Sec. 701. Modification of State ceiling on low-income housing credit.
Sec. 702. Modification of criteria for allocating housing credits among
projects.
Sec. 703. Additional responsibilities of housing credit agencies.
Sec. 704. Modifications to rules relating to basis of building which is
eligible for credit.
Sec. 705. Other modifications.
Sec. 706. Carryforward rules.
Sec. 707. Effective date.
Subtitle B--Provisions Relating to Real Estate Investment Trusts
Part I--Treatment of Income and Services Provided by Taxable REIT
Subsidiaries
Sec. 711. Modifications to asset diversification test.
Sec. 712. Treatment of income and services provided by taxable REIT
subsidiaries.
Sec. 713. Taxable REIT subsidiary.
Sec. 714. Limitation on earnings stripping.
Sec. 715. 100 percent tax on improperly allocated amounts.
Sec. 716. Effective date.
Part II--Health Care REITs
Sec. 721. Health care REITs.
Part III--Conformity With Regulated Investment Company Rules
Sec. 731. Conformity with regulated investment company rules.
Part IV--Clarification of Exception From Impermissible Tenant Service
Income
Sec. 741. Clarification of exception for independent operators.
Part V--Modification of Earnings and Profits Rules
Sec. 751. Modification of earnings and profits rules.
Subtitle C--Private Activity Bond Volume Cap
Sec. 761. Acceleration of phase-in of increase in volume cap on private
activity bonds.
Subtitle D--Exclusion From Gross Income for Certain Forgiven Mortgage
Obligations.
Sec. 771. Exclusion from gross income for certain forgiven mortgage
obligations.
TITLE VIII--MISCELLANEOUS PROVISIONS
Sec. 801. Credit for modifications to inter-city buses required under
the Americans with Disabilities Act of 1990.
[[Page H794]]
Sec. 802. Certain educational benefits provided by an employer to
children of employees excludable from gross income as a
scholarship.
Sec. 803. Tax incentives for qualified United States independent film
and television production.
TITLE I--AMENDMENTS TO FAIR LABOR STANDARDS ACT OF 1938
SEC. 101. MINIMUM WAGE.
(a) Increase.--Section 6(a)(1) of the Fair Labor Standards
Act of 1938 (29 U.S.C. 206(a)(1)) is amended to read as
follows:
``(1) except as otherwise provided in this section, not
less than--
``(A) $5.15 an hour beginning September 1, 1997,
``(B) $5.48 an hour during the year beginning April 1,
2000,
``(C) $5.81 an hour during the year beginning April 1,
2001, and
``(D) $6.15 an hour during the year beginning April 1,
2002.''.
(b) Overtime.--Section 7(e) of such Act (29 U.S.C. 207(e))
is amended by striking paragraph (1).
SEC. 102. EXEMPTION FOR COMPUTER PROFESSIONALS.
Section 13(a) of the Fair Labor Standards Act of 1938 (29
U.S.C. 213(a)) is amended by amending paragraph (17) to read
as follows:
``(17) any employee who is a computer systems, network, or
database analyst, designer, developer, programmer, software
engineer, or other similarly skilled worker--
``(A) whose primary duty is--
``(i) the application of systems or network or database
analysis techniques and procedures, including consulting with
users, to determine hardware, software, systems, network, or
database specifications (including functional
specifications);
``(ii) the design, configuration, development, integration,
documentation, analysis, creation, testing, securing, or
modification of, or problem resolution for, computer systems,
networks, databases, or programs, including prototypes, based
on and related to user, system, network, or database
specifications, including design specifications and machine
operating systems;
``(iii) the management or training of employees performing
duties described in clause (i) or (ii); or
``(iv) a combination of duties described in clauses (i),
(ii), or (iii) the performance of which requires the same
level of skills; and
``(B) who, in the case of an employee who is compensated on
an hourly basis, is compensated at a rate of not less than
$27.63 an hour.
For purposes of paragraph (17), the term `network' includes
the Internet and intranet networks and the world wide web. An
employee who meets the exemption provided by paragraph (17)
shall be considered an employee in a professional capacity
pursuant to paragraph (1).''.
SEC. 103. EXEMPTION FOR CERTAIN SALES EMPLOYEES.
(a) Amendment.--Section 13(a) of the Fair Labor Standards
Act of 1938 (29 U.S.C. 213(a)) is amended by striking the
period at the end of paragraph (17) and inserting a semicolon
and by adding at the end the following:
``(18) any employee employed in a sales position if--
``(A) the employee has specialized or technical knowledge
related to products or services being sold;
``(B) the employee's--
``(i) sales are predominantly to persons or entities to
whom the employee's position has made previous sales; or
``(ii) position does not involve initiating sales contacts;
``(C) the employee has a detailed understanding of the
needs of those to whom the employee is selling;
``(D) the employee exercises discretion in offering a
variety of products and services;
``(E) the employee receives--
``(i) base compensation, determined without regard to the
number of hours worked by the employee, of not less than an
amount equal to one and one-half times the minimum wage in
effect under section 6(a)(1) multiplied by 2,080; and
``(ii) in addition to the employee's base compensation,
compensation based upon each sale attributable to the
employee;
``(F) the employee's aggregate compensation based upon
sales attributable to the employee is not less than 40
percent of one and one-half times the minimum wage multiplied
by 2,080;
``(G) the employee receives a rate of compensation based
upon each sale attributable to the employee which is beyond
sales required to reach the compensation required by
subparagraph (F) which rate is not less than the rate on
which the compensation required by subparagraph (F) is
determined; and
``(H) the rate of annual compensation or base compensation
for any employee who did not work for an employer for an
entire calendar year is prorated to reflect annual
compensation which would have been earned if the employee had
been compensated at the same rate for the entire calendar
year.''.
(b) Construction.--The amendment made by subsection (a) may
not be construed to apply to individuals who are employed as
route sales drivers.
SEC. 104. EXEMPTION FOR FUNERAL DIRECTORS.
Section 13(a) of the Fair Labor Standards Act of 1938 (29
U.S.C. 213(a)) is amended by striking the period at the end
of paragraph (18) and inserting ``; or'' and by adding after
paragraph (18) the following:
``(19) any employee employed as a licensed funeral director
or a licensed embalmer.''.
TITLE II--SMALL BUSINESS PROVISIONS
SEC. 201. 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 and the taxpayer's spouse and dependents.''.
(b) Clarification of Limitations on Other Coverage.--The
first sentence of section 162(l)(2)(B) is amended to read as
follows: ``Paragraph (1) shall not apply to any taxpayer for
any calendar month for which the taxpayer participates in any
subsidized health plan maintained by any employer (other than
an employer described in section 401(c)(4)) of the taxpayer
or the spouse of the taxpayer.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2000.
SEC. 202. INCREASE IN EXPENSE TREATMENT FOR SMALL
BUSINESSES.
(a) In General.--Paragraph (1) of section 179(b) (relating
to dollar limitation) is amended to read as follows:
``(1) Dollar limitation.--The aggregate cost which may be
taken into account under subsection (a) for any taxable year
shall not exceed $30,000.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2000.
SEC. 203. SMALL BUSINESSES ALLOWED INCREASED DEDUCTION FOR
MEAL EXPENSES.
(a) In General.--Subsection (n) of section 274 (relating to
only 50 percent of meal and entertainment expenses allowed as
deduction) is amended by adding at the end the following new
paragraph:
``(4) Special rule for small businesses.--
``(A) In general.--In the case of any taxpayer which is a
small business, paragraph (1) shall be applied by
substituting for `50 percent' with respect to expenses for
food or beverages--
``(i) `55 percent' in the case of taxable years beginning
in 2001, and
``(ii) `60 percent' in the case of taxable years beginning
after 2001.
``(B) Small business.--For purposes of this paragraph, the
term `small business' means, with respect to expenses paid or
incurred during any taxable year--
``(i) any C corporation which meets the requirements of
section 55(e)(1) for such year, and
``(ii) any S corporation, partnership, or sole
proprietorship which would meet such requirements if it were
a C corporation.''
(b) Effective Date.--The amendment made by subsection (a)
shall apply to taxable years beginning after December 31,
2000.
SEC. 204. INCREASED DEDUCTIBILITY OF BUSINESS MEAL EXPENSES
FOR INDIVIDUALS SUBJECT TO FEDERAL LIMITATIONS
ON HOURS OF SERVICE.
(a) In General.--Paragraph (3) of section 274(n) (relating
to only 50 percent of meal and entertainment expenses allowed
as deduction) is amended to read as follows:
``(3) Special rule for individuals subject to federal hours
of service.--In the case of any expenses for food or
beverages consumed while away from home (within the meaning
of section 162(a)(2)) by an individual during, or incident
to, the period of duty subject to the hours of service
limitations of the Department of Transportation, paragraph
(1) shall be applied by substituting `80 percent' for `50
percent'.''
(b) Effective Date.--The amendment made by subsection (a)
shall apply to taxable years beginning after December 31,
2000.
SEC. 205. REPEAL OF OCCUPATIONAL TAXES RELATING TO DISTILLED
SPIRITS, WINE, AND BEER.
(a) Repeal of Occupational Taxes.--
(1) In general.--The following provisions of part II of
subchapter A of chapter 51 of the Internal Revenue Code of
1986 (relating to occupational taxes) are hereby repealed:
(A) Subpart A (relating to rectifier).
(B) Subpart B (relating to brewer).
(C) Subpart D (relating to wholesale dealers) (other than
sections 5114 and 5116).
(D) Subpart E (relating to retail dealers) (other than
section 5124).
(E) Subpart G (relating to general provisions) (other than
sections 5142, 5143, 5145, and 5146).
(2) Nonbeverage domestic drawback.--Section 5131 is amended
by striking ``, on payment of a special tax per annum,''.
(3) Industrial use of distilled spirits.--Section 5276 is
hereby repealed.
(b) Conforming Amendments.--
(1)(A) The heading for part II of subchapter A of chapter
51 and the table of subparts for such part are amended to
read as follows:
``PART II--MISCELLANEOUS PROVISIONS
``Subpart A. Manufacturers of stills.
``Subpart B. Nonbeverage domestic drawback claimants.
``Subpart C. Recordkeeping by dealers.
``Subpart D. Other provisions.''
(B) The table of parts for such subchapter A is amended by
striking the item relating
[[Page H795]]
to part II and inserting the following new item:
``Part II. Miscellaneous provisions.''
(2) Subpart C of part II of such subchapter (relating to
manufacturers of stills) is redesignated as subpart A.
(3)(A) Subpart F of such part II (relating to nonbeverage
domestic drawback claimants) is redesignated as subpart B and
sections 5131 through 5134 are redesignated as sections 5111
through 5114, respectively.
(B) The table of sections for such subpart B, as so
redesignated, is amended--
(i) by redesignating the items relating to sections 5131
through 5134 as relating to sections 5111 through 5114,
respectively, and
(ii) by striking ``and rate of tax'' in the item relating
to section 5111, as so redesignated.
(C) Section 5111, as redesignated by subparagraph (A), is
amended--
(i) by striking ``and rate of tax'' in the section heading,
(ii) by striking the subsection heading for subsection (a),
and
(iii) by striking subsection (b).
(4) Part II of subchapter A of chapter 51 is amended by
adding after subpart B, as redesignated by paragraph (3), the
following new subpart:
``Subpart C. Recordkeeping by Dealers
``Sec. 5121. Recordkeeping by wholesale dealers.
``Sec. 5122. Recordkeeping by retail dealers.
``Sec. 5123. Preservation and inspection of records, and entry of
premises for inspection.''
(5)(A) Section 5114 (relating to records) is moved to
subpart C of such part II and inserted after the table of
sections for such subpart.
(B) Section 5114 is amended--
(i) by striking the section heading and inserting the
following new heading:
``SEC. 5121. RECORDKEEPING BY WHOLESALE DEALERS.'',
and
(ii) by redesignating subsection (c) as subsection (d) and
by inserting after subsection (b) the following new
subsection:
``(c) Wholesale Dealers.--For purposes of this part--
``(1) Wholesale dealer in liquors.--The term `wholesale
dealer in liquors' means any dealer (other than a wholesale
dealer in beer) who sells, or offers for sale, distilled
spirits, wines, or beer, to another dealer.
``(2) Wholesale dealer in beer.--The term `wholesale dealer
in beer' means any dealer who sells, or offers for sale,
beer, but not distilled spirits or wines, to another dealer.
``(3) Dealer.--The term `dealer' means any person who
sells, or offers for sale, any distilled spirits, wines, or
beer.
``(4) Presumption in case of sale of 20 wine gallons or
more.--The sale, or offer for sale, of distilled spirits,
wines, or beer, in quantities of 20 wine gallons or more to
the same person at the same time, shall be presumptive
evidence that the person making such sale, or offer for sale,
is engaged in or carrying on the business of a wholesale
dealer in liquors or a wholesale dealer in beer, as the case
may be. Such presumption may be overcome by evidence
satisfactorily showing that such sale, or offer for sale, was
made to a person other than a dealer.''
(C) Paragraph (3) of section 5121(d), as so redesignated,
is amended by striking ``section 5146'' and inserting
``section 5123''.
(6)(A) Section 5124 (relating to records) is moved to
subpart C of part II of subchapter A of chapter 51 and
inserted after section 5121.
(B) Section 5124 is amended--
(i) by striking the section heading and inserting the
following new heading:
``SEC. 5122. RECORDKEEPING BY RETAIL DEALERS.'',
(ii) by striking ``section 5146'' in subsection (c) and
inserting ``section 5123'', and
(iii) by redesignating subsection (c) as subsection (d) and
inserting after subsection (b) the following new subsection:
``(c) Retail Dealers.--For purposes of this section--
``(1) Retail dealer in liquors.--The term `retail dealer in
liquors' means any dealer (other than a retail dealer in
beer) who sells, or offers for sale, distilled spirits,
wines, or beer, to any person other than a dealer.
``(2) Retail dealer in beer.--The term `retail dealer in
beer' means any dealer who sells, or offers for sale, beer,
but not distilled spirits or wines, to any person other than
a dealer.
``(3) Dealer.--The term `dealer' has the meaning given such
term by section 5121(c)(3).''
(7) Section 5146 is moved to subpart C of part II of
subchapter A of chapter 51, inserted after section 5122, and
redesignated as section 5123.
(8) Part II of subchapter A of chapter 51 is amended by
inserting after subpart C the following new subpart:
``Subpart D. Other Provisions
``Sec. 5131. Packaging distilled spirits for industrial uses.
``Sec. 5132. Prohibited purchases by dealers.''
(9) Section 5116 is moved to subpart D of part II of
subchapter A of chapter 51, inserted after the table of
sections, redesignated as section 5131, and amended by
inserting ``(as defined section 5121(c))'' after ``dealer''
in subsection (a).
(10) Subpart D of part II of subchapter A of chapter 51 is
amended by adding at the end thereof the following new
section:
``SEC. 5132. PROHIBITED PURCHASES BY DEALERS.
``(a) In General.--Except as provided in regulations
prescribed by the Secretary, it shall be unlawful for a
dealer to purchase distilled spirits from any person other
than a wholesale dealer in liquors who is required to keep
the records prescribed by section 5121.
``(b) Penalty and Forfeiture.--
``For penalty and forfeiture provisions applicable to violations of
subsection (a), see sections 5687 and 7302.''
(11) Subsection (b) of section 5002 is amended--
(A) by striking ``section 5112(a)'' and inserting ``section
5121(c)(3)'',
(B) by striking ``section 5112'' and inserting ``section
5121(c)'',
(C) by striking ``section 5122'' and inserting ``section
5122(c)''.
(12) Subparagraph (A) of section 5010(c)(2) is amended by
striking ``section 5134'' and inserting ``section 5114''.
(13) Subsection (d) of section 5052 is amended to read as
follows:
``(d) Brewer.--For purposes of this chapter, the term
`brewer' means any person who brews beer or produces beer for
sale. Such term shall not include any person who produces
only beer exempt from tax under section 5053(e).''
(14) The text of section 5182 is amended to read as
follows:
``For provisions requiring recordkeeping by wholesale
liquor dealers, see section 5112, and by retail liquor
dealers, see section 5122.''
(15) Subsection (b) of section 5402 is amended by striking
``section 5092'' and inserting ``section 5052(d)''.
(16) Section 5671 is amended by striking ``or 5091''.
(17)(A) Part V of subchapter J of chapter 51 is hereby
repealed.
(B) The table of parts for such subchapter J is amended by
striking the item relating to part V.
(18)(A) Sections 5142, 5143, and 5145 are moved to
subchapter D of chapter 52, inserted after section 5731,
redesignated as sections 5732, 5733, and 5734, respectively,
and amended by striking ``this part'' each place it appears
and inserting ``this subchapter''.
(B) Section 5732, as redesignated by subparagaph (A), is
amended by striking ``(except the tax imposed by section
5131)'' each place it appears.
(C) Subsection (c) of section 5733, as redesignated by
subparagraph (A), is amended by striking paragraph (2) and by
redesignating paragraph (3) as paragraph (2).
(D) The table of sections for subchapter D of chapter 52 is
amended by adding at the end thereof the following:
``Sec. 5732. Payment of tax.
``Sec. 5733. Provisions relating to liability for occupational taxes.
``Sec. 5734. Application of State laws.''
(E) Section 5731 is amended by striking subsection (c) and
by redesignating subsection (d) as subsection (c).
(19) Subsection (c) of section 6071 is amended by striking
``section 5142'' and inserting ``section 5732''.
(20) Paragraph (1) of section 7652(g) is amended--
(A) by striking ``subpart F'' and inserting ``subpart B'',
and
(B) by striking ``section 5131(a)'' and inserting ``section
5111(a)''.
(c) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act,
but shall not apply to taxes imposed for periods before such
date.
TITLE III--PENSION PROVISIONS
Subtitle A--Expanding Coverage
SEC. 301. INCREASE IN BENEFIT AND CONTRIBUTION LIMITS.
(a) Defined Benefit Plans.--
(1) Dollar limit.--
(A) Subparagraph (A) of section 415(b)(1) (relating to
limitation for defined benefit plans) is amended by striking
``$90,000'' and inserting ``$160,000''.
(B) Subparagraphs (C) and (D) of section 415(b)(2) are each
amended by striking ``$90,000'' each place it appears in the
headings and the text and inserting ``$160,000''.
(C) Paragraph (7) of section 415(b) (relating to benefits
under certain collectively bargained plans) is amended by
striking ``the greater of $68,212 or one-half the amount
otherwise applicable for such year under paragraph (1)(A) for
`$90,000' '' and inserting ``one-half the amount otherwise
applicable for such year under paragraph (1)(A) for
`$160,000' ''.
(2) Limit reduced when benefit begins before age 62.--
Subparagraph (C) of section 415(b)(2) is amended by striking
``the social security retirement age'' each place it appears
in the heading and text and inserting ``age 62''.
(3) Limit increased when benefit begins after age 65.--
Subparagraph (D) of section 415(b)(2) is amended by striking
``the social security retirement age'' each place it appears
in the heading and text and inserting ``age 65''.
(4) Cost-of-living adjustments.--Subsection (d) of section
415 (related to cost-of-living adjustments) is amended--
(A) by striking ``$90,000'' in paragraph (1)(A) and
inserting ``$160,000'', and
(B) in paragraph (3)(A)--
(i) by striking ``$90,000'' in the heading and inserting
``$160,000'', and
(ii) by striking ``October 1, 1986'' and inserting ``July
1, 2000''.
[[Page H796]]
(5) Conforming amendment.--Section 415(b)(2) is amended by
striking subparagraph (F).
(b) Defined Contribution Plans.--
(1) Dollar limit.--Subparagraph (A) of section 415(c)(1)
(relating to limitation for defined contribution plans) is
amended by striking ``$30,000'' and inserting ``$40,000''.
(2) Cost-of-living adjustments.--Subsection (d) of section
415 (related to cost-of-living adjustments) is amended--
(A) by striking ``$30,000'' in paragraph (1)(C) and
inserting ``$40,000'', and
(B) in paragraph (3)(D)--
(i) by striking ``$30,000'' in the heading and inserting
``$40,000'', and
(ii) by striking ``October 1, 1993'' and inserting ``July
1, 2000''.
(c) Qualified Trusts.--
(1) Compensation limit.--Sections 401(a)(17), 404(l),
408(k), and 505(b)(7) are each amended by striking
``$150,000'' each place it appears and inserting
``$200,000''.
(2) Base period and rounding of cost-of-living
adjustment.--Subparagraph (B) of section 401(a)(17) is
amended--
(A) by striking ``October 1, 1993'' and inserting ``July 1,
2000'', and
(B) by striking ``$10,000'' both places it appears and
inserting ``$5,000''.
(d) Elective Deferrals.--
(1) In general.--Paragraph (1) of section 402(g) (relating
to limitation on exclusion for elective deferrals) is amended
to read as follows:
``(1) In general.--
``(A) Limitation.--Notwithstanding subsections (e)(3) and
(h)(1)(B), the elective deferrals of any individual for any
taxable year shall be included in such individual's gross
income to the extent the amount of such deferrals for the
taxable year exceeds the applicable dollar amount.
``(B) Applicable dollar amount.--For purposes of
subparagraph (A), the applicable dollar amount shall be the
amount determined in accordance with the following table:
``For taxable years The applicable
beginning in dollar amount:
calendar year:
2001.....................................................$11,000
2002.....................................................$12,000
2003.....................................................$13,000
2004.....................................................$14,000
2005 or thereafter....................................$15,000.''.
(2) Cost-of-living adjustment.--Paragraph (5) of section
402(g) is amended to read as follows:
``(5) Cost-of-living adjustment.--In the case of taxable
years beginning after December 31, 2005, the Secretary shall
adjust the $15,000 amount under paragraph (1)(B) at the same
time and in the same manner as under section 415(d), except
that the base period shall be the calendar quarter beginning
July 1, 2004, and any increase under this paragraph which is
not a multiple of $500 shall be rounded to the next lowest
multiple of $500.''.
(3) Conforming amendments.--
(A) Section 402(g) (relating to limitation on exclusion for
elective deferrals), as amended by paragraphs (1) and (2), is
further amended by striking paragraph (4) and redesignating
paragraphs (5), (6), (7), (8), and (9) as paragraphs (4),
(5), (6), (7), and (8), respectively.
(B) Paragraph (2) of section 457(c) is amended by striking
``402(g)(8)(A)(iii)'' and inserting ``402(g)(7)(A)(iii)''.
(C) Clause (iii) of section 501(c)(18)(D) is amended by
striking ``(other than paragraph (4) thereof)''.
(e) Deferred Compensation Plans of State and Local
Governments and Tax-Exempt Organizations.--
(1) In general.--Section 457 (relating to deferred
compensation plans of State and local governments and tax-
exempt organizations) is amended--
(A) in subsections (b)(2)(A) and (c)(1) by striking
``$7,500'' each place it appears and inserting ``the
applicable dollar amount'', and
(B) in subsection (b)(3)(A) by striking ``$15,000'' and
inserting ``twice the dollar amount in effect under
subsection (b)(2)(A)''.
(2) Applicable dollar amount; cost-of-living adjustment.--
Paragraph (15) of section 457(e) is amended to read as
follows:
``(15) Applicable dollar amount.--
``(A) In general.--The applicable dollar amount shall be
the amount determined in accordance with the following table:
``For taxable years The applicable
beginning in dollar amount:
calendar year:
2001.....................................................$11,000
2002.....................................................$12,000
2003.....................................................$13,000
2004.....................................................$14,000
2005 or thereafter.......................................$15,000.
``(B) Cost-of-living adjustments.--In the case of taxable
years beginning after December 31, 2005, the Secretary shall
adjust the $15,000 amount specified in the table in
subparagraph (A) at the same time and in the same manner as
under section 415(d), except that the base period shall be
the calendar quarter beginning July 1, 2004, and any increase
under this paragraph which is not a multiple of $500 shall be
rounded to the next lowest multiple of $500.''.
(f ) Simple Retirement Accounts.--
(1) Limitation.--Clause (ii) of section 408(p)(2)(A)
(relating to general rule for qualified salary reduction
arrangement) is amended by striking ``$6,000'' and inserting
``the applicable dollar amount''.
(2) Applicable dollar amount.--Subparagraph (E) of
408(p)(2) is amended to read as follows:
``(E) Applicable dollar amount; cost-of-living
adjustment.--
``(i) In general.--For purposes of subparagraph (A)(ii),
the applicable dollar amount shall be the amount determined
in accordance with the following table:
``For taxable years The applicable
beginning in dollar amount:
calendar year:
2001..................................................$7,000
2002..................................................$8,000
2003..................................................$9,000
2004 or thereafter...................................$10,000.
``(ii) Cost-of-living adjustment.--In the case of a year
beginning after December 31, 2004, the Secretary shall adjust
the $10,000 amount under clause (i) at the same time and in
the same manner as under section 415(d), except that the base
period taken into account shall be the calendar quarter
beginning July 1, 2003, and any increase under this
subparagraph which is not a multiple of $500 shall be rounded
to the next lower multiple of $500.''.
(3) Conforming amendments.--
(A) Clause (I) of section 401(k)(11)(B)(i) is amended by
striking ``$6,000'' and inserting ``the amount in effect
under section 408(p)(2)(A)(ii)''.
(B) Section 401(k)(11) is amended by striking subparagraph
(E).
(g) Rounding Rule Relating to Defined Benefit Plans and
Defined Contribution Plans.--Paragraph (4) of section 415(d)
is amended to read as follows:
``(4) Rounding.--
``(A) $160,000 amount.--Any increase under subparagraph (A)
of paragraph (1) which is not a multiple of $5,000 shall be
rounded to the next lowest multiple of $5,000.
``(B) $40,000 amount.--Any increase under subparagraph (C)
of paragraph (1) which is not a multiple of $1,000 shall be
rounded to the next lowest multiple of $1,000.''.
(h) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2000.
SEC. 302. PLAN LOANS FOR SUBCHAPTER S OWNERS, PARTNERS, AND
SOLE PROPRIETORS.
(a) Amendment to 1986 Code.--Subparagraph (B) of section
4975(f )(6) (relating to exemptions not to apply to certain
transactions) is amended by adding at the end the following
new clause:
``(iii) Loan exception.--For purposes of subparagraph
(A)(i), the term `owner-employee' shall only include a person
described in subclause (II) or (III) of clause (i).''.
(b) Amendment to ERISA.--Section 408(d)(2) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1108(d)(2))
is amended by adding at the end the following new
subparagraph:
``(C) For purposes of paragraph (1)(A), the term `owner-
employee' shall only include a person described in clause
(ii) or (iii) of subparagraph (A).''.
(c) Effective Date.--The amendments made by this section
shall apply to loans made after December 31, 2000.
SEC. 303. MODIFICATION OF TOP-HEAVY RULES.
(a) Simplification of Definition of Key Employee.--
(1) In general.--Section 416(i)(1)(A) (defining key
employee) is amended--
(A) by striking ``or any of the 4 preceding plan years'' in
the matter preceding clause (i),
(B) by striking clause (i) and inserting the following:
``(i) an officer of the employer having an annual
compensation greater than $150,000,'',
(C) by striking clause (ii) and redesignating clauses (iii)
and (iv) as clauses (ii) and (iii), respectively, and
(D) by striking the second sentence in the matter following
clause (iii), as redesignated by subparagraph (C).
(2) Conforming amendment.--Section 416(i)(1)(B)(iii) is
amended by striking ``and subparagraph (A)(ii)''.
(b) Matching Contributions Taken Into Account for Minimum
Contribution Requirements.--Section 416(c)(2)(A) (relating to
defined contribution plans) is amended by adding at the end
the following: ``Employer matching contributions (as defined
in section 401(m)(4)(A)) shall be taken into account for
purposes of this subparagraph.''.
(c) Distributions During Last Year Before Determination
Date Taken Into Account.--
(1) In general.--Paragraph (3) of section 416(g) is amended
to read as follows:
``(3) Distributions during last year before determination
date taken into account.--
``(A) In general.--For purposes of determining--
``(i) the present value of the cumulative accrued benefit
for any employee, or
``(ii) the amount of the account of any employee,
such present value or amount shall be increased by the
aggregate distributions made with respect to such employee
under the plan during the 1-year period ending on the
determination date. The preceding sentence shall also apply
to distributions under a terminated plan which if it had not
been terminated would have been required to be included in an
aggregation group.
``(B) 5-year period in case of in-service distribution.--In
the case of any distribution made for a reason other than
separation from service, death, or disability, subparagraph
(A) shall be applied by substituting `5-year period' for `1-
year period'.''.
[[Page H797]]
(2) Benefits not taken into account.--Subparagraph (E) of
section 416(g)(4) is amended--
(A) by striking ``last 5 years'' in the heading and
inserting ``last year before determination date'', and
(B) by striking ``5-year period'' and inserting ``1-year
period''.
(d) Definition of Top-Heavy Plans.--Paragraph (4) of
section 416(g) (relating to other special rules for top-heavy
plans) is amended by adding at the end the following new
subparagraph:
``(H) Cash or deferred arrangements using alternative
methods of meeting nondiscrimination requirements.--The term
`top-heavy plan' shall not include a plan which consists
solely of--
``(i) a cash or deferred arrangement which meets the
requirements of section 401(k)(12), and
``(ii) matching contributions with respect to which the
requirements of section 401(m)(11) are met.
If, but for this subparagraph, a plan would be treated as a
top-heavy plan because it is a member of an aggregation group
which is a top-heavy group, contributions under the plan may
be taken into account in determining whether any other plan
in the group meets the requirements of subsection (c)(2).''.
(e) Frozen Plan Exempt From Minimum Benefit Requirement.--
Subparagraph (C) of section 416(c)(1) (relating to defined
benefit plans) is amended--
(A) by striking ``clause (ii)'' in clause (i) and inserting
``clause (ii) or (iii)'', and
(B) by adding at the end the following:
``(iii) Exception for frozen plan.--For purposes of
determining an employee's years of service with the employer,
any service with the employer shall be disregarded to the
extent that such service occurs during a plan year when the
plan benefits (within the meaning of section 410(b)) no
employee or former employee.''.
(f ) Elimination of Family Attribution.--Section
416(i)(1)(B) (defining 5-percent owner) is amended by adding
at the end the following new clause:
``(iv) Family attribution disregarded.--Solely for purposes
of applying this paragraph (and not for purposes of any
provision of this title which incorporates by reference
the definition of a key employee or 5-percent owner under
this paragraph), section 318 shall be applied without
regard to subsection (a)(1) thereof in determining whether
any person is a 5-percent owner.''.
(g) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2000.
SEC. 304. ELECTIVE DEFERRALS NOT TAKEN INTO ACCOUNT FOR
PURPOSES OF DEDUCTION LIMITS.
(a) In General.--Section 404 (relating to deduction for
contributions of an employer to an employees' trust or
annuity plan and compensation under a deferred payment plan)
is amended by adding at the end the following new subsection:
``(n) Elective Deferrals Not Taken Into Account for
Purposes of Deduction Limits.--Elective deferrals (as defined
in section 402(g)(3)) shall not be subject to any limitation
contained in paragraph (3), (7), or (9) of subsection (a),
and such elective deferrals shall not be taken into account
in applying any such limitation to any other
contributions.''.
(b) Effective Date.--The amendment made by this section
shall apply to years beginning after December 31, 2000.
SEC. 305. REPEAL OF COORDINATION REQUIREMENTS FOR DEFERRED
COMPENSATION PLANS OF STATE AND LOCAL
GOVERNMENTS AND TAX-EXEMPT ORGANIZATIONS.
(a) In General.--Subsection (c) of section 457 (relating to
deferred compensation plans of State and local governments
and tax-exempt organizations), as amended by section 211, is
amended to read as follows:
``(c) Limitation.--The maximum amount of the compensation
of any one individual which may be deferred under subsection
(a) during any taxable year shall not exceed the amount in
effect under subsection (b)(2)(A) (as modified by any
adjustment provided under subsection (b)(3)).''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to years beginning after December 31, 2000.
SEC. 306. ELIMINATION OF USER FEE FOR REQUESTS TO IRS
REGARDING PENSION PLANS.
(a) Elimination of Certain User Fees.--The Secretary of the
Treasury or the Secretary's delegate shall not require
payment of user fees under the program established under
section 7527 of the Internal Revenue Code of 1986 for
requests to the Internal Revenue Service for determination
letters with respect to the qualified status of a pension
benefit plan maintained solely by one or more eligible
employers or any trust which is part of the plan. The
preceding sentence shall not apply to any request--
(1) made after the 5th plan year the pension benefit plan
is in existence, or
(2) made by the sponsor of any prototype or similar plan
which the sponsor intends to market to participating
employers.
(b) Pension Benefit Plan.--For purposes of this section,
the term ``pension benefit plan'' means a pension, profit-
sharing, stock bonus, annuity, or employee stock ownership
plan.
(c) Eligible Employer.--For purposes of this section, the
term ``eligible employer'' has the same meaning given such
term in section 408(p)(2)(C)(i)(I) of the Internal Revenue
Code of 1986. The determination of whether an employer is an
eligible employer under this section shall be made as of the
date of the request described in subsection (a).
(d) Effective Date.--The provisions of this section shall
apply with respect to requests made after December 31, 2000.
SEC. 307. DEDUCTION LIMITS.
(a) In General.--Section 404(a) (relating to general rule)
is amended by adding at the end the following:
``(12) Definition of compensation.--For purposes of
paragraphs (3), (7), (8), and (9), the term `compensation'
shall include amounts treated as participant's compensation
under subparagraph (C) or (D) of section 415(c)(3).''.
(b) Conforming Amendment.--Subparagraph (B) of section
404(a)(3) is amended by striking the last sentence thereof.
(c) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2000.
SEC. 308. OPTION TO TREAT ELECTIVE DEFERRALS AS AFTER-TAX
CONTRIBUTIONS.
(a) In General.--Subpart A of part I of subchapter D of
chapter 1 (relating to deferred compensation, etc.) is
amended by inserting after section 402 the following new
section:
``SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFERRALS AS PLUS
CONTRIBUTIONS.
``(a) General Rule.--If an applicable retirement plan
includes a qualified plus contribution program--
``(1) any designated plus contribution made by an employee
pursuant to the program shall be treated as an elective
deferral for purposes of this chapter, except that such
contribution shall not be excludable from gross income, and
``(2) such plan (and any arrangement which is part of such
plan) shall not be treated as failing to meet any requirement
of this chapter solely by reason of including such program.
``(b) Qualified Plus Contribution Program.--For purposes of
this section--
``(1) In general.--The term `qualified plus contribution
program' means a program under which an employee may elect to
make designated plus contributions in lieu of all or a
portion of elective deferrals the employee is otherwise
eligible to make under the applicable retirement plan.
``(2) Separate accounting required.--A program shall not be
treated as a qualified plus contribution program unless the
applicable retirement plan--
``(A) establishes separate accounts (`designated plus
accounts') for the designated plus contributions of each
employee and any earnings properly allocable to the
contributions, and
``(B) maintains separate recordkeeping with respect to each
account.
``(c) Definitions and Rules Relating to Designated Plus
Contributions.--For purposes of this section--
``(1) Designated plus contribution.--The term `designated
plus contribution' means any elective deferral which--
``(A) is excludable from gross income of an employee
without regard to this section, and
``(B) the employee designates (at such time and in such
manner as the Secretary may prescribe) as not being so
excludable.
``(2) Designation limits.--The amount of elective deferrals
which an employee may designate under paragraph (1) shall not
exceed the excess (if any) of--
``(A) the maximum amount of elective deferrals excludable
from gross income of the employee for the taxable year
(without regard to this section), over
``(B) the aggregate amount of elective deferrals of the
employee for the taxable year which the employee does not
designate under paragraph (1).
``(3) Rollover contributions.--
``(A) In general.--A rollover contribution of any payment
or distribution from a designated plus account which is
otherwise allowable under this chapter may be made only if
the contribution is to--
``(i) another designated plus account of the individual
from whose account the payment or distribution was made, or
``(ii) a Roth IRA of such individual.
``(B) Coordination with limit.--Any rollover contribution
to a designated plus account under subparagraph (A) shall not
be taken into account for purposes of paragraph (1).
``(d) Distribution Rules.--For purposes of this title--
``(1) Exclusion.--Any qualified distribution from a
designated plus account shall not be includible in gross
income.
``(2) Qualified distribution.--For purposes of this
subsection--
``(A) In general.--The term `qualified distribution' has
the meaning given such term by section 408A(d)(2)(A) (without
regard to clause (iv) thereof).
``(B) Distributions within nonexclusion period.--A payment
or distribution from a designated plus account shall not be
treated as a qualified distribution if such payment or
distribution is made within the 5-taxable-year period
beginning with the earlier of--
``(i) the first taxable year for which the individual made
a designated plus contribution to any designated plus account
established
[[Page H798]]
for such individual under the same applicable retirement
plan, or
``(ii) if a rollover contribution was made to such
designated plus account from a designated plus account
previously established for such individual under another
applicable retirement plan, the first taxable year for which
the individual made a designated plus contribution to such
previously established account.
``(C) Distributions of excess deferrals and earnings.--The
term `qualified distribution' shall not include any
distribution of any excess deferral under section 402(g)(2)
and any income on the excess deferral.
``(3) Aggregation rules.--Section 72 shall be applied
separately with respect to distributions and payments from a
designated plus account and other distributions and payments
from the plan.
``(e) Other Definitions.--For purposes of this section--
``(1) Applicable retirement plan.--The term `applicable
retirement plan' means--
``(A) an employees' trust described in section 401(a) which
is exempt from tax under section 501(a), and
``(B) a plan under which amounts are contributed by an
individual's employer for an annuity contract described in
section 403(b).
``(2) Elective deferral.--The term `elective deferral'
means any elective deferral described in subparagraph (A) or
(C) of section 402(g)(3).''.
(b) Excess Deferrals.--Section 402(g) (relating to
limitation on exclusion for elective deferrals) is amended--
(1) by adding at the end of paragraph (1) the following new
sentence: ``The preceding sentence shall not apply to so much
of such excess as does not exceed the designated plus
contributions of the individual for the taxable year.'', and
(2) by inserting ``(or would be included but for the last
sentence thereof)'' after ``paragraph (1)'' in paragraph
(2)(A).
(c) Rollovers.--Subparagraph (B) of section 402(c)(8) is
amended by adding at the end the following:
``If any portion of an eligible rollover distribution is
attributable to payments or distributions from a designated
plus account (as defined in section 402A), an eligible
retirement plan with respect to such portion shall include
only another designated plus account and a Roth IRA.''.
(d) Reporting Requirements.--
(1) W-2 information.--Section 6051(a)(8) is amended by
inserting ``, including the amount of designated plus
contributions (as defined in section 402A)'' before the comma
at the end.
(2) Information.--Section 6047 is amended by redesignating
subsection (f ) as subsection (g) and by inserting after
subsection (e) the following new subsection:
``(f ) Designated Plus Contributions.--The Secretary shall
require the plan administrator of each applicable retirement
plan (as defined in section 402A) to make such returns and
reports regarding designated plus contributions (as so
defined) to the Secretary, participants and beneficiaries of
the plan, and such other persons as the Secretary may
prescribe.''.
(e) Conforming Amendments.--
(1) Section 408A(e) is amended by adding after the first
sentence the following new sentence: ``Such term includes a
rollover contribution described in section 402A(c)(3)(A).''.
(2) The table of sections for subpart A of part I of
subchapter D of chapter 1 is amended by inserting after the
item relating to section 402 the following new item:
``Sec. 402A. Optional treatment of elective deferrals as plus
contributions.''.
(f ) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2000.
SEC. 309. REDUCED PBGC PREMIUM FOR NEW PLANS OF SMALL
EMPLOYERS.
(a) In General.--Subparagraph (A) of section 4006(a)(3) of
the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1306(a)(3)(A)) is amended--
(1) in clause (i), by inserting ``other than a new single-
employer plan (as defined in subparagraph (F)) maintained by
a small employer (as so defined),'' after ``single-employer
plan,'',
(2) in clause (iii), by striking the period at the end and
inserting ``, and'', and
(3) by adding at the end the following new clause:
``(iv) in the case of a new single-employer plan (as
defined in subparagraph (F)) maintained by a small employer
(as so defined) for the plan year, $5 for each individual who
is a participant in such plan during the plan year.''.
(b) Definition of New Single-Employer Plan.--Section
4006(a)(3) of the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1306(a)(3)) is amended by adding at the end
the following new subparagraph:
``(F)(i) For purposes of this paragraph, a single-employer
plan maintained by a contributing sponsor shall be treated as
a new single-employer plan for each of its first 5 plan years
if, during the 36-month period ending on the date of the
adoption of such plan, the sponsor or any member of such
sponsor's controlled group (or any predecessor of either)
had not established or maintained a plan to which this
title applies with respect to which benefits were accrued
for substantially the same employees as are in the new
single-employer plan.
``(ii)(I) For purposes of this paragraph, the term `small
employer' means an employer which on the first day of any
plan year has, in aggregation with all members of the
controlled group of such employer, 100 or fewer employees.
``(II) In the case of a plan maintained by two or more
contributing sponsors that are not part of the same
controlled group, the employees of all contributing sponsors
and controlled groups of such sponsors shall be aggregated
for purposes of determining whether any contributing sponsor
is a small employer.''.
(c) Effective Date.--The amendments made by this section
shall apply to plans established after December 31, 2000.
SEC. 310. REDUCTION OF ADDITIONAL PBGC PREMIUM FOR NEW AND
SMALL PLANS.
(a) New Plans.--Subparagraph (E) of section 4006(a)(3) of
the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1306(a)(3)(E)) is amended by adding at the end the
following new clause:
``(v) In the case of a new defined benefit plan, the amount
determined under clause (ii) for any plan year shall be an
amount equal to the product of the amount determined under
clause (ii) and the applicable percentage. For purposes of
this clause, the term `applicable percentage' means--
``(I) 0 percent, for the first plan year.
``(II) 20 percent, for the second plan year.
``(III) 40 percent, for the third plan year.
``(IV) 60 percent, for the fourth plan year.
``(V) 80 percent, for the fifth plan year.
For purposes of this clause, a defined benefit plan (as
defined in section 3(35)) maintained by a contributing
sponsor shall be treated as a new defined benefit plan for
its first 5 plan years if, during the 36-month period ending
on the date of the adoption of the plan, the sponsor and each
member of any controlled group including the sponsor (or any
predecessor of either) did not establish or maintain a plan
to which this title applies with respect to which benefits
were accrued for substantially the same employees as are in
the new plan.''.
(b) Small Plans.--Paragraph (3) of section 4006(a) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1306(a)) is amended--
(1) by striking ``The'' in subparagraph (E)(i) and
inserting ``Except as provided in subparagraph (G), the'',
and
(2) by inserting after subparagraph (F) the following new
subparagraph:
``(G)(i) In the case of an employer who has 25 or fewer
employees on the first day of the plan year, the additional
premium determined under subparagraph (E) for each
participant shall not exceed $5 multiplied by the number of
participants in the plan as of the close of the preceding
plan year.
``(ii) For purposes of clause (i), whether an employer has
25 or fewer employees on the first day of the plan year is
determined taking into consideration all of the employees of
all members of the contributing sponsor's controlled group.
In the case of a plan maintained by two or more contributing
sponsors, the employees of all contributing sponsors and
their controlled groups shall be aggregated for purposes of
determining whether 25-or-fewer-employees limitation has been
satisfied.''.
(c) Effective Dates.--
(1) Subsection (a).--The amendments made by subsection (a)
shall apply to plans established after December 31, 2000.
(2) Subsection (b).--The amendments made by subsection (b)
shall apply to plan years beginning after December 31, 2000.
Subtitle B--Enhancing Fairness for Women
SEC. 321. CATCHUP CONTRIBUTIONS FOR INDIVIDUALS AGE 50 OR
OVER.
(a) In General.--Section 414 (relating to definitions and
special rules) is amended by adding at the end the following
new subsection:
``(v) Catchup Contributions for Individuals Age 50 or
Over.--
``(1) In general.--An applicable employer plan shall not be
treated as failing to meet any requirement of this title
solely because the plan permits an eligible participant to
make additional elective deferrals in any plan year.
``(2) Limitation on amount of additional deferrals.--
``(A) In general.--A plan shall not permit additional
elective deferrals under paragraph (1) for any year in an
amount greater than the lesser of--
``(i) the applicable percentage of the applicable dollar
amount for such elective deferrals for such year, or
``(ii) the excess (if any) of--
``(I) the participant's compensation for the year, over
``(II) any other elective deferrals of the participant for
such year which are made without regard to this subsection.
``(B) Applicable percentage.--For purposes of this
paragraph, the applicable percentage shall be determined in
accordance with the following table:
``For taxable years The applicable
beginning in: percentage is:
2001..................................................10 percent
2002..................................................20 percent
2003..................................................30 percent
2004..................................................40 percent
2005 and thereafter...................................50 percent.
``(3) Treatment of contributions.--In the case of any
contribution to a plan under paragraph (1)--
``(A) such contribution shall not, with respect to the year
in which the contribution is made--
``(i) be subject to any otherwise applicable limitation
contained in section 402(g), 402(h), 403(b), 404(a), 404(h),
408, 415, or 457, or
[[Page H799]]
``(ii) be taken into account in applying such limitations
to other contributions or benefits under such plan or any
other such plan, and
``(B) such plan shall not be treated as failing to meet the
requirements of section 401(a)(4), 401(a)(26), 401(k)(3),
401(k)(11), 401(k)(12), 401(m), 403(b)(12), 408(k), 408(p),
408B, 410(b), or 416 by reason of the making of (or the right
to make) such contribution.
``(4) Eligible participant.--For purposes of this
subsection, the term `eligible participant' means, with
respect to any plan year, a participant in a plan--
``(A) who has attained the age of 50 before the close of
the plan year, and
``(B) with respect to whom no other elective deferrals may
(without regard to this subsection) be made to the plan for
the plan year by reason of the application of any limitation
or other restriction described in paragraph (3) or contained
in the terms of the plan.
``(5) Other definitions and rules.--For purposes of this
subsection--
``(A) Applicable dollar amount.--The term `applicable
dollar amount' means, with respect to any year, the amount in
effect under section 402(g)(1)(B), 408(p)(2)(E)(i), or
457(e)(15)(A), whichever is applicable to an applicable
employer plan, for such year.
``(B) Applicable employer plan.--The term `applicable
employer plan' means--
``(i) an employees' trust described in section 401(a) which
is exempt from tax under section 501(a),
``(ii) a plan under which amounts are contributed by an
individual's employer for an annuity contract described in
section 403(b),
``(iii) an eligible deferred compensation plan under
section 457 of an eligible employer as defined in section
457(e)(1)(A), and
``(iv) an arrangement meeting the requirements of section
408 (k) or (p).
``(C) Elective deferral.--The term `elective deferral' has
the meaning given such term by subsection (u)(2)(C).
``(D) Exception for section 457 plans.--This subsection
shall not apply to an applicable employer plan described in
subparagraph (B)(iii) for any year to which section 457(b)(3)
applies.''.
(b) Effective Date.--The amendment made by this section
shall apply to contributions in taxable years beginning after
December 31, 2000.
SEC. 322. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF EMPLOYEES
TO DEFINED CONTRIBUTION PLANS.
(a) Equitable Treatment.--
(1) In general.--Subparagraph (B) of section 415(c)(1)
(relating to limitation for defined contribution plans) is
amended by striking ``25 percent'' and inserting ``100
percent''.
(2) Application to section 403(b).--Section 403(b) is
amended--
(A) by striking ``the exclusion allowance for such taxable
year'' in paragraph (1) and inserting ``the applicable limit
under section 415'',
(B) by striking paragraph (2), and
(C) by inserting ``or any amount received by a former
employee after the 5th taxable year following the taxable
year in which such employee was terminated'' before the
period at the end of the second sentence of paragraph (3).
(3) Conforming amendments.--
(A) Subsection (f ) of section 72 is amended by striking
``section 403(b)(2)(D)(iii))'' and inserting ``section
403(b)(2)(D)(iii), as in effect before the enactment of the
Wage and Employment Growth Act of 1999)''.
(B) Section 404(a)(10)(B) is amended by striking ``, the
exclusion allowance under section 403(b)(2),''.
(C) Section 415(a)(2) is amended by striking ``, and the
amount of the contribution for such portion shall reduce the
exclusion allowance as provided in section 403(b)(2)''.
(D) Section 415(c)(3) is amended by adding at the end the
following new subparagraph:
``(E) Annuity contracts.--In the case of an annuity
contract described in section 403(b), the term `participant's
compensation' means the participant's includible compensation
determined under section 403(b)(3).''.
(E) Section 415(c) is amended by striking paragraph (4).
(F) Section 415(c)(7) is amended to read as follows:
``(7) Certain contributions by church plans not treated as
exceeding limit.--
``(A) In general.--Notwithstanding any other provision of
this subsection, at the election of a participant who is an
employee of a church or a convention or association of
churches, including an organization described in section
414(e)(3)(B)(ii), contributions and other additions for an
annuity contract or retirement income account described in
section 403(b) with respect to such participant, when
expressed as an annual addition to such participant's
account, shall be treated as not exceeding the limitation of
paragraph (1) if such annual addition is not in excess of
$10,000.
``(B) $40,000 aggregate limitation.--The total amount of
additions with respect to any participant which may be taken
into account for purposes of this subparagraph for all years
may not exceed $40,000.
``(C) Annual addition.--For purposes of this paragraph, the
term `annual addition' has the meaning given such term by
paragraph (2).''.
(G) Subparagraph (B) of section 402(g)(7) (as redesignated
by section 211) is amended by inserting before the period at
the end the following: ``(as in effect before the enactment
of the Wage and Employment Growth Act of 1999)''.
(3) Effective date.--The amendments made by this subsection
shall apply to years beginning after December 31, 2000.
(b) Special Rules for Sections 403(b) and 408.--
(1) In general.--Subsection (k) of section 415 is amended
by adding at the end the following new paragraph:
``(4) Special rules for sections 403(b) and 408.--For
purposes of this section, any annuity contract described in
section 403(b) for the benefit of a participant shall be
treated as a defined contribution plan maintained by each
employer with respect to which the participant has the
control required under subsection (b) or (c) of section 414
(as modified by subsection (h)). For purposes of this
section, any contribution by an employer to a simplified
employee pension plan for an individual for a taxable year
shall be treated as an employer contribution to a defined
contribution plan for such individual for such year.''.
(2) Effective date.--
(A) In general.--The amendment made by paragraph (1) shall
apply to limitation years beginning after December 31, 1999.
(B) Exclusion allowance.--Effective for limitation years
beginning in 2000, in the case of any annuity contract
described in section 403(b) of the Internal Revenue Code of
1986, the amount of the contribution disqualified by reason
of section 415(g) of such Code shall reduce the exclusion
allowance as provided in section 403(b)(2) of such Code.
(3) Modification of 403(b) exclusion allowance to conform
to 415 modification.--The Secretary of the Treasury shall
modify the regulations regarding the exclusion allowance
under section 403(b)(2) of the Internal Revenue Code of 1986
to render void the requirement that contributions to a
defined benefit pension plan be treated as previously
excluded amounts for purposes of the exclusion allowance.
For taxable years beginning after December 31, 1999, such
regulations shall be applied as if such requirement were
void.
(c) Deferred Compensation Plans of State and Local
Governments and Tax-Exempt Organizations.--
(1) In general.--Subparagraph (B) of section 457(b)(2)
(relating to salary limitation on eligible deferred
compensation plans) is amended by striking ``33\1/3\
percent'' and inserting ``100 percent''.
(2) Effective date.--The amendment made by this subsection
shall apply to years beginning after December 31, 2000.
SEC. 323. FASTER VESTING OF CERTAIN EMPLOYER MATCHING
CONTRIBUTIONS.
(a) Amendments to 1986 Code.--Section 411(a) (relating to
minimum vesting standards) is amended--
(1) in paragraph (2), by striking ``A plan'' and inserting
``Except as provided in paragraph (12), a plan'', and
(2) by adding at the end the following:
``(12) Faster vesting for matching contributions.--In the
case of matching contributions (as defined in section
401(m)(4)(A)), paragraph (2) shall be applied--
``(A) by substituting `3 years' for `5 years' in
subparagraph (A), and
``(B) by substituting the following table for the table
contained in subparagraph (B):
The nonforfeitable
``Years of service: percentage is:
2.............................................................20 ....
3.............................................................40 ....
4.............................................................60 ....
5.............................................................80 ....
6.........................................................100.''.....
(b) Amendments to ERISA.--Section 203(a) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1053(a)) is
amended--
(1) in paragraph (2), by striking ``A plan'' and inserting
``Except as provided in paragraph (4), a plan'', and
(2) by adding at the end the following:
``(4) Faster vesting for matching contributions.--In the
case of matching contributions (as defined in section
401(m)(4)(A) of the Internal Revenue Code of 1986), paragraph
(2) shall be applied--
``(A) by substituting `3 years' for `5 years' in
subparagraph (A), and
``(B) by substituting the following table for the table
contained in subparagraph (B):
The nonforfeitable
``Years of service: percentage is:
2.............................................................20 ....
3.............................................................40 ....
4.............................................................60 ....
5.............................................................80 ....
6.........................................................100.''.....
(c) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to contributions
for plan years beginning after December 31, 2000.
(2) Collective bargaining agreements.--In the case of a
plan maintained pursuant to one or more collective bargaining
agreements between employee representatives and one or more
employers ratified by the date of the enactment of this Act,
the amendments made by this section shall not apply to
contributions on behalf of employees covered by any such
agreement for plan years beginning before the earlier of--
(A) the later of--
(i) the date on which the last of such collective
bargaining agreements terminates (determined without regard
to any extension thereof on or after such date of the
enactment), or
[[Page H800]]
(ii) January 1, 2001, or
(B) January 1, 2005.
(3) Service required.--With respect to any plan, the
amendments made by this section shall not apply to any
employee before the date that such employee has 1 hour of
service under such plan in any plan year to which the
amendments made by this section apply.
SEC. 324. SIMPLIFY AND UPDATE THE MINIMUM DISTRIBUTION RULES.
(a) Simplification and Finalization of Minimum Distribution
Requirements.--
(1) In general.--The Secretary of the Treasury shall--
(A) simplify and finalize the regulations relating to
minimum distribution requirements under sections 401(a)(9),
408(a)(6) and (b)(3), 403(b)(10), and 457(d)(2) of the
Internal Revenue Code of 1986, and
(B) modify such regulations to--
(i) reflect current life expectancy, and
(ii) revise the required distribution methods so that,
under reasonable assumptions, the amount of the required
minimum distribution does not decrease over a participant's
life expectancy.
(2) Fresh start.--Notwithstanding subparagraph (D) of
section 401(a)(9) of such Code, during the first year that
regulations are in effect under this subsection, required
distributions for future years may be redetermined to reflect
changes under such regulations. Such redetermination shall
include the opportunity to choose a new designated
beneficiary and to elect a new method of calculating life
expectancy.
(3) Effective date for regulations.--Regulations referred
to in paragraph (1) shall be effective for years beginning
after December 31, 2000, and shall apply in such years
without regard to whether an individual had previously begun
receiving minimum distributions.
(b) Repeal of Rule Where Distributions Had Begun Before
Death Occurs.--
(1) In general.--Subparagraph (B) of section 401(a)(9) is
amended by striking clause (i) and redesignating clauses
(ii), (iii), and (iv) as clauses (i), (ii), and (iii),
respectively.
(2) Conforming changes.--
(A) Clause (i) of section 401(a)(9)(B) (as so redesignated)
is amended--
(i) by striking ``for other cases'' in the heading, and
(ii) by striking ``the distribution of the employee's
interest has begun in accordance with subparagraph (A)(ii)''
and inserting ``his entire interest has been distributed to
him,''.
(B) Clause (ii) of section 401(a)(9)(B) (as so
redesignated) is amended by striking ``clause (ii)'' and
inserting ``clause (i)''.
(C) Clause (iii) of section 401(a)(9)(B) (as so
redesignated) is amended--
(i) by striking ``clause (iii)(I)'' and inserting ``clause
(ii)(I)'',
(ii) by striking ``clause (iii)(III)'' in subclause (I) and
inserting ``clause (ii)(III)'',
(iii) by striking ``the date on which the employee would
have attained the age 70\1/2\,'' in subclause (I) and
inserting ``April 1 of the calendar year following the
calendar year in which the spouse attains 70\1/2\,'', and
(iv) by striking ``the distributions to such spouse
begin,'' in subclause (II) and inserting ``his entire
interest has been distributed to him,''.
(3) Effective date.--The amendments made by this subsection
shall apply to years beginning after December 31, 2000.
(c) Reduction in Excise Tax.--
(1) In general.--Subsection (a) of section 4974 is amended
by striking ``50 percent'' and inserting ``10 percent''.
(2) Effective date.--The amendment made by this subsection
shall apply to years beginning after December 31, 2000.
SEC. 325. CLARIFICATION OF TAX TREATMENT OF DIVISION OF
SECTION 457 PLAN BENEFITS UPON DIVORCE.
(a) In General.--Section 414(p)(11) (relating to
application of rules to governmental and church plans) is
amended--
(1) by inserting ``or an eligible deferred compensation
plan (within the meaning of section 457(b))'' after
``subsection (e))'', and
(2) in the heading, by striking ``governmental and church
plans'' and inserting ``certain other plans''.
(b) Waiver of Certain Distribution Requirements.--Paragraph
(10) of section 414(p) is amended by striking ``and section
409(d)'' and inserting ``section 409(d), and section
457(d)''.
(c) Tax Treatment of Payments From a Section 457 Plan.--
Subsection (p) of section 414 is amended by redesignating
paragraph (12) as paragraph (13) and inserting after
paragraph (11) the following new paragraph:
``(12) Tax treatment of payments from a section 457 plan.--
If a distribution or payment from an eligible deferred
compensation plan described in section 457(b) is made
pursuant to a qualified domestic relations order, rules
similar to the rules of section 402(e)(1)(A) shall apply to
such distribution or payment.''.
(d) Effective Date.--The amendments made by this section
shall apply to transfers, distributions, and payments made
after December 31, 2000.
SEC. 326. MODIFICATION OF SAFE HARBOR RELIEF FOR HARDSHIP
WITHDRAWALS FROM CASH OR DEFERRED ARRANGEMENTS.
(a) In General.--The Secretary of the Treasury shall revise
the regulations relating to hardship distributions under
section 401(k)(2)(B)(i)(IV) of the Internal Revenue Code of
1986 to provide that the period an employee is prohibited
from making elective and employee contributions in order for
a distribution to be deemed necessary to satisfy financial
need shall be equal to 6 months.
(b) Effective Date.--The revised regulations under
subsection (a) shall apply to years beginning after December
31, 2000.
Subtitle C--Increasing Portability for Participants
SEC. 331. ROLLOVERS ALLOWED AMONG VARIOUS TYPES OF PLANS.
(a) Rollovers From and to Section 457 Plans.--
(1) Rollovers from section 457 plans.--
(A) In general.--Section 457(e) (relating to other
definitions and special rules) is amended by adding at the
end the following:
``(16) Rollover amounts.--
``(A) General rule.--In the case of an eligible deferred
compensation plan established and maintained by an employer
described in subsection (e)(1)(A), if--
``(i) any portion of the balance to the credit of an
employee in such plan is paid to such employee in an eligible
rollover distribution (within the meaning of section
402(c)(4) without regard to subparagraph (C) thereof),
``(ii) the employee transfers any portion of the property
such employee receives in such distribution to an eligible
retirement plan described in section 402(c)(8)(B), and
``(iii) in the case of a distribution of property other
than money, the amount so transferred consists of the
property distributed,
then such distribution (to the extent so transferred) shall
not be includible in gross income for the taxable year in
which paid.
``(B) Certain rules made applicable.--The rules of
paragraphs (2) through (7) (other than paragraph (4)(C)) and
(9) of section 402(c) and section 402(f ) shall apply for
purposes of subparagraph (A).
``(C) Reporting.--Rollovers under this paragraph shall be
reported to the Secretary in the same manner as rollovers
from qualified retirement plans (as defined in section
4974(c)).''.
(B) Deferral limit determined without regard to rollover
amounts.--Section 457(b)(2) (defining eligible deferred
compensation plan) is amended by inserting ``(other than
rollover amounts)'' after ``taxable year''.
(C) Direct rollover.--Paragraph (1) of section 457(d) is
amended by striking ``and'' at the end of subparagraph (A),
by striking the period at the end of subparagraph (B) and
inserting ``, and'', and by inserting after subparagraph (B)
the following:
``(C) in the case of a plan maintained by an employer
described in subsection (e)(1)(A), the plan meets
requirements similar to the requirements of section
401(a)(31).
Any amount transferred in a direct trustee-to-trustee
transfer in accordance with section 401(a)(31) shall not be
includible in gross income for the taxable year of
transfer.''.
(D) Withholding.--
(i) Paragraph (12) of section 3401(a) is amended by adding
at the end the following:
``(E) under or to an eligible deferred compensation plan
which, at the time of such payment, is a plan described in
section 457(b) maintained by an employer described in section
457(e)(1)(A); or''.
(ii) Paragraph (3) of section 3405(c) is amended to read as
follows:
``(3) Eligible rollover distribution.--For purposes of this
subsection, the term `eligible rollover distribution' has the
meaning given such term by section 402(f )(2)(A).''.
(iii) Liability for withholding.--Subparagraph (B) of
section 3405(d)(2) is amended by striking ``or'' at the end
of clause (ii), by striking the period at the end of clause
(iii) and inserting ``, or'', and by adding at the end the
following:
``(iv) section 457(b).''.
(2) Rollovers to section 457 plans.--
(A) In general.--Section 402(c)(8)(B) (defining eligible
retirement plan) is amended by striking ``and'' at the end of
clause (iii), by striking the period at the end of clause
(iv) and inserting ``, and'', and by inserting after
clause (iv) the following new clause:
``(v) an eligible deferred compensation plan described in
section 457(b) of an employer described in section
457(e)(1)(A).''.
(B) Separate accounting.--Section 402(c) is amended by
adding at the end the following new paragraph:
``(11) Separate accounting.--Unless a plan described in
clause (v) of paragraph (8)(B) agrees to separately account
for amounts rolled into such plan from eligible retirement
plans not described in such clause, the plan described in
such clause may not accept transfers or rollovers from such
retirement plans.''.
(C) 10 percent additional tax.--Subsection (t) of section
72 (relating to 10-percent additional tax on early
distributions from qualified retirement plans) is amended by
adding at the end the following new paragraph:
``(9) Special rule for rollovers to section 457 plans.--For
purposes of this subsection, a distribution from an eligible
deferred compensation plan (as defined in section 457(b)) of
an employer described in section 457(e)(1)(A) shall be
treated as a distribution from a qualified retirement plan
described in 4974(c)(1) to the extent that such distribution
is attributable to an amount transferred to an eligible
deferred compensation plan from a qualified retirement plan
(as defined in section 4974(c)).''.
(b) Allowance of Rollovers From and to 403 (b) Plans.--
(1) Rollovers from section 403 (b) plans.--Section
403(b)(8)(A)(ii) (relating to rollover
[[Page H801]]
amounts) is amended by striking ``such distribution'' and all
that follows and inserting ``such distribution to an eligible
retirement plan described in section 402(c)(8)(B), and''.
(2) Rollovers to section 403 (b) plans.--Section
402(c)(8)(B) (defining eligible retirement plan), as amended
by subsection (a), is amended by striking ``and'' at the end
of clause (iv), by striking the period at the end of clause
(v) and inserting ``, and'', and by inserting after clause
(v) the following new clause:
``(vi) an annuity contract described in section 403(b).''.
(c) Expanded Explanation to Recipients of Rollover
Distributions.--Paragraph (1) of section 402(f ) (relating to
written explanation to recipients of distributions eligible
for rollover treatment) is amended by striking ``and'' at the
end of subparagraph (C), by striking the period at the end of
subparagraph (D) and inserting ``, and'', and by adding at
the end the following new subparagraph:
``(E) of the provisions under which distributions from the
eligible retirement plan receiving the distribution may be
subject to restrictions and tax consequences which are
different from those applicable to distributions from the
plan making such distribution.''.
(d) Spousal Rollovers.--Section 402(c)(9) (relating to
rollover where spouse receives distribution after death of
employee) is amended by striking ``; except that'' and all
that follows up to the end period.
(e) Conforming Amendments.--
(1) Section 72(o)(4) is amended by striking ``and
408(d)(3)'' and inserting ``403(b)(8), 408(d)(3), and
457(e)(16)''.
(2) Section 219(d)(2) is amended by striking ``or
408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
(3) Section 401(a)(31)(B) is amended by striking ``and
403(a)(4)'' and inserting ``, 403(a)(4), 403(b)(8), and
457(e)(16)''.
(4) Subparagraph (A) of section 402(f )(2) is amended by
striking ``or paragraph (4) of section 403(a)'' and inserting
``, paragraph (4) of section 403(a), subparagraph (A) of
section 403(b)(8), or subparagraph (A) of section
457(e)(16)''.
(5) Paragraph (1) of section 402(f ) is amended by striking
``from an eligible retirement plan''.
(6) Subparagraphs (A) and (B) of section 402(f )(1) are
amended by striking ``another eligible retirement plan'' and
inserting ``an eligible retirement plan''.
(7) Subparagraph (B) of section 403(b)(8) is amended to
read as follows:
``(B) Certain rules made applicable.--The rules of
paragraphs (2) through (7) and (9) of section 402(c) and
section 402(f ) shall apply for purposes of subparagraph (A),
except that section 402(f ) shall be applied to the payor in
lieu of the plan administrator.''.
(8) Section 408(a)(1) is amended by striking ``or
403(b)(8)'' and inserting ``, 403(b)(8), or 457(e)(16)''.
(9) Subparagraphs (A) and (B) of section 415(b)(2) are each
amended by striking ``and 408(d)(3)'' and inserting
``403(b)(8), 408(d)(3), and 457(e)(16)''.
(10) Section 415(c)(2) is amended by striking ``and
408(d)(3)'' and inserting ``408(d)(3), and 457(e)(16)''.
(11) Section 4973(b)(1)(A) is amended by striking ``or
408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
(f ) Effective Date; Special Rule.--
(1) Effective date.--The amendments made by this section
shall apply to distributions after December 31, 2000.
(2) Special rule.--Notwithstanding any other provision of
law, subsections (h)(3) and (h)(5) of section 1122 of the Tax
Reform Act of 1986 shall not apply to any distribution from
an eligible retirement plan (as defined in clause (iii) or
(iv) of section 402(c)(8)(B) of the Internal Revenue Code of
1986) on behalf of an individual if there was a rollover to
such plan on behalf of such individual which is permitted
solely by reason of any amendment made by this section.
SEC. 332. ROLLOVERS OF IRAS INTO WORKPLACE RETIREMENT PLANS.
(a) In General.--Subparagraph (A) of section 408(d)(3)
(relating to rollover amounts) is amended by adding ``or'' at
the end of clause (i), by striking clauses (ii) and (iii),
and by adding at the end the following:
``(ii) the entire amount received (including money and any
other property) is paid into an eligible retirement plan for
the benefit of such individual not later than the 60th day
after the date on which the payment or distribution is
received, except that the maximum amount which may be paid
into such plan may not exceed the portion of the amount
received which is includible in gross income (determined
without regard to this paragraph).
For purposes of clause (ii), the term `eligible retirement
plan' means an eligible retirement plan described in clause
(iii), (iv), (v), or (vi) of section 402(c)(8)(B).''.
(b) Conforming Amendments.--
(1) Paragraph (1) of section 403(b) is amended by striking
``section 408(d)(3)(A)(iii)'' and inserting ``section
408(d)(3)(A)(ii)''.
(2) Clause (i) of section 408(d)(3)(D) is amended by
striking ``(i), (ii), or (iii)'' and inserting ``(i) or
(ii)''.
(3) Subparagraph (G) of section 408(d)(3) is amended to
read as follows:
``(G) Simple retirement accounts.--In the case of any
payment or distribution out of a simple retirement account
(as defined in subsection (p)) to which section 72(t)(6)
applies, this paragraph shall not apply unless such payment
or distribution is paid into another simple retirement
account.''.
(c) Effective Date; Special Rule.--
(1) Effective date.--The amendments made by this section
shall apply to distributions after December 31, 2000.
(2) Special rule.--Notwithstanding any other provision of
law, subsections (h)(3) and (h)(5) of section 1122 of the Tax
Reform Act of 1986 shall not apply to any distribution from
an eligible retirement plan (as defined in clause (iii) or
(iv) of section 402(c)(8)(B) of the Internal Revenue Code of
1986) on behalf of an individual if there was a rollover to
such plan on behalf of such individual which is permitted
solely by reason of the amendments made by this section.
SEC. 333. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.
(a) Rollovers From Exempt Trusts.--Paragraph (2) of section
402(c) (relating to maximum amount which may be rolled over)
is amended by adding at the end the following: ``The
preceding sentence shall not apply to such distribution to
the extent--
``(A) such portion is transferred in a direct trustee-to-
trustee transfer to a qualified trust which is part of a plan
which is a defined contribution plan and which agrees to
separately account for amounts so transferred, including
separately accounting for the portion of such distribution
which is includible in gross income and the portion of such
distribution which is not so includible, or
``(B) such portion is transferred to an eligible retirement
plan described in clause (i) or (ii) of paragraph (8)(B).''.
(b) Optional Direct Transfer of Eligible Rollover
Distributions.--Subparagraph (B) of section 401(a)(31)
(relating to limitation) is amended by adding at the end the
following: ``The preceding sentence shall not apply to such
distribution if the plan to which such distribution is
transferred--
``(i) agrees to separately account for amounts so
transferred, including separately accounting for the portion
of such distribution which is includible in gross income and
the portion of such distribution which is not so includible,
or
``(ii) is an eligible retirement plan described in clause
(i) or (ii) of section 402(c)(8)(B).''.
(c) Rules for Applying Section 72 to IRAs.--Paragraph (3)
of section 408(d) (relating to special rules for applying
section 72) is amended by inserting at the end the following:
``(H) Application of section 72.--
``(i) In general.--If--
``(I) a distribution is made from an individual retirement
plan, and
``(II) a rollover contribution is made to an eligible
retirement plan described in section 402(c)(8)(B)(iii), (iv),
(v), or (vi) with respect to all or part of such
distribution,
then, notwithstanding paragraph (2), the rules of clause (ii)
shall apply for purposes of applying section 72.
``(ii) Applicable rules.--In the case of a distribution
described in clause (i)--
``(I) section 72 shall be applied separately to such
distribution,
``(II) notwithstanding the pro rata allocation of income
on, and investment in, the contract to distributions under
section 72, the portion of such distribution rolled over to
an eligible retirement plan described in clause (i) shall be
treated as from income on the contract (to the extent of the
aggregate income on the contract from all individual
retirement plans of the distributee), and
``(III) appropriate adjustments shall be made in applying
section 72 to other distributions in such taxable year and
subsequent taxable years.''.
(d) Effective Date.--The amendments made by this section
shall apply to distributions made after December 31, 2000.
SEC. 334. HARDSHIP EXCEPTION TO 60-DAY RULE.
(a) Exempt Trusts.--Paragraph (3) of section 402(c)
(relating to transfer must be made within 60 days of receipt)
is amended to read as follows:
``(3) Transfer must be made within 60 days of receipt.--
``(A) In general.--Except as provided in subparagraph (B),
paragraph (1) shall not apply to any transfer of a
distribution made after the 60th day following the day on
which the distributee received the property distributed.
``(B) Hardship exception.--The Secretary may waive the 60-
day requirement under subparagraph (A) where the failure to
waive such requirement would be against equity or good
conscience, including casualty, disaster, or other events
beyond the reasonable control of the individual subject to
such requirement.''.
(b) IRAs.--Paragraph (3) of section 408(d) (relating to
rollover contributions), as amended by section 229, is
amended by adding after subparagraph (H) the following new
subparagraph:
``(I) Waiver of 60-day requirement.--The Secretary may
waive the 60-day requirement under subparagraphs (A) and (D)
where the failure to waive such requirement would be against
equity or good conscience, including casualty, disaster, or
other events beyond the reasonable control of the individual
subject to such requirement.''.
(c) Effective Date.--The amendments made by this section
shall apply to distributions after December 31, 2000.
SEC. 335. TREATMENT OF FORMS OF DISTRIBUTION.
(a) Plan Transfers.--
(1) Amendment to internal revenue code of 1986.--Paragraph
(6) of section 411(d) (relating to accrued benefit not to be
decreased
[[Page H802]]
by amendment) is amended by adding at the end the following:
``(D) Plan transfers.--
``(i) A defined contribution plan (in this subparagraph
referred to as the `transferee plan') shall not be treated as
failing to meet the requirements of this subsection merely
because the transferee plan does not provide some or all
of the forms of distribution previously available under
another defined contribution plan (in this subparagraph
referred to as the `transferor plan') to the extent that--
``(I) the forms of distribution previously available under
the transferor plan applied to the account of a participant
or beneficiary under the transferor plan that was transferred
from the transferor plan to the transferee plan pursuant to a
direct transfer rather than pursuant to a distribution from
the transferor plan,
``(II) the terms of both the transferor plan and the
transferee plan authorize the transfer described in subclause
(I),
``(III) the transfer described in subclause (I) was made
pursuant to a voluntary election by the participant or
beneficiary whose account was transferred to the transferee
plan,
``(IV) the election described in subclause (III) was made
after the participant or beneficiary received a notice
describing the consequences of making the election,
``(V) if the transferor plan provides for an annuity as the
normal form of distribution under the plan in accordance with
section 417, the transfer is made with the consent of the
participant's spouse (if any), and such consent meets
requirements similar to the requirements imposed by section
417(a)(2), and
``(VI) the transferee plan allows the participant or
beneficiary described in clause (iii) to receive any
distribution to which the participant or beneficiary is
entitled under the transferee plan in the form of a single
sum distribution.
``(ii) Clause (i) shall apply to plan mergers and other
transactions having the effect of a direct transfer,
including consolidations of benefits attributable to
different employers within a multiple employer plan.
``(E) Elimination of form of distribution.--Except to the
extent provided in regulations, a defined contribution plan
shall not be treated as failing to meet the requirements of
this section merely because of the elimination of a form of
distribution previously available thereunder. This
subparagraph shall not apply to the elimination of a form of
distribution with respect to any participant unless--
``(i) a single sum payment is available to such participant
at the same time or times as the form of distribution being
eliminated, and
``(ii) such single sum payment is based on the same or
greater portion of the participant's account as the form of
distribution being eliminated.''.
(2) Amendment to erisa.--Section 204(g) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1054(g)) is
amended by adding at the end the following:
``(4)(A) A defined contribution plan (in this subparagraph
referred to as the `transferee plan') shall not be treated as
failing to meet the requirements of this subsection merely
because the transferee plan does not provide some or all of
the forms of distribution previously available under another
defined contribution plan (in this subparagraph referred to
as the `transferor plan') to the extent that--
``(i) the forms of distribution previously available under
the transferor plan applied to the account of a participant
or beneficiary under the transferor plan that was transferred
from the transferor plan to the transferee plan pursuant to a
direct transfer rather than pursuant to a distribution from
the transferor plan;
``(ii) the terms of both the transferor plan and the
transferee plan authorize the transfer described in clause
(i);
``(iii) the transfer described in clause (i) was made
pursuant to a voluntary election by the participant or
beneficiary whose account was transferred to the transferee
plan;
``(iv) the election described in clause (iii) was made
after the participant or beneficiary received a notice
describing the consequences of making the election;
``(v) if the transferor plan provides for an annuity as the
normal form of distribution under the plan in accordance with
section 205, the transfer is made with the consent of the
participant's spouse (if any), and such consent meets
requirements similar to the requirements imposed by section
205(c)(2); and
``(vi) the transferee plan allows the participant or
beneficiary described in clause (iii) to receive any
distribution to which the participant or beneficiary is
entitled under the transferee plan in the form of a single
sum distribution.
``(B) Subparagraph (A) shall apply to plan mergers and
other transactions having the effect of a direct transfer,
including consolidations of benefits attributable to
different employers within a multiple employer plan.
``(5) Elimination of form of distribution.--Except to the
extent provided in regulations, a defined contribution plan
shall not be treated as failing to meet the requirements of
this section merely because of the elimination of a form of
distribution previously available thereunder. This paragraph
shall not apply to the elimination of a form of distribution
with respect to any participant unless--
``(A) a single sum payment is available to such participant
at the same time or times as the form of distribution being
eliminated; and
``(B) such single sum payment is based on the same or
greater portion of the participant's account as the form of
distribution being eliminated.''.
(3) Effective date.--The amendments made by this subsection
shall apply to years beginning after December 31, 2000.
(b) Regulations.--
(1) Amendment to internal revenue code of 1986.--The last
sentence of paragraph (6)(B) of section 411(d) (relating to
accrued benefit not to be decreased by amendment) is amended
to read as follows: ``The Secretary shall by regulations
provide that this subparagraph shall not apply to any plan
amendment that does not adversely affect the rights of
participants in a material manner.''.
(2) Amendment to erisa.--The last sentence of section
204(g)(2) of the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1054(g)(2)) is amended to read as follows:
``The Secretary of the Treasury shall by regulations provide
that this paragraph shall not apply to any plan amendment
that does not adversely affect the rights of participants in
a material manner.''.
(3) Secretary directed.--Not later than December 31, 2001,
the Secretary of the Treasury is directed to issue final
regulations under section 411(d)(6) of the Internal Revenue
Code of 1986 and section 204(g) of the Employee Retirement
Income Security Act of 1974, including the regulations
required by the amendments made by this subsection. Such
regulations shall apply to plan years beginning after
December 31, 2001, or such earlier date as is specified by
the Secretary of the Treasury.
SEC. 336. RATIONALIZATION OF RESTRICTIONS ON DISTRIBUTIONS.
(a) Modification of Same Desk Exception.--
(1) Section 401(k).--
(A) Section 401(k)(2)(B)(i)(I) (relating to qualified cash
or deferred arrangements) is amended by striking ``separation
from service'' and inserting ``severance from employment''.
(B) Subparagraph (A) of section 401(k)(10) (relating to
distributions upon termination of plan or disposition of
assets or subsidiary) is amended to read as follows:
``(A) In general.--An event described in this subparagraph
is the termination of the plan without establishment or
maintenance of another defined contribution plan (other than
an employee stock ownership plan as defined in section
4975(e)(7)).''.
(C) Section 401(k)(10) is amended--
(i) in subparagraph (B)--
(I) by striking ``An event'' in clause (i) and inserting
``A termination'', and
(II) by striking ``the event'' in clause (i) and inserting
``the termination'',
(ii) by striking subparagraph (C), and
(iii) by striking ``or disposition of assets or
subsidiary'' in the heading.
(2) Section 403(b).--
(A) Paragraphs (7)(A)(ii) and (11)(A) of section 403(b) are
each amended by striking ``separates from service'' and
inserting ``has a severance from employment''.
(B) The heading for paragraph (11) of section 403(b) is
amended by striking ``separation from service'' and inserting
``severance from employment''.
(3) Section 457.--Clause (ii) of section 457(d)(1)(A) is
amended by striking ``is separated from service'' and
inserting ``has a severance from employment''.
(b) Effective Date.--The amendments made by this section
shall apply to distributions after December 31, 2000.
SEC. 337. PURCHASE OF SERVICE CREDIT IN GOVERNMENTAL DEFINED
BENEFIT PLANS.
(a) 403(b) Plans.--Subsection (b) of section 403 is amended
by adding at the end the following new paragraph:
``(13) Trustee-to-trustee transfers to purchase permissive
service credit.--No amount shall be includible in gross
income by reason of a direct trustee-to-trustee transfer to a
defined benefit governmental plan (as defined in section
414(d)) if such transfer is--
``(A) for the purchase of permissive service credit (as
defined in section 415(n)(3)(A)) under such plan, or
``(B) a repayment to which section 415 does not apply by
reason of subsection (k)(3) thereof.''.
(b) 457 Plans.--
(1) Subsection (e) of section 457 is amended by adding
after paragraph (16) the following new paragraph:
``(17) Trustee-to-trustee transfers to purchase permissive
service credit.--No amount shall be includible in gross
income by reason of a direct trustee-to-trustee transfer to a
defined benefit governmental plan (as defined in section
414(d)) if such transfer is--
``(A) for the purchase of permissive service credit (as
defined in section 415(n)(3)(A)) under such plan, or
``(B) a repayment to which section 415 does not apply by
reason of subsection (k)(3) thereof.''.
(2) Section 457(b)(2) is amended by striking ``(other than
rollover amounts)'' and inserting ``(other than rollover
amounts and amounts received in a transfer referred to in
subsection (e)(17))''.
(c) Effective Date.--The amendments made by this section
shall apply to trustee-to-trustee transfers after December
31, 2000.
[[Page H803]]
SEC. 338. EMPLOYERS MAY DISREGARD ROLLOVERS FOR PURPOSES OF
CASH-OUT AMOUNTS.
(a) Qualified Plans.--
(1) Amendment to internal revenue code of 1986.--Section
411(a)(11) (relating to restrictions on certain mandatory
distributions) is amended by adding at the end the following:
``(D) Special rule for rollover contributions.--A plan
shall not fail to meet the requirements of this paragraph if,
under the terms of the plan, the present value of the
nonforfeitable accrued benefit is determined without regard
to that portion of such benefit which is attributable to
rollover contributions (and earnings allocable thereto). For
purposes of this subparagraph, the term `rollover
contributions' means any rollover contribution under sections
402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and
457(e)(16).''.
(2) Amendment to erisa.--Section 203(e) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1053(c)) is
amended by adding at the end the following:
``(4) A plan shall not fail to meet the requirements of
this subsection if, under the terms of the plan, the present
value of the nonforfeitable accrued benefit is determined
without regard to that portion of such benefit which is
attributable to rollover contributions (and earnings
allocable thereto). For purposes of this subparagraph, the
term `rollover contributions' means any rollover contribution
under sections 402(c), 403(a)(4), 403(b)(8),
408(d)(3)(A)(ii), and 457(e)(16) of the Internal Revenue Code
of 1986.''.
(b) Eligible Deferred Compensation Plans.--Clause (i) of
section 457(e)(9)(A) is amended by striking ``such amount''
and inserting ``the portion of such amount which is not
attributable to rollover contributions (as defined in section
411(a)(11)(D))''.
(c) Effective Date.--The amendments made by this section
shall apply to distributions after December 31, 2000.
SEC. 339. MINIMUM DISTRIBUTION AND INCLUSION REQUIREMENTS FOR
SECTION 457 PLANS.
(a) Minimum Distribution Requirements.--Paragraph (2) of
section 457(d) (relating to distribution requirements) is
amended to read as follows:
``(2) Minimum distribution requirements.--A plan meets the
minimum distribution requirements of this paragraph if such
plan meets the requirements of section 401(a)(9).''.
(b) Inclusion in Gross Income.--
(1) Year of inclusion.--Subsection (a) of section 457
(relating to year of inclusion in gross income) is amended to
read as follows:
``(a) Year of Inclusion in Gross Income.--
``(1) In general.--Any amount of compensation deferred
under an eligible deferred compensation plan, and any income
attributable to the amounts so deferred, shall be includible
in gross income only for the taxable year in which such
compensation or other income--
``(A) is paid to the participant or other beneficiary, in
the case of a plan of an eligible employer described in
subsection (e)(1)(A), and
``(B) is paid or otherwise made available to the
participant or other beneficiary, in the case of a plan of an
eligible employer described in subsection (e)(1)(B).
``(2) Special rule for rollover amounts.--To the extent
provided in section 72(t)(9), section 72(t) shall apply to
any amount includible in gross income under this
subsection.''.
(2) Conforming amendments.--
(A) So much of paragraph (9) of section 457(e) as precedes
subparagraph (A) is amended to read as follows:
``(9) Benefits of tax exempt organization plans not treated
as made available by reason of certain elections, etc.--In
the case of an eligible deferred compensation plan of an
employer described in subsection (e)(1)(B)--''.
(B) Section 457(d) is amended by adding at the end the
following new paragraph:
``(3) Special rule for government plan.--An eligible
deferred compensation plan of an employer described in
subsection (e)(1)(A) shall not be treated as failing to meet
the requirements of this subsection solely by reason of
making a distribution described in subsection (e)(9)(A).''.
(c) Effective Date.--The amendments made by this section
shall apply to distributions after December 31, 2000.
Subtitle D--Strengthening Pension Security and Enforcement
SEC. 341. REPEAL OF 150 PERCENT OF CURRENT LIABILITY FUNDING
LIMIT.
(a) Amendment to Internal Revenue Code of 1986.--Section
412(c)(7) (relating to full-funding limitation) is amended--
(1) by striking ``the applicable percentage'' in
subparagraph (A)(i)(I) and inserting ``in the case of plan
years beginning before January 1, 2004, the applicable
percentage'', and
(2) by amending subparagraph (F) to read as follows:
``(F) Applicable percentage.--For purposes of subparagraph
(A)(i)(I), the applicable percentage shall be determined in
accordance with the following table:
``In the case of any plan The applicable
the beginning in-- percentage is--
2001.........................................................160
2002.........................................................165
2003......................................................170.''.
(b) Amendment to ERISA.--Section 302(c)(7) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1082(c)(7))
is amended--
(1) by striking ``the applicable percentage'' in
subparagraph (A)(i)(I) and inserting ``in the case of plan
years beginning before January 1, 2004, the applicable
percentage'', and
(2) by amending subparagraph (F) to read as follows:
``(F) Applicable percentage.--For purposes of subparagraph
(A)(i)(I), the applicable percentage shall be determined in
accordance with the following table:
``In the case of any plan The applicable
year beginning in-- percentage is--
2001.........................................................160
2002.........................................................165
2003......................................................170.''.
(c) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2000.
SEC. 342. MAXIMUM CONTRIBUTION DEDUCTION RULES MODIFIED AND
APPLIED TO ALL DEFINED BENEFIT PLANS.
(a) In General.--Subparagraph (D) of section 404(a)(1)
(relating to special rule in case of certain plans) is
amended to read as follows:
``(D) Special rule in case of certain plans.--
``(i) In general.--In the case of any defined benefit plan,
except as provided in regulations, the maximum amount
deductible under the limitations of this paragraph shall not
be less than the unfunded termination liability
(determined as if the proposed termination date referred
to in section 4041(b)(2)(A)(i)(II) of the Employee
Retirement Income Security Act of 1974 were the last day
of the plan year).
``(ii) Plans with less than 100 participants.--For purposes
of this subparagraph, in the case of a plan which has less
than 100 participants for the plan year, termination
liability shall not include the liability attributable to
benefit increases for highly compensated employees (as
defined in section 414(q)) resulting from a plan amendment
which is made or becomes effective, whichever is later,
within the last 2 years before the termination date.
``(iii) Rule for determining number of participants.--For
purposes of determining whether a plan has more than 100
participants, all defined benefit plans maintained by the
same employer (or any member of such employer's controlled
group (within the meaning of section 412(l)(8)(C))) shall be
treated as one plan, but only employees of such member or
employer shall be taken into account.
``(iv) Plans established and maintained by professional
service employers.--Clause (i) shall not apply to a plan
described in section 4021(b)(13) of the Employee Retirement
Income Security Act of 1974.''.
(b) Conforming Amendment.--Paragraph (6) of section 4972(c)
is amended to read as follows:
``(6) Exceptions.--In determining the amount of
nondeductible contributions for any taxable year, there shall
not be taken into account so much of the contributions to one
or more defined contribution plans which are not deductible
when contributed solely because of section 404(a)(7) as does
not exceed the greater of--
``(A) the amount of contributions not in excess of 6
percent of compensation (within the meaning of section
404(a)) paid or accrued (during the taxable year for which
the contributions were made) to beneficiaries under the
plans, or
``(B) the sum of--
``(i) the amount of contributions described in section
401(m)(4)(A), plus
``(ii) the amount of contributions described in section
402(g)(3)(A).
For purposes of this paragraph, the deductible limits under
section 404(a)(7) shall first be applied to amounts
contributed to a defined benefit plan and then to amounts
described in subparagraph (B).''.
(c) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2000.
SEC. 343. MISSING PARTICIPANTS.
(a) In General.--Section 4050 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1350) is amended by
redesignating subsection (c) as subsection (e) and by
inserting after subsection (b) the following:
``(c) Multiemployer Plans.--The corporation shall prescribe
rules similar to the rules in subsection (a) for
multiemployer plans covered by this title that terminate
under section 4041A.
``(d) Plans Not Otherwise Subject to Title.--
``(1) Transfer to corporation.--The plan administrator of a
plan described in paragraph (4) may elect to transfer a
missing participant's benefits to the corporation upon
termination of the plan.
``(2) Information to the corporation.--To the extent
provided in regulations, the plan administrator of a plan
described in paragraph (4) shall, upon termination of the
plan, provide the corporation information with respect to
benefits of a missing participant if the plan transfers such
benefits--
``(A) to the corporation, or
``(B) to an entity other than the corporation or a plan
described in paragraph (4)(B)(ii).
``(3) Payment by the corporation.--If benefits of a missing
participant were transferred to the corporation under
paragraph (1), the corporation shall, upon location of the
participant or beneficiary, pay to the participant or
beneficiary the amount transferred (or the appropriate
survivor benefit) either--
``(A) in a single sum (plus interest), or
[[Page H804]]
``(B) in such other form as is specified in regulations of
the corporation.
``(4) Plans described.--A plan is described in this
paragraph if--
``(A) the plan is a pension plan (within the meaning of
section 3(2))--
``(i) to which the provisions of this section do not apply
(without regard to this subsection), and
``(ii) which is not a plan described in paragraphs (2)
through (11) of section 4021(b), and
``(B) at the time the assets are to be distributed upon
termination, the plan--
``(i) has missing participants, and
``(ii) has not provided for the transfer of assets to pay
the benefits of all missing participants to another pension
plan (within the meaning of section 3(2)).
``(5) Certain provisions not to apply.--Subsections (a)(1)
and (a)(3) shall not apply to a plan described in paragraph
(4).''.
(b) Effective Date.--The amendment made by this section
shall apply to distributions made after final regulations
implementing subsections (c) and (d) of section 4050 of the
Employee Retirement Income Security Act of 1974 (as added by
subsection (a)), respectively, are prescribed.
SEC. 344. PERIODIC PENSION BENEFITS STATEMENTS.
(a) In General.--Section 105(a) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1025 (a)) is amended
to read as follows:
``(a)(1) Except as provided in paragraph (2)--
``(A) The administrator of an individual account plan shall
furnish a pension benefit statement--
``(i) to a plan participant at least once annually, and
``(ii) to a plan beneficiary upon written request.
``(B) The administrator of a defined benefit plan shall
furnish a pension benefit statement--
``(i) at least once every 3 years to each participant with
a nonforfeitable accrued benefit who is employed by the
employer maintaining the plan at the time the statement is
furnished to participants, and
``(ii) to a participant or beneficiary of the plan upon
written request.
``(2) Notwithstanding paragraph (1), the administrator of a
plan to which more than 1 unaffiliated employer is required
to contribute shall only be required to furnish a pension
benefit statement under paragraph (1) upon the written
request of a participant or beneficiary of the plan.
``(3) A pension benefit statement under paragraph (1)--
``(A) shall indicate, on the basis of the latest available
information--
``(i) the total benefits accrued, and
``(ii) the nonforfeitable pension benefits, if any, which
have accrued, or the earliest date on which benefits will
become nonforfeitable,
``(B) shall be communicated in a manner calculated to be
understood by the average plan participant, and
``(C) may be provided in written, electronic, telephonic,
or other appropriate form.
``(4) In the case of a defined benefit plan, the
requirements of paragraph (1)(B)(i) shall be treated as met
with respect to a participant if the administrator provides
the participant at least once each year with notice of the
availability of the pension benefit statement and the ways in
which the participant may obtain such statement. Such notice
shall be provided in written, electronic, telephonic, or
other appropriate form, and may be included with other
communications to the participant if done in a manner
reasonably designed to attract the attention of the
participant.''.
(b) Conforming Amendments.--
(1) Section 105 of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1025) is amended by striking
subsection (d).
(2) Section 105(b) of such Act (29 U.S.C. 1025(b)) is
amended to read as follows:
``(b) In no case shall a participant or beneficiary of a
plan be entitled to more than one statement described in
subsection (a)(1)(A) or (a)(1)(B)(ii), whichever is
applicable, in any 12-month period.''.
(c) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2000.
SEC. 345. CIVIL PENALTIES FOR BREACH OF FIDUCIARY
RESPONSIBILITY.
(a) Imposition and Amount of Penalty Made Discretionary.--
Section 502(l)(1) of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1132(l)(1)) is amended--
(1) by striking ``shall'' and inserting ``may'', and
(2) by striking ``equal to'' and inserting ``not greater
than''.
(b) Applicable Recovery Amount.--Section 502(l)(2) of such
Act (29 U.S.C. 1132(l)(2)) is amended to read as follows:
``(2) For purposes of paragraph (1), the term `applicable
recovery amount' means any amount which is recovered from any
fiduciary or other person (or from any other person on behalf
of any such fiduciary or other person) with respect to a
breach or violation described in paragraph (1) on or after
the 30th day following receipt by such fiduciary or other
person of written notice from the Secretary of the violation,
whether paid voluntarily or by order of a court in a judicial
proceeding instituted by the Secretary under subsection
(a)(2) or (a)(5). The Secretary may, in the Secretary's sole
discretion, extend the 30-day period described in the
preceding sentence.''.
(c) Other Rules.--Section 502(l) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1132(l)) is amended by
adding at the end the following:
``(5) A person shall be jointly and severally liable for
the penalty described in paragraph (1) to the same extent
that such person is jointly and severally liable for the
applicable recovery amount on which the penalty is based.
``(6) No penalty shall be assessed under this subsection
unless the person against whom the penalty is assessed is
given notice and opportunity for a hearing with respect to
the violation and applicable recovery amount.''.
(d) Effective Dates.--
(1) In general.--The amendments made by this section shall
apply to any breach of fiduciary responsibility or other
violation of part 4 of subtitle B of title I of the Employee
Retirement Income Security Act of 1974 occurring on or after
the date of enactment of this Act.
(2) Transition rule.--In applying the amendment made by
subsection (b) (relating to applicable recovery amount), a
breach or other violation occurring before the date of
enactment of this Act which continues after the 180th day
after such date (and which may have been discontinued at any
time during its existence) shall be treated as having
occurred after such date of enactment.
SEC. 346. EXCISE TAX RELIEF FOR SOUND PENSION FUNDING.
(a) In General.--Subsection (c) of section 4972 (relating
to nondeductible contributions) is amended by adding at the
end the following new paragraph:
``(7) Defined benefit plan exception.--In determining the
amount of nondeductible contributions for any taxable year,
an employer may elect for such year not to take into account
any contributions to a defined benefit plan except to the
extent that such contributions exceed the full-funding
limitation (as defined in section 412(c)(7), determined
without regard to subparagraph (A)(i)(I) thereof). For
purposes of this paragraph, the deductible limits under
section 404(a)(7) shall first be applied to amounts
contributed to defined contribution plans and then to amounts
described in this paragraph. If an employer makes an election
under this paragraph for a taxable year, paragraph (6) shall
not apply to such employer for such taxable year.''.
(b) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2000.
SEC. 347. EXCISE TAX ON FAILURE TO PROVIDE NOTICE BY DEFINED
BENEFIT PLANS SIGNIFICANTLY REDUCING FUTURE
BENEFIT ACCRUALS.
(a) Amendment to 1986 Code.--Chapter 43 (relating to
qualified pension, etc., plans) is amended by adding at the
end the following new section:
``SEC. 4980F. FAILURE OF APPLICABLE PLANS REDUCING BENEFIT
ACCRUALS TO SATISFY NOTICE REQUIREMENTS.
``(a) Imposition of Tax.--There is hereby imposed a tax on
the failure of any applicable pension plan to meet the
requirements of subsection (e) with respect to any applicable
individual.
``(b) Amount of Tax.--
``(1) In general.--The amount of the tax imposed by
subsection (a) on any failure with respect to any applicable
individual shall be $100 for each day in the noncompliance
period with respect to such failure.
``(2) Noncompliance period.--For purposes of this section,
the term `noncompliance period' means, with respect to any
failure, the period beginning on the date the failure first
occurs and ending on the date the failure is corrected.
``(c) Limitations on Amount of Tax.--
``(1) Overall limitation for unintentional failures.--In
the case of failures that are due to reasonable cause and not
to willful neglect, the tax imposed by subsection (a) for
failures during the taxable year of the employer (or, in the
case of a multiemployer plan, the taxable year of the trust
forming part of the plan) shall not exceed $500,000. For
purposes of the preceding sentence, all multiemployer
plans of which the same trust forms a part shall be
treated as one plan. For purposes of this paragraph, if
not all persons who are treated as a single employer for
purposes of this section have the same taxable year, the
taxable years taken into account shall be determined under
principles similar to the principles of section 1561.
``(2) Waiver by secretary.--In the case of a failure which
is due to reasonable cause and not to willful neglect, the
Secretary may waive part or all of the tax imposed by
subsection (a) to the extent that the payment of such tax
would be excessive relative to the failure involved.
``(d) Liability for Tax.--The following shall be liable for
the tax imposed by subsection (a):
``(1) In the case of a plan other than a multiemployer
plan, the employer.
``(2) In the case of a multiemployer plan, the plan.
``(e) Notice Requirements for Plans Significantly Reducing
Benefit Accruals.--
``(1) In general.--If an applicable pension plan is amended
to provide for a significant reduction in the rate of future
benefit accrual, the plan administrator shall provide written
notice to each applicable individual (and to each employee
organization representing applicable individuals).
``(2) Notice.--The notice required by paragraph (1) shall
be written in a manner calculated to be understood by the
average plan
[[Page H805]]
participant and shall provide sufficient information (as
determined in accordance with regulations prescribed by the
Secretary) to allow applicable individuals to understand the
effect of the plan amendment.
``(3) Timing of notice.--Except as provided in regulations,
the notice required by paragraph (1) shall be provided within
a reasonable time before the effective date of the plan
amendment.
``(4) Designees.--Any notice under paragraph (1) may be
provided to a person designated, in writing, by the person to
which it would otherwise be provided.
``(5) Notice before adoption of amendment.--A plan shall
not be treated as failing to meet the requirements of
paragraph (1) merely because notice is provided before the
adoption of the plan amendment if no material modification of
the amendment occurs before the amendment is adopted.
``(f ) Applicable Individual; Applicable Pension Plan.--For
purposes of this section--
``(1) Applicable individual.--The term `applicable
individual' means, with respect to any plan amendment--
``(A) any participant in the plan, and
``(B) any beneficiary who is an alternate payee (within the
meaning of section 414(p)(8)) under an applicable qualified
domestic relations order (within the meaning of section
414(p)(1)(A)),
who may reasonably be expected to be affected by such plan
amendment.
``(2) Applicable pension plan.--The term `applicable
pension plan' means--
``(A) any defined benefit plan, or
``(B) an individual account plan which is subject to the
funding standards of section 412,
which had 100 or more participants who had accrued a benefit,
or with respect to whom contributions were made, under the
plan (whether or not vested) as of the last day of the plan
year preceding the plan year in which the plan amendment
becomes effective. Such term shall not include a governmental
plan (within the meaning of section 414(d)) or a church plan
(within the meaning of section 414(e)) with respect to which
the election provided by section 410(d) has not been made.''.
(b) Amendment to ERISA.--Section 204(h) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1054(h)) is
amended by adding at the end the following new paragraph:
``(3)(A) A plan to which paragraph (1) applies shall not be
treated as meeting the requirements of such paragraph unless,
in addition to any notice required to be provided to an
individual or organization under such paragraph, the plan
administrator provides the notice described in subparagraph
(B).
``(B) The notice required by subparagraph (A) shall be
written in a manner calculated to be understood by the
average plan participant and shall provide sufficient
information (as determined in accordance with regulations
prescribed by the Secretary of the Treasury) to allow
individuals to understand the effect of the plan amendment.
``(C) Except as provided in regulations prescribed by the
Secretary of the Treasury, the notice required by
subparagraph (A) shall be provided within a reasonable time
before the effective date of the plan amendment.
``(D) A plan shall not be treated as failing to meet the
requirements of subparagraph (A) merely because notice is
provided before the adoption of the plan amendment if no
material modification of the amendment occurs before the
amendment is adopted.''.
(c) Clerical Amendment.--The table of sections for chapter
43 is amended by adding at the end the following new item:
``Sec. 4980F. Failure of applicable plans reducing benefit accruals to
satisfy notice requirements.''.
(d) Effective Dates.--
(1) In general.--The amendments made by this section shall
apply to plan amendments taking effect on or after the date
of the enactment of this Act.
(2) Transition.--Until such time as the Secretary of the
Treasury issues regulations under sections 4980F(e)(2) and
(3) of the Internal Revenue Code of 1986 and section
204(h)(3) of the Employee Retirement Income Security Act of
1974 (as added by the amendments made by this section), a
plan shall be treated as meeting the requirements of such
sections if it makes a good faith effort to comply with such
requirements.
(3) Special rule.--The period for providing any notice
required by the amendments made by this section shall not end
before the date which is 3 months after the date of the
enactment of this Act.
SEC. 348. PROTECTION OF INVESTMENT OF EMPLOYEE CONTRIBUTIONS
TO 401(K) PLANS.
(a) In General.--Section 1524(b) of the Taxpayer Relief Act
of 1997 is amended to read as follows:
``(b) Effective Date.--
``(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to elective
deferrals for plan years beginning after December 31, 1998.
``(2) Nonapplication to previously acquired property.--The
amendments made by this section shall not apply to any
elective deferral which is invested in assets consisting of
qualifying employer securities, qualifying employer real
property, or both, if such assets were acquired before
January 1, 1999.''.
(b) Effective Date.--The amendment made by this section
shall apply as if included in the provision of the Taxpayer
Relief Act of 1997 to which it relates.
SEC. 349. TREATMENT OF MULTIEMPLOYER PLANS UNDER SECTION 415.
(a) Compensation Limit.--Paragraph (11) of section 415(b)
(relating to limitation for defined benefit plans) is amended
to read as follows:
``(11) Special limitation rule for governmental and
multiemployer plans.--In the case of a governmental plan (as
defined in section 414(d)) or a multiemployer plan (as
defined in section 414(f )), subparagraph (B) of paragraph
(1) shall not apply.''.
(b) Effective Date.--The amendment made by this section
shall apply to years beginning after December 31, 2000.
SEC. 350. TECHNICAL CORRECTIONS TO SAVER ACT.
Section 517 of the Employee Retirement Income Security Act
of 1974 (29 U.S.C. 1147) is amended--
(1) in subsection (a), by striking ``2001 and 2005 on or
after September 1 of each year involved'' and inserting
``2001, 2005, and 2009 in the month of September of each year
involved'';
(2) in subsection (b), by adding at the end the following
new sentence: ``To effectuate the purposes of this paragraph,
the Secretary may enter into a cooperative agreement,
pursuant to the Federal Grant and Cooperative Agreement Act
of 1977 (31 U.S.C. 6301 et seq.), with the American Savings
Education Council.'';
(3) in subsection (e)(2)--
(A) by striking subparagraph (D) and inserting the
following:
``(D) the Chairman and Ranking Member of the Subcommittee
on Labor, Health and Human Services, and Education of the
Committee on Appropriations of the House of Representatives
and the Chairman and Ranking Member of the Subcommittee on
Labor, Health and Human Services, and Education of the
Committee on Appropriations of the Senate;'';
(B) by redesignating subparagraph (G) as subparagraph (J);
and
(C) by inserting after subparagraph (F) the following new
subparagraphs:
``(G) the Chairman and Ranking Member of the Committee on
Finance of the Senate;
``(H) the Chairman and Ranking Member of the Committee on
Ways and Means of the House of Representatives;
``(I) the Chairman and Ranking Member of the Subcommittee
on Employer-Employee Relations of the Committee on Education
and the Workforce of the House of Representatives; and'';
(4) in subsection (e)(3)(A)--
(A) by striking ``There shall be no more than 200
additional participants.'' and inserting ``The participants
in the National Summit shall also include additional
participants appointed under this subparagraph.'';
(B) by striking ``one-half shall be appointed by the
President,'' in clause (i) and inserting ``not more than 100
participants shall be appointed under this clause by the
President,'', and by striking ``and'' at the end of clause
(i);
(C) by striking ``one-half shall be appointed by the
elected leaders of Congress'' in clause (ii) and inserting
``not more than 100 participants shall be appointed under
this clause by the elected leaders of Congress'', and by
striking the period at the end of clause (ii) and inserting
``; and''; and
(D) by adding at the end the following new clause:
``(iii) The President, in consultation with the elected
leaders of Congress referred to in subsection (a), may
appoint under this clause additional participants to the
National Summit. The number of such additional participants
appointed under this clause may not exceed the lesser of 3
percent of the total number of all additional participants
appointed under this paragraph, or 10. Such additional
participants shall be appointed from persons nominated by the
organization referred to in subsection (b)(2) which is made
up of private sector businesses and associations partnered
with Government entities to promote long term financial
security in retirement through savings and with which the
Secretary is required thereunder to consult and cooperate and
shall not be Federal, State, or local government
employees.'';
(5) in subsection (e)(3)(B), by striking ``January 31,
1998'' in subparagraph (B) and inserting ``May 1, 2001, May
1, 2005, and May 1, 2009, for each of the subsequent summits,
respectively'';
(6) in subsection (f)(1)(C), by inserting ``, no later than
90 days prior to the date of the commencement of the National
Summit,'' after ``comment'' in paragraph (1)(C);
(7) in subsection (g), by inserting ``, in consultation
with the congressional leaders specified in subsection
(e)(2),'' after ``report'';
(8) in subsection (i)--
(A) by striking ``beginning on or after October 1, 1997''
in paragraph (1) and inserting ``2001, 2005, and 2009''; and
(B) by adding at the end the following new paragraph:
``(3) Reception and representation authority.--The
Secretary is hereby granted reception and representation
authority limited specifically to the events at the National
Summit. The Secretary shall use any private contributions
received in connection with the National Summit prior to
using funds appropriated for purposes of the National Summit
pursuant to this paragraph.''; and
(9) in subsection (k)--
[[Page H806]]
(A) by striking ``shall enter into a contract on a sole-
source basis'' and inserting ``may enter into a contract on a
sole-source basis''; and
(B) by striking ``fiscal year 1998'' and inserting ``fiscal
years 2001, 2005, and 2009''.
SEC. 351. MODEL SPOUSAL CONSENT LANGUAGE AND QUALIFIED
DOMESTIC RELATIONS ORDER.
(a) Model Spousal Consent Language.--Section 205(c) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1055(c)) is amended by adding at the end the following new
paragraph:
``(9) Not later than January 1, 2001, the Secretary of
Labor shall develop model language for the spousal consent
required under paragraph (2) which--
``(A) is written in a manner calculated to be understood by
the average person, and
``(B) discloses in plain terms whether--
``(i) the waiver is irrevocable, and
``(ii) the waiver may be revoked by a qualified domestic
relations order.''.
(b) Model Qualified Domestic Relations Order.--Section
206(d)(3) of such Act (29 U.S.C. 1056(d)(3)) is amended by
adding at the end the following new subparagraph:
``(O) Not later than January 1, 2001, the Secretary shall
develop language for a qualified domestic relations order
which meets--
``(i) the requirements of subparagraph (B)(i), and
``(ii) the requirements of this Act related to the need to
consider the treatment of any lump sum payment, qualified
joint and survivor annuity, or qualified preretirement
survivor annuity.''.
(c) Publicity.--The Secretary of Labor shall include
publicity for the model language required by the amendments
made by this section in the pension outreach efforts
undertaken by each Secretary.
SEC. 352. ELIMINATION OF ERISA DOUBLE JEOPARDY.
(a) Elimination of Second Lawsuits by the Secretary.--
Section 502(h) of the Employee Retirement Income Security Act
of 1974 (29 U.S.C. 1132(h)) is amended--
(1) by inserting ``(1)'' after ``(h)'', and
(2) by adding at the end the following:
``(2) In any case in which--
``(A) a complaint in an action brought against a person
under subsection (a)(2) is served in accordance with
paragraph (1), and
``(B) the action is maintained as a class action or
derivative action under the Federal Rules of Civil Procedure,
``(C) the action is resolved by a court-approved settlement
agreement,
``(D) the complaint is served upon the Secretary at least
90 days prior to final court approval of the settlement
agreement, and
``(E) the Secretary receives a fully executed copy of the
settlement agreement within the time established by the court
for notifying the plan's participants of the proposed
compromise pursuant to Rule 23 or 23.1 of the Federal Rules
of Civil Procedure,
the Secretary shall be barred from litigating any claim
against such person under subsection (a)(2) that was, or
could have been, brought in that action with respect to the
same plan. Notwithstanding this paragraph, the Secretary
shall not be barred from litigating any claim against such
person under subsection (a)(2) if the Secretary filed a
complaint under subsection (a)(2) prior to the final court
approval of the settlement agreement.''.
(b) Effective Date.--The amendments made by this section
are effective with respect to all actions or claims commenced
by the Secretary that are pending on or after the date of the
enactment of this Act.
Subtitle E--Reducing Regulatory Burdens
SEC. 361. MODIFICATION OF TIMING OF PLAN VALUATIONS.
(a) In General.--Section 412(c)(9) (relating to annual
valuation) is amended--
(1) by striking ``For purposes'' and inserting the
following:
``(A) In general.--For purposes'', and
(2) by adding at the end the following:
``(B) Election to use prior year valuation.--
``(i) In general.--Except as provided in clause (ii), if,
for any plan year--
``(I) an election is in effect under this subparagraph with
respect to a plan, and
``(II) the assets of the plan are not less than 125 percent
of the plan's current liability (as defined in paragraph
(7)(B)), determined as of the valuation date for the
preceding plan year,
then this section shall be applied using the information
available as of such valuation date.
``(ii) Exceptions.--
``(I) Actual valuation every 3 years.--Clause (i) shall not
apply for more than 2 consecutive plan years and valuation
shall be under subparagraph (A) with respect to any plan year
to which clause (i) does not apply by reason of this
subclause.
``(II) Regulations.--Clause (i) shall not apply to the
extent that more frequent valuations are required under the
regulations under subparagraph (A).
``(iii) Adjustments.--Information under clause (i) shall,
in accordance with regulations, be actuarially adjusted to
reflect significant differences in participants.
``(iv) Election.--An election under this subparagraph, once
made, shall be irrevocable without the consent of the
Secretary.''.
(b) Amendments to ERISA.--Paragraph (9) of section 302(c)
of the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1053(c)) is amended--
(1) by inserting ``(A)'' after ``(9)'', and
(2) by adding at the end the following:
``(B)(i) Except as provided in clause (ii), if, for any
plan year--
``(I) an election is in effect under this subparagraph with
respect to a plan, and
``(II) the assets of the plan are not less than 125 percent
of the plan's current liability (as defined in paragraph
(7)(B)), determined as of the valuation date for the
preceding plan year,
then this section shall be applied using the information
available as of such valuation date.
``(ii)(I) Clause (i) shall not apply for more than 2
consecutive plan years and valuation shall be under
subparagraph (A) with respect to any plan year to which
clause (i) does not apply by reason of this subclause.
``(II) Clause (i) shall not apply to the extent that more
frequent valuations are required under the regulations under
subparagraph (A).
``(iii) Information under clause (i) shall, in accordance
with regulations, be actuarially adjusted to reflect
significant differences in participants.
``(iv) An election under this subparagraph, once made,
shall be irrevocable without the consent of the Secretary of
the Treasury.''.
(c) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2000.
SEC. 362. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT LOSS OF
DIVIDEND DEDUCTION.
(a) In General.--Section 404(k)(2)(A) (defining applicable
dividends) is amended by striking ``or'' at the end of clause
(ii), by redesignating clause (iii) as clause (iv), and by
inserting after clause (ii) the following new clause:
``(iii) is, at the election of such participants or their
beneficiaries--
``(I) payable as provided in clause (i) or (ii), or
``(II) paid to the plan and reinvested in qualifying
employer securities, or''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2000.
SEC. 363. REPEAL OF TRANSITION RULE RELATING TO CERTAIN
HIGHLY COMPENSATED EMPLOYEES.
(a) In General.--Paragraph (4) of section 1114(c) of the
Tax Reform Act of 1986 is hereby repealed.
(b) Effective Date.--The repeal made by subsection (a)
shall apply to plan years beginning after December 31, 1999.
SEC. 364. EMPLOYEES OF TAX-EXEMPT ENTITIES.
(a) In General.--The Secretary of the Treasury shall modify
Treasury Regulations section 1.410(b)-6(g) to provide that
employees of an organization described in section
403(b)(1)(A)(i) of the Internal Revenue Code of 1986 who are
eligible to make contributions under section 403(b) of such
Code pursuant to a salary reduction agreement may be treated
as excludable with respect to a plan under section 401 (k) or
(m) of such Code that is provided under the same general
arrangement as a plan under such section 401(k), if--
(1) no employee of an organization described in section
403(b)(1)(A)(i) of such Code is eligible to participate in
such section 401(k) plan or section 401(m) plan, and
(2) 95 percent of the employees who are not employees of an
organization described in section 403(b)(1)(A)(i) of such
Code are eligible to participate in such plan under such
section 401 (k) or (m).
(b) Effective Date.--The modification required by
subsection (a) shall apply as of the same date set forth in
section 1426(b) of the Small Business Job Protection Act of
1996.
SEC. 365. CLARIFICATION OF TREATMENT OF EMPLOYER-PROVIDED
RETIREMENT ADVICE.
(a) In General.--Subsection (a) of section 132 (relating to
exclusion from gross income) is amended by striking ``or'' at
the end of paragraph (5), by striking the period at the end
of paragraph (6) and inserting ``, or'', and by adding at the
end the following new paragraph:
``(7) qualified retirement planning services.''.
(b) Qualified Retirement Planning Services Defined.--
Section 132 is amended by redesignating subsection (m) as
subsection (n) and by inserting after subsection (l) the
following:
``(m) Qualified Retirement Planning Services.--
``(1) In general.--For purposes of this section, the term
`qualified retirement planning services' means any retirement
planning service provided to an employee and his spouse by an
employer maintaining a qualified employer plan.
``(2) Nondiscrimination rule.--Subsection (a)(7) shall
apply in the case of highly compensated employees only if
such services are available on substantially the same terms
to each member of the group of employees normally provided
education and information regarding the employer's qualified
employer plan.
``(3) Qualified employer plan.--For purposes of this
subsection, the term `qualified employer plan' means a plan,
contract, pension, or account described in section
219(g)(5).''.
(c) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2000.
SEC. 366. REPORTING SIMPLIFICATION.
(a) Simplified Annual Filing Requirement for Owners and
Their Spouses.--
[[Page H807]]
(1) In general.--The Secretary of the Treasury shall modify
the requirements for filing annual returns with respect to
one-participant retirement plans to ensure that such plans
with assets of $250,000 or less as of the close of the plan
year need not file a return for that year.
(2) One-participant retirement plan defined.--For purposes
of this subsection, the term ``one-participant retirement
plan'' means a retirement plan that--
(A) on the first day of the plan year--
(i) covered only the employer (and the employer's spouse)
and the employer owned the entire business (whether or not
incorporated), or
(ii) covered only one or more partners (and their spouses)
in a business partnership (including partners in an S or C
corporation),
(B) meets the minimum coverage requirements of section
410(b) of the Internal Revenue Code of 1986 without being
combined with any other plan of the business that covers the
employees of the business,
(C) does not provide benefits to anyone except the employer
(and the employer's spouse) or the partners (and their
spouses),
(D) does not cover a business that is a member of an
affiliated service group, a controlled group of corporations,
or a group of businesses under common control, and
(E) does not cover a business that leases employees.
(3) Other definitions.--Terms used in paragraph (2) which
are also used in section 414 of the Internal Revenue Code of
1986 shall have the respective meanings given such terms by
such section.
(b) Simplified Annual Filing Requirement for Plans With
Fewer Than 25 Employees.--In the case of a retirement plan
which covers less than 25 employees on the first day of the
plan year and meets the requirements described in
subparagraphs (B), (D), and (E) of subsection (a)(2), the
Secretary of the Treasury shall provide for the filing of a
simplified annual return that is substantially similar to the
annual return required to be filed by a one-participant
retirement plan.
(c) Effective Date.--The provisions of this section shall
take effect on January 1, 2001.
SEC. 367. IMPROVEMENT OF EMPLOYEE PLANS COMPLIANCE RESOLUTION
SYSTEM.
The Secretary of the Treasury shall continue to update and
improve the Employee Plans Compliance Resolution System (or
any successor program) giving special attention to--
(1) increasing the awareness and knowledge of small
employers concerning the availability and use of the program,
(2) taking into account special concerns and circumstances
that small employers face with respect to compliance and
correction of compliance failures,
(3) extending the duration of the self-correction period
under the Administrative Policy Regarding Self-Correction for
significant compliance failures,
(4) expanding the availability to correct insignificant
compliance failures under the Administrative Policy Regarding
Self-Correction during audit, and
(5) assuring that any tax, penalty, or sanction that is
imposed by reason of a compliance failure is not excessive
and bears a reasonable relationship to the nature, extent,
and severity of the failure.
SEC. 368. SUBSTANTIAL OWNER BENEFITS IN TERMINATED PLANS.
(a) Modification of Phase-In of Guarantee.--Section
4022(b)(5) of the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1322(b)(5)) is amended to read as follows:
``(5)(A) For purposes of this paragraph, the term `majority
owner' means an individual who, at any time during the 60-
month period ending on the date the determination is being
made--
``(i) owns the entire interest in an unincorporated trade
or business,
``(ii) in the case of a partnership, is a partner who owns,
directly or indirectly, 50 percent or more of either the
capital interest or the profits interest in such partnership,
or
``(iii) in the case of a corporation, owns, directly or
indirectly, 50 percent or more in value of either the voting
stock of that corporation or all the stock of that
corporation.
For purposes of clause (iii), the constructive ownership
rules of section 1563(e) of the Internal Revenue Code of 1986
shall apply (determined without regard to section
1563(e)(3)(C)).
``(B) In the case of a participant who is a majority owner,
the amount of benefits guaranteed under this section shall
equal the product of--
``(i) a fraction (not to exceed 1) the numerator of which
is the number of years from the later of the effective date
or the adoption date of the plan to the termination date, and
the denominator of which is 10, and
``(ii) the amount of benefits that would be guaranteed
under this section if the participant were not a majority
owner.''.
(b) Modification of Allocation of Assets.--
(1) Section 4044(a)(4)(B) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1344(a)(4)(B)) is amended by
striking ``section 4022(b)(5)'' and inserting ``section
4022(b)(5)(B)''.
(2) Section 4044(b) of such Act (29 U.S.C. 1344(b)) is
amended--
(A) by striking ``(5)'' in paragraph (2) and inserting
``(4), (5),'', and
(B) by redesignating paragraphs (3) through (6) as
paragraphs (4) through (7), respectively, and by inserting
after paragraph (2) the following:
``(3) If assets available for allocation under paragraph
(4) of subsection (a) are insufficient to satisfy in full the
benefits of all individuals who are described in that
paragraph, the assets shall be allocated first to benefits
described in subparagraph (A) of that paragraph. Any
remaining assets shall then be allocated to benefits
described in subparagraph (B) of that paragraph. If assets
allocated to such subparagraph (B) are insufficient to
satisfy in full the benefits described in that subparagraph,
the assets shall be allocated pro rata among individuals on
the basis of the present value (as of the termination date)
of their respective benefits described in that
subparagraph.''.
(c) Conforming Amendments.--
(1) Section 4021 of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1321) is amended--
(A) in subsection (b)(9), by striking ``as defined in
section 4022(b)(6)'', and
(B) by adding at the end the following:
``(d) For purposes of subsection (b)(9), the term
`substantial owner' means an individual who, at any time
during the 60-month period ending on the date the
determination is being made--
``(1) owns the entire interest in an unincorporated trade
or business,
``(2) in the case of a partnership, is a partner who owns,
directly or indirectly, more than 10 percent of either the
capital interest or the profits interest in such partnership,
or
``(3) in the case of a corporation, owns, directly or
indirectly, more than 10 percent in value of either the
voting stock of that corporation or all the stock of that
corporation.
For purposes of paragraph (3), the constructive ownership
rules of section 1563(e) of the Internal Revenue Code of 1986
shall apply (determined without regard to section
1563(e)(3)(C)).''.
(2) Section 4043(c)(7) of such Act (29 U.S.C. 1343(c)(7))
is amended by striking ``section 4022(b)(6)'' and inserting
``section 4021(d)''.
(d) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to plan
terminations--
(A) under section 4041(c) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1341(c)) with respect to
which notices of intent to terminate are provided under
section 4041(a)(2) of such Act (29 U.S.C. 1341(a)(2)) after
December 31, 2000, and
(B) under section 4042 of such Act (29 U.S.C. 1342) with
respect to which proceedings are instituted by the
corporation after such date.
(2) Conforming amendments.--The amendments made by
subsection (c) shall take effect on the date of the enactment
of this Act.
SEC. 369. MODIFICATION OF EXCLUSION FOR EMPLOYER PROVIDED
TRANSIT PASSES.
(a) In General.--Section 132(f )(3) (relating to cash
reimbursements) is amended by striking the last sentence.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
1999.
SEC. 370. REPEAL OF THE MULTIPLE USE TEST.
(a) In General.--Paragraph (9) of section 401(m) is amended
to read as follows:
``(9) Regulations.--The Secretary shall prescribe such
regulations as may be necessary to carry out the purposes of
this subsection and subsection (k), including regulations
permitting appropriate aggregation of plans and
contributions.''.
(b) Effective Date.--The amendment made by this section
shall apply to years beginning after December 31, 2000.
SEC. 371. FLEXIBILITY IN NONDISCRIMINATION, COVERAGE, AND
LINE OF BUSINESS RULES.
(a) Nondiscrimination.--
(1) In general.--The Secretary of the Treasury shall, by
regulation, provide that a plan shall be deemed to satisfy
the requirements of section 401(a)(4) of the Internal Revenue
Code of 1986 if such plan satisfies the facts and
circumstances test under section 401(a)(4) of such Code, as
in effect before January 1, 1994, but only if--
(A) the plan satisfies conditions prescribed by the
Secretary to appropriately limit the availability of such
test, and
(B) the plan is submitted to the Secretary for a
determination of whether it satisfies such test.
Subparagraph (B) shall only apply to the extent provided by
the Secretary.
(2) Effective dates.--
(A) Regulations.--The regulation required by paragraph (1)
shall apply to years beginning after December 31, 2000.
(B) Conditions of availability.--Any condition of
availability prescribed by the Secretary under paragraph
(1)(A) shall not apply before the first year beginning not
less than 120 days after the date on which such condition is
prescribed.
(b) Coverage Test.--
(1) In general.--Section 410(b)(1) (relating to minimum
coverage requirements) is amended by adding at the end the
following:
``(D) In the case that the plan fails to meet the
requirements of subparagraphs (A), (B) and (C), the plan--
``(i) satisfies subparagraph (B), as in effect immediately
before the enactment of the Tax Reform Act of 1986,
``(ii) is submitted to the Secretary for a determination of
whether it satisfies the requirement described in clause (i),
and
[[Page H808]]
``(iii) satisfies conditions prescribed by the Secretary by
regulation that appropriately limit the availability of this
subparagraph.
Clause (ii) shall apply only to the extent provided by the
Secretary.''.
(2) Effective dates.--
(A) In general.--The amendment made by paragraph (1) shall
apply to years beginning after December 31, 2000.
(B) Conditions of availability.--Any condition of
availability prescribed by the Secretary under regulations
prescribed by the Secretary under section 410(b)(1)(D) of the
Internal Revenue Code of 1986 shall not apply before the
first year beginning not less than 120 days after the date on
which such condition is prescribed.
(c) Line of Business Rules.--The Secretary of the Treasury
shall, on or before December 31, 2000, modify the existing
regulations issued under section 414(r) of the Internal
Revenue Code of 1986 in order to expand (to the extent that
the Secretary determines appropriate) the ability of a
pension plan to demonstrate compliance with the line of
business requirements based upon the facts and circumstances
surrounding the design and operation of the plan, even though
the plan is unable to satisfy the mechanical tests currently
used to determine compliance.
SEC. 372. EXTENSION TO INTERNATIONAL ORGANIZATIONS OF
MORATORIUM ON APPLICATION OF CERTAIN
NONDISCRIMINATION RULES APPLICABLE TO STATE AND
LOCAL PLANS.
(a) In General.--Subparagraph (G) of section 401(a)(5),
subparagraph (H) of section 401(a)(26), subparagraph (G) of
section 401(k)(3), and paragraph (2) of section 1505(d) of
the Taxpayer Relief Act of 1997 are each amended by inserting
``or by an international organization which is described in
section 414(d)'' after ``or instrumentality thereof)''.
(b) Conforming Amendments.--
(1) The headings for subparagraph (G) of section 401(a)(5)
and subparagraph (H) of section 401(a)(26) are each amended
by inserting ``and international organization'' after
``governmental''.
(2) Subparagraph (G) of section 401(k)(3) is amended by
inserting ``State and local governmental and international
organization plans.--'' after ``(G)''.
(c) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2000.
SEC. 373. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.
(a) Expansion of Period.--
(1) In general.--Subparagraph (A) of section 205(c)(7) of
the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1055) is amended by striking ``90-day'' and inserting
``180-day''.
(2) Modification of regulations.--The Secretary of the
Treasury shall modify the regulations of such Secretary under
part 2 of subtitle B of title I of the Employee Retirement
Income Security Act of 1974 to the extent that they relate to
sections 203(e) and 205 of such Act to substitute ``180
days'' for ``90 days'' each place it appears.
(3) Effective date.--The amendments made by paragraph (1)
and the modifications required by paragraph (2) shall apply
to years beginning after December 31, 2000.
(b) Consent Regulation Inapplicable to Certain
Distributions.--
(1) In general.--The Secretary of the Treasury shall modify
the regulations under section 205 of the Employee Retirement
Income Security Act of 1974 to provide that the description
of a participant's right, if any, to defer receipt of a
distribution shall also describe the consequences of failing
to defer such receipt.
(2) Effective date.--The modifications required by
paragraph (1) shall apply to years beginning after December
31, 2000.
SEC. 374. ANNUAL REPORT DISSEMINATION.
(a) In General.--Section 104(b)(3) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1024(b)(3))
is amended by striking ``shall furnish'' and inserting
``shall make available for examination (and, upon request,
shall furnish)''.
(b) Effective Date.--The amendment made by this section
shall apply to reports for years beginning after December 31,
1998.
SEC. 375. EXCESS BENEFIT PLANS.
(a) In General.--Section 3(36) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1002(36)) is amended
to read as follows:
``(36) The term `excess benefit plan' means a plan, without
regard to whether such plan is funded, maintained by an
employer solely for the purpose of providing benefits to
employees in excess of any limitation imposed by section
401(a)(17) or 415 of the Internal Revenue Code of 1986 or any
other limitation on contributions or benefits in such Code on
plans to which any of such sections apply. To the extent that
a separable part of a plan (as determined by the Secretary of
Labor) maintained by an employer is maintained for such
purpose, that part shall be treated as a separate plan which
is an excess benefit plan.''.
(b) Effective Date.--The amendment made by this section
shall apply to years beginning after December 31, 1999.
SEC. 376. BENEFIT SUSPENSION NOTICE.
(a) Modification of Regulation.--The Secretary of Labor
shall modify the regulation under section 203(a)(3)(B) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1053(a)(3)(B)) to provide that, except in the case of
employment, subsequent to the commencement of payment of
benefits, with a former employer, the notification required
by such regulation--
(1) may be included in the summary plan description for the
plan furnished in accordance with section 104(b) of such Act
(29 U.S.C. 1024(b)), rather than in a separate notice, and
(2) need not include a copy of the relevant plan
provisions.
(c) Effective Date.--The modification made under this
section shall apply to plan years beginning after December
31, 1999.
SEC. 377. CLARIFICATION OF CHURCH WELFARE PLAN STATUS UNDER
STATE INSURANCE LAW.
For purposes of determining the status under State
insurance law of a church plan (as defined in section 414(e)
of the Internal Revenue Code and section 3(33) of the
Employee Retirement Income Security Act that is a welfare
plan (as defined in section 3(1)), such church plan (and any
trust under such plan) shall be deemed a single-employer plan
that--
(1) reimburses costs from general church assets;
(2) purchases insurance coverage with general church
assets; or
(3) both.
For purposes of this paragraph, the term ``reimbursing costs
from general church assets'' means engaging in a practice
that does not have the effect of transferring or spreading
risk. The scope of this paragraph is limited to determining
the status of a church welfare plan under State insurance
law, and does not otherwise recharacterized the status, or
modify or affect the rights, of any plan participant,
including those who make plan contributions.
Subtitle F--Plan Amendments
SEC. 381. PROVISIONS RELATING TO PLAN AMENDMENTS.
(a) In General.--If this section applies to any plan or
contract amendment--
(1) such plan or contract shall be treated as being
operated in accordance with the terms of the plan during the
period described in subsection (b)(2)(A), and
(2) such plan shall not fail to meet the requirements of
section 411(d)(6) of the Internal Revenue Code of 1986 by
reason of such amendment.
(b) Amendments to Which Section Applies.--
(1) In general.--This section shall apply to any amendment
to any plan or annuity contract which is made--
(A) pursuant to any amendment made by this title, or
pursuant to any regulation issued under this title, and
(B) on or before the last day of the first plan year
beginning on or after January 1, 2003.
In the case of a government plan (as defined in section
414(d) of the Internal Revenue Code of 1986), this paragraph
shall be applied by substituting ``2005'' for ``2003''.
(2) Conditions.--This section shall not apply to any
amendment unless--
(A) during the period--
(i) beginning on the date the legislative or regulatory
amendment described in paragraph (1)(A) takes effect (or in
the case of a plan or contract amendment not required by such
legislative or regulatory amendment, the effective date
specified by the plan), and
(ii) ending on the date described in paragraph (1)(B) (or,
if earlier, the date the plan or contract amendment is
adopted),
the plan or contract is operated as if such plan or contract
amendment were in effect, and
(B) such plan or contract amendment applies retroactively
for such period.
TITLE IV--EXTENSION OF WORK OPPORTUNITY CREDIT AND WELFARE-TO-WORK
CREDIT
SEC. 401. WORK OPPORTUNITY CREDIT AND WELFARE-TO-WORK CREDIT.
(a) Temporary Extension.--Sections 51(c)(4)(B) and 51A(f )
(relating to termination) are each amended by striking ``June
30, 1999'' and inserting ``December 31, 2001''.
(b) Clarification of First Year of Employment.--Paragraph
(2) of section 51(i) is amended by striking ``during which he
was not a member of a targeted group''.
(c) Effective Date.--The amendments made by this section
shall apply to individuals who begin work for the employer
after June 30, 1999.
TITLE V--ESTATE TAX RELIEF
Subtitle A--Reductions of Estate and Gift Tax Rates
SEC. 501. REDUCTIONS OF ESTATE AND GIFT TAX RATES.
(a) Maximum Rate of Tax Reduced to 50 Percent.--
(1) In general.--The table contained in section 2001(c)(1)
is amended by striking the two highest brackets and inserting
the following:
$1,025,800, plus 50% of the excess over $2,500,000.''..................
(2) Phase-in of reduced rate.--Subsection (c) of section
2001 is amended by adding at the end the following new
paragraph:
``(3) Phase-in of reduced rate.--In the case of decedents
dying, and gifts made, during 2001, the last item in the
table contained in paragraph (1) shall be applied by
substituting `53%' for `50%'.''.
(b) Repeal of Phaseout of Graduated Rates.--Subsection (c)
of section 2001 is amended by striking paragraph (2) and
redesignating paragraph (3), as added by subsection (a), as
paragraph (2).
(c) Additional Reductions of Rates of Tax.--Subsection (c)
of section 2001, as so amended, is amended by adding at the
end the following new paragraph:
[[Page H809]]
``(3) Phasedown of tax.--In the case of estates of
decedents dying, and gifts made, during any calendar year
after 2002--
``(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:
2003.........................................................1.0
2004 and thereafter..........................................2.0.
``(C) 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, 2002.
Subtitle B--Unified Credit Replaced With Unified Exemption Amount
SEC. 511. 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 the Wage and
Employment Growth Act of 1999).
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:
``In the case of The exemption
calendar year: amount 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.
``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 the Wage and Employment Growth Act
of 1999).''.
(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) Subparagraph (B) of section 2001(b)(1) is amended by
inserting before the comma ``reduced by the amount described
in section 2052(a)(2)(B)''.
(2)(A) Subsection (b) of section 2011 is amended--
(i) by striking ``adjusted'' in the table, and
(ii) by striking the last sentence.
(B) 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)(A) 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''.
(B) Subparagraph (A) of section 2013(c)(1) is amended by
striking ``2010,''.
(5) Paragraph (2) of section 2014(b) is amended by striking
``2010,''.
(6) 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 the Wage and Employment Growth Act of 1999) or
the exemption allowable under section 2052 with respect to
the decedent as a credit under section 2505 (as so in effect)
or exemption under section 2521 (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,''.
(7) Paragraph (3) of section 2057(a) is amended to read as
follows:
``(3) Coordination with exemption amount.--
``(A) In general.--Except as provided in subparagraph (B),
if this section applies to an estate, the exemption amount
under section 2052 shall be $625,000.
``(B) Increase in exemption amount if deduction is less
than $675,000.--If the deduction allowed by this section is
less than $675,000, the amount of the exemption amount under
section 2052 shall be increased (but not above the amount
which would apply to the estate without regard to this
section) by the excess of $675,000 over the amount of the
deduction allowed.''.
(8)(A) Subparagraph (B) of section 2101(b)(1) is amended by
inserting before the comma ``reduced by 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 the
Wage and Employment Growth Act of 1999)''
(B) Subsection (b) of section 2101 is amended by striking
the last sentence.
(9) Section 2102 is amended by striking subsection (c).
(10) 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
``(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 the Wage and
Employment Growth Act of 1999) 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).''.
(11)(A) Subsection (a) of section 2107 is amended by adding
at the end the following new paragraph:
``(3) Limitation on exemption amount.--Subparagraphs (B)
and (C) of section 2106(a)(4) shall not apply in applying
section 2106 for purposes of this section.''.
(B) Subsection (c) of section 2107 is amended--
(i) by striking paragraph (1) and by redesignating
paragraphs (2) and (3) as paragraphs (1) and (2),
respectively, and
(ii) by striking the second sentence of paragraph (2) (as
so redesignated).
(12) 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''.
(13) 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''.
(14) Subparagraph (B) of section 2207B(a)(1) is amended to
read as follows:
[[Page H810]]
``(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.''.
(15) Subsection (a) of section 2503 is amended by striking
``section 2522'' and inserting ``section 2521''.
(16) Paragraph (1) of section 6018(a) is amended by
striking ``the applicable exclusion amount in effect under
section 2010(c)'' and inserting ``the exemption amount under
section 2052''.
(17) 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
$1,000,000, or''.
(18) The table of sections for part II of subchapter A of
chapter 11 is amended by striking the item relating to
section 2010.
(19) The table of sections for part IV of subchapter A of
chapter 11 is amended by inserting after the item relating to
section 2051 the following new item:
``Sec. 2052. Exemption.''.
(20) The table of sections for subchapter A of chapter 12
is amended by striking the item relating to section 2505.
(21) The table of sections for subchapter C of chapter 12
is amended by inserting before the item relating to section
2522 the following new item:
``Sec. 2521. Exemption.''.
(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.
Subtitle C--Modifications of Generation-skipping Transfer Tax
SEC. 521. DEEMED ALLOCATION OF GST EXEMPTION TO LIFETIME
TRANSFERS TO TRUSTS; RETROACTIVE ALLOCATIONS.
(a) In General.--Section 2632 (relating to special rules
for allocation of GST exemption) is amended by redesignating
subsection (c) as subsection (e) and by inserting after
subsection (b) the following new subsections:
``(c) Deemed Allocation to Certain Lifetime Transfers to
GST Trusts.--
``(1) In general.--If any individual makes an indirect skip
during such individual's lifetime, any unused portion of such
individual's GST exemption shall be allocated to the property
transferred to the extent necessary to make the inclusion
ratio for such property zero. If the amount of the indirect
skip exceeds such unused portion, the entire unused portion
shall be allocated to the property transferred.
``(2) Unused portion.--For purposes of paragraph (1), the
unused portion of an individual's GST exemption is that
portion of such exemption which has not previously been--
``(A) allocated by such individual,
``(B) treated as allocated under subsection (b) with
respect to a direct skip occurring during or before the
calendar year in which the indirect skip is made, or
``(C) treated as allocated under paragraph (1) with respect
to a prior indirect skip.
``(3) Definitions.--
``(A) Indirect skip.--For purposes of this subsection, the
term `indirect skip' means any transfer of property (other
than a direct skip) subject to the tax imposed by chapter 12
made to a GST trust.
``(B) GST trust.--The term `GST trust' means a trust that
could have a generation-skipping transfer with respect to the
transferor unless--
``(i) the trust instrument provides that more than 25
percent of the trust corpus must be distributed to or may be
withdrawn by 1 or more individuals who are non-skip persons--
``(I) before the date that the individual attains age 46,
``(II) on or before one or more dates specified in the
trust instrument that will occur before the date that such
individual attains age 46, or
``(III) upon the occurrence of an event that, in accordance
with regulations prescribed by the Secretary, may reasonably
be expected to occur before the date that such individual
attains age 46;
``(ii) the trust instrument provides that more than 25
percent of the trust corpus must be distributed to or may be
withdrawn by one or more individuals who are non-skip persons
and who are living on the date of death of another person
identified in the instrument (by name or by class) who is
more than 10 years older than such individuals;
``(iii) the trust instrument provides that, if one or more
individuals who are non-skip persons die on or before a date
or event described in clause (i) or (ii), more than 25
percent of the trust corpus either must be distributed to the
estate or estates of one or more of such individuals or is
subject to a general power of appointment exercisable by one
or more of such individuals;
``(iv) the trust is a trust any portion of which would be
included in the gross estate of a non-skip person (other than
the transferor) if such person died immediately after the
transfer;
``(v) the trust is a charitable lead annuity trust (within
the meaning of section 2642(e)(3)(A)) or a charitable
remainder annuity trust or a charitable remainder unitrust
(within the meaning of section 664(d)); or
``(vi) the trust is a trust with respect to which a
deduction was allowed under section 2522 for the amount of an
interest in the form of the right to receive annual payments
of a fixed percentage of the net fair market value of the
trust property (determined yearly) and which is required to
pay principal to a non-skip person if such person is alive
when the yearly payments for which the deduction was allowed
terminate.
For purposes of this subparagraph, the value of transferred
property shall not be considered to be includible in the
gross estate of a non-skip person or subject to a right of
withdrawal by reason of such person holding a right to
withdraw so much of such property as does not exceed the
amount referred to in section 2503(b) with respect to any
transferor, and it shall be assumed that powers of
appointment held by non-skip persons will not be exercised.
``(4) Automatic allocations to certain gst trusts.--For
purposes of this subsection, an indirect skip to which
section 2642(f ) applies shall be deemed to have been made
only at the close of the estate tax inclusion period. The
fair market value of such transfer shall be the fair market
value of the trust property at the close of the estate tax
inclusion period.
``(5) Applicability and effect.--
``(A) In general.--An individual--
``(i) may elect to have this subsection not apply to--
``(I) an indirect skip, or
``(II) any or all transfers made by such individual to a
particular trust, and
``(ii) may elect to treat any trust as a GST trust for
purposes of this subsection with respect to any or all
transfers made by such individual to such trust.
``(B) Elections.--
``(i) Elections with respect to indirect skips.--An
election under subparagraph (A)(i)(I) shall be deemed to be
timely if filed on a timely filed gift tax return for the
calendar year in which the transfer was made or deemed to
have been made pursuant to paragraph (4) or on such later
date or dates as may be prescribed by the Secretary.
``(ii) Other elections.--An election under clause (i)(II)
or (ii) of subparagraph (A) may be made on a timely filed
gift tax return for the calendar year for which the election
is to become effective.
``(d) Retroactive Allocations.--
``(1) In general.--If--
``(A) a non-skip person has an interest or a future
interest in a trust to which any transfer has been made,
``(B) such person--
``(i) is a lineal descendant of a grandparent of the
transferor or of a grandparent of the transferor's spouse or
former spouse, and
``(ii) is assigned to a generation below the generation
assignment of the transferor, and
``(C) such person predeceases the transferor,
then the transferor may make an allocation of any of such
transferor's unused GST exemption to any previous transfer or
transfers to the trust on a chronological basis.
``(2) Special rules.--If the allocation under paragraph (1)
by the transferor is made on a gift tax return filed on or
before the date prescribed by section 6075(b) for gifts made
within the calendar year within which the non-skip person's
death occurred--
``(A) the value of such transfer or transfers for purposes
of section 2642(a) shall be determined as if such allocation
had been made on a timely filed gift tax return for each
calendar year within which each transfer was made,
``(B) such allocation shall be effective immediately before
such death, and
``(C) the amount of the transferor's unused GST exemption
available to be allocated shall be determined immediately
before such death.
``(3) Future interest.--For purposes of this subsection, a
person has a future interest in a trust if the trust may
permit income or corpus to be paid to such person on a date
or dates in the future.''.
(b) Conforming Amendment.--Paragraph (2) of section 2632(b)
is amended by striking ``with respect to a direct skip'' and
inserting ``or subsection (c)(1)''.
(c) Effective Dates.--
(1) Deemed allocation.--Section 2632(c) of the Internal
Revenue Code of 1986 (as added by subsection (a)), and the
amendment made by subsection (b), shall apply to transfers
subject to chapter 11 or 12 made after December 31, 1999, and
to estate tax inclusion periods ending after December 31,
1999.
(2) Retroactive allocations.--Section 2632(d) of the
Internal Revenue Code of 1986 (as added by subsection (a))
shall apply to deaths of non-skip persons occurring after the
date of the enactment of this Act.
SEC. 522. SEVERING OF TRUSTS.
(a) In General.--Subsection (a) of section 2642 (relating
to inclusion ratio) is amended by adding at the end the
following new paragraph:
``(3) Severing of trusts.--
``(A) In general.--If a trust is severed in a qualified
severance, the trusts resulting from such severance shall be
treated as separate trusts thereafter for purposes of this
chapter.
``(B) Qualified severance.--For purposes of subparagraph
(A)--
``(i) In general.--The term `qualified severance' means the
division of a single trust and the creation (by any means
available under the governing instrument or under local law)
of two or more trusts if--
``(I) the single trust was divided on a fractional basis,
and
[[Page H811]]
``(II) the terms of the new trusts, in the aggregate,
provide for the same succession of interests of beneficiaries
as are provided in the original trust.
``(ii) Trusts with inclusion ratio greater than zero.--If a
trust has an inclusion ratio of greater than zero and less
than 1, a severance is a qualified severance only if the
single trust is divided into two trusts, one of which
receives a fractional share of the total value of all trust
assets equal to the applicable fraction of the single trust
immediately before the severance. In such case, the trust
receiving such fractional share shall have an inclusion ratio
of zero and the other trust shall have an inclusion ratio of
1.
``(iii) Regulations.--The term `qualified severance'
includes any other severance permitted under regulations
prescribed by the Secretary.
``(C) Timing and manner of severances.--A severance
pursuant to this paragraph may be made at any time. The
Secretary shall prescribe by forms or regulations the manner
in which the qualified severance shall be reported to the
Secretary.''.
(b) Effective Date.--The amendment made by this section
shall apply to severances after the date of the enactment of
this Act.
SEC. 523. MODIFICATION OF CERTAIN VALUATION RULES.
(a) Gifts for Which Gift Tax Return Filed or Deemed
Allocation Made.--Paragraph (1) of section 2642(b) (relating
to valuation rules, etc.) is amended to read as follows:
``(1) Gifts for which gift tax return filed or deemed
allocation made.--If the allocation of the GST exemption to
any transfers of property is made on a gift tax return filed
on or before the date prescribed by section 6075(b) for such
transfer or is deemed to be made under section 2632 (b)(1) or
(c)(1)--
``(A) the value of such property for purposes of subsection
(a) shall be its value as finally determined for purposes of
chapter 12 (within the meaning of section 2001(f )(2)), or,
in the case of an allocation deemed to have been made at the
close of an estate tax inclusion period, its value at the
time of the close of the estate tax inclusion period, and
``(B) such allocation shall be effective on and after the
date of such transfer, or, in the case of an allocation
deemed to have been made at the close of an estate tax
inclusion period, on and after the close of such estate tax
inclusion period.''.
(b) Transfers at Death.--Subparagraph (A) of section
2642(b)(2) is amended to read as follows:
``(A) Transfers at death.--If property is transferred as a
result of the death of the transferor, the value of such
property for purposes of subsection (a) shall be its value as
finally determined for purposes of chapter 11; except that,
if the requirements prescribed by the Secretary respecting
allocation of post-death changes in value are not met, the
value of such property shall be determined as of the time of
the distribution concerned.''.
(c) Effective Date.--The amendments made by this section
shall take effect as if included in the amendments made by
section 1431 of the Tax Reform Act of 1986.
SEC. 524. RELIEF PROVISIONS.
(a) In General.--Section 2642 is amended by adding at the
end the following new subsection:
``(g) Relief Provisions.--
``(1) Relief for late elections.--
``(A) In general.--The Secretary shall by regulation
prescribe such circumstances and procedures under which
extensions of time will be granted to make--
``(i) an allocation of GST exemption described in paragraph
(1) or (2) of subsection (b), and
``(ii) an election under subsection (b)(3) or (c)(5) of
section 2632.
Such regulations shall include procedures for requesting
comparable relief with respect to transfers made before the
date of the enactment of this paragraph.
``(B) Basis for determinations.--In determining whether to
grant relief under this paragraph, the Secretary shall take
into account all relevant circumstances, including evidence
of intent contained in the trust instrument or instrument of
transfer and such other factors as the Secretary deems
relevant. For purposes of determining whether to grant relief
under this paragraph, the time for making the allocation (or
election) shall be treated as if not expressly prescribed
by statute.
``(2) Substantial compliance.--An allocation of GST
exemption under section 2632 that demonstrates an intent to
have the lowest possible inclusion ratio with respect to a
transfer or a trust shall be deemed to be an allocation of so
much of the transferor's unused GST exemption as produces the
lowest possible inclusion ratio. In determining whether there
has been substantial compliance, all relevant circumstances
shall be taken into account, including evidence of intent
contained in the trust instrument or instrument of transfer
and such other factors as the Secretary deems relevant.''.
(b) Effective Dates.--
(1) Relief for late elections.--Section 2642(g)(1) of the
Internal Revenue Code of 1986 (as added by subsection (a))
shall apply to requests pending on, or filed after, the date
of the enactment of this Act.
(2) Substantial compliance.--Section 2642(g)(2) of such
Code (as so added) shall take effect on the date of the
enactment of this Act and shall apply to allocations made
prior to such date for purposes of determining the tax
consequences of generation-skipping transfers with respect to
which the period of time for filing claims for refund has not
expired. No implication is intended with respect to the
availability of relief for late elections or the application
of a rule of substantial compliance prior to the enactment of
this amendment.
Subtitle D--Conservation Easements
SEC. 531. EXPANSION OF ESTATE TAX RULE FOR CONSERVATION
EASEMENTS.
(a) Where Land Is Located.--
(1) In general.--Clause (i) of section 2031(c)(8)(A)
(defining land subject to a conservation easement) is
amended--
(A) by striking ``25 miles'' both places it appears and
inserting ``50 miles'', and
(B) striking ``10 miles'' and inserting ``25 miles''.
(2) Effective date.--The amendments made by this subsection
shall apply to estates of decedents dying after December 31,
1999.
(b) Clarification of Date for Determining Value of Land and
Easement.--
(1) In general.--Section 2031(c)(2) (defining applicable
percentage) is amended by adding at the end the following new
sentence: ``The values taken into account under the preceding
sentence shall be such values as of the date of the
contribution referred to in paragraph (8)(B).''.
(2) Effective date.--The amendment made by this subsection
shall apply to estates of decedents dying after December 31,
1997.
TITLE VI--TAX RELIEF FOR DISTRESSED COMMUNITIES AND INDUSTRIES
Subtitle A--American Community Renewal Act of 1999
SEC. 601. SHORT TITLE.
This subtitle may be cited as the ``American Community
Renewal Act of 1999''.
SEC. 602. DESIGNATION OF AND TAX INCENTIVES FOR RENEWAL
COMMUNITIES.
(a) In General.--Chapter 1 is amended by adding at the end
the following new subchapter:
``Subchapter X--Renewal Communities
``Part I. Designation.
``Part II. Renewal community capital gain; renewal community business.
``Part III. Family development accounts.
``Part IV. Additional incentives.
``PART I--DESIGNATION
``Sec. 1400E. Designation of renewal communities.
``SEC. 1400E. DESIGNATION OF RENEWAL COMMUNITIES.
``(a) Designation.--
``(1) Definitions.--For purposes of this title, the term
`renewal community' means any area--
``(A) which is nominated by one or more local governments
and the State or States in which it is located for
designation as a renewal community (hereinafter in this
section referred to as a `nominated area'); and
``(B) which the Secretary of Housing and Urban Development
designates as a renewal community, after consultation with--
``(i) the Secretaries of Agriculture, Commerce, Labor, and
the Treasury; the Director of the Office of Management and
Budget; and the Administrator of the Small Business
Administration; and
``(ii) in the case of an area on an Indian reservation, the
Secretary of the Interior.
``(2) Number of designations.--
``(A) In general.--The Secretary of Housing and Urban
Development may designate not more than 15 nominated areas as
renewal communities of which--
``(i) only 5 may be designated during the first 12 months
of the period referred to in paragraph (4)(B),
``(ii) an additional 5 may be designated during the second
12 months of such period, and
``(iii) the remaining 5 may be designated during the last
12 months of such period.
``(B) Minimum designation in rural areas.--Of the areas
designated under paragraph (1), at least 3 must be areas--
``(i) which are within a local government jurisdiction or
jurisdictions with a population of less than 50,000,
``(ii) which are outside of a metropolitan statistical area
(within the meaning of section 143(k)(2)(B)), or
``(iii) which are determined by the Secretary of Housing
and Urban Development, after consultation with the Secretary
of Commerce, to be rural areas.
``(3) Areas designated based on degree of poverty, etc.--
``(A) In general.--Except as otherwise provided in this
section, the nominated areas designated as renewal
communities under this subsection shall be those nominated
areas with the highest average ranking with respect to the
criteria described in subparagraphs (B), (C), and (D) of
subsection (c)(3). For purposes of the preceding sentence, an
area shall be ranked within each such criterion on the basis
of the amount by which the area exceeds such criterion, with
the area which exceeds such criterion by the greatest amount
given the highest ranking.
[[Page H812]]
``(B) Exception where inadequate course of action, etc.--An
area shall not be designated under subparagraph (A) if the
Secretary of Housing and Urban Development determines that
the course of action described in subsection (d)(2) with
respect to such area is inadequate.
``(C) Priority for empowerment zones and enterprise
communities with respect to first half of designations.--With
respect to the first 10 designations made under this
section--
``(i) all shall be chosen from nominated areas which are
empowerment zones or enterprise communities (and are
otherwise eligible for designation under this section); and
``(ii) two shall be areas described in paragraph (2)(B).
``(4) Limitation on designations.--
``(A) Publication of regulations.--The Secretary of Housing
and Urban Development shall prescribe by regulation no later
than 4 months after the date of the enactment of this
section, after consultation with the officials described in
paragraph (1)(B)--
``(i) the procedures for nominating an area under paragraph
(1)(A);
``(ii) the parameters relating to the size and population
characteristics of a renewal community; and
``(iii) the manner in which nominated areas will be
evaluated based on the criteria specified in subsection (d).
``(B) Time limitations.--The Secretary of Housing and Urban
Development may designate nominated areas as renewal
communities only during the 36-month period beginning on the
first day of the first month following the month in which the
regulations described in subparagraph (A) are prescribed.
``(C) Procedural rules.--The Secretary of Housing and Urban
Development shall not make any designation of a nominated
area as a renewal community under paragraph (2) unless--
``(i) the local governments and the States in which the
nominated area is located have the authority--
``(I) to nominate such area for designation as a renewal
community;
``(II) to make the State and local commitments described in
subsection (d); and
``(III) to provide assurances satisfactory to the Secretary
of Housing and Urban Development that such commitments will
be fulfilled,
``(ii) a nomination regarding such area is submitted in
such a manner and in such form, and contains such
information, as the Secretary of Housing and
Urban Development shall by regulation prescribe; and
``(iii) the Secretary of Housing and Urban Development
determines that any information furnished is reasonably
accurate.
``(5) Nomination process for indian reservations.--For
purposes of this subchapter, in the case of a nominated area
on an Indian reservation, the reservation governing body (as
determined by the Secretary of the Interior) shall be treated
as being both the State and local governments with respect to
such area.
``(b) Period for Which Designation Is in Effect.--
``(1) In general.--Any designation of an area as a renewal
community shall remain in effect during the period beginning
on the date of the designation and ending on the earliest
of--
``(A) December 31, 2007,
``(B) the termination date designated by the State and
local governments in their nomination, or
``(C) the date the Secretary of Housing and Urban
Development revokes such designation.
``(2) Revocation of designation.--The Secretary of Housing
and Urban Development may revoke the designation under this
section of an area if such Secretary determines that the
local government or the State in which the area is located--
``(A) has modified the boundaries of the area, or
``(B) is not complying substantially with, or fails to make
progress in achieving, the State or local commitments,
respectively, described in subsection (d).
``(c) Area and Eligibility Requirements.--
``(1) In general.--The Secretary of Housing and Urban
Development may designate a nominated area as a renewal
community under subsection (a) only if the area meets the
requirements of paragraphs (2) and (3) of this subsection.
``(2) Area requirements.--A nominated area meets the
requirements of this paragraph if--
``(A) the area is within the jurisdiction of one or more
local governments;
``(B) the boundary of the area is continuous; and
``(C) the area--
``(i) has a population, of at least--
``(I) 4,000 if any portion of such area (other than a rural
area described in subsection (a)(2)(B)(i)) is located within
a metropolitan statistical area (within the meaning of
section 143(k)(2)(B)) which has a population of 50,000 or
greater; or
``(II) 1,000 in any other case; or
``(ii) is entirely within an Indian reservation (as
determined by the Secretary of the Interior).
``(3) Eligibility requirements.--A nominated area meets the
requirements of this paragraph if the State and the local
governments in which it is located certify (and the Secretary
of Housing and Urban Development, after such review of
supporting data as he deems appropriate, accepts such
certification) that--
``(A) the area is one of pervasive poverty, unemployment,
and general distress;
``(B) the unemployment rate in the area, as determined by
the most recent available data, was at least 1\1/2\ times the
national unemployment rate for the period to which such data
relate;
``(C) the poverty rate for each population census tract
within the nominated area is at least 20 percent; and
``(D) in the case of an urban area, at least 70 percent of
the households living in the area have incomes below 80
percent of the median income of households within the
jurisdiction of the local government (determined in the same
manner as under section 119(b)(2) of the Housing and
Community Development Act of 1974).
``(4) Consideration of high incidence of crime.--The
Secretary of Housing and Urban Development shall take into
account, in selecting nominated areas for designation as
renewal communities under this section, the extent to which
such areas have a high incidence of crime.
``(5) Consideration of communities identified in gao
study.--The Secretary of Housing and Urban Development shall
take into account, in selecting nominated areas for
designation as renewal communities under this section, if
the area has census tracts identified in the May 12, 1998,
report of the Government Accounting Office regarding the
identification of economically distressed areas.
``(d) Required State and Local Commitments.--
``(1) In general.--The Secretary of Housing and Urban
Development may designate any nominated area as a renewal
community under subsection (a) only if--
``(A) the local government and the State in which the area
is located agree in writing that, during any period during
which the area is a renewal community, such governments will
follow a specified course of action which meets the
requirements of paragraph (2) and is designed to reduce the
various burdens borne by employers or employees in such area;
and
``(B) the economic growth promotion requirements of
paragraph (3) are met.
``(2) Course of action.--
``(A) In general.--A course of action meets the
requirements of this paragraph if such course of action is a
written document, signed by a State (or local government) and
neighborhood organizations, which evidences a partnership
between such State or government and community-based
organizations and which commits each signatory to specific
and measurable goals, actions, and timetables. Such course of
action shall include at least five of the following:
``(i) A reduction of tax rates or fees applying within the
renewal community.
``(ii) An increase in the level of efficiency of local
services within the renewal community.
``(iii) Crime reduction strategies, such as crime
prevention (including the provision of such services by
nongovernmental entities).
``(iv) Actions to reduce, remove, simplify, or streamline
governmental requirements applying within the renewal
community.
``(v) Involvement in the program by private entities,
organizations, neighborhood organizations, and community
groups, particularly those in the renewal community,
including a commitment from such private entities to provide
jobs and job training for, and technical, financial, or other
assistance to, employers, employees, and residents from the
renewal community.
``(vi) State or local income tax benefits for fees paid for
services performed by a nongovernmental entity which were
formerly performed by a governmental entity.
``(vii) The gift (or sale at below fair market value) of
surplus real property (such as land, homes, and commercial or
industrial structures) in the renewal community to
neighborhood organizations, community development
corporations, or private companies.
``(B) Recognition of past efforts.--For purposes of this
section, in evaluating the course of action agreed to by any
State or local government, the Secretary of Housing and Urban
Development shall take into account the past efforts of such
State or local government in reducing the various burdens
borne by employers and employees in the area involved.
``(3) Economic growth promotion requirements.--The economic
growth promotion requirements of this paragraph are met with
respect to a nominated area if the local government and the
State in which such area is located certify in writing that
such government and State, respectively, have repealed or
otherwise will not enforce within the area, if such area is
designated as a renewal community--
``(A) licensing requirements for occupations that do not
ordinarily require a professional degree;
``(B) zoning restrictions on home-based businesses which do
not create a public nuisance;
``(C) permit requirements for street vendors who do not
create a public nuisance;
``(D) zoning or other restrictions that impede the
formation of schools or child care centers; and
``(E) franchises or other restrictions on competition for
businesses providing public services, including but not
limited to taxicabs, jitneys, cable television, or trash
hauling,
except to the extent that such regulation of businesses and
occupations is necessary for
[[Page H813]]
and well-tailored to the protection of health and safety.
``(e) Coordination With Treatment of Empowerment Zones and
Enterprise Communities.--For purposes of this title, if there
are in effect with respect to the same area both--
``(1) a designation as a renewal community; and
``(2) a designation as an empowerment zone or enterprise
community,
both of such designations shall be given full effect with
respect to such area.
``(f ) Definitions and Special Rules.--For purposes of this
subchapter--
``(1) Governments.--If more than one government seeks to
nominate an area as a renewal community, any reference to, or
requirement of, this section shall apply to all such
governments.
``(2) State.--The term `State' includes Puerto Rico, the
Virgin Islands of the United States, Guam, American Samoa,
the Northern Mariana Islands, and any other possession of the
United States.
``(3) Local government.--The term `local government'
means--
``(A) any county, city, town, township, parish, village, or
other general purpose political subdivision of a State;
``(B) any combination of political subdivisions described
in subparagraph (A) recognized by the Secretary of Housing
and Urban Development; and
``(C) the District of Columbia.
``(4) Application of rules relating to census tracts and
census data.--The rules of sections 1392(b)(4) and 1393(a)(9)
shall apply.
``PART II--RENEWAL COMMUNITY CAPITAL GAIN; RENEWAL COMMUNITY BUSINESS
``Sec. 1400F. Renewal community capital gain.
``Sec. 1400G. Renewal community business defined.
``SEC. 1400F. RENEWAL COMMUNITY CAPITAL GAIN.
``(a) General Rule.--Gross income does not include any
qualified capital gain recognized on the sale or exchange of
a qualified community asset held for more than 5 years.
``(b) Qualified Community Asset.--For purposes of this
section--
``(1) In general.--The term `qualified community asset'
means--
``(A) any qualified community stock;
``(B) any qualified community partnership interest; and
``(C) any qualified community business property.
``(2) Qualified community stock.--
``(A) In general.--Except as provided in subparagraph (B),
the term `qualified community stock' means any stock in a
domestic corporation if--
``(i) such stock is acquired by the taxpayer after December
31, 2000, and before January 1, 2008, at its original issue
(directly or through an underwriter) from the corporation
solely in exchange for cash;
``(ii) as of the time such stock was issued, such
corporation was a renewal community business (or, in the case
of a new corporation, such corporation was being organized
for purposes of being a renewal community business); and
``(iii) during substantially all of the taxpayer's holding
period for such stock, such corporation qualified as a
renewal community business.
``(B) Redemptions.--A rule similar to the rule of section
1202(c)(3) shall apply for purposes of this paragraph.
``(3) Qualified community partnership interest.--The term
`qualified community partnership interest' means any capital
or profits interest in a domestic partnership if--
``(A) such interest is acquired by the taxpayer after
December 31, 2000, and before January 1, 2008;
``(B) as of the time such interest was acquired, such
partnership was a renewal community business (or, in the case
of a new partnership, such partnership was being organized
for purposes of being a renewal community business); and
``(C) during substantially all of the taxpayer's holding
period for such interest, such partnership qualified as a
renewal community business.
A rule similar to the rule of paragraph (2)(B) shall apply
for purposes of this paragraph.
``(4) Qualified community business property.--
``(A) In general.--The term `qualified community business
property' means tangible property if--
``(i) such property was acquired by the taxpayer by
purchase (as defined in section 179(d)(2)) after December 31,
2000, and before January 1, 2008;
``(ii) the original use of such property in the renewal
community commences with the taxpayer; and
``(iii) during substantially all of the taxpayer's holding
period for such property, substantially all of the use of
such property was in a renewal community business of the
taxpayer.
``(B) Special rule for substantial improvements.--The
requirements of clauses (i) and (ii) of subparagraph (A)
shall be treated as satisfied with respect to--
``(i) property which is substantially improved (within the
meaning of section 1400B(b)(4)(B)(ii)) by the taxpayer before
January 1, 2008; and
``(ii) any land on which such property is located.
``(c) Certain Rules To Apply.--Rules similar to the rules
of paragraphs (5), (6), and (7) of subsection (b), and
subsections (e), (f ), and (g), of section 1400B shall apply
for purposes of this section.
``SEC. 1400G. RENEWAL COMMUNITY BUSINESS DEFINED.
``For purposes of this part, the term `renewal community
business' means any entity or proprietorship which would be a
qualified business entity or qualified proprietorship under
section 1397B if--
``(1) references to renewal communities were substituted
for references to empowerment zones in such section; and
``(2) `80 percent' were substituted for `50 percent' in
subsections (b)(2) and (c)(1) of such section.
``PART III--FAMILY DEVELOPMENT ACCOUNTS
``Sec. 1400H. Family development accounts for renewal community EITC
recipients.
``Sec. 1400I. Designation of earned income tax credit payments for
deposit to family development account.
``SEC. 1400H. FAMILY DEVELOPMENT ACCOUNTS FOR RENEWAL
COMMUNITY EITC RECIPIENTS.
``(a) Allowance of Deduction.--
``(1) In general.--There shall be allowed as a deduction--
``(A) in the case of a qualified individual, the amount
paid in cash for the taxable year by such individual to any
family development account for such individual's benefit; and
``(B) in the case of any person other than a qualified
individual, the amount paid in cash for the taxable year by
such person to any family development account for the benefit
of a qualified individual but only if the amount so paid is
designated for purposes of this section by such individual.
``(2) Limitation.--
``(A) In general.--The amount allowable as a deduction to
any individual for any taxable year by reason of paragraph
(1)(A) shall not exceed the lesser of--
``(i) $2,000, or
``(ii) an amount equal to the compensation includible in
the individual's gross income for such taxable year.
``(B) Persons donating to family development accounts of
others.--The amount which may be designated under paragraph
(1)(B) by any qualified individual for any taxable year of
such individual shall not exceed $1,000.
``(3) Special rules for certain married individuals.--Rules
similar to rules of section 219(c) shall apply to the
limitation in paragraph (2)(A).
``(4) Coordination with iras.--No deduction shall be
allowed under this section for any taxable year to any person
by reason of a payment to an account for the benefit of a
qualified individual if any amount is paid for such taxable
year into an individual retirement account (including a Roth
IRA) for the benefit of such individual.
``(5) Rollovers.--No deduction shall be allowed under this
section with respect to any rollover contribution.
``(b) Tax Treatment of Distributions.--
``(1) Inclusion of amounts in gross income.--Except as
otherwise provided in this subsection, any amount paid or
distributed out of a family development account shall be
included in gross income by the payee or distributee, as the
case may be.
``(2) Exclusion of qualified family development
distributions.--Paragraph (1) shall not apply to any
qualified family development distribution.
``(c) Qualified Family Development Distribution.--For
purposes of this section--
``(1) In general.--The term `qualified family development
distribution' means any amount paid or distributed out of a
family development account which would otherwise be
includible in gross income, to the extent that such payment
or distribution is used exclusively to pay qualified family
development expenses for the holder of the account or the
spouse or dependent (as defined in section 152) of such
holder.
``(2) Qualified family development expenses.--The term
`qualified family development expenses' means any of the
following:
``(A) Qualified higher education expenses.
``(B) Qualified first-time homebuyer costs.
``(C) Qualified business capitalization costs.
``(D) Qualified medical expenses.
``(E) Qualified rollovers.
``(3) Qualified higher education expenses.--
``(A) In general.--The term `qualified higher education
expenses' has the meaning given such term by section
72(t)(7), determined by treating postsecondary vocational
educational schools as eligible educational institutions.
``(B) Postsecondary vocational education school.--The term
`postsecondary vocational educational school' means an area
vocational education school (as defined in subparagraph (C)
or (D) of section 521(4) of the Carl D. Perkins Vocational
and Applied Technology Education Act (20 U.S.C. 2471(4)))
which is in any State (as defined in section 521(33) of such
Act), as such sections are in effect on the date of the
enactment of this section.
``(C) Coordination with other benefits.--The amount of
qualified higher education expenses for any taxable year
shall be reduced as provided in section 25A(g)(2).
[[Page H814]]
``(4) Qualified first-time homebuyer costs.--The term
`qualified first-time homebuyer costs' means qualified
acquisition costs (as defined in section 72(t)(8) without
regard to subparagraph (B) thereof) with respect to a
principal residence (within the meaning of section 121) for a
qualified first-time homebuyer (as defined in section
72(t)(8)).
``(5) Qualified business capitalization costs.--
``(A) In general.--The term `qualified business
capitalization costs' means qualified expenditures for the
capitalization of a qualified business pursuant to a
qualified plan.
``(B) Qualified expenditures.--The term `qualified
expenditures' means expenditures included in a qualified
plan, including capital, plant, equipment, working capital,
and inventory expenses.
``(C) Qualified business.--The term `qualified business'
means any trade or business other than any trade or
business--
``(i) which consists of the operation of any facility
described in section 144(c)(6)(B), or
``(ii) which contravenes any law.
``(D) Qualified plan.--The term `qualified plan' means a
business plan which meets such requirements as the Secretary
may specify.
``(6) Qualified medical expenses.--The term `qualified
medical expenses' means any amount paid during the taxable
year, not compensated for by insurance or otherwise, for
medical care (as defined in section 213(d)) of the taxpayer,
his spouse, or his dependent (as defined in section 152).
``(7) Qualified rollovers.--The term `qualified rollover'
means any amount paid from a family development account of a
taxpayer into another such account established for the
benefit of--
``(A) such taxpayer, or
``(B) any qualified individual who is--
``(i) the spouse of such taxpayer, or
``(ii) any dependent (as defined in section 152) of the
taxpayer.
Rules similar to the rules of section 408(d)(3) shall apply
for purposes of this paragraph.
``(d) Tax Treatment of Accounts.--
``(1) In general.--Any family development account is exempt
from taxation under this subtitle unless such account has
ceased to be a family development account by reason of
paragraph (2). Notwithstanding the preceding sentence, any
such account is subject to the taxes imposed by section 511
(relating to imposition of tax on unrelated business income
of charitable, etc., organizations). Notwithstanding any
other provision of this title (including chapters 11 and
12), the basis of any person in such an account is zero.
``(2) Loss of exemption in case of prohibited
transactions.--For purposes of this section, rules similar to
the rules of section 408(e) shall apply.
``(3) Other rules to apply.--Rules similar to the rules of
paragraphs (4), (5), and (6) of section 408(d) shall apply
for purposes of this section.
``(e) Family Development Account.--For purposes of this
title, the term `family development account' means a trust
created or organized in the United States for the exclusive
benefit of a qualified individual or his beneficiaries, but
only if the written governing instrument creating the trust
meets the following requirements:
``(1) Except in the case of a qualified rollover (as
defined in subsection (c)(7))--
``(A) no contribution will be accepted unless it is in
cash; and
``(B) contributions will not be accepted for the taxable
year in excess of $3,000.
``(2) The requirements of paragraphs (2) through (6) of
section 408(a) are met.
``(f ) Qualified Individual.--For purposes of this section,
the term `qualified individual' means, for any taxable year,
an individual--
``(1) who is a bona fide resident of a renewal community
throughout the taxable year; and
``(2) to whom a credit was allowed under section 32 for the
preceding taxable year.
``(g) Other Definitions and Special Rules.--
``(1) Compensation.--The term `compensation' has the
meaning given such term by section 219(f )(1).
``(2) Married individuals.--The maximum deduction under
subsection (a) shall be computed separately for each
individual, and this section shall be applied without regard
to any community property laws.
``(3) Time when contributions deemed made.--For purposes of
this section, a taxpayer shall be deemed to have made a
contribution to a family development account on the last day
of the preceding taxable year if the contribution is made on
account of such taxable year and is made not later than the
time prescribed by law for filing the return for such taxable
year (not including extensions thereof).
``(4) Employer payments; custodial accounts.--Rules similar
to the rules of sections 219(f )(5) and 408(h) shall apply
for purposes of this section.
``(5) Reports.--The trustee of a family development account
shall make such reports regarding such account to the
Secretary and to the individual for whom the account is
maintained with respect to contributions (and the years to
which they relate), distributions, and such other matters as
the Secretary may require under regulations. The reports
required by this paragraph--
``(A) shall be filed at such time and in such manner as the
Secretary prescribes in such regulations; and
``(B) shall be furnished to individuals--
``(i) not later than January 31 of the calendar year
following the calendar year to which such reports relate; and
``(ii) in such manner as the Secretary prescribes in such
regulations.
``(6) Investment in collectibles treated as
distributions.--Rules similar to the rules of section 408(m)
shall apply for purposes of this section.
``(h) Penalty for Distributions Not Used for Qualified
Family Development Expenses.--
``(1) In general.--If any amount is distributed from a
family development account and is not used exclusively to pay
qualified family development expenses for the holder of the
account or the spouse or dependent (as defined in section
152) of such holder, the tax imposed by this chapter for the
taxable year of such distribution shall be increased by 10
percent of the portion of such amount which is includible in
gross income.
``(2) Exception for certain distributions.--Paragraph (1)
shall not apply to distributions which are--
``(A) made on or after the date on which the account holder
attains age 59\1/2\,
``(B) made to a beneficiary (or the estate of the account
holder) on or after the death of the account holder, or
``(C) attributable to the account holder's being disabled
within the meaning of section 72(m)(7).
``(i) Application of Section.--This section shall apply to
amounts paid to a family development account for any taxable
year beginning after December 31, 2000, and before January
1, 2008.
``SEC. 1400I. DESIGNATION OF EARNED INCOME TAX CREDIT
PAYMENTS FOR DEPOSIT TO FAMILY DEVELOPMENT
ACCOUNT.
``(a) In General.--With respect to the return of any
qualified individual (as defined in section 1400H(f )) for
the taxable year of the tax imposed by this chapter, such
individual may designate that a specified portion (not less
than $1) of any overpayment of tax for such taxable year
which is attributable to the earned income tax credit shall
be deposited by the Secretary into a family development
account of such individual. The Secretary shall so deposit
such portion designated under this subsection.
``(b) Manner and Time of Designation.--A designation under
subsection (a) may be made with respect to any taxable year--
``(1) at the time of filing the return of the tax imposed
by this chapter for such taxable year, or
``(2) at any other time (after the time of filing the
return of the tax imposed by this chapter for such taxable
year) specified in regulations prescribed by the Secretary.
Such designation shall be made in such manner as the
Secretary prescribes by regulations.
``(c) Portion Attributable to Earned Income Tax Credit.--
For purposes of subsection (a), an overpayment for any
taxable year shall be treated as attributable to the earned
income tax credit to the extent that such overpayment does
not exceed the credit allowed to the taxpayer under section
32 for such taxable year.
``(d) Overpayments Treated as Refunded.--For purposes of
this title, any portion of an overpayment of tax designated
under subsection (a) shall be treated as being refunded to
the taxpayer as of the last date prescribed for filing the
return of tax imposed by this chapter (determined without
regard to extensions) or, if later, the date the return is
filed.
``(e) Termination.--This section shall not apply to any
taxable year beginning after December 31, 2007.
``PART IV--ADDITIONAL INCENTIVES
``Sec. 1400K. Commercial revitalization deduction.
``Sec. 1400L. Increase in expensing under section 179.
``SEC. 1400K. COMMERCIAL REVITALIZATION DEDUCTION.
``(a) General Rule.--At the election of the taxpayer,
either--
``(1) one-half of any qualified revitalization expenditures
chargeable to capital account with respect to any qualified
revitalization building shall be allowable as a deduction for
the taxable year in which the building is placed in service,
or
``(2) a deduction for all such expenditures shall be
allowable ratably over the 120-month period beginning with
the month in which the building is placed in service.
The deduction provided by this section with respect to such
expenditure shall be in lieu of any depreciation deduction
otherwise allowable on account of such expenditure.
``(b) Qualified Revitalization Buildings and
Expenditures.--For purposes of this section--
``(1) Qualified revitalization building.--The term
`qualified revitalization building' means any building (and
its structural components) if--
``(A) such building is located in a renewal community and
is placed in service after December 31, 2000;
``(B) a commercial revitalization deduction amount is
allocated to the building under subsection (d); and
``(C) depreciation (or amortization in lieu of
depreciation) is allowable with respect to the building
(without regard to this section).
[[Page H815]]
``(2) Qualified revitalization expenditure.--
``(A) In general.--The term `qualified revitalization
expenditure' means any amount properly chargeable to capital
account--
``(i) for property for which depreciation is allowable
under section 168 (without regard to this section) and which
is--
``(I) nonresidential real property; or
``(II) an addition or improvement to property described in
subclause (I);
``(ii) in connection with the construction of any qualified
revitalization building which was not previously placed in
service or in connection with the substantial rehabilitation
(within the meaning of section 47(c)(1)(C)) of a building
which was placed in service before the beginning of such
rehabilitation; and
``(iii) for land (including land which is functionally
related to such property and subordinate thereto).
``(B) Dollar limitation.--The aggregate amount which may be
treated as qualified revitalization expenditures with respect
to any qualified revitalization building for any taxable
year shall not exceed the excess of--
``(i) $10,000,000, reduced by
``(ii) any such expenditures with respect to the building
taken into account by the taxpayer or any predecessor in
determining the amount of the deduction under this section
for all preceding taxable years.
``(C) Certain expenditures not included.--The term
`qualified revitalization expenditure' does not include--
``(i) Acquisition costs.--The costs of acquiring any
building or interest therein and any land in connection with
such building to the extent that such costs exceed 30 percent
of the qualified revitalization expenditures determined
without regard to this clause.
``(ii) Credits.--Any expenditure which the taxpayer may
take into account in computing any credit allowable under
this title unless the taxpayer elects to take the expenditure
into account only for purposes of this section.
``(c) When Expenditures Taken Into Account.--Qualified
revitalization expenditures with respect to any qualified
revitalization building shall be taken into account for the
taxable year in which the qualified revitalization building
is placed in service. For purposes of the preceding sentence,
a substantial rehabilitation of a building shall be treated
as a separate building.
``(d) Limitation on Aggregate Deductions Allowable With
Respect to Buildings Located in a State.--
``(1) In general.--The amount of the deduction determined
under this section for any taxable year with respect to any
building shall not exceed the commercial revitalization
deduction amount (in the case of an amount determined under
subsection (a)(2), the present value of such amount as
determined under the rules of section 42(b)(2)(C) by
substituting `100 percent' for `72 percent' in clause (ii)
thereof) allocated to such building under this subsection by
the commercial revitalization agency. Such allocation shall
be made at the same time and in the same manner as under
paragraphs (1) and (7) of section 42(h).
``(2) Commercial revitalization deduction amount for
agencies.--
``(A) In general.--The aggregate commercial revitalization
deduction amount which a commercial revitalization agency may
allocate for any calendar year is the amount of the State
commercial revitalization deduction ceiling determined under
this paragraph for such calendar year for such agency.
``(B) State commercial revitalization deduction ceiling.--
The State commercial revitalization deduction ceiling
applicable to any State--
``(i) for each calendar year after 2000 and before 2008 is
$6,000,000 for each renewal community in the State; and
``(ii) zero for each calendar year thereafter.
``(C) Commercial revitalization agency.--For purposes of
this section, the term `commercial revitalization agency'
means any agency authorized by a State to carry out this
section.
``(e) Responsibilities of Commercial Revitalization
Agencies.--
``(1) Plans for allocation.--Notwithstanding any other
provision of this section, the commercial revitalization
deduction amount with respect to any building shall be zero
unless--
``(A) such amount was allocated pursuant to a qualified
allocation plan of the commercial revitalization agency which
is approved (in accordance with rules similar to the rules of
section 147(f )(2) (other than subparagraph (B)(ii) thereof))
by the governmental unit of which such agency is a part; and
``(B) such agency notifies the chief executive officer (or
its equivalent) of the local jurisdiction within which the
building is located of such allocation and provides such
individual a reasonable opportunity to comment on the
allocation.
``(2) Qualified allocation plan.--For purposes of this
subsection, the term `qualified allocation plan' means any
plan--
``(A) which sets forth selection criteria to be used to
determine priorities of the commercial revitalization agency
which are appropriate to local conditions;
``(B) which considers--
``(i) the degree to which a project contributes to the
implementation of a strategic plan that is devised for a
renewal community through a citizen participation process;
``(ii) the amount of any increase in permanent, full-time
employment by reason of any project; and
``(iii) the active involvement of residents and nonprofit
groups within the renewal community; and
``(C) which provides a procedure that the agency (or its
agent) will follow in monitoring compliance with this
section.
``(f ) Regulations.--For purposes of this section, the
Secretary shall, by regulations, provide for the application
of rules similar to the rules of section 49 and subsections
(a) and (b) of section 50.
``(g) Termination.--This section shall not apply to any
building placed in service after December 31, 2007.
``SEC. 1400L. INCREASE IN EXPENSING UNDER SECTION 179.
``(a) General Rule.--In the case of a renewal community
business (as defined in section 1400G), for purposes of
section 179--
``(1) the limitation under section 179(b)(1) shall be
increased by the lesser of--
``(A) $35,000; or
``(B) the cost of section 179 property which is qualified
renewal property placed in service during the taxable year;
and
``(2) the amount taken into account under section 179(b)(2)
with respect to any section 179 property which is qualified
renewal property shall be 50 percent of the cost thereof.
``(b) Recapture.--Rules similar to the rules under section
179(d)(10) shall apply with respect to any qualified renewal
property which ceases to be used in a renewal community by a
renewal community business.
``(c) Qualified Renewal Property.--For purposes of this
section--
``(1) In general.--The term `qualified renewal property'
means any property to which section 168 applies (or would
apply but for section 179) if--
``(A) such property was acquired by the taxpayer by
purchase (as defined in section 179(d)(2)) after December 31,
2000, and before January 1, 2008; and
``(B) such property would be qualified zone property (as
defined in section 1397C) if references to renewal
communities were substituted for references to empowerment
zones in section 1397C.
``(2) Certain rules to apply.--The rules of subsections
(a)(2) and (b) of section 1397C shall apply for purposes of
this section.''.
SEC. 603. EXTENSION OF EXPENSING OF ENVIRONMENTAL REMEDIATION
COSTS TO RENEWAL COMMUNITIES.
(a) Extension.--Paragraph (2) of section 198(c) (defining
targeted area) is amended by redesignating subparagraph (C)
as subparagraph (D) and by inserting after subparagraph (B)
the following new subparagraph:
``(C) Renewal communities included.--Except as provided in
subparagraph (B), such term shall include a renewal community
(as defined in section 1400E) with respect to expenditures
paid or incurred after December 31, 2000.''.
(b) Extension of Termination Date for Renewal
Communities.--Subsection (h) of section 198 is amended by
inserting before the period ``(December 31, 2007, in the case
of a renewal community, as defined in section 1400E).''.
SEC. 604. EXTENSION OF WORK OPPORTUNITY TAX CREDIT FOR
RENEWAL COMMUNITIES.
(a) Extension.--Subsection (c) of section 51 (relating to
termination) is amended by adding at the end the following
new paragraph:
``(5) Extension of credit for renewal communities.--
``(A) In general.--In the case of an individual who begins
work for the employer after the date contained in paragraph
(4)(B), for purposes of section 38--
``(i) in lieu of applying subsection (a), the amount of the
work opportunity credit determined under this section for the
taxable year shall be equal to--
``(I) 15 percent of the qualified first-year wages for such
year; and
``(II) 30 percent of the qualified second-year wages for
such year;
``(ii) subsection (b)(3) shall be applied by substituting
`$10,000' for `$6,000';
``(iii) paragraph (4)(B) shall be applied by substituting
for the date contained therein the last day for which the
designation under section 1400E of the renewal community
referred to in subparagraph (B)(i) is in effect; and
``(iv) rules similar to the rules of section 51A(b)(5)(C)
shall apply.
``(B) Qualified first- and second-year wages.--For purposes
of subparagraph (A)--
``(i) In general.--The term `qualified wages' means, with
respect to each 1-year period referred to in clause (ii) or
(iii), as the case may be, the wages paid or incurred by the
employer during the taxable year to any individual but only
if--
``(I) the employer is engaged in a trade or business in a
renewal community throughout such 1-year period;
``(II) the principal place of abode of such individual is
in such renewal community throughout such 1-year period; and
``(III) substantially all of the services which such
individual performs for the employer during such 1-year
period are performed in such renewal community.
``(ii) Qualified first-year wages.--The term `qualified
first-year wages' means, with respect to any individual,
qualified wages attributable to service rendered during the
1-year period beginning with the day the individual begins
work for the employer.
``(iii) Qualified second-year wages.--The term `qualified
second-year wages' means, with respect to any individual,
qualified wages attributable to service rendered during the
1-year period beginning on the day after the last day of the
1-year period with
[[Page H816]]
respect to such individual determined under clause (ii).''.
(b) Congruent Treatment of Renewal Communities and
Enterprise Zones for Purposes of Youth Residence
Requirements.--
(1) High-risk youth.--Subparagraphs (A)(ii) and (B) of
section 51(d)(5) are each amended by striking ``empowerment
zone or enterprise community'' and inserting ``empowerment
zone, enterprise community, or renewal community''.
(2) Qualified summer youth employee.--Clause (iv) of
section 51(d)(7)(A) is amended by striking ``empowerment zone
or enterprise community'' and inserting ``empowerment zone,
enterprise community, or renewal community''.
(3) Headings.--Paragraphs (5)(B) and (7)(C) of section
51(d) are each amended by inserting ``or community'' in the
heading after ``zone''.
(4) Effective date.--The amendments made by this subsection
shall apply to individuals who begin work for the employer
after December 31, 2000.
SEC. 605. CONFORMING AND CLERICAL AMENDMENTS.
(a) Deduction for Contributions to Family Development
Accounts Allowable Whether or Not Taxpayer Itemizes.--
Subsection (a) of section 62 (relating to adjusted gross
income defined) is amended by inserting after paragraph (19)
the following new paragraph:
``(20) Family development accounts.--The deduction allowed
by section 1400H(a)(1).''.
(b) Tax on Excess Contributions.--
(1) Tax imposed.--Subsection (a) of section 4973 is amended
by striking ``or'' at the end of paragraph (3), adding ``or''
at the end of paragraph (4), and inserting after paragraph
(4) the following new paragraph:
``(5) a family development account (within the meaning of
section 1400H(e)),''.
(2) Excess contributions.--Section 4973 is amended by
adding at the end the following new subsection:
``(g) Family Development Accounts.--For purposes of this
section, in the case of family development accounts, the term
`excess contributions' means the sum of--
``(1) the excess (if any) of--
``(A) the amount contributed for the taxable year to the
accounts (other than a qualified rollover, as defined in
section 1400H(c)(7)), over
``(B) the amount allowable as a deduction under section
1400H for such contributions; and
``(2) the amount determined under this subsection for the
preceding taxable year reduced by the sum of--
``(A) the distributions out of the accounts for the taxable
year which were included in the gross income of the payee
under section 1400H(b)(1);
``(B) the distributions out of the accounts for the taxable
year to which rules similar to the rules of section 408(d)(5)
apply by reason of section 1400H(d)(3); and
``(C) the excess (if any) of the maximum amount allowable
as a deduction under section 1400H for the taxable year over
the amount contributed to the account for the taxable year.
For purposes of this subsection, any contribution which is
distributed from the family development account in a
distribution to which rules similar to the rules of section
408(d)(4) apply by reason of section 1400H(d)(3) shall be
treated as an amount not contributed.''.
(c) Tax on Prohibited Transactions.--Section 4975 is
amended--
(1) by adding at the end of subsection (c) the following
new paragraph:
``(6) Special rule for family development accounts.--An
individual for whose benefit a family development account is
established and any contributor to such account shall be
exempt from the tax imposed by this section with respect to
any transaction concerning such account (which would
otherwise be taxable under this section) if, with respect to
such transaction, the account ceases to be a family
development account by reason of the application of section
1400H(d)(2) to such account.''; and
(2) in subsection (e)(1), by striking ``or'' at the end of
subparagraph (E), by redesignating subparagraph (F) as
subparagraph (G), and by inserting after subparagraph (E) the
following new subparagraph:
``(F) a family development account described in section
1400H(e), or''.
(d) Information Relating to Certain Trusts and Annuity
Plans.--Subsection (c) of section 6047 is amended--
(1) by inserting ``or section 1400H'' after ``section
219''; and
(2) by inserting ``, of any family development account
described in section 1400H(e),'', after ``section 408(a)''.
(e) Inspection of Applications for Tax Exemption.--Clause
(i) of section 6104(a)(1)(B) is amended by inserting ``a
family development account described in section 1400H(e),''
after ``section 408(a),''.
(f ) Failure To Provide Reports on Family Development
Accounts.--Paragraph (2) of section 6693(a) is amended by
striking ``and'' at the end of subparagraph (C), by striking
the period and inserting
``, and'' at the end of subparagraph (D), and by adding at
the end the following new subparagraph:
``(E) section 1400H(g)(6) (relating to family development
accounts).''.
(g) Conforming Amendments Regarding Commercial
Revitalization Deduction.--
(1) Section 172 is amended by redesignating subsection ( j)
as subsection (k) and by inserting after subsection (i) the
following new subsection:
``( j) No Carryback of Section 1400k Deduction Before Date
of the Enactment.--No portion of the net operating loss for
any taxable year which is attributable to any commercial
revitalization deduction determined under section 1400K may
be carried back to a taxable year ending before the date of
the enactment of section 1400K.''.
(2) Subparagraph (B) of section 48(a)(2) is amended by
inserting ``or commercial revitalization'' after
``rehabilitation'' each place it appears in the text and
heading.
(3) Subparagraph (C) of section 469(i)(3) is amended--
(A) by inserting ``or section 1400K'' after ``section 42'';
and
(B) by inserting ``and commercial revitalization
deduction'' after ``credit'' in the heading.
(h) Clerical Amendments.--The table of subchapters for
chapter 1 is amended by adding at the end the following new
item:
``Subchapter X. Renewal Communities.''.
Subtitle B--Timber Incentives
SEC. 611. TEMPORARY SUSPENSION OF MAXIMUM AMOUNT OF
AMORTIZABLE REFORESTATION EXPENDITURES.
(a) Increase in Dollar Limitation.--Paragraph (1) of
section 194(b) (relating to amortization of reforestation
expenditures) is amended by striking ``$10,000 ($5,000'' and
inserting ``$25,000 ($12,500''.
(b) Temporary Suspension of Increased Dollar Limitation.--
Subsection (b) of section 194(b) (relating to amortization of
reforestation expenditures) is amended by adding at the end
the following new paragraph:
``(5) Suspension of dollar limitation.--Paragraph (1) shall
not apply to taxable years beginning after December 31, 1999,
and before January 1, 2004.
(c) Conforming Amendment.--Paragraph (1) of section 48(b)
is amended by striking ``section 194(b)(1)'' and inserting
``section 194(b)(1) and without regard to section
194(b)(5)''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2000.
TITLE VII--REAL ESTATE PROVISIONS
Subtitle A--Improvements in Low-Income Housing Credit
SEC. 701. MODIFICATION OF STATE CEILING ON LOW-INCOME HOUSING
CREDIT.
(a) In General.--Clauses (i) and (ii) of section
42(h)(3)(C) (relating to State housing credit ceiling) are
amended to read as follows:
``(i) the unused State housing credit ceiling (if any) of
such State for the preceding calendar year,
``(ii) the greater of--
``(I) the applicable amount under subparagraph (H)
multiplied by the State population, or
``(II) $2,000,000,''.
(b) Applicable Amount.--Paragraph (3) of section 42(h)
(relating to housing credit dollar amount for agencies) is
amended by adding at the end the following new subparagraph:
``(H) Applicable amount of state ceiling.--For purposes of
subparagraph (C)(ii), the applicable amount shall be
determined under the following table:
``For calendar The applicable
year: amount is:
2000......................................................$1.35
2001..................................................... 1.45
2002..................................................... 1.55
2003..................................................... 1.65
2004 and thereafter................................. 1.75.''.
(c) Adjustment of State Ceiling for Increases in Cost-of-
Living.--Paragraph (3) of section 42(h) (relating to housing
credit dollar amount for agencies), as amended by subsection
(c), is amended by adding at the end the following new
subparagraph:
``(I) Cost-of-living adjustment.--
``(i) In general.--In the case of a calendar year after
2004, the $2,000,000 in subparagraph (C) and the $1.75 amount
in subparagraph (H) shall each be increased by an amount
equal to--
``(I) such dollar amount, multiplied by
``(II) the cost-of-living adjustment determined under
section 1(f )(3) for such calendar year by substituting
`calendar year 2003' for `calendar year 1992' in subparagraph
(B) thereof.
``(ii) Rounding.--
``(I) In the case of the amount in subparagraph (C), any
increase under clause (i) which is not a multiple of $5,000
shall be rounded to the next lowest multiple of $5,000.
``(II) In the case of the amount in subparagraph (H), any
increase under clause (i) which is not a multiple of 5 cents
shall be rounded to the next lowest multiple of 5 cents.''.
(d) Conforming Amendments.--
(1) Section 42(h)(3)(C), as amended by subsection (a), is
amended--
(A) by striking ``clause (ii)'' in the matter following
clause (iv) and inserting ``clause (i)'', and
(B) by striking ``clauses (i)'' in the matter following
clause (iv) and inserting ``clauses (ii)''.
(2) Section 42(h)(3)(D)(ii) is amended--
(A) by striking ``subparagraph (C)(ii)'' and inserting
``subparagraph (C)(i)'', and
(B) by striking ``clauses (i)'' in subclause (II) and
inserting ``clauses (ii)''.
(e) Effective Date.--The amendments made by this section
shall apply to calendar years after 2000.
[[Page H817]]
SEC. 702. MODIFICATION OF CRITERIA FOR ALLOCATING HOUSING
CREDITS AMONG PROJECTS.
(a) Selection Criteria.--Subparagraph (C) of section
42(m)(1) (relating to certain selection criteria must be
used) is amended--
(1) by inserting ``, including whether the project includes
the use of existing housing as part of a community
revitalization plan'' before the comma at the end of clause
(iii), and
(2) by striking clauses (v), (vi), and (vii) and inserting
the following new clauses:
``(v) tenant populations with special housing needs,
``(vi) public housing waiting lists,
``(vii) tenant populations of individuals with children,
and
``(viii) projects intended for eventual tenant
ownership.''.
(b) Preference for Community Revitalization Projects
Located in Qualified Census Tracts.--Clause (ii) of section
42(m)(1)(B) is amended by striking ``and'' at the end of
subclause (I), by adding ``and'' at the end of subclause
(II), and by inserting after subclause (II) the following new
subclause:
``(III) projects which are located in qualified census
tracts (as defined in subsection (d)(5)(C)) and the
development of which contributes to a concerted community
revitalization plan,''.
SEC. 703. ADDITIONAL RESPONSIBILITIES OF HOUSING CREDIT
AGENCIES.
(a) Market Study; Public Disclosure of Rationale for Not
Following Credit Allocation Priorities.--Subparagraph (A) of
section 42(m)(1) (relating to responsibilities of housing
credit agencies) is amended by striking ``and'' at the end of
clause (i), by striking the period at the end of clause (ii)
and inserting a comma, and by adding at the end the following
new clauses:
``(iii) a comprehensive market study of the housing needs
of low-income individuals in the area to be served by the
project is conducted before the credit allocation is made and
at the developer's expense by a disinterested party who is
approved by such agency, and
``(iv) a written explanation is available to the general
public for any allocation of a housing credit dollar amount
which is not made in accordance with established priorities
and selection criteria of the housing credit agency.''.
(b) Site Visits.--Clause (iii) of section 42(m)(1)(B)
(relating to qualified allocation plan) is amended by
inserting before the period ``and in monitoring for
noncompliance with habitability standards through regular
site visits''.
SEC. 704. MODIFICATIONS TO RULES RELATING TO BASIS OF
BUILDING WHICH IS ELIGIBLE FOR CREDIT.
(a) Adjusted Basis To Include Portion of Certain Buildings
Used by Low-Income Individuals Who Are Not Tenants and by
Project Employees.--Paragraph (4) of section 42(d) (relating
to special rules relating to determination of adjusted basis)
is amended--
(1) by striking ``subparagraph (B)'' in subparagraph (A)
and inserting ``subparagraphs (B) and (C)'',
(2) by redesignating subparagraph (C) as subparagraph (D),
and
(3) by inserting after subparagraph (B) the following new
subparagraph:
``(C) Inclusion of basis of property used to provide
services for certain nontenants.--
``(i) In general.--The adjusted basis of any building
located in a qualified census tract (as defined in paragraph
(5)(C)) shall be determined by taking into account the
adjusted basis of property (of a character subject to the
allowance for depreciation and not otherwise taken into
account) used throughout the taxable year in providing any
community service facility.
``(ii) Limitation.--The increase in the adjusted basis of
any building which is taken into account by reason of clause
(i) shall not exceed 10 percent of the eligible basis of the
qualified low-income housing project of which it is a part.
For purposes of the preceding sentence, all community service
facilities which are part of the same qualified low-income
housing project shall be treated as one facility.
``(iii) Community service facility.--For purposes of this
subparagraph, the term `community service facility' means any
facility designed to serve primarily individuals whose income
is 60 percent or less of area median income (within the
meaning of subsection (g)(1)(B)).''.
(b) Certain Native American Housing Assistance Disregarded
in Determining Whether Building Is Federally Subsidized for
Purposes of the Low-Income Housing Credit.--Subparagraph (E)
of section 42(i)(2) (relating to determination of whether
building is federally subsidized) is amended--
(1) in clause (i), by inserting ``or the Native American
Housing Assistance and Self-Determination Act of 1996 (25
U.S.C. 4101 et seq.) (as in effect on October 1, 1997)''
after ``this subparagraph)'', and
(2) in the subparagraph heading, by inserting ``or native
american housing assistance'' after ``home assistance''.
SEC. 705. OTHER MODIFICATIONS.
(a) Allocation of Credit Limit to Certain Buildings.--
(1) The first sentence of section 42(h)(1)(E)(ii) is
amended by striking ``(as of'' the first place it appears and
inserting ``(as of the later of the date which is 6 months
after the date that the allocation was made or''.
(2) The last sentence of section 42(h)(3)(C) is amended by
striking ``project which'' and inserting ``project which
fails to meet the 10 percent test under paragraph (1)(E)(ii)
on a date after the close of the calendar year in which the
allocation was made or which''.
(b) Determination of Whether Buildings Are Located in High
Cost Areas.--The first sentence of section 42(d)(5)(C)(ii)(I)
is amended--
(1) by inserting ``either'' before ``in which 50 percent'',
and
(2) by inserting before the period ``or which has a poverty
rate of at least 25 percent''.
SEC. 706. CARRYFORWARD RULES.
(a) In General.--Clause (ii) of section 42(h)(3)(D)
(relating to unused housing credit carryovers allocated among
certain States) is amended by striking ``the excess'' and all
that follows and inserting ``the excess (if any) of--
``(I) the unused State housing credit ceiling for the year
preceding such year, over
``(II) the aggregate housing credit dollar amount allocated
for such year.''.
(b) Conforming Amendment.--The second sentence of section
42(h)(3)(C) (relating to State housing credit ceiling) is
amended by striking ``clauses (i) and (iii)'' and inserting
``clauses (i) through (iv)''.
SEC. 707. EFFECTIVE DATE.
Except as otherwise provided in this subtitle, the
amendments made by this subtitle shall apply to--
(1) housing credit dollar amounts allocated after December
31, 1999, and
(2) buildings placed in service after such date to the
extent paragraph (1) of section 42(h) of the Internal Revenue
Code of 1986 does not apply to any building by reason of
paragraph (4) thereof, but only with respect to bonds issued
after such date.
Subtitle B--Provisions Relating to Real Estate Investment Trusts
PART I--TREATMENT OF INCOME AND SERVICES PROVIDED BY TAXABLE REIT
SUBSIDIARIES
SEC. 711. MODIFICATIONS TO ASSET DIVERSIFICATION TEST.
(a) In General.--Subparagraph (B) of section 856(c)(4) is
amended to read as follows:
``(B)(i) not more than 25 percent of the value of its total
assets is represented by securities (other than those
includible under subparagraph (A)), and
``(ii) except with respect to a taxable REIT subsidiary and
securities includible under subparagraph (A)--
``(I) not more than 5 percent of the value of its total
assets is represented by securities of any one issuer,
``(II) the trust does not hold securities possessing more
than 10 percent of the total voting power of the outstanding
securities of any one issuer, and
``(III) the trust does not hold securities having a value
of more than 10 percent of the total value of the outstanding
securities of any one issuer.''.
(b) Exception for Straight Debt Securities.--Subsection (c)
of section 856 is amended by adding at the end the following
new paragraph:
``(7) Straight debt safe harbor in applying paragraph
(4).--Securities of an issuer which are straight debt (as
defined in section 1361(c)(5) without regard to subparagraph
(B)(iii) thereof) shall not be taken into account in applying
paragraph (4)(B)(ii)(III) if--
``(A) the issuer is an individual, or
``(B) the only securities of such issuer which are held by
the trust or a taxable REIT subsidiary of the trust are
straight debt (as so defined), or
``(C) the issuer is a partnership and the trust holds at
least a 20 percent profits interest in the partnership.''.
SEC. 712. TREATMENT OF INCOME AND SERVICES PROVIDED BY
TAXABLE REIT SUBSIDIARIES.
(a) Income From Taxable REIT Subsidiaries Not Treated as
Impermissible Tenant Service Income.--Clause (i) of section
856(d)(7)(C) (relating to exceptions to impermissible tenant
service income) is amended by inserting ``or through a
taxable REIT subsidiary of such trust'' after ``income''.
(b) Certain Income From Taxable REIT Subsidiaries Not
Excluded From Rents From Real Property.--
(1) In general.--Subsection (d) of section 856 (relating to
rents from real property defined) is amended by adding at the
end the following new paragraphs:
``(8) Special rule for taxable reit subsidiaries.--For
purposes of this subsection, amounts paid to a real estate
investment trust by a taxable REIT subsidiary of such trust
shall not be excluded from rents from real property by reason
of paragraph (2)(B) if the requirements of either of the
following subparagraphs are met:
``(A) Limited rental exception.--The requirements of this
subparagraph are met with respect to any property if at least
90 percent of the leased space of the property is rented to
persons other than taxable REIT subsidiaries of such trust
and other than persons described in section 856(d)(2)(B). The
preceding sentence shall apply only to the extent that the
amounts paid to the trust as rents from real property (as
defined in paragraph (1) without regard to paragraph (2)(B))
from such property are substantially comparable to such rents
made by the other tenants of the trust's property for
comparable space.
[[Page H818]]
``(B) Exception for certain lodging facilities.--The
requirements of this subparagraph are met with respect to an
interest in real property which is a qualified lodging
facility leased by the trust to a taxable REIT subsidiary of
the trust if the property is operated on behalf of such
subsidiary by a person who is an eligible independent
contractor.
``(9) Eligible independent contractor.--For purposes of
paragraph (8)(B)--
``(A) In general.--The term `eligible independent
contractor' means, with respect to any qualified lodging
facility, any independent contractor if, at the time such
contractor enters into a management agreement or other
similar service contract with the taxable REIT subsidiary to
operate the facility, such contractor (or any related person)
is actively engaged in the trade or business of operating
qualified lodging facilities for any person who is not a
related person with respect to the real estate investment
trust or the taxable REIT subsidiary.
``(B) Special rules.--Solely for purposes of this paragraph
and paragraph (8)(B), a person shall not fail to be treated
as an independent contractor with respect to any qualified
lodging facility by reason of any of the following:
``(i) The taxable REIT subsidiary bears the expenses for
the operation of the facility pursuant to the management
agreement or other similar service contract.
``(ii) The taxable REIT subsidiary receives the revenues
from the operation of such facility, net of expenses for such
operation and fees payable to the operator pursuant to such
agreement or contract.
``(iii) The real estate investment trust receives income
from such person with respect to another property that is
attributable to a lease of such other property to such person
that was in effect as of the later of--
``(I) January 1, 1999, or
``(II) the earliest date that any taxable REIT subsidiary
of such trust entered into a management agreement or other
similar service contract with such person with respect to
such qualified lodging facility.
``(C) Renewals, etc., of existing leases.--For purposes of
subparagraph (B)(iii)--
``(i) a lease shall be treated as in effect on January 1,
1999, without regard to its renewal after such date, so long
as such renewal is pursuant to the terms of such lease as in
effect on whichever of the dates under subparagraph (B)(iii)
is the latest, and
``(ii) a lease of a property entered into after whichever
of the dates under subparagraph (B)(iii) is the latest shall
be treated as in effect on such date if--
``(I) on such date, a lease of such property from the trust
was in effect, and
``(II) under the terms of the new lease, such trust
receives a substantially similar or lesser benefit in
comparison to the lease referred to in subclause (I).
``(D) Qualified lodging facility.--For purposes of this
paragraph--
``(i) In general.--The term `qualified lodging facility'
means any lodging facility unless wagering activities are
conducted at or in connection with such facility by any
person who is engaged in the business of accepting wagers and
who is legally authorized to engage in such business at or in
connection with such facility.
``(ii) Lodging facility.--The term `lodging facility' means
a hotel, motel, or other establishment more than one-half of
the dwelling units in which are used on a transient basis.
``(iii) Customary amenities and facilities.--The term
`lodging facility' includes customary amenities and
facilities operated as part of, or associated with, the
lodging facility so long as such amenities and facilities are
customary for other properties of a comparable size and class
owned by other owners unrelated to such real estate
investment trust.
``(E) Operate includes manage.--References in this
paragraph to operating a property shall be treated as
including a reference to managing the property.
``(F) Related person.--Persons shall be treated as related
to each other if such persons are treated as a single
employer under subsection (a) or (b) of section 52.''.
(2) Conforming amendment.--Subparagraph (B) of section
856(d)(2) is amended by inserting ``except as provided in
paragraph (8),'' after ``(B)''.
(3) Determining rents from real property.--
(A)(i) Paragraph (1) of section 856(d) is amended by
striking ``adjusted bases'' each place it occurs and
inserting ``fair market values''.
(ii) The amendment made by this subparagraph shall apply to
taxable years beginning after December 31, 2000.
(B)(i) Clause (i) of section 856(d)(2)(B) is amended by
striking ``number'' and inserting ``value''.
(ii) The amendment made by this subparagraph shall apply to
amounts received or accrued in taxable years beginning after
December 31, 2000, except for amounts paid pursuant to leases
in effect on July 12, 1999, or pursuant to a binding contract
in effect on such date and at all times thereafter.
SEC. 713. TAXABLE REIT SUBSIDIARY.
(a) In General.--Section 856 is amended by adding at the
end the following new subsection:
``(l) Taxable REIT Subsidiary.--For purposes of this part--
``(1) In general.--The term `taxable REIT subsidiary'
means, with respect to a real estate investment trust, a
corporation (other than a real estate investment trust) if--
``(A) such trust directly or indirectly owns stock in such
corporation, and
``(B) such trust and such corporation jointly elect that
such corporation shall be treated as a taxable REIT
subsidiary of such trust for purposes of this part.
Such an election, once made, shall be irrevocable unless both
such trust and corporation consent to its revocation. Such
election, and any revocation thereof, may be made without the
consent of the Secretary.
``(2) 35 percent ownership in another taxable reit
subsidiary.--The term `taxable REIT subsidiary' includes,
with respect to any real estate investment trust, any
corporation (other than a real estate investment trust) with
respect to which a taxable REIT subsidiary of such trust owns
directly or indirectly--
``(A) securities possessing more than 35 percent of the
total voting power of the outstanding securities of such
corporation, or
``(B) securities having a value of more than 35 percent of
the total value of the outstanding securities of such
corporation.
The preceding sentence shall not apply to a qualified REIT
subsidiary (as defined in subsection (i)(2)). The rule of
section 856(c)(7) shall apply for purposes of subparagraph
(B).
``(3) Exceptions.--The term `taxable REIT subsidiary' shall
not include--
``(A) any corporation which directly or indirectly operates
or manages a lodging facility or a health care facility, and
``(B) any corporation which directly or indirectly provides
to any other person (under a franchise, license, or
otherwise) rights to any brand name under which any lodging
facility or health care facility is operated.
Subparagraph (B) shall not apply to rights provided to an
eligible independent contractor to operate or manage a
lodging facility if such rights are held by such corporation
as a franchisee, licensee, or in a similar capacity and such
lodging facility is either owned by such corporation or is
leased to such corporation from the real estate investment
trust.
``(4) Definitions.--For purposes of paragraph (3)--
``(A) Lodging facility.--The term `lodging facility' has
the meaning given to such term by paragraph (9)(D)(ii).
``(B) Health care facility.--The term `health care
facility' has the meaning given to such term by subsection
(e)(6)(D)(ii).''.
(b) Conforming Amendment.--Paragraph (2) of section 856(i)
is amended by adding at the end the following new sentence:
``Such term shall not include a taxable REIT subsidiary.''.
SEC. 714. LIMITATION ON EARNINGS STRIPPING.
Paragraph (3) of section 163( j) (relating to limitation on
deduction for interest on certain indebtedness) is amended by
striking ``and'' at the end of subparagraph (A), by striking
the period at the end of subparagraph (B) and inserting ``,
and'', and by adding at the end the following new
subparagraph:
``(C) any interest paid or accrued (directly or indirectly)
by a taxable REIT subsidiary (as defined in section 856(l))
of a real estate investment trust to such trust.''.
SEC. 715. 100 PERCENT TAX ON IMPROPERLY ALLOCATED AMOUNTS.
(a) In General.--Subsection (b) of section 857 (relating to
method of taxation of real estate investment trusts and
holders of shares or certificates of beneficial interest) is
amended by redesignating paragraphs (7) and (8) as paragraphs
(8) and (9), respectively, and by inserting after paragraph
(6) the following new paragraph:
``(7) Income from redetermined rents, redetermined
deductions, and excess interest.--
``(A) Imposition of tax.--There is hereby imposed for each
taxable year of the real estate investment trust a tax equal
to 100 percent of redetermined rents, redetermined
deductions, and excess interest.
``(B) Redetermined rents.--
``(i) In general.--The term `redetermined rents' means
rents from real property (as defined in subsection 856(d))
the amount of which would (but for subparagraph (E)) be
reduced on distribution, apportionment, or allocation under
section 482 to clearly reflect income as a result of services
furnished or rendered by a taxable REIT subsidiary of the
real estate investment trust to a tenant of such trust.
``(ii) Exception for certain services.--Clause (i) shall
not apply to amounts received directly or indirectly by a
real estate investment trust for services described in
paragraph (1)(B) or (7)(C)(i) of section 856(d).
``(iii) Exception for de minimis amounts.--Clause (i) shall
not apply to amounts described in section 856(d)(7)(A) with
respect to a property to the extent such amounts do not
exceed the one percent threshold described in section
856(d)(7)(B) with respect to such property.
``(iv) Exception for comparably priced services.--Clause
(i) shall not apply to any service rendered by a taxable REIT
subsidiary of a real estate investment trust to a tenant of
such trust if--
``(I) such subsidiary renders a significant amount of
similar services to persons other than such trust and tenants
of such trust who are unrelated (within the meaning of
section 856(d)(8)(F)) to such subsidiary, trust, and tenants,
but
``(II) only to the extent the charge for such service so
rendered is substantially comparable to the charge for the
similar services
[[Page H819]]
rendered to persons referred to in subclause (I).
``(v) Exception for certain separately charged services.--
Clause (i) shall not apply to any service rendered by a
taxable REIT subsidiary of a real estate investment trust to
a tenant of such trust if--
``(I) the rents paid to the trust by tenants (leasing at
least 25 percent of the net leasable space in the trust's
property) who are not receiving such service from such
subsidiary are substantially comparable to the rents paid by
tenants leasing comparable space who are receiving such
service from such subsidiary, and
``(II) the charge for such service from such subsidiary is
separately stated.
``(vi) Exception for certain services based on subsidiary's
income from the services.--Clause (i) shall not apply to any
service rendered by a taxable REIT subsidiary of a real
estate investment trust to a tenant of such trust if the
gross income of such subsidiary from such service is not less
than 150 percent of such subsidiary's direct cost in
furnishing or rendering the service.
``(vii) Exceptions granted by secretary.--The Secretary may
waive the tax otherwise imposed by subparagraph (A) if the
trust establishes to the satisfaction of the Secretary that
rents charged to tenants were established on an arms' length
basis even though a taxable REIT subsidiary of the trust
provided services to such tenants.
``(C) Redetermined deductions.--The term `redetermined
deductions' means deductions (other than redetermined rents)
of a taxable REIT subsidiary of a real estate investment
trust if the amount of such deductions would (but for
subparagraph (E)) be decreased on distribution,
apportionment, or allocation under section 482 to clearly
reflect income as between such subsidiary and such trust.
``(D) Excess interest.--The term `excess interest' means
any deductions for interest payments by a taxable REIT
subsidiary of a real estate investment trust to such trust to
the extent that the interest payments are in excess of a rate
that is commercially reasonable.
``(E) Coordination with section 482.--The imposition of tax
under subparagraph (A) shall be in lieu of any distribution,
apportionment, or allocation under section 482.
``(F) Regulatory authority.--The Secretary shall prescribe
such regulations as may be necessary or appropriate to carry
out the purposes of this paragraph. Until the Secretary
prescribes such regulations, real estate investment trusts
and their taxable REIT subsidiaries may base their
allocations on any reasonable method.''.
(b) Amount Subject to Tax Not Required To Be Distributed.--
Subparagraph (E) of section 857(b)(2) (relating to real
estate investment trust taxable income) is amended by
striking ``paragraph (5)'' and inserting ``paragraphs (5) and
(7)''.
SEC. 716. EFFECTIVE DATE.
(a) In General.--The amendments made by this part shall
apply to taxable years beginning after December 31, 2000.
(b) Transitional Rules Related to Section 711.--
(1) Existing arrangements.--
(A) In general.--Except as otherwise provided in this
paragraph, the amendment made by section 711 shall not apply
to a real estate investment trust with respect to--
(i) securities of a corporation held directly or indirectly
by such trust on July 12, 1999,
(ii) securities of a corporation held by an entity on July
12, 1999, if such trust acquires control of such entity
pursuant to a written binding contract in effect on such date
and at all times thereafter before such acquisition,
(iii) securities received by such trust (or a successor) in
exchange for, or with respect to, securities described in
clause (i) or (ii) in a transaction in which gain or loss is
not recognized, and
(iv) securities acquired directly or indirectly by such
trust as part of a reorganization (as defined in section
368(a)(1) of the Internal Revenue Code of 1986) with respect
to such trust if such securities are described in clause (i),
(ii), or (iii) with respect to any other real estate
investment trust.
(B) New trade or business or substantial new assets.--
Subparagraph (A) shall cease to apply to securities of a
corporation as of the first day after July 12, 1999, on which
such corporation engages in a substantial new line of
business, or acquires any substantial asset, other than--
(i) pursuant to a binding contract in effect on such date
and at all times thereafter before the acquisition of such
asset,
(ii) in a transaction in which gain or loss is not
recognized by reason of section 1031 or 1033 of the Internal
Revenue Code of 1986, or
(iii) in a reorganization (as so defined) with another
corporation the securities of which are described in
paragraph (1)(A) of this subsection.
(C) Limitation on transition rules.--Subparagraph (A) shall
cease to apply to securities of a corporation held, acquired,
or received, directly or indirectly, by a real estate
investment trust as of the first day after July 12, 1999, on
which such trust acquires any additional securities of such
corporation other than--
(i) pursuant to a binding contract in effect on July 12,
1999, and at all times thereafter, or
(ii) in a reorganization (as so defined) with another
corporation the securities of which are described in
paragraph (1)(A) of this subsection.
(2) Tax-free conversion.--If--
(A) at the time of an election for a corporation to become
a taxable REIT subsidiary, the amendment made by section 1021
does not apply to such corporation by reason of paragraph
(1), and
(B) such election first takes effect before January 1,
2004,
such election shall be treated as a reorganization qualifying
under section 368(a)(1)(A) of such Code.
PART II--HEALTH CARE REITS
SEC. 721. HEALTH CARE REITS.
(a) Special Foreclosure Rule for Health Care Properties.--
Subsection (e) of section 856 (relating to special rules for
foreclosure property) is amended by adding at the end the
following new paragraph:
``(6) Special rule for qualified health care properties.--
For purposes of this subsection--
``(A) Acquisition at expiration of lease.--The term
`foreclosure property' shall include any qualified health
care property acquired by a real estate investment trust as
the result of the termination of a lease of such property
(other than a termination by reason of a default, or the
imminence of a default, on the lease).
``(B) Grace period.--In the case of a qualified health care
property which is foreclosure property solely by reason of
subparagraph (A), in lieu of applying paragraphs (2) and
(3)--
``(i) the qualified health care property shall cease to be
foreclosure property as of the close of the second taxable
year after the taxable year in which such trust acquired such
property, and
``(ii) if the real estate investment trust establishes to
the satisfaction of the Secretary that an extension of the
grace period in clause (i) is necessary to the orderly
leasing or liquidation of the trust's interest in such
qualified health care property, the Secretary may grant one
or more extensions of the grace period for such qualified
health care property.
Any such extension shall not extend the grace period beyond
the close of the 6th year after the taxable year in which
such trust acquired such qualified health care property.
``(C) Income from independent contractors.--For purposes of
applying paragraph (4)(C) with respect to qualified health
care property which is foreclosure property by reason of
subparagraph (A) or paragraph (1), income derived or received
by the trust from an independent contractor shall be
disregarded to the extent such income is attributable to--
``(i) any lease of property in effect on the date the real
estate investment trust acquired the qualified health care
property (without regard to its renewal after such date so
long as such renewal is pursuant to the terms of such lease
as in effect on such date), or
``(ii) any lease of property entered into after such date
if--
``(I) on such date, a lease of such property from the trust
was in effect, and
``(II) under the terms of the new lease, such trust
receives a substantially similar or lesser benefit in
comparison to the lease referred to in subclause (I).
``(D) Qualified health care property.--
``(i) In general.--The term `qualified health care
property' means any real property (including interests
therein), and any personal property incident to such real
property, which--
``(I) is a health care facility, or
``(II) is necessary or incidental to the use of a health
care facility.
``(ii) Health care facility.--For purposes of clause (i),
the term `health care facility' means a hospital, nursing
facility, assisted living facility, congregate care facility,
qualified continuing care facility (as defined in section
7872(g)(4)), or other licensed facility which extends medical
or nursing or ancillary services to patients and which,
immediately before the termination, expiration, default, or
breach of the lease of or mortgage secured by such facility,
was operated by a provider of such services which was
eligible for participation in the medicare program under
title XVIII of the Social Security Act with respect to such
facility.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2000.
PART III--CONFORMITY WITH REGULATED INVESTMENT COMPANY RULES
SEC. 731. CONFORMITY WITH REGULATED INVESTMENT COMPANY RULES.
(a) Distribution Requirement.--Clauses (i) and (ii) of
section 857(a)(1)(A) (relating to requirements applicable to
real estate investment trusts) are each amended by striking
``95 percent (90 percent for taxable years beginning before
January 1, 1980)'' and inserting ``90 percent''.
(b) Imposition of Tax.--Clause (i) of section 857(b)(5)(A)
(relating to imposition of tax in case of failure to meet
certain requirements) is amended by striking ``95 percent (90
percent in the case of taxable years beginning before January
1, 1980)'' and inserting ``90 percent''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2000.
[[Page H820]]
PART IV--CLARIFICATION OF EXCEPTION FROM IMPERMISSIBLE TENANT SERVICE
INCOME
SEC. 741. CLARIFICATION OF EXCEPTION FOR INDEPENDENT
OPERATORS.
(a) In General.--Paragraph (3) of section 856(d) (relating
to independent contractor defined) is amended by adding at
the end the following flush sentence:
``In the event that any class of stock of either the real
estate investment trust or such person is regularly traded on
an established securities market, only persons who own,
directly or indirectly, more than 5 percent of such class of
stock shall be taken into account as owning any of the stock
of such class for purposes of applying the 35 percent
limitation set forth in subparagraph (B) (but all of the
outstanding stock of such class shall be considered
outstanding in order to compute the denominator for purpose
of determining the applicable percentage of ownership).''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2000.
PART V--MODIFICATION OF EARNINGS AND PROFITS RULES
SEC. 751. MODIFICATION OF EARNINGS AND PROFITS RULES.
(a) Rules for Determining Whether Regulated Investment
Company Has Earnings and Profits From Non-RIC Year.--
Subsection (c) of section 852 is amended by adding at the end
the following new paragraph:
``(3) Distributions to meet requirements of subsection
(a)(2)(B).--Any distribution which is made in order to comply
with the requirements of subsection (a)(2)(B)--
``(A) shall be treated for purposes of this subsection and
subsection (a)(2)(B) as made from the earliest earnings and
profits accumulated in any taxable year to which the
provisions of this part did not apply rather than the most
recently accumulated earnings and profits, and
``(B) to the extent treated under subparagraph (A) as made
from accumulated earnings and profits, shall not be treated
as a distribution for purposes of subsection (b)(2)(D) and
section 855.''.
(b) Clarification of Application of REIT Spillover Dividend
Rules to Distributions To Meet Qualification Requirement.--
Subparagraph (B) of section 857(d)(3) is amended by inserting
before the period ``and section 858''.
(c) Application of Deficiency Dividend Procedures.--
Paragraph (1) of section 852(e) is amended by adding at the
end the following new sentence: ``If the determination under
subparagraph (A) is solely as a result of the failure to meet
the requirements of subsection (a)(2), the preceding sentence
shall also apply for purposes of applying subsection (a)(2)
to the non-RIC year.''.
(d) Effective Date.--The amendments made by this section
shall apply to distributions after December 31, 2000.
Subtitle C--Private Activity Bond Volume Cap
SEC. 761. ACCELERATION OF PHASE-IN OF INCREASE IN VOLUME CAP
ON PRIVATE ACTIVITY BONDS.
(a) In General.--The table contained in section 146(d)(2)
(relating to per capita limit; aggregate limit) is amended to
read as follows:
``Calendar Year Per Capita Limit Aggregate Limit
------------------------------------------------------------------------
2000....................... $55.00 165,000,000
2001....................... 60.00 180,000,000
2002....................... 65.00 195,000,000
2003....................... 70.00 210,000,000
2004 and thereafter........ 75.00 225,000,000.''.
(b) Effective Date.--The amendment made by this section
shall apply to calendar years beginning after 1999.
Subtitle D--Exclusion from gross income for certain forgiven mortgage
obligations
SEC. 771. EXCLUSION FROM GROSS INCOME FOR CERTAIN FORGIVEN
MORTGAGE OBLIGATIONS.
(a) In General.--Paragraph (1) of section 108(a) of the
Internal Revenue Code of 1986 (relating to exclusion from
gross income) is amended by striking ``or'' at the end of
both subparagraphs (A) and (C), by striking the period at the
end of subparagraph (D) and inserting ``, or'', and by
inserting after subparagraph (D) the following new
subparagraph:
``(E) in the case of an individual, the indebtedness
discharged is qualified residential indebtedness.''.
(b) Qualified Residential Indebtedness Shortfall.--Section
108 of such Code (relating to discharge of indebtedness) is
amended by adding at the end the following new subsection:
``(h) Qualified Residential Indebtedness.--
``(1) Limitations.--The amount excluded under subparagraph
(E) of subsection (a)(1) with respect to any qualified
residential indebtedness shall not exceed the excess (if any)
of--
``(A) the outstanding principal amount of such indebtedness
(immediately before the discharge), over
``(B) the sum of--
``(i) the amount realized from the sale of the real
property securing such indebtedness reduced by the cost of
such sale, and
``(ii) the outstanding principal amount of any other
indebtedness secured by such property.
``(2) Qualified residential indebtedness.--
``(A) In general.--The term `qualified residential
indebtedness' means indebtedness which--
``(i) was incurred or assumed by the taxpayer in connection
with real property used as a residence and is secured by such
real property,
``(ii) is incurred or assumed to acquire, construct,
reconstruct, or substantially improve such real property, and
``(iii) with respect to which such taxpayer makes an
election to have this paragraph apply.
``(B) Refinanced indebtedness.--Such term shall include
indebtedness resulting from the refinancing of indebtedness
under subparagraph (A)(ii), but only to the extent the
refinanced indebtedness does not exceed the amount of the
indebtedness being refinanced.
``(C) Exceptions.--Such term shall not include qualified
farm indebtedness or qualified real property business
indebtedness.''.
(c) Conforming Amendments.--
(1) Paragraph (2) of section 108(a) of such Code is
amended--
(A) in subparagraph (A) by striking ``and (D)'' and
inserting ``(D), and (E)'', and
(B) by amending subparagraph (B) to read as follows:
``(B) Insolvency exclusion takes precedence over qualified
farm exclusion; qualified real property business exclusion;
and qualified residential shortfall exclusion.--Subparagraphs
(C), (D), and (E) of paragraph (1) shall not apply to a
discharge to the extent the taxpayer is insolvent.''.
(2) Paragraph (1) of section 108(b) of such Code is amended
by striking ``or (C)'' and inserting ``(C), or (E)''.
(3) Subsection (c) of section 121 of such Code is amended
by adding at the end the following new paragraph:
``(4) Special rule relating to discharge of indebtedness.--
The amount of gain which (but for this paragraph) would be
excluded from gross income under subsection (a) with respect
to a principal residence shall be reduced by the amount
excluded from gross income under section 108(a)(1)(E) with
respect to such residence.''.
(d) Effective Date.--The amendments made by this section
shall apply to discharges after the date of the enactment of
this Act.
TITLE VIII--MISCELLANEOUS PROVISIONS
SEC. 801. CREDIT FOR MODIFICATIONS TO INTER-CITY BUSES
REQUIRED UNDER THE AMERICANS WITH DISABILITIES
ACT OF 1990.
(a) In General.--Subsection (a) of section 44 (relating to
expenditures to provide access to disabled individuals) is
amended to read as follows:
``(a) General Rule.--For purposes of section 38, the amount
of the disabled access credit determined under this section
for any taxable year shall be an amount equal to the sum of--
``(1) in the case of an eligible small business, 50 percent
of so much of the eligible access expenditures for the
taxable year as exceed $250 but do not exceed $10,250, and
``(2) 50 percent of so much of the eligible bus access
expenditures for the taxable year with respect to each
eligible bus as exceed $250 but do not exceed $30,250.''.
(b) Eligible Bus Access Expenditures.--Section 44 is
amended by redesignating subsections (d) and (e) as
subsections (e) and (f), respectively, and by inserting after
subsection (c) the following new subsection:
``(d) Eligible Bus Access Expenditures.--For purposes of
this section--
``(1) In general.--The term `eligible bus access
expenditures' means amounts paid or incurred by the taxpayer
for the purpose of enabling the taxpayer's eligible bus to
comply with applicable requirements under the Americans With
Disabilities Act of 1990 (as in effect on the date of the
enactment of this subsection).
``(2) Certain expenditures not included.--The amount of
eligible bus access expenditures otherwise taken into account
under subsection (a)(2) shall be reduced to the extent that
funds for such expenditures are received under any Federal,
State, or local program.
``(3) Eligible bus.--The term `eligible bus' means any
automobile bus eligible for a refund under section 6427(b) by
reason of transportation described in section
6427(b)(1)(A).''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
1999, and before January 1, 2012.
SEC. 802. CERTAIN EDUCATIONAL BENEFITS PROVIDED BY AN
EMPLOYER TO CHILDREN OF EMPLOYEES EXCLUDABLE
FROM GROSS INCOME AS A SCHOLARSHIP.
(a) In General.--Section 117 (relating to qualified
scholarships) is amended by adding at the end the following
new subsection:
``(e) Employer-Provided Educational Benefits Provided to
Children of Employees.--
``(1) In general.--In determining whether any amount is a
qualified scholarship for purposes of subsection (a), the
fact that such amount is provided in connection with an
[[Page H821]]
employment relationship shall be disregarded if--
``(A) such amount is provided by the employer to a child
(as defined in section 151(c)(3)) of an employee of such
employer,
``(B) such amount is provided pursuant to a plan which
meets the nondiscrimination requirements of subsection
(d)(3), and
``(C) amounts provided under such plan are in addition to
any other compensation payable to employees and such plan
does not provide employees with a choice between such amounts
and any other benefit.
For purposes of subparagraph (C), the business practices of
the employer (as well as such plan) shall be taken into
account.
``(2) Dollar limitations.--
``(A) Per child.--The amount excluded from the gross income
of the employee by reason of paragraph (1) for a taxable year
with respect to amounts provided to each child of such
employee shall not exceed $2,000.
``(B) Aggregate limit.--The amount excluded from the gross
income of the employee by reason of paragraph (1) for a
taxable year (after the application of subparagraph (A))
shall not exceed the excess of the dollar amount contained in
section 127(a)(2) over the amount excluded from the
employee's gross income under section 127 for such year.
``(3) Principal shareholders and owners.--Paragraph (1)
shall not apply to any amount provided to any child of any
individual if such individual (or such individual's spouse)
owns (on any day of the year) more than 5 percent of the
stock or of the capital or profits interest in the employer.
``(4) Degree requirement not to apply.--In the case of an
amount which is treated as a qualified scholarship by reason
of this subsection, subsection (a) shall be applied without
regard to the requirement that the recipient be a candidate
for a degree.
``(5) Certain other rules to apply.--Rules similar to the
rules of paragraphs (4), (5), and (7) of section 127(c) shall
apply for purposes of this subsection.''
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
SEC. 803. TAX INCENTIVES FOR QUALIFIED UNITED STATES
INDEPENDENT FILM AND TELEVISION PRODUCTION.
(a) In General.--Subpart C of part IV of subchapter A of
chapter 1 (relating to refundable credits) is amended by
redesignating section 35 as section 36 and by inserting after
section 34 the following new section:
``SEC. 35. UNITED STATES INDEPENDENT FILM AND TELEVISION
PRODUCTION WAGE CREDIT.
``(a) Amount of Credit.--There shall be allowed as a credit
against the tax imposed by this subtitle for the taxable year
an amount equal to 20 percent of the qualified wages paid or
incurred during the calendar year which ends with or within
the taxable year.
``(b) Only First $20,000 of Wages per Year Taken Into
Account.--With respect to each qualified United States
independent film and television production, the amount of
qualified wages paid or incurred to each qualified United
States independent film and television production employee
which may be taken into account for a calendar year shall not
exceed $20,000.
``(c) Qualified Wages.--For purposes of this section--
``(1) In general.--The term `qualified wages' means any
wages paid or incurred by an employer for services performed
by an employee while such employee is a qualified United
States independent film and television production employee.
``(2) Qualified united states independent film and
television production employee.--
``(A) In general.--The term `qualified United States
independent film and television production employee' means,
with respect to any period, any employee of an employer if
substantially all of the services performed during such
period by such employee for such employer are performed in an
activity related to any qualified United States independent
film and television production in a trade or business of the
employer.
``(B) Certain individuals not eligible.--Such term shall
not include--
``(i) any individual described in subparagraph (A), (B), or
(C) of section 51(i)(1), and
``(ii) any 5-percent owner (as defined in section
416(i)(1)(B).
``(3) Coordination with other wage credits.--No credit
shall be allowed under any other provision of this chapter
for wages paid to any employee during any calendar year if
the employer is allowed a credit under this section for any
of such wages.
``(4) Wages.--The term `wages' has the same meaning as when
used in section 51.
``(d) Qualified United States Independent Film and
Television Production.--For purposes of this section--
``(1) In general.--The term `qualified United States
independent film and television production' means any
production of any motion picture (whether released
theatrically or directly to video cassette or any other
format), a mini series, or a pilot production for a
dramatic series if--
``(A) the production is produced in whole or in substantial
part within the United States (determined on the basis of
proportion of the qualified United States independent film
and television production employees with respect to such
production to total employee performing services related to
such production),
``(B) the production is created primarily for use as public
entertainment or for educational purposes, and
``(C) the total production cost of the production is less
than $10,000,000.
``(2) Public entertainment.--The term `public
entertainment' includes a motion picture film, video tape, or
television program intended for initial broadcast via the
public broadcast spectrum or delivered via cable
distribution, or productions that are submitted to a national
organization that rates films for violent or adult content.
Such term does not include any film or tape the market for
which is primarily topical, is otherwise essentially
transitory in nature, or is produced for private
noncommercial use.
``(3) Total production cost.--The term `total production
cost' includes costs incurred in the delivery of the final
master copy but does not include development, acquisition,
and marketing costs of the qualified United States
independent film and television production.
``(e) Controlled Groups.--For purposes of this section--
``(1) all employers treated as a single employer under
subsection (a) or (b) of section 52 shall be treated as a
single employer for purposes of this subpart, and
``(2) the credit (if any) determined under this section
with respect to each such employer shall be its proportionate
share of the wages giving rise to such credit.
``(f) Certain Other Rules Made Applicable.--Rules similar
to the rules of section 51(k) and subsections (c) and (d) of
section 52 shall apply for purposes of this section.''.
(b) Denial of Double Benefit.--Subsection (a) of section
280C is amended by inserting ``35,'' before ``45A(a),''.
(c) Conforming Amendments.--
(1) Paragraph (2) of section 1324(b) of title 31, United
States Code, is amended by inserting before the period ``, or
from section 35 of such Code''.
(2) The table of sections for subpart C of part IV of
subchapter A of chapter 1 is amended by striking the last
item and inserting the following new items:
``Sec. 35. United States independent film and television production
wage credit.
``Sec. 36. Overpayments of tax.''.
(d) Effective Date.--The amendments made by this section
shall apply to wages paid or incurred after the date of the
enactment of this Act in taxable years ending after such
date.
The SPEAKER pro tempore. The amendment consisting of the text of H.R.
3832 is adopted.
The text of H.R. 3081, as amended by inserting the text of H.R. 3832,
is as follows:
H.R. 3832
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Small
Business Tax Fairness Act of 2000''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is
expressed in terms of an amendment to, or repeal of, a
section or other provision, the reference shall be considered
to be made to a section or other provision of the Internal
Revenue Code of 1986.
(c) Table of Contents.--
Sec. 1. Short title; references; table of contents.
TITLE I--SMALL BUSINESS PROVISIONS
Sec. 101. Deduction for 100 percent of health insurance costs of self-
employed individuals.
Sec. 102. Increase in expense treatment for small businesses.
Sec. 103. Increased deduction for meal expenses.
Sec. 104. Increased deductibility of business meal expenses for
individuals subject to Federal limitations on hours of
service.
Sec. 105. Income averaging for farmers and fishermen not to increase
alternative minimum tax liability.
Sec. 106. Repeal of occupational taxes relating to distilled spirits,
wine, and beer.
Sec. 107. Repeal of modification of installment method.
TITLE II--PENSION PROVISIONS
Subtitle A--Expanding Coverage
Sec. 201. Increase in benefit and contribution limits.
Sec. 202. Plan loans for subchapter S owners, partners, and sole
proprietors.
Sec. 203. Modification of top-heavy rules.
Sec. 204. Elective deferrals not taken into account for purposes of
deduction limits.
Sec. 205. Repeal of coordination requirements for deferred compensation
plans of State and local governments and tax-exempt
organizations.
Sec. 206. Elimination of user fee for requests to IRS regarding pension
plans.
Sec. 207. Deduction limits.
Sec. 208. Option to treat elective deferrals as after-tax
contributions.
Subtitle B--Enhancing Fairness for Women
Sec. 221. Catchup contributions for individuals age 50 or over.
[[Page H822]]
Sec. 222. Equitable treatment for contributions of employees to defined
contribution plans.
Sec. 223. Faster vesting of certain employer matching contributions.
Sec. 224. Simplify and update the minimum distribution rules.
Sec. 225. Clarification of tax treatment of division of section 457
plan benefits upon divorce.
Sec. 226. Modification of safe harbor relief for hardship withdrawals
from cash or deferred arrangements.
Subtitle C--Increasing Portability for Participants
Sec. 231. Rollovers allowed among various types of plans.
Sec. 232. Rollovers of IRAs into workplace retirement plans.
Sec. 233. Rollovers of after-tax contributions.
Sec. 234. Hardship exception to 60-day rule.
Sec. 235. Treatment of forms of distribution.
Sec. 236. Rationalization of restrictions on distributions.
Sec. 237. Purchase of service credit in governmental defined benefit
plans.
Sec. 238. Employers may disregard rollovers for purposes of cash-out
amounts.
Sec. 239. Minimum distribution and inclusion requirements for section
457 plans.
Subtitle D--Strengthening Pension Security and Enforcement
Sec. 241. Repeal of 150 percent of current liability funding limit.
Sec. 242. Maximum contribution deduction rules modified and applied to
all defined benefit plans.
Sec. 243. Excise tax relief for sound pension funding.
Sec. 244. Excise tax on failure to provide notice by defined benefit
plans significantly reducing future benefit accruals.
Sec. 245. Treatment of multiemployer plans under section 415.
Subtitle E--Reducing Regulatory Burdens
Sec. 261. Modification of timing of plan valuations.
Sec. 262. ESOP dividends may be reinvested without loss of dividend
deduction.
Sec. 263. Repeal of transition rule relating to certain highly
compensated employees.
Sec. 264. Employees of tax-exempt entities.
Sec. 265. Clarification of treatment of employer-provided retirement
advice.
Sec. 266. Reporting simplification.
Sec. 267. Improvement of employee plans compliance resolution system.
Sec. 268. Modification of exclusion for employer provided transit
passes.
Sec. 269. Repeal of the multiple use test.
Sec. 270. Flexibility in nondiscrimination, coverage, and line of
business rules.
Sec. 271. Extension to international organizations of moratorium on
application of certain nondiscrimination rules applicable
to State and local plans.
Sec. 272. Notice and consent period regarding distributions.
Subtitle F--Plan Amendments
Sec. 281. Provisions relating to plan amendments.
TITLE III--ESTATE TAX RELIEF
Subtitle A--Reductions of Estate and Gift Tax Rates
Sec. 301. Reductions of estate and gift tax rates.
Sec. 302. Sense of the Congress concerning repeal of the death tax.
Subtitle B--Unified Credit Replaced With Unified Exemption Amount
Sec. 311. Unified credit against estate and gift taxes replaced with
unified exemption amount.
Subtitle C--Modifications of Generation-Skipping Transfer Tax
Sec. 321. Deemed allocation of GST exemption to lifetime transfers to
trusts; retroactive allocations.
Sec. 322. Severing of trusts.
Sec. 323. Modification of certain valuation rules.
Sec. 324. Relief provisions.
Subtitle D--Conservation Easements
Sec. 331. Expansion of estate tax rule for conservation easements.
TITLE IV--TAX RELIEF FOR DISTRESSED COMMUNITIES AND INDUSTRIES
Subtitle A--American Community Renewal Act of 2000
Sec. 401. Short title.
Sec. 402. Designation of and tax incentives for renewal communities.
Sec. 403. Extension of expensing of environmental remediation costs to
renewal communities.
Sec. 404. Extension of work opportunity tax credit for renewal
communities.
Sec. 405. Conforming and clerical amendments.
Subtitle B--Timber Incentives
Sec. 411. Temporary suspension of maximum amount of amortizable
reforestation expenditures.
TITLE V--REAL ESTATE PROVISIONS
Subtitle A--Improvements in Low-Income Housing Credit
Sec. 501. Modification of State ceiling on low-income housing credit.
Sec. 502. Modification of criteria for allocating housing credits among
projects.
Sec. 503. Additional responsibilities of housing credit agencies.
Sec. 504. Modifications to rules relating to basis of building which is
eligible for credit.
Sec. 505. Other modifications.
Sec. 506. Carryforward rules.
Sec. 507. Effective date.
Subtitle B--Private Activity Bond Volume Cap
Sec. 511. Acceleration of phase-in of increase in volume cap on private
activity bonds.
Subtitle C--Exclusion From Gross Income for Certain Forgiven Mortgage
Obligations
Sec. 512. Exclusion from gross income for certain forgiven mortgage
obligations.
TITLE I--SMALL BUSINESS PROVISIONS
SEC. 101. 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 and the taxpayer's spouse and dependents.''.
(b) Clarification of Limitations on Other Coverage.--The
first sentence of section 162(l)(2)(B) is amended to read as
follows: ``Paragraph (1) shall not apply to any taxpayer for
any calendar month for which the taxpayer participates in any
subsidized health plan maintained by any employer (other than
an employer described in section 401(c)(4)) of the taxpayer
or the spouse of the taxpayer.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2000.
SEC. 102. INCREASE IN EXPENSE TREATMENT FOR SMALL BUSINESSES.
(a) In General.--Paragraph (1) of section 179(b) (relating
to dollar limitation) is amended to read as follows:
``(1) Dollar limitation.--The aggregate cost which may be
taken into account under subsection (a) for any taxable year
shall not exceed $30,000.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2000.
SEC. 103. INCREASED DEDUCTION FOR MEAL EXPENSES.
(a) In General.--Paragraph (1) of section 274(n) (relating
to only 50 percent of meal and entertainment expenses allowed
as deduction) is amended by striking ``50 percent'' in the
text and inserting ``the allowable percentage''.
(b) Allowable Percentages.--Subsection (n) of section 274
is amended by redesignating paragraphs (2) and (3) as
paragraphs (3) and (4), respectively, and by inserting after
paragraph (1) the following new paragraph:
``(2) Allowable percentage.--For purposes of paragraph (1),
the allowable percentage is--
``(A) in the case of amounts for items described in
paragraph (1)(B), 50 percent, and
``(B) in the case of expenses for food or beverages, 60
percent (55 percent for taxable years beginning during
2001).''
(c) Conforming Amendment.--The heading for subsection (n)
of section 274 is amended by striking ``50 Percent'' and
inserting ``Limited Percentages''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2000.
SEC. 104. INCREASED DEDUCTIBILITY OF BUSINESS MEAL EXPENSES
FOR INDIVIDUALS SUBJECT TO FEDERAL LIMITATIONS
ON HOURS OF SERVICE.
(a) In General.--Paragraph (4) of section 274(n) (relating
to limited percentages of meal and entertainment expenses
allowed as deduction), as redesignated by section 103, is
amended to read as follows:
``(4) Special rule for individuals subject to federal hours
of service.--In the case of any expenses for food or
beverages consumed while away from home (within the meaning
of section 162(a)(2)) by an individual during, or incident
to, the period of duty subject to the hours of service
limitations of the Department of Transportation, paragraph
(2)(B) shall be applied by substituting `80 percent' for the
percentage otherwise applicable under paragraph (2)(B).''
(b) Effective Date.--The amendment made by subsection (a)
shall apply to taxable years beginning after December 31,
2000.
SEC. 105. INCOME AVERAGING FOR FARMERS AND FISHERMEN NOT TO
INCREASE ALTERNATIVE MINIMUM TAX LIABILITY.
(a) In General.--Section 55(c) (defining regular tax) is
amended by redesignating paragraph (2) as paragraph (3) and
by inserting after paragraph (1) the following:
``(2) Coordination with income averaging for farmers and
fishermen.--Solely for purposes of this section, section 1301
(relating to averaging of farm and fishing income) shall not
apply in computing the regular tax.''.
(b) Allowing Income Averaging for Fishermen.--
[[Page H823]]
(1) In general.--Section 1301(a) is amended by striking
``farming business'' and inserting ``farming business or
fishing business,''.
(2) Definition of elected farm income.--
(A) In general.--Clause (i) of section 1301(b)(1)(A) is
amended by inserting ``or fishing business'' before the
semicolon.
(B) Conforming amendment.--Subparagraph (B) of section
1301(b)(1) is amended by inserting ``or fishing business''
after ``farming business'' both places it occurs.
(3) Definition of fishing business.--Section 1301(b) is
amended by adding at the end the following new paragraph:
``(4) Fishing business.--The term `fishing business' means
the conduct of commercial fishing as defined in section 3 of
the Magnuson-Stevens Fishery Conservation and Management Act
(16 U.S.C. 1802).''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2000.
SEC. 106. REPEAL OF OCCUPATIONAL TAXES RELATING TO DISTILLED
SPIRITS, WINE, AND BEER.
(a) Repeal of Occupational Taxes.--
(1) In general.--The following provisions of part II of
subchapter A of chapter 51 of the Internal Revenue Code of
1986 (relating to occupational taxes) are hereby repealed:
(A) Subpart A (relating to proprietors of distilled spirits
plants, bonded wine cellars, etc.).
(B) Subpart B (relating to brewer).
(C) Subpart D (relating to wholesale dealers) (other than
sections 5114 and 5116).
(D) Subpart E (relating to retail dealers) (other than
section 5124).
(E) Subpart G (relating to general provisions) (other than
sections 5142, 5143, 5145, and 5146).
(2) Nonbeverage domestic drawback.--Section 5131 is amended
by striking ``, on payment of a special tax per annum,''.
(3) Industrial use of distilled spirits.--Section 5276 is
hereby repealed.
(b) Conforming Amendments.--
(1)(A) The heading for part II of subchapter A of chapter
51 and the table of subparts for such part are amended to
read as follows:
``PART II--MISCELLANEOUS PROVISIONS
``Subpart A. Manufacturers of stills.
``Subpart B. Nonbeverage domestic drawback claimants.
``Subpart C. Recordkeeping by dealers.
``Subpart D. Other provisions.''
(B) The table of parts for such subchapter A is amended by
striking the item relating to part II and inserting the
following new item:
``Part II. Miscellaneous provisions.''
(2) Subpart C of part II of such subchapter (relating to
manufacturers of stills) is redesignated as subpart A.
(3)(A) Subpart F of such part II (relating to nonbeverage
domestic drawback claimants) is redesignated as subpart B and
sections 5131 through 5134 are redesignated as sections 5111
through 5114, respectively.
(B) The table of sections for such subpart B, as so
redesignated, is amended--
(i) by redesignating the items relating to sections 5131
through 5134 as relating to sections 5111 through 5114,
respectively, and
(ii) by striking ``and rate of tax'' in the item relating
to section 5111, as so redesignated.
(C) Section 5111, as redesignated by subparagraph (A), is
amended--
(i) by striking ``and rate of tax'' in the section heading,
(ii) by striking ``(a) Eligibility for Drawback.--'', and
(iii) by striking subsection (b).
(4) Part II of subchapter A of chapter 51 is amended by
adding after subpart B, as redesignated by paragraph (3), the
following new subpart:
``Subpart C--Recordkeeping by Dealers
``Sec. 5121. Recordkeeping by wholesale dealers.
``Sec. 5122. Recordkeeping by retail dealers.
``Sec. 5123. Preservation and inspection of records, and entry of
premises for inspection.''
(5)(A) Section 5114 (relating to records) is moved to
subpart C of such part II and inserted after the table of
sections for such subpart.
(B) Section 5114 is amended--
(i) by striking the section heading and inserting the
following new heading:
``SEC. 5121. RECORDKEEPING BY WHOLESALE DEALERS.'',
and
(ii) by redesignating subsection (c) as subsection (d) and
by inserting after subsection (b) the following new
subsection:
``(c) Wholesale Dealers.--For purposes of this part--
``(1) Wholesale dealer in liquors.--The term `wholesale
dealer in liquors' means any dealer (other than a wholesale
dealer in beer) who sells, or offers for sale, distilled
spirits, wines, or beer, to another dealer.
``(2) Wholesale dealer in beer.--The term `wholesale dealer
in beer' means any dealer who sells, or offers for sale,
beer, but not distilled spirits or wines, to another dealer.
``(3) Dealer.--The term `dealer' means any person who
sells, or offers for sale, any distilled spirits, wines, or
beer.
``(4) Presumption in case of sale of 20 wine gallons or
more.--The sale, or offer for sale, of distilled spirits,
wines, or beer, in quantities of 20 wine gallons or more to
the same person at the same time, shall be presumptive
evidence that the person making such sale, or offer for sale,
is engaged in or carrying on the business of a wholesale
dealer in liquors or a wholesale dealer in beer, as the case
may be. Such presumption may be overcome by evidence
satisfactorily showing that such sale, or offer for sale, was
made to a person other than a dealer.''
(C) Paragraph (3) of section 5121(d), as so redesignated,
is amended by striking ``section 5146'' and inserting
``section 5123''.
(6)(A) Section 5124 (relating to records) is moved to
subpart C of part II of subchapter A of chapter 51 and
inserted after section 5121.
(B) Section 5124 is amended--
(i) by striking the section heading and inserting the
following new heading:
``SEC. 5122. RECORDKEEPING BY RETAIL DEALERS.'',
(ii) by striking ``section 5146'' in subsection (c) and
inserting ``section 5123'', and
(iii) by redesignating subsection (c) as subsection (d) and
inserting after subsection (b) the following new subsection:
``(c) Retail Dealers.--For purposes of this section--
``(1) Retail dealer in liquors.--The term `retail dealer in
liquors' means any dealer (other than a retail dealer in
beer) who sells, or offers for sale, distilled spirits,
wines, or beer, to any person other than a dealer.
``(2) Retail dealer in beer.--The term `retail dealer in
beer' means any dealer who sells, or offers for sale, beer,
but not distilled spirits or wines, to any person other than
a dealer.
``(3) Dealer.--The term `dealer' has the meaning given such
term by section 5121(c)(3).''
(7) Section 5146 is moved to subpart C of part II of
subchapter A of chapter 51, inserted after section 5122, and
redesignated as section 5123.
(8) Part II of subchapter A of chapter 51 is amended by
inserting after subpart C the following new subpart:
``Subpart D. Other Provisions
``Sec. 5131. Packaging distilled spirits for industrial uses.
``Sec. 5132. Prohibited purchases by dealers.''
(9) Section 5116 is moved to subpart D of part II of
subchapter A of chapter 51, inserted after the table of
sections, redesignated as section 5131, and amended by
inserting ``(as defined in section 5121(c))'' after
``dealer'' in subsection (a).
(10) Subpart D of part II of subchapter A of chapter 51 is
amended by adding at the end thereof the following new
section:
``SEC. 5132. PROHIBITED PURCHASES BY DEALERS.
``(a) In General.--Except as provided in regulations
prescribed by the Secretary, it shall be unlawful for a
dealer to purchase distilled spirits from any person other
than a wholesale dealer in liquors who is required to keep
the records prescribed by section 5121.
``(b) Penalty and Forfeiture.--
``For penalty and forfeiture provisions applicable to violations of
subsection (a), see sections 5687 and 7302.''
(11) Subsection (b) of section 5002 is amended--
(A) by striking ``section 5112(a)'' and inserting ``section
5121(c)(3)'',
(B) by striking ``section 5112'' and inserting ``section
5121(c)'',
(C) by striking ``section 5122'' and inserting ``section
5122(c)''.
(12) Subparagraph (A) of section 5010(c)(2) is amended by
striking ``section 5134'' and inserting ``section 5114''.
(13) Subsection (d) of section 5052 is amended to read as
follows:
``(d) Brewer.--For purposes of this chapter, the term
`brewer' means any person who brews beer or produces beer for
sale. Such term shall not include any person who produces
only beer exempt from tax under section 5053(e).''
(14) The text of section 5182 is amended to read as
follows:
``For provisions requiring recordkeeping by wholesale liquor dealers,
see section 5112, and by retail liquor dealers, see section 5122.''
(15) Subsection (b) of section 5402 is amended by striking
``section 5092'' and inserting ``section 5052(d)''.
(16) Section 5671 is amended by striking ``or 5091''.
(17)(A) Part V of subchapter J of chapter 51 is hereby
repealed.
(B) The table of parts for such subchapter J is amended by
striking the item relating to part V.
(18)(A) Sections 5142, 5143, and 5145 are moved to
subchapter D of chapter 52, inserted after section 5731,
redesignated as sections 5732, 5733, and 5734, respectively,
and amended--
(i) by striking ``this part'' each place it appears and
inserting ``this subchapter'', and
(ii) by striking ``this subpart'' in section 5732(c)(2) (as
so redesignated) and inserting ``this subchapter''.
(B) Section 5732, as redesignated by subparagraph (A), is
amended by striking ``(except the tax imposed by section
5131)'' each place it appears.
(C) Subsection (c) of section 5733, as redesignated by
subparagraph (A), is amended by striking paragraph (2) and by
redesignating paragraph (3) as paragraph (2).
(D) The table of sections for subchapter D of chapter 52 is
amended by adding at the end thereof the following:
``Sec. 5732. Payment of tax.
[[Page H824]]
``Sec. 5733. Provisions relating to liability for occupational taxes.
``Sec. 5734. Application of State laws.''
(E) Section 5731 is amended by striking subsection (c) and
by redesignating subsection (d) as subsection (c).
(19) Subsection (c) of section 6071 is amended by striking
``section 5142'' and inserting ``section 5732''.
(20) Paragraph (1) of section 7652(g) is amended--
(A) by striking ``subpart F'' and inserting ``subpart B'',
and
(B) by striking ``section 5131(a)'' and inserting ``section
5111(a)''.
(21) The table of sections for subchapter D of chapter 51
is amended by striking the item relating to section 5276.
(c) Effective Date.--The amendments made by this section
shall take effect on July 1, 2001, but shall not apply to
taxes imposed for periods before such date.
SEC. 107. REPEAL OF MODIFICATION OF INSTALLMENT METHOD.
(a) In General.--Subsection (a) of section 536 of the
Ticket to Work and Work Incentives Improvement Act of 1999
(relating to modification of installment method and repeal of
installment method for accrual method taxpayers) is repealed
effective with respect to sales and other dispositions
occurring on or after the date of the enactment of such Act.
(b) Applicability.--The Internal Revenue Code of 1986 shall
be applied and administered as if that subsection (and the
amendments made by that subsection) had not been enacted.
TITLE II--PENSION PROVISIONS
Subtitle A--Expanding Coverage
SEC. 201. INCREASE IN BENEFIT AND CONTRIBUTION LIMITS.
(a) Defined Benefit Plans.--
(1) Dollar limit.--
(A) Subparagraph (A) of section 415(b)(1) (relating to
limitation for defined benefit plans) is amended by striking
``$90,000'' and inserting ``$160,000''.
(B) Subparagraphs (C) and (D) of section 415(b)(2) are each
amended by striking ``$90,000'' each place it appears in the
headings and the text and inserting ``$160,000''.
(C) Paragraph (7) of section 415(b) (relating to benefits
under certain collectively bargained plans) is amended by
striking ``the greater of $68,212 or one-half the amount
otherwise applicable for such year under paragraph (1)(A) for
`$90,000' '' and inserting ``one-half the amount otherwise
applicable for such year under paragraph (1)(A) for
`$160,000' ''.
(2) Limit reduced when benefit begins before age 62.--
Subparagraph (C) of section 415(b)(2) is amended by striking
``the social security retirement age'' each place it appears
in the heading and text and inserting ``age 62''.
(3) Limit increased when benefit begins after age 65.--
Subparagraph (D) of section 415(b)(2) is amended by striking
``the social security retirement age'' each place it appears
in the heading and text and inserting ``age 65''.
(4) Cost-of-living adjustments.--Subsection (d) of section
415 (related to cost-of-living adjustments) is amended--
(A) by striking ``$90,000'' in paragraph (1)(A) and
inserting ``$160,000'', and
(B) in paragraph (3)(A)--
(i) by striking ``$90,000'' in the heading and inserting
``$160,000'', and
(ii) by striking ``October 1, 1986'' and inserting ``July
1, 2000''.
(5) Conforming amendment.--Section 415(b)(2) is amended by
striking subparagraph (F).
(b) Defined Contribution Plans.--
(1) Dollar limit.--Subparagraph (A) of section 415(c)(1)
(relating to limitation for defined contribution plans) is
amended by striking ``$30,000'' and inserting ``$40,000''.
(2) Cost-of-living adjustments.--Subsection (d) of section
415 (related to cost-of-living adjustments) is amended--
(A) by striking ``$30,000'' in paragraph (1)(C) and
inserting ``$40,000'', and
(B) in paragraph (3)(D)--
(i) by striking ``$30,000'' in the heading and inserting
``$40,000'', and
(ii) by striking ``October 1, 1993'' and inserting ``July
1, 2000''.
(c) Qualified Trusts.--
(1) Compensation limit.--Sections 401(a)(17), 404(l),
408(k), and 505(b)(7) are each amended by striking
``$150,000'' each place it appears and inserting
``$200,000''.
(2) Base period and rounding of cost-of-living
adjustment.--Subparagraph (B) of section 401(a)(17) is
amended--
(A) by striking ``October 1, 1993'' and inserting ``July 1,
2000'', and
(B) by striking ``$10,000'' both places it appears and
inserting ``$5,000''.
(d) Elective Deferrals.--
(1) In general.--Paragraph (1) of section 402(g) (relating
to limitation on exclusion for elective deferrals) is amended
to read as follows:
``(1) In general.--
``(A) Limitation.--Notwithstanding subsections (e)(3) and
(h)(1)(B), the elective deferrals of any individual for any
taxable year shall be included in such individual's gross
income to the extent the amount of such deferrals for the
taxable year exceeds the applicable dollar amount.
``(B) Applicable dollar amount.--For purposes of
subparagraph (A), the applicable dollar amount shall be the
amount determined in accordance with the following table:
``For taxable years The applicable
beginning in dollar amount:
calendar year:
2001.....................................................$11,000
2002.....................................................$12,000
2003.....................................................$13,000
2004 or thereafter....................................$14,000.''.
(2) Cost-of-living adjustment.--Paragraph (5) of section
402(g) is amended to read as follows:
``(5) Cost-of-living adjustment.--In the case of taxable
years beginning after December 31, 2004, the Secretary shall
adjust the $14,000 amount under paragraph (1)(B) at the same
time and in the same manner as under section 415(d), except
that the base period shall be the calendar quarter beginning
July 1, 2003, and any increase under this paragraph which is
not a multiple of $500 shall be rounded to the next lowest
multiple of $500.''.
(3) Conforming amendments.--
(A) Section 402(g) (relating to limitation on exclusion for
elective deferrals), as amended by paragraphs (1) and (2), is
further amended by striking paragraph (4) and redesignating
paragraphs (5), (6), (7), (8), and (9) as paragraphs (4),
(5), (6), (7), and (8), respectively.
(B) Paragraph (2) of section 457(c) is amended by striking
``402(g)(8)(A)(iii)'' and inserting ``402(g)(7)(A)(iii)''.
(C) Clause (iii) of section 501(c)(18)(D) is amended by
striking ``(other than paragraph (4) thereof)''.
(e) Deferred Compensation Plans of State and Local
Governments and Tax-Exempt Organizations.--
(1) In general.--Section 457 (relating to deferred
compensation plans of State and local governments and tax-
exempt organizations) is amended--
(A) in subsections (b)(2)(A) and (c)(1) by striking
``$7,500'' each place it appears and inserting ``the
applicable dollar amount'', and
(B) in subsection (b)(3)(A) by striking ``$15,000'' and
inserting ``twice the dollar amount in effect under
subsection (b)(2)(A)''.
(2) Applicable dollar amount; cost-of-living adjustment.--
Paragraph (15) of section 457(e) is amended to read as
follows:
``(15) Applicable dollar amount.--
``(A) In general.--The applicable dollar amount shall be
the amount determined in accordance with the following table:
``For taxable years The applicable
beginning in dollar amount:
calendar year:
2001.....................................................$11,000
2002.....................................................$12,000
2003.....................................................$13,000
2004 or thereafter.......................................$14,000.
``(B) Cost-of-living adjustments.--In the case of taxable
years beginning after December 31, 2004, the Secretary shall
adjust the $14,000 amount specified in the table in
subparagraph (A) at the same time and in the same manner as
under section 415(d), except that the base period shall be
the calendar quarter beginning July 1, 2003, and any increase
under this paragraph which is not a multiple of $500 shall be
rounded to the next lowest multiple of $500.''.
(f ) Simple Retirement Accounts.--
(1) Limitation.--Clause (ii) of section 408(p)(2)(A)
(relating to general rule for qualified salary reduction
arrangement) is amended by striking ``$6,000'' and inserting
``the applicable dollar amount''.
(2) Applicable dollar amount.--Subparagraph (E) of
408(p)(2) is amended to read as follows:
``(E) Applicable dollar amount; cost-of-living
adjustment.--
``(i) In general.--For purposes of subparagraph (A)(ii),
the applicable dollar amount shall be the amount determined
in accordance with the following table:
``For taxable years The applicable
beginning in dollar amount:
calendar year:
2001..................................................$7,000
2002..................................................$8,000
2003..................................................$9,000
2004 or thereafter...................................$10,000.
``(ii) Cost-of-living adjustment.--In the case of a year
beginning after December 31, 2004, the Secretary shall adjust
the $10,000 amount under clause (i) at the same time and in
the same manner as under section 415(d), except that the base
period taken into account shall be the calendar quarter
beginning July 1, 2003, and any increase under this
subparagraph which is not a multiple of $500 shall be rounded
to the next lower multiple of $500.''.
(3) Conforming amendments.--
(A) Clause (I) of section 401(k)(11)(B)(i) is amended by
striking ``$6,000'' and inserting ``the amount in effect
under section 408(p)(2)(A)(ii)''.
(B) Section 401(k)(11) is amended by striking subparagraph
(E).
(g) Rounding Rule Relating to Defined Benefit Plans and
Defined Contribution Plans.--Paragraph (4) of section 415(d)
is amended to read as follows:
``(4) Rounding.--
``(A) $160,000 amount.--Any increase under subparagraph (A)
of paragraph (1) which is not a multiple of $5,000 shall be
rounded to the next lowest multiple of $5,000.
``(B) $40,000 amount.--Any increase under subparagraph (C)
of paragraph (1) which is not a multiple of $1,000 shall be
rounded to the next lowest multiple of $1,000.''.
(h) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2000.
[[Page H825]]
SEC. 202. PLAN LOANS FOR SUBCHAPTER S OWNERS, PARTNERS, AND
SOLE PROPRIETORS.
(a) Amendment to 1986 Code.--Subparagraph (B) of section
4975(f )(6) (relating to exemptions not to apply to certain
transactions) is amended by adding at the end the following
new clause:
``(iii) Loan exception.--For purposes of subparagraph
(A)(i), the term `owner-employee' shall only include a person
described in subclause (II) or (III) of clause (i).''.
(b) Effective Date.--The amendment made by this section
shall apply to loans made after December 31, 2000.
SEC. 203. MODIFICATION OF TOP-HEAVY RULES.
(a) Simplification of Definition of Key Employee.--
(1) In general.--Section 416(i)(1)(A) (defining key
employee) is amended--
(A) by striking ``or any of the 4 preceding plan years'' in
the matter preceding clause (i),
(B) by striking clause (i) and inserting the following:
``(i) an officer of the employer having an annual
compensation greater than $150,000,'',
(C) by striking clause (ii) and redesignating clauses (iii)
and (iv) as clauses (ii) and (iii), respectively, and
(D) by striking the second sentence in the matter following
clause (iii), as redesignated by subparagraph (C).
(2) Conforming amendment.--Section 416(i)(1)(B)(iii) is
amended by striking ``and subparagraph (A)(ii)''.
(b) Matching Contributions Taken Into Account for Minimum
Contribution Requirements.--Section 416(c)(2)(A) (relating to
defined contribution plans) is amended by adding at the end
the following: ``Employer matching contributions (as defined
in section 401(m)(4)(A)) shall be taken into account for
purposes of this subparagraph.''.
(c) Distributions During Last Year Before Determination
Date Taken Into Account.--
(1) In general.--Paragraph (3) of section 416(g) is amended
to read as follows:
``(3) Distributions during last year before determination
date taken into account.--
``(A) In general.--For purposes of determining--
``(i) the present value of the cumulative accrued benefit
for any employee, or
``(ii) the amount of the account of any employee,
such present value or amount shall be increased by the
aggregate distributions made with respect to such employee
under the plan during the 1-year period ending on the
determination date. The preceding sentence shall also apply
to distributions under a terminated plan which if it had not
been terminated would have been required to be included in an
aggregation group.
``(B) 5-year period in case of in-service distribution.--In
the case of any distribution made for a reason other than
separation from service, death, or disability, subparagraph
(A) shall be applied by substituting `5-year period' for `1-
year period'.''.
(2) Benefits not taken into account.--Subparagraph (E) of
section 416(g)(4) is amended--
(A) by striking ``last 5 years'' in the heading and
inserting ``last year before determination date'', and
(B) by striking ``5-year period'' and inserting ``1-year
period''.
(d) Definition of Top-Heavy Plans.--Paragraph (4) of
section 416(g) (relating to other special rules for top-heavy
plans) is amended by adding at the end the following new
subparagraph:
``(H) Cash or deferred arrangements using alternative
methods of meeting nondiscrimination requirements.--The term
`top-heavy plan' shall not include a plan which consists
solely of--
``(i) a cash or deferred arrangement which meets the
requirements of section 401(k)(12), and
``(ii) matching contributions with respect to which the
requirements of section 401(m)(11) are met.
If, but for this subparagraph, a plan would be treated as a
top-heavy plan because it is a member of an aggregation group
which is a top-heavy group, contributions under the plan may
be taken into account in determining whether any other plan
in the group meets the requirements of subsection (c)(2).''.
(e) Frozen Plan Exempt From Minimum Benefit Requirement.--
Subparagraph (C) of section 416(c)(1) (relating to defined
benefit plans) is amended--
(A) by striking ``clause (ii)'' in clause (i) and inserting
``clause (ii) or (iii)'', and
(B) by adding at the end the following:
``(iii) Exception for frozen plan.--For purposes of
determining an employee's years of service with the employer,
any service with the employer shall be disregarded to the
extent that such service occurs during a plan year when the
plan benefits (within the meaning of section 410(b)) no
employee or former employee.''.
(f ) Elimination of Family Attribution.--Section
416(i)(1)(B) (defining 5-percent owner) is amended by adding
at the end the following new clause:
``(iv) Family attribution disregarded.--Solely for purposes
of applying this paragraph (and not for purposes of any
provision of this title which incorporates by reference the
definition of a key employee or 5-percent owner under this
paragraph), section 318 shall be applied without regard to
subsection (a)(1) thereof in determining whether any person
is a 5-percent owner.''.
(g) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2000.
SEC. 204. ELECTIVE DEFERRALS NOT TAKEN INTO ACCOUNT FOR
PURPOSES OF DEDUCTION LIMITS.
(a) In General.--Section 404 (relating to deduction for
contributions of an employer to an employees' trust or
annuity plan and compensation under a deferred payment plan)
is amended by adding at the end the following new subsection:
``(n) Elective Deferrals Not Taken Into Account for
Purposes of Deduction Limits.--Elective deferrals (as defined
in section 402(g)(3)) shall not be subject to any limitation
contained in paragraph (3), (7), or (9) of subsection (a),
and such elective deferrals shall not be taken into account
in applying any such limitation to any other
contributions.''.
(b) Effective Date.--The amendment made by this section
shall apply to years beginning after December 31, 2000.
SEC. 205. REPEAL OF COORDINATION REQUIREMENTS FOR DEFERRED
COMPENSATION PLANS OF STATE AND LOCAL
GOVERNMENTS AND TAX-EXEMPT ORGANIZATIONS.
(a) In General.--Subsection (c) of section 457 (relating to
deferred compensation plans of State and local governments
and tax-exempt organizations), as amended by section 211, is
amended to read as follows:
``(c) Limitation.--The maximum amount of the compensation
of any one individual which may be deferred under subsection
(a) during any taxable year shall not exceed the amount in
effect under subsection (b)(2)(A) (as modified by any
adjustment provided under subsection (b)(3)).''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to years beginning after December 31, 2000.
SEC. 206. ELIMINATION OF USER FEE FOR REQUESTS TO IRS
REGARDING PENSION PLANS.
(a) Elimination of Certain User Fees.--The Secretary of the
Treasury or the Secretary's delegate shall not require
payment of user fees under the program established under
section 7527 of the Internal Revenue Code of 1986 for
requests to the Internal Revenue Service for determination
letters with respect to the qualified status of a pension
benefit plan maintained solely by one or more eligible
employers or any trust which is part of the plan. The
preceding sentence shall not apply to any request--
(1) made after the 5th plan year the pension benefit plan
is in existence, or
(2) made by the sponsor of any prototype or similar plan
which the sponsor intends to market to participating
employers.
(b) Pension Benefit Plan.--For purposes of this section,
the term ``pension benefit plan'' means a pension, profit-
sharing, stock bonus, annuity, or employee stock ownership
plan.
(c) Eligible Employer.--For purposes of this section, the
term ``eligible employer'' has the same meaning given such
term in section 408(p)(2)(C)(i)(I) of the Internal Revenue
Code of 1986. The determination of whether an employer is an
eligible employer under this section shall be made as of the
date of the request described in subsection (a).
(d) Effective Date.--The provisions of this section shall
apply with respect to requests made after December 31, 2000.
SEC. 207. DEDUCTION LIMITS.
(a) In General.--Section 404(a) (relating to general rule)
is amended by adding at the end the following:
``(12) Definition of compensation.--For purposes of
paragraphs (3), (7), (8), and (9), the term `compensation'
shall include amounts treated as participant's compensation
under subparagraph (C) or (D) of section 415(c)(3).''.
(b) Conforming Amendment.--Subparagraph (B) of section
404(a)(3) is amended by striking the last sentence thereof.
(c) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2000.
SEC. 208. OPTION TO TREAT ELECTIVE DEFERRALS AS AFTER-TAX
CONTRIBUTIONS.
(a) In General.--Subpart A of part I of subchapter D of
chapter 1 (relating to deferred compensation, etc.) is
amended by inserting after section 402 the following new
section:
``SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFERRALS AS PLUS
CONTRIBUTIONS.
``(a) General Rule.--If an applicable retirement plan
includes a qualified plus contribution program--
``(1) any designated plus contribution made by an employee
pursuant to the program shall be treated as an elective
deferral for purposes of this chapter, except that such
contribution shall not be excludable from gross income, and
``(2) such plan (and any arrangement which is part of such
plan) shall not be treated as failing to meet any requirement
of this chapter solely by reason of including such program.
``(b) Qualified Plus Contribution Program.--For purposes of
this section--
``(1) In general.--The term `qualified plus contribution
program' means a program under which an employee may elect to
make designated plus contributions in lieu of all or a
portion of elective deferrals the employee is otherwise
eligible to make under the applicable retirement plan.
``(2) Separate accounting required.--A program shall not be
treated as a qualified
[[Page H826]]
plus contribution program unless the applicable retirement
plan--
``(A) establishes separate accounts (`designated plus
accounts') for the designated plus contributions of each
employee and any earnings properly allocable to the
contributions, and
``(B) maintains separate recordkeeping with respect to each
account.
``(c) Definitions and Rules Relating to Designated Plus
Contributions.--For purposes of this section--
``(1) Designated plus contribution.--The term `designated
plus contribution' means any elective deferral which--
``(A) is excludable from gross income of an employee
without regard to this section, and
``(B) the employee designates (at such time and in such
manner as the Secretary may prescribe) as not being so
excludable.
``(2) Designation limits.--The amount of elective deferrals
which an employee may designate under paragraph (1) shall not
exceed the excess (if any) of--
``(A) the maximum amount of elective deferrals excludable
from gross income of the employee for the taxable year
(without regard to this section), over
``(B) the aggregate amount of elective deferrals of the
employee for the taxable year which the employee does not
designate under paragraph (1).
``(3) Rollover contributions.--
``(A) In general.--A rollover contribution of any payment
or distribution from a designated plus account which is
otherwise allowable under this chapter may be made only if
the contribution is to--
``(i) another designated plus account of the individual
from whose account the payment or distribution was made, or
``(ii) a Roth IRA of such individual.
``(B) Coordination with limit.--Any rollover contribution
to a designated plus account under subparagraph (A) shall not
be taken into account for purposes of paragraph (1).
``(d) Distribution Rules.--For purposes of this title--
``(1) Exclusion.--Any qualified distribution from a
designated plus account shall not be includible in gross
income.
``(2) Qualified distribution.--For purposes of this
subsection--
``(A) In general.--The term `qualified distribution' has
the meaning given such term by section 408A(d)(2)(A) (without
regard to clause (iv) thereof).
``(B) Distributions within nonexclusion period.--A payment
or distribution from a designated plus account shall not be
treated as a qualified distribution if such payment or
distribution is made within the 5-taxable-year period
beginning with the earlier of--
``(i) the first taxable year for which the individual made
a designated plus contribution to any designated plus account
established for such individual under the same applicable
retirement plan, or
``(ii) if a rollover contribution was made to such
designated plus account from a designated plus account
previously established for such individual under another
applicable retirement plan, the first taxable year for which
the individual made a designated plus contribution to such
previously established account.
``(C) Distributions of excess deferrals and earnings.--The
term `qualified distribution' shall not include any
distribution of any excess deferral under section 402(g)(2)
and any income on the excess deferral.
``(3) Aggregation rules.--Section 72 shall be applied
separately with respect to distributions and payments from a
designated plus account and other distributions and payments
from the plan.
``(e) Other Definitions.--For purposes of this section--
``(1) Applicable retirement plan.--The term `applicable
retirement plan' means--
``(A) an employees' trust described in section 401(a) which
is exempt from tax under section 501(a), and
``(B) a plan under which amounts are contributed by an
individual's employer for an annuity contract described in
section 403(b).
``(2) Elective deferral.--The term `elective deferral'
means any elective deferral described in subparagraph (A) or
(C) of section 402(g)(3).''.
(b) Excess Deferrals.--Section 402(g) (relating to
limitation on exclusion for elective deferrals) is amended--
(1) by adding at the end of paragraph (1) the following new
sentence: ``The preceding sentence shall not apply to so much
of such excess as does not exceed the designated plus
contributions of the individual for the taxable year.'', and
(2) by inserting ``(or would be included but for the last
sentence thereof)'' after ``paragraph (1)'' in paragraph
(2)(A).
(c) Rollovers.--Subparagraph (B) of section 402(c)(8) is
amended by adding at the end the following:
``If any portion of an eligible rollover distribution is
attributable to payments or distributions from a designated
plus account (as defined in section 402A), an eligible
retirement plan with respect to such portion shall include
only another designated plus account and a Roth IRA.''.
(d) Reporting Requirements.--
(1) W-2 information.--Section 6051(a)(8) is amended by
inserting ``, including the amount of designated plus
contributions (as defined in section 402A)'' before the comma
at the end.
(2) Information.--Section 6047 is amended by redesignating
subsection (f ) as subsection (g) and by inserting after
subsection (e) the following new subsection:
``(f ) Designated Plus Contributions.--The Secretary shall
require the plan administrator of each applicable retirement
plan (as defined in section 402A) to make such returns and
reports regarding designated plus contributions (as so
defined) to the Secretary, participants and beneficiaries of
the plan, and such other persons as the Secretary may
prescribe.''.
(e) Conforming Amendments.--
(1) Section 408A(e) is amended by adding after the first
sentence the following new sentence: ``Such term includes a
rollover contribution described in section 402A(c)(3)(A).''.
(2) The table of sections for subpart A of part I of
subchapter D of chapter 1 is amended by inserting after the
item relating to section 402 the following new item:
``Sec. 402A. Optional treatment of elective deferrals as plus
contributions.''.
(f ) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2000.
Subtitle B--Enhancing Fairness for Women
SEC. 221. CATCHUP CONTRIBUTIONS FOR INDIVIDUALS AGE 50 OR
OVER.
(a) In General.--Section 414 (relating to definitions and
special rules) is amended by adding at the end the following
new subsection:
``(v) Catchup Contributions for Individuals Age 50 or
Over.--
``(1) In general.--An applicable employer plan shall not be
treated as failing to meet any requirement of this title
solely because the plan permits an eligible participant to
make additional elective deferrals in any plan year.
``(2) Limitation on amount of additional deferrals.--
``(A) In general.--A plan shall not permit additional
elective deferrals under paragraph (1) for any year in an
amount greater than the lesser of--
``(i) the applicable percentage of the applicable dollar
amount for such elective deferrals for such year, or
``(ii) the excess (if any) of--
``(I) the participant's compensation for the year, over
``(II) any other elective deferrals of the participant for
such year which are made without regard to this subsection.
``(B) Applicable percentage.--For purposes of this
paragraph, the applicable percentage shall be determined in
accordance with the following table:
``For taxable years beginning in: The applicable percentage is:
2001...............................................................10
2002...............................................................20
2003...............................................................30
2004 and thereafter................................................40
``(3) Treatment of contributions.--In the case of any
contribution to a plan under paragraph (1)--
``(A) such contribution shall not, with respect to the year
in which the contribution is made--
``(i) be subject to any otherwise applicable limitation
contained in section 402(g), 402(h), 403(b), 404(a), 404(h),
408, 415, or 457, or
``(ii) be taken into account in applying such limitations
to other contributions or benefits under such plan or any
other such plan, and
``(B) such plan shall not be treated as failing to meet the
requirements of section 401(a)(4), 401(a)(26), 401(k)(3),
401(k)(11), 401(k)(12), 401(m), 403(b)(12), 408(k), 408(p),
408B, 410(b), or 416 by reason of the making of (or the right
to make) such contribution.
``(4) Eligible participant.--For purposes of this
subsection, the term `eligible participant' means, with
respect to any plan year, a participant in a plan--
``(A) who has attained the age of 50 before the close of
the plan year, and
``(B) with respect to whom no other elective deferrals may
(without regard to this subsection) be made to the plan for
the plan year by reason of the application of any limitation
or other restriction described in paragraph (3) or contained
in the terms of the plan.
``(5) Other definitions and rules.--For purposes of this
subsection--
``(A) Applicable dollar amount.--The term `applicable
dollar amount' means, with respect to any year, the amount in
effect under section 402(g)(1)(B), 408(p)(2)(E)(i), or
457(e)(15)(A), whichever is applicable to an applicable
employer plan, for such year.
``(B) Applicable employer plan.--The term `applicable
employer plan' means--
``(i) an employees' trust described in section 401(a) which
is exempt from tax under section 501(a),
``(ii) a plan under which amounts are contributed by an
individual's employer for an annuity contract described in
section 403(b),
``(iii) an eligible deferred compensation plan under
section 457 of an eligible employer as defined in section
457(e)(1)(A), and
``(iv) an arrangement meeting the requirements of section
408 (k) or (p).
``(C) Elective deferral.--The term `elective deferral' has
the meaning given such term by subsection (u)(2)(C).
``(D) Exception for section 457 plans.--This subsection
shall not apply to an applicable employer plan described in
subparagraph (B)(iii) for any year to which section 457(b)(3)
applies.''.
(b) Effective Date.--The amendment made by this section
shall apply to contributions in taxable years beginning after
December 31, 2000.
[[Page H827]]
SEC. 222. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF EMPLOYEES
TO DEFINED CONTRIBUTION PLANS.
(a) Equitable Treatment.--
(1) In general.--Subparagraph (B) of section 415(c)(1)
(relating to limitation for defined contribution plans) is
amended by striking ``25 percent'' and inserting ``100
percent''.
(2) Application to section 403(b).--Section 403(b) is
amended--
(A) by striking ``the exclusion allowance for such taxable
year'' in paragraph (1) and inserting ``the applicable limit
under section 415'',
(B) by striking paragraph (2), and
(C) by inserting ``or any amount received by a former
employee after the 5th taxable year following the taxable
year in which such employee was terminated'' before the
period at the end of the second sentence of paragraph (3).
(3) Conforming amendments.--
(A) Subsection (f ) of section 72 is amended by striking
``section 403(b)(2)(D)(iii))'' and inserting ``section
403(b)(2)(D)(iii), as in effect before the enactment of the
Small Business Tax Fairness Act of 2000)''.
(B) Section 404(a)(10)(B) is amended by striking ``, the
exclusion allowance under section 403(b)(2),''.
(C) Section 415(a)(2) is amended by striking ``, and the
amount of the contribution for such portion shall reduce the
exclusion allowance as provided in section 403(b)(2)''.
(D) Section 415(c)(3) is amended by adding at the end the
following new subparagraph:
``(E) Annuity contracts.--In the case of an annuity
contract described in section 403(b), the term `participant's
compensation' means the participant's includible compensation
determined under section 403(b)(3).''.
(E) Section 415(c) is amended by striking paragraph (4).
(F) Section 415(c)(7) is amended to read as follows:
``(7) Certain contributions by church plans not treated as
exceeding limit.--
``(A) In general.--Notwithstanding any other provision of
this subsection, at the election of a participant who is an
employee of a church or a convention or association of
churches, including an organization described in section
414(e)(3)(B)(ii), contributions and other additions for an
annuity contract or retirement income account described in
section 403(b) with respect to such participant, when
expressed as an annual addition to such participant's
account, shall be treated as not exceeding the limitation of
paragraph (1) if such annual addition is not in excess of
$10,000.
``(B) $40,000 aggregate limitation.--The total amount of
additions with respect to any participant which may be taken
into account for purposes of this subparagraph for all years
may not exceed $40,000.
``(C) Annual addition.--For purposes of this paragraph, the
term `annual addition' has the meaning given such term by
paragraph (2).''.
(G) Subparagraph (B) of section 402(g)(7) (as redesignated
by section 211) is amended by inserting before the period at
the end the following: ``(as in effect before the enactment
of the Small Business Tax Fairness Act of 2000)''.
(3) Effective date.--The amendments made by this subsection
shall apply to years beginning after December 31, 2000.
(b) Special Rules for Sections 403(b) and 408.--
(1) In general.--Subsection (k) of section 415 is amended
by adding at the end the following new paragraph:
``(4) Special rules for sections 403(b) and 408.--For
purposes of this section, any annuity contract described in
section 403(b) for the benefit of a participant shall be
treated as a defined contribution plan maintained by each
employer with respect to which the participant has the
control required under subsection (b) or (c) of section 414
(as modified by subsection (h)). For purposes of this
section, any contribution by an employer to a simplified
employee pension plan for an individual for a taxable year
shall be treated as an employer contribution to a defined
contribution plan for such individual for such year.''.
(2) Effective date.--
(A) In general.--The amendment made by paragraph (1) shall
apply to limitation years beginning after December 31, 1999.
(B) Exclusion allowance.--Effective for limitation years
beginning in 2000, in the case of any annuity contract
described in section 403(b) of the Internal Revenue Code of
1986, the amount of the contribution disqualified by reason
of section 415(g) of such Code shall reduce the exclusion
allowance as provided in section 403(b)(2) of such Code.
(3) Modification of 403(b) exclusion allowance to conform
to 415 modification.--The Secretary of the Treasury shall
modify the regulations regarding the exclusion allowance
under section 403(b)(2) of the Internal Revenue Code of 1986
to render void the requirement that contributions to a
defined benefit pension plan be treated as previously
excluded amounts for purposes of the exclusion allowance. For
taxable years beginning after December 31, 1999, such
regulations shall be applied as if such requirement were
void.
(c) Deferred Compensation Plans of State and Local
Governments and Tax-Exempt Organizations.--
(1) In general.--Subparagraph (B) of section 457(b)(2)
(relating to salary limitation on eligible deferred
compensation plans) is amended by striking ``33\1/3\
percent'' and inserting ``100 percent''.
(2) Effective date.--The amendment made by this subsection
shall apply to years beginning after December 31, 2000.
SEC. 223. FASTER VESTING OF CERTAIN EMPLOYER MATCHING
CONTRIBUTIONS.
(a) Amendments to 1986 Code.--Section 411(a) (relating to
minimum vesting standards) is amended--
(1) in paragraph (2), by striking ``A plan'' and inserting
``Except as provided in paragraph (12), a plan'', and
(2) by adding at the end the following:
``(12) Faster vesting for matching contributions.--In the
case of matching contributions (as defined in section
401(m)(4)(A)), paragraph (2) shall be applied--
``(A) by substituting `3 years' for `5 years' in
subparagraph (A), and
``(B) by substituting the following table for the table
contained in subparagraph (B):
The nonforfeitable
``Years of service: percentage is:
2.............................................................20 ....
3.............................................................40 ....
4.............................................................60 ....
5.............................................................80 ....
6.........................................................100.''.....
(b) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to contributions
for plan years beginning after December 31, 2000.
(2) Collective bargaining agreements.--In the case of a
plan maintained pursuant to one or more collective bargaining
agreements between employee representatives and one or more
employers ratified by the date of the enactment of this Act,
the amendments made by this section shall not apply to
contributions on behalf of employees covered by any such
agreement for plan years beginning before the earlier of--
(A) the later of--
(i) the date on which the last of such collective
bargaining agreements terminates (determined without regard
to any extension thereof on or after such date of the
enactment), or
(ii) January 1, 2001, or
(B) January 1, 2005.
(3) Service required.--With respect to any plan, the
amendments made by this section shall not apply to any
employee before the date that such employee has 1 hour of
service under such plan in any plan year to which the
amendments made by this section apply.
SEC. 224. SIMPLIFY AND UPDATE THE MINIMUM DISTRIBUTION RULES.
(a) Simplification and Finalization of Minimum Distribution
Requirements.--
(1) In general.--The Secretary of the Treasury shall--
(A) simplify and finalize the regulations relating to
minimum distribution requirements under sections 401(a)(9),
408(a)(6) and (b)(3), 403(b)(10), and 457(d)(2) of the
Internal Revenue Code of 1986, and
(B) modify such regulations to--
(i) reflect current life expectancy, and
(ii) revise the required distribution methods so that,
under reasonable assumptions, the amount of the required
minimum distribution does not decrease over a participant's
life expectancy.
(2) Fresh start.--Notwithstanding subparagraph (D) of
section 401(a)(9) of such Code, during the first year that
regulations are in effect under this subsection, required
distributions for future years may be redetermined to reflect
changes under such regulations. Such redetermination shall
include the opportunity to choose a new designated
beneficiary and to elect a new method of calculating life
expectancy.
(3) Effective date for regulations.--Regulations referred
to in paragraph (1) shall be effective for years beginning
after December 31, 2000, and shall apply in such years
without regard to whether an individual had previously begun
receiving minimum distributions.
(b) Repeal of Rule Where Distributions Had Begun Before
Death Occurs.--
(1) In general.--Subparagraph (B) of section 401(a)(9) is
amended by striking clause (i) and redesignating clauses
(ii), (iii), and (iv) as clauses (i), (ii), and (iii),
respectively.
(2) Conforming changes.--
(A) Clause (i) of section 401(a)(9)(B) (as so redesignated)
is amended--
(i) by striking ``for other cases'' in the heading, and
(ii) by striking ``the distribution of the employee's
interest has begun in accordance with subparagraph (A)(ii)''
and inserting ``his entire interest has been distributed to
him,''.
(B) Clause (ii) of section 401(a)(9)(B) (as so
redesignated) is amended by striking ``clause (ii)'' and
inserting ``clause (i)''.
(C) Clause (iii) of section 401(a)(9)(B) (as so
redesignated) is amended--
(i) by striking ``clause (iii)(I)'' and inserting ``clause
(ii)(I)'',
(ii) by striking ``clause (iii)(III)'' in subclause (I) and
inserting ``clause (ii)(III)'',
(iii) by striking ``the date on which the employee would
have attained the age 70\1/2\,'' in subclause (I) and
inserting ``April 1 of the calendar year following the
calendar year in which the spouse attains 70\1/2\,'', and
(iv) by striking ``the distributions to such spouse
begin,'' in subclause (II) and inserting ``his entire
interest has been distributed to him,''.
(3) Effective date.--The amendments made by this subsection
shall apply to years beginning after December 31, 2000.
[[Page H828]]
(c) Reduction in Excise Tax.--
(1) In general.--Subsection (a) of section 4974 is amended
by striking ``50 percent'' and inserting ``10 percent''.
(2) Effective date.--The amendment made by this subsection
shall apply to years beginning after December 31, 2000.
SEC. 225. CLARIFICATION OF TAX TREATMENT OF DIVISION OF
SECTION 457 PLAN BENEFITS UPON DIVORCE.
(a) In General.--Section 414(p)(11) (relating to
application of rules to governmental and church plans) is
amended--
(1) by inserting ``or an eligible deferred compensation
plan (within the meaning of section 457(b))'' after
``subsection (e))'', and
(2) in the heading, by striking ``governmental and church
plans'' and inserting ``certain other plans''.
(b) Waiver of Certain Distribution Requirements.--Paragraph
(10) of section 414(p) is amended by striking ``and section
409(d)'' and inserting ``section 409(d), and section
457(d)''.
(c) Tax Treatment of Payments From a Section 457 Plan.--
Subsection (p) of section 414 is amended by redesignating
paragraph (12) as paragraph (13) and inserting after
paragraph (11) the following new paragraph:
``(12) Tax treatment of payments from a section 457 plan.--
If a distribution or payment from an eligible deferred
compensation plan described in section 457(b) is made
pursuant to a qualified domestic relations order, rules
similar to the rules of section 402(e)(1)(A) shall apply to
such distribution or payment.''.
(d) Effective Date.--The amendments made by this section
shall apply to transfers, distributions, and payments made
after December 31, 2000.
SEC. 226. MODIFICATION OF SAFE HARBOR RELIEF FOR HARDSHIP
WITHDRAWALS FROM CASH OR DEFERRED ARRANGEMENTS.
(a) In General.--The Secretary of the Treasury shall revise
the regulations relating to hardship distributions under
section 401(k)(2)(B)(i)(IV) of the Internal Revenue Code of
1986 to provide that the period an employee is prohibited
from making elective and employee contributions in order for
a distribution to be deemed necessary to satisfy financial
need shall be equal to 6 months.
(b) Effective Date.--The revised regulations under
subsection (a) shall apply to years beginning after December
31, 2000.
Subtitle C--Increasing Portability for Participants
SEC. 231. ROLLOVERS ALLOWED AMONG VARIOUS TYPES OF PLANS.
(a) Rollovers From and to Section 457 Plans.--
(1) Rollovers from section 457 plans.--
(A) In general.--Section 457(e) (relating to other
definitions and special rules) is amended by adding at the
end the following:
``(16) Rollover amounts.--
``(A) General rule.--In the case of an eligible deferred
compensation plan established and maintained by an employer
described in subsection (e)(1)(A), if--
``(i) any portion of the balance to the credit of an
employee in such plan is paid to such employee in an eligible
rollover distribution (within the meaning of section
402(c)(4) without regard to subparagraph (C) thereof),
``(ii) the employee transfers any portion of the property
such employee receives in such distribution to an eligible
retirement plan described in section 402(c)(8)(B), and
``(iii) in the case of a distribution of property other
than money, the amount so transferred consists of the
property distributed,
then such distribution (to the extent so transferred) shall
not be includible in gross income for the taxable year in
which paid.
``(B) Certain rules made applicable.--The rules of
paragraphs (2) through (7) (other than paragraph (4)(C)) and
(9) of section 402(c) and section 402(f ) shall apply for
purposes of subparagraph (A).
``(C) Reporting.--Rollovers under this paragraph shall be
reported to the Secretary in the same manner as rollovers
from qualified retirement plans (as defined in section
4974(c)).''.
(B) Deferral limit determined without regard to rollover
amounts.--Section 457(b)(2) (defining eligible deferred
compensation plan) is amended by inserting ``(other than
rollover amounts)'' after ``taxable year''.
(C) Direct rollover.--Paragraph (1) of section 457(d) is
amended by striking ``and'' at the end of subparagraph (A),
by striking the period at the end of subparagraph (B) and
inserting ``, and'', and by inserting after subparagraph (B)
the following:
``(C) in the case of a plan maintained by an employer
described in subsection (e)(1)(A), the plan meets
requirements similar to the requirements of section
401(a)(31).
Any amount transferred in a direct trustee-to-trustee
transfer in accordance with section 401(a)(31) shall not be
includible in gross income for the taxable year of
transfer.''.
(D) Withholding.--
(i) Paragraph (12) of section 3401(a) is amended by adding
at the end the following:
``(E) under or to an eligible deferred compensation plan
which, at the time of such payment, is a plan described in
section 457(b) maintained by an employer described in section
457(e)(1)(A); or''.
(ii) Paragraph (3) of section 3405(c) is amended to read as
follows:
``(3) Eligible rollover distribution.--For purposes of this
subsection, the term `eligible rollover distribution' has the
meaning given such term by section 402(f )(2)(A).''.
(iii) Liability for withholding.--Subparagraph (B) of
section 3405(d)(2) is amended by striking ``or'' at the end
of clause (ii), by striking the period at the end of clause
(iii) and inserting ``, or'', and by adding at the end the
following:
``(iv) section 457(b).''.
(2) Rollovers to section 457 plans.--
(A) In general.--Section 402(c)(8)(B) (defining eligible
retirement plan) is amended by striking ``and'' at the end of
clause (iii), by striking the period at the end of clause
(iv) and inserting ``, and'', and by inserting after clause
(iv) the following new clause:
``(v) an eligible deferred compensation plan described in
section 457(b) of an employer described in section
457(e)(1)(A).''.
(B) Separate accounting.--Section 402(c) is amended by
adding at the end the following new paragraph:
``(11) Separate accounting.--Unless a plan described in
clause (v) of paragraph (8)(B) agrees to separately account
for amounts rolled into such plan from eligible retirement
plans not described in such clause, the plan described in
such clause may not accept transfers or rollovers from such
retirement plans.''.
(C) 10 percent additional tax.--Subsection (t) of section
72 (relating to 10-percent additional tax on early
distributions from qualified retirement plans) is amended by
adding at the end the following new paragraph:
``(9) Special rule for rollovers to section 457 plans.--For
purposes of this subsection, a distribution from an eligible
deferred compensation plan (as defined in section 457(b)) of
an employer described in section 457(e)(1)(A) shall be
treated as a distribution from a qualified retirement plan
described in 4974(c)(1) to the extent that such distribution
is attributable to an amount transferred to an eligible
deferred compensation plan from a qualified retirement plan
(as defined in section 4974(c)).''.
(b) Allowance of Rollovers From and to 403 (b) Plans.--
(1) Rollovers from section 403 (b) plans.--Section
403(b)(8)(A)(ii) (relating to rollover amounts) is amended by
striking ``such distribution'' and all that follows and
inserting ``such distribution to an eligible retirement plan
described in section 402(c)(8)(B), and''.
(2) Rollovers to section 403 (b) plans.--Section
402(c)(8)(B) (defining eligible retirement plan), as amended
by subsection (a), is amended by striking ``and'' at the end
of clause (iv), by striking the period at the end of clause
(v) and inserting ``, and'', and by inserting after clause
(v) the following new clause:
``(vi) an annuity contract described in section 403(b).''.
(c) Expanded Explanation to Recipients of Rollover
Distributions.--Paragraph (1) of section 402(f ) (relating to
written explanation to recipients of distributions eligible
for rollover treatment) is amended by striking ``and'' at the
end of subparagraph (C), by striking the period at the end of
subparagraph (D) and inserting ``, and'', and by adding at
the end the following new subparagraph:
``(E) of the provisions under which distributions from the
eligible retirement plan receiving the distribution may be
subject to restrictions and tax consequences which are
different from those applicable to distributions from the
plan making such distribution.''.
(d) Spousal Rollovers.--Section 402(c)(9) (relating to
rollover where spouse receives distribution after death of
employee) is amended by striking ``; except that'' and all
that follows up to the end period.
(e) Conforming Amendments.--
(1) Section 72(o)(4) is amended by striking ``and
408(d)(3)'' and inserting ``403(b)(8), 408(d)(3), and
457(e)(16)''.
(2) Section 219(d)(2) is amended by striking ``or
408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
(3) Section 401(a)(31)(B) is amended by striking ``and
403(a)(4)'' and inserting ``, 403(a)(4), 403(b)(8), and
457(e)(16)''.
(4) Subparagraph (A) of section 402(f )(2) is amended by
striking ``or paragraph (4) of section 403(a)'' and inserting
``, paragraph (4) of section 403(a), subparagraph (A) of
section 403(b)(8), or subparagraph (A) of section
457(e)(16)''.
(5) Paragraph (1) of section 402(f ) is amended by striking
``from an eligible retirement plan''.
(6) Subparagraphs (A) and (B) of section 402(f )(1) are
amended by striking ``another eligible retirement plan'' and
inserting ``an eligible retirement plan''.
(7) Subparagraph (B) of section 403(b)(8) is amended to
read as follows:
``(B) Certain rules made applicable.--The rules of
paragraphs (2) through (7) and (9) of section 402(c) and
section 402(f ) shall apply for purposes of subparagraph (A),
except that section 402(f ) shall be applied to the payor in
lieu of the plan administrator.''.
(8) Section 408(a)(1) is amended by striking ``or
403(b)(8)'' and inserting ``, 403(b)(8), or 457(e)(16)''.
(9) Subparagraphs (A) and (B) of section 415(b)(2) are each
amended by striking ``and 408(d)(3)'' and inserting
``403(b)(8), 408(d)(3), and 457(e)(16)''.
(10) Section 415(c)(2) is amended by striking ``and
408(d)(3)'' and inserting ``408(d)(3), and 457(e)(16)''.
(11) Section 4973(b)(1)(A) is amended by striking ``or
408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
(f ) Effective Date; Special Rule.--
[[Page H829]]
(1) Effective date.--The amendments made by this section
shall apply to distributions after December 31, 2000.
(2) Special rule.--Notwithstanding any other provision of
law, subsections (h)(3) and (h)(5) of section 1122 of the Tax
Reform Act of 1986 shall not apply to any distribution from
an eligible retirement plan (as defined in clause (iii) or
(iv) of section 402(c)(8)(B) of the Internal Revenue Code of
1986) on behalf of an individual if there was a rollover to
such plan on behalf of such individual which is permitted
solely by reason of any amendment made by this section.
SEC. 232. ROLLOVERS OF IRAS INTO WORKPLACE RETIREMENT PLANS.
(a) In General.--Subparagraph (A) of section 408(d)(3)
(relating to rollover amounts) is amended by adding ``or'' at
the end of clause (i), by striking clauses (ii) and (iii),
and by adding at the end the following:
``(ii) the entire amount received (including money and any
other property) is paid into an eligible retirement plan for
the benefit of such individual not later than the 60th day
after the date on which the payment or distribution is
received, except that the maximum amount which may be paid
into such plan may not exceed the portion of the amount
received which is includible in gross income (determined
without regard to this paragraph).
For purposes of clause (ii), the term `eligible retirement
plan' means an eligible retirement plan described in clause
(iii), (iv), (v), or (vi) of section 402(c)(8)(B).''.
(b) Conforming Amendments.--
(1) Paragraph (1) of section 403(b) is amended by striking
``section 408(d)(3)(A)(iii)'' and inserting ``section
408(d)(3)(A)(ii)''.
(2) Clause (i) of section 408(d)(3)(D) is amended by
striking ``(i), (ii), or (iii)'' and inserting ``(i) or
(ii)''.
(3) Subparagraph (G) of section 408(d)(3) is amended to
read as follows:
``(G) Simple retirement accounts.--In the case of any
payment or distribution out of a simple retirement account
(as defined in subsection (p)) to which section 72(t)(6)
applies, this paragraph shall not apply unless such payment
or distribution is paid into another simple retirement
account.''.
(c) Effective Date; Special Rule.--
(1) Effective date.--The amendments made by this section
shall apply to distributions after December 31, 2000.
(2) Special rule.--Notwithstanding any other provision of
law, subsections (h)(3) and (h)(5) of section 1122 of the Tax
Reform Act of 1986 shall not apply to any distribution from
an eligible retirement plan (as defined in clause (iii) or
(iv) of section 402(c)(8)(B) of the Internal Revenue Code of
1986) on behalf of an individual if there was a rollover to
such plan on behalf of such individual which is permitted
solely by reason of the amendments made by this section.
SEC. 233. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.
(a) Rollovers From Exempt Trusts.--Paragraph (2) of section
402(c) (relating to maximum amount which may be rolled over)
is amended by adding at the end the following: ``The
preceding sentence shall not apply to such distribution to
the extent--
``(A) such portion is transferred in a direct trustee-to-
trustee transfer to a qualified trust which is part of a plan
which is a defined contribution plan and which agrees to
separately account for amounts so transferred, including
separately accounting for the portion of such distribution
which is includible in gross income and the portion of such
distribution which is not so includible, or
``(B) such portion is transferred to an eligible retirement
plan described in clause (i) or (ii) of paragraph (8)(B).''.
(b) Optional Direct Transfer of Eligible Rollover
Distributions.--Subparagraph (B) of section 401(a)(31)
(relating to limitation) is amended by adding at the end the
following: ``The preceding sentence shall not apply to such
distribution if the plan to which such distribution is
transferred--
``(i) agrees to separately account for amounts so
transferred, including separately accounting for the portion
of such distribution which is includible in gross income and
the portion of such distribution which is not so includible,
or
``(ii) is an eligible retirement plan described in clause
(i) or (ii) of section 402(c)(8)(B).''.
(c) Rules for Applying Section 72 to IRAs.--Paragraph (3)
of section 408(d) (relating to special rules for applying
section 72) is amended by inserting at the end the following:
``(H) Application of section 72.--
``(i) In general.--If--
``(I) a distribution is made from an individual retirement
plan, and
``(II) a rollover contribution is made to an eligible
retirement plan described in section 402(c)(8)(B)(iii), (iv),
(v), or (vi) with respect to all or part of such
distribution,
then, notwithstanding paragraph (2), the rules of clause (ii)
shall apply for purposes of applying section 72.
``(ii) Applicable rules.--In the case of a distribution
described in clause (i)--
``(I) section 72 shall be applied separately to such
distribution,
``(II) notwithstanding the pro rata allocation of income
on, and investment in, the contract to distributions under
section 72, the portion of such distribution rolled over to
an eligible retirement plan described in clause (i) shall be
treated as from income on the contract (to the extent of the
aggregate income on the contract from all individual
retirement plans of the distributee), and
``(III) appropriate adjustments shall be made in applying
section 72 to other distributions in such taxable year and
subsequent taxable years.''.
(d) Effective Date.--The amendments made by this section
shall apply to distributions made after December 31, 2000.
SEC. 234. HARDSHIP EXCEPTION TO 60-DAY RULE.
(a) Exempt Trusts.--Paragraph (3) of section 402(c)
(relating to transfer must be made within 60 days of receipt)
is amended to read as follows:
``(3) Transfer must be made within 60 days of receipt.--
``(A) In general.--Except as provided in subparagraph (B),
paragraph (1) shall not apply to any transfer of a
distribution made after the 60th day following the day on
which the distributee received the property distributed.
``(B) Hardship exception.--The Secretary may waive the 60-
day requirement under subparagraph (A) where the failure to
waive such requirement would be against equity or good
conscience, including casualty, disaster, or other events
beyond the reasonable control of the individual subject to
such requirement.''.
(b) IRAs.--Paragraph (3) of section 408(d) (relating to
rollover contributions), as amended by section 233, is
amended by adding after subparagraph (H) the following new
subparagraph:
``(I) Waiver of 60-day requirement.--The Secretary may
waive the 60-day requirement under subparagraphs (A) and (D)
where the failure to waive such requirement would be against
equity or good conscience, including casualty, disaster, or
other events beyond the reasonable control of the individual
subject to such requirement.''.
(c) Effective Date.--The amendments made by this section
shall apply to distributions after December 31, 2000.
SEC. 235. TREATMENT OF FORMS OF DISTRIBUTION.
(a) Plan Transfers.--
(1) Amendment to internal revenue code of 1986.--Paragraph
(6) of section 411(d) (relating to accrued benefit not to be
decreased by amendment) is amended by adding at the end the
following:
``(D) Plan transfers.--
``(i) A defined contribution plan (in this subparagraph
referred to as the `transferee plan') shall not be treated as
failing to meet the requirements of this subsection merely
because the transferee plan does not provide some or all of
the forms of distribution previously available under another
defined contribution plan (in this subparagraph referred to
as the `transferor plan') to the extent that--
``(I) the forms of distribution previously available under
the transferor plan applied to the account of a participant
or beneficiary under the transferor plan that was transferred
from the transferor plan to the transferee plan pursuant to a
direct transfer rather than pursuant to a distribution from
the transferor plan,
``(II) the terms of both the transferor plan and the
transferee plan authorize the transfer described in subclause
(I),
``(III) the transfer described in subclause (I) was made
pursuant to a voluntary election by the participant or
beneficiary whose account was transferred to the transferee
plan,
``(IV) the election described in subclause (III) was made
after the participant or beneficiary received a notice
describing the consequences of making the election,
``(V) if the transferor plan provides for an annuity as the
normal form of distribution under the plan in accordance with
section 417, the transfer is made with the consent of the
participant's spouse (if any), and such consent meets
requirements similar to the requirements imposed by section
417(a)(2), and
``(VI) the transferee plan allows the participant or
beneficiary described in clause (iii) to receive any
distribution to which the participant or beneficiary is
entitled under the transferee plan in the form of a single
sum distribution.
``(ii) Clause (i) shall apply to plan mergers and other
transactions having the effect of a direct transfer,
including consolidations of benefits attributable to
different employers within a multiple employer plan.
``(E) Elimination of form of distribution.--Except to the
extent provided in regulations, a defined contribution plan
shall not be treated as failing to meet the requirements of
this section merely because of the elimination of a form of
distribution previously available thereunder. This
subparagraph shall not apply to the elimination of a form of
distribution with respect to any participant unless--
``(i) a single sum payment is available to such participant
at the same time or times as the form of distribution being
eliminated, and
``(ii) such single sum payment is based on the same or
greater portion of the participant's account as the form of
distribution being eliminated.''.
(2) Effective date.--The amendment made by this subsection
shall apply to years beginning after December 31, 2000.
(b) Regulations.--
(1) Amendment to internal revenue code of 1986.--The last
sentence of paragraph (6)(B) of section 411(d) (relating to
accrued benefit not to be decreased by amendment) is amended
to read as follows: ``The Secretary
[[Page H830]]
shall by regulations provide that this subparagraph shall not
apply to any plan amendment that does not adversely affect
the rights of participants in a material manner.''.
(2) Secretary directed.--Not later than December 31, 2001,
the Secretary of the Treasury is directed to issue final
regulations under section 411(d)(6) of the Internal Revenue
Code of 1986, including the regulations required by the
amendments made by this subsection. Such regulations shall
apply to plan years beginning after December 31, 2001, or
such earlier date as is specified by the Secretary of the
Treasury.
SEC. 236. RATIONALIZATION OF RESTRICTIONS ON DISTRIBUTIONS.
(a) Modification of Same Desk Exception.--
(1) Section 401(k).--
(A) Section 401(k)(2)(B)(i)(I) (relating to qualified cash
or deferred arrangements) is amended by striking ``separation
from service'' and inserting ``severance from employment''.
(B) Subparagraph (A) of section 401(k)(10) (relating to
distributions upon termination of plan or disposition of
assets or subsidiary) is amended to read as follows:
``(A) In general.--An event described in this subparagraph
is the termination of the plan without establishment or
maintenance of another defined contribution plan (other than
an employee stock ownership plan as defined in section
4975(e)(7)).''.
(C) Section 401(k)(10) is amended--
(i) in subparagraph (B)--
(I) by striking ``An event'' in clause (i) and inserting
``A termination'', and
(II) by striking ``the event'' in clause (i) and inserting
``the termination'',
(ii) by striking subparagraph (C), and
(iii) by striking ``or disposition of assets or
subsidiary'' in the heading.
(2) Section 403(b).--
(A) Paragraphs (7)(A)(ii) and (11)(A) of section 403(b) are
each amended by striking ``separates from service'' and
inserting ``has a severance from employment''.
(B) The heading for paragraph (11) of section 403(b) is
amended by striking ``separation from service'' and inserting
``severance from employment''.
(3) Section 457.--Clause (ii) of section 457(d)(1)(A) is
amended by striking ``is separated from service'' and
inserting ``has a severance from employment''.
(b) Effective Date.--The amendments made by this section
shall apply to distributions after December 31, 2000.
SEC. 237. PURCHASE OF SERVICE CREDIT IN GOVERNMENTAL DEFINED
BENEFIT PLANS.
(a) 403(b) Plans.--Subsection (b) of section 403 is amended
by adding at the end the following new paragraph:
``(13) Trustee-to-trustee transfers to purchase permissive
service credit.--No amount shall be includible in gross
income by reason of a direct trustee-to-trustee transfer to a
defined benefit governmental plan (as defined in section
414(d)) if such transfer is--
``(A) for the purchase of permissive service credit (as
defined in section 415(n)(3)(A)) under such plan, or
``(B) a repayment to which section 415 does not apply by
reason of subsection (k)(3) thereof.''.
(b) 457 Plans.--
(1) Subsection (e) of section 457 is amended by adding
after paragraph (16) the following new paragraph:
``(17) Trustee-to-trustee transfers to purchase permissive
service credit.--No amount shall be includible in gross
income by reason of a direct trustee-to-trustee transfer to a
defined benefit governmental plan (as defined in section
414(d)) if such transfer is--
``(A) for the purchase of permissive service credit (as
defined in section 415(n)(3)(A)) under such plan, or
``(B) a repayment to which section 415 does not apply by
reason of subsection (k)(3) thereof.''.
(2) Section 457(b)(2) is amended by striking ``(other than
rollover amounts)'' and inserting ``(other than rollover
amounts and amounts received in a transfer referred to in
subsection (e)(17))''.
(c) Effective Date.--The amendments made by this section
shall apply to trustee-to-trustee transfers after December
31, 2000.
SEC. 238. EMPLOYERS MAY DISREGARD ROLLOVERS FOR PURPOSES OF
CASH-OUT AMOUNTS.
(a) Qualified Plans.--Section 411(a)(11) (relating to
restrictions on certain mandatory distributions) is amended
by adding at the end the following:
``(D) Special rule for rollover contributions.--A plan
shall not fail to meet the requirements of this paragraph if,
under the terms of the plan, the present value of the
nonforfeitable accrued benefit is determined without regard
to that portion of such benefit which is attributable to
rollover contributions (and earnings allocable thereto). For
purposes of this subparagraph, the term `rollover
contributions' means any rollover contribution under sections
402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and
457(e)(16).''.
(b) Eligible Deferred Compensation Plans.--Clause (i) of
section 457(e)(9)(A) is amended by striking ``such amount''
and inserting ``the portion of such amount which is not
attributable to rollover contributions (as defined in section
411(a)(11)(D))''.
(c) Effective Date.--The amendments made by this section
shall apply to distributions after December 31, 2000.
SEC. 239. MINIMUM DISTRIBUTION AND INCLUSION REQUIREMENTS FOR
SECTION 457 PLANS.
(a) Minimum Distribution Requirements.--Paragraph (2) of
section 457(d) (relating to distribution requirements) is
amended to read as follows:
``(2) Minimum distribution requirements.--A plan meets the
minimum distribution requirements of this paragraph if such
plan meets the requirements of section 401(a)(9).''.
(b) Inclusion in Gross Income.--
(1) Year of inclusion.--Subsection (a) of section 457
(relating to year of inclusion in gross income) is amended to
read as follows:
``(a) Year of Inclusion in Gross Income.--
``(1) In general.--Any amount of compensation deferred
under an eligible deferred compensation plan, and any income
attributable to the amounts so deferred, shall be includible
in gross income only for the taxable year in which such
compensation or other income--
``(A) is paid to the participant or other beneficiary, in
the case of a plan of an eligible employer described in
subsection (e)(1)(A), and
``(B) is paid or otherwise made available to the
participant or other beneficiary, in the case of a plan of an
eligible employer described in subsection (e)(1)(B).
``(2) Special rule for rollover amounts.--To the extent
provided in section 72(t)(9), section 72(t) shall apply to
any amount includible in gross income under this
subsection.''.
(2) Conforming amendments.--
(A) So much of paragraph (9) of section 457(e) as precedes
subparagraph (A) is amended to read as follows:
``(9) Benefits of tax exempt organization plans not treated
as made available by reason of certain elections, etc.--In
the case of an eligible deferred compensation plan of an
employer described in subsection (e)(1)(B)--''.
(B) Section 457(d) is amended by adding at the end the
following new paragraph:
``(3) Special rule for government plan.--An eligible
deferred compensation plan of an employer described in
subsection (e)(1)(A) shall not be treated as failing to meet
the requirements of this subsection solely by reason of
making a distribution described in subsection (e)(9)(A).''.
(c) Effective Date.--The amendments made by this section
shall apply to distributions after December 31, 2000.
Subtitle D--Strengthening Pension Security and Enforcement
SEC. 241. REPEAL OF 150 PERCENT OF CURRENT LIABILITY FUNDING
LIMIT.
(a) Amendment to Internal Revenue Code of 1986.--Section
412(c)(7) (relating to full-funding limitation) is amended--
(1) by striking ``the applicable percentage'' in
subparagraph (A)(i)(I) and inserting ``in the case of plan
years beginning before January 1, 2004, the applicable
percentage'', and
(2) by amending subparagraph (F) to read as follows:
``(F) Applicable percentage.--For purposes of subparagraph
(A)(i)(I), the applicable percentage shall be determined in
accordance with the following table:
``In the case of any plan year beginning The applicable percentage is--
2001............................................................160
2002............................................................165
2003........................................................170.''.
(b) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2000.
SEC. 242. MAXIMUM CONTRIBUTION DEDUCTION RULES MODIFIED AND
APPLIED TO ALL DEFINED BENEFIT PLANS.
(a) In General.--Subparagraph (D) of section 404(a)(1)
(relating to special rule in case of certain plans) is
amended to read as follows:
``(D) Special rule in case of certain plans.--
``(i) In general.--In the case of any defined benefit plan,
except as provided in regulations, the maximum amount
deductible under the limitations of this paragraph shall not
be less than the unfunded termination liability (determined
as if the proposed termination date referred to in section
4041(b)(2)(A)(i)(II) of the Employee Retirement Income
Security Act of 1974 were the last day of the plan year).
``(ii) Plans with less than 100 participants.--For purposes
of this subparagraph, in the case of a plan which has less
than 100 participants for the plan year, termination
liability shall not include the liability attributable to
benefit increases for highly compensated employees (as
defined in section 414(q)) resulting from a plan amendment
which is made or becomes effective, whichever is later,
within the last 2 years before the termination date.
``(iii) Rule for determining number of participants.--For
purposes of determining whether a plan has more than 100
participants, all defined benefit plans maintained by the
same employer (or any member of such employer's controlled
group (within the meaning of section 412(l)(8)(C))) shall be
treated as one plan, but only employees of such member or
employer shall be taken into account.
``(iv) Plans established and maintain by professional
service employers.--Clause (i) shall not apply to a plan
described in section 4021(b)(13) of the Employee Retirement
Income Security Act of 1974.''.
[[Page H831]]
(b) Conforming Amendment.--Paragraph (6) of section 4972(c)
is amended to read as follows:
``(6) Exceptions.--In determining the amount of
nondeductible contributions for any taxable year, there shall
not be taken into account so much of the contributions to one
or more defined contribution plans which are not deductible
when contributed solely because of section 404(a)(7) as does
not exceed the greater of--
``(A) the amount of contributions not in excess of 6
percent of compensation (within the meaning of section
404(a)) paid or accrued (during the taxable year for which
the contributions were made) to beneficiaries under the
plans, or
``(B) the sum of--
``(i) the amount of contributions described in section
401(m)(4)(A), plus
``(ii) the amount of contributions described in section
402(g)(3)(A).
For purposes of this paragraph, the deductible limits under
section 404(a)(7) shall first be applied to amounts
contributed to a defined benefit plan and then to amounts
described in subparagraph (B).''.
(c) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2000.
SEC. 243. EXCISE TAX RELIEF FOR SOUND PENSION FUNDING.
(a) In General.--Subsection (c) of section 4972 (relating
to nondeductible contributions) is amended by adding at the
end the following new paragraph:
``(7) Defined benefit plan exception.--In determining the
amount of nondeductible contributions for any taxable year,
an employer may elect for such year not to take into account
any contributions to a defined benefit plan except to the
extent that such contributions exceed the full-funding
limitation (as defined in section 412(c)(7), determined
without regard to subparagraph (A)(i)(I) thereof). For
purposes of this paragraph, the deductible limits under
section 404(a)(7) shall first be applied to amounts
contributed to defined contribution plans and then to amounts
described in this paragraph. If an employer makes an election
under this paragraph for a taxable year, paragraph (6) shall
not apply to such employer for such taxable year.''.
(b) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2000.
SEC. 244. EXCISE TAX ON FAILURE TO PROVIDE NOTICE BY DEFINED
BENEFIT PLANS SIGNIFICANTLY REDUCING FUTURE
BENEFIT ACCRUALS.
(a) Amendment to 1986 Code.--Chapter 43 (relating to
qualified pension, etc., plans) is amended by adding at the
end the following new section:
``SEC. 4980F. FAILURE OF APPLICABLE PLANS REDUCING BENEFIT
ACCRUALS TO SATISFY NOTICE REQUIREMENTS.
``(a) Imposition of Tax.--There is hereby imposed a tax on
the failure of any applicable pension plan to meet the
requirements of subsection (e) with respect to any applicable
individual.
``(b) Amount of Tax.--
``(1) In general.--The amount of the tax imposed by
subsection (a) on any failure with respect to any applicable
individual shall be $100 for each day in the noncompliance
period with respect to such failure.
``(2) Noncompliance period.--For purposes of this section,
the term `noncompliance period' means, with respect to any
failure, the period beginning on the date the failure first
occurs and ending on the date the failure is corrected.
``(c) Limitations on Amount of Tax.--
``(1) Overall limitation for unintentional failures.--In
the case of failures that are due to reasonable cause and not
to willful neglect, the tax imposed by subsection (a) for
failures during the taxable year of the employer (or, in the
case of a multiemployer plan, the taxable year of the trust
forming part of the plan) shall not exceed $500,000. For
purposes of the preceding sentence, all multiemployer plans
of which the same trust forms a part shall be treated as one
plan. For purposes of this paragraph, if not all persons who
are treated as a single employer for purposes of this section
have the same taxable year, the taxable years taken into
account shall be determined under principles similar to the
principles of section 1561.
``(2) Waiver by secretary.--In the case of a failure which
is due to reasonable cause and not to willful neglect, the
Secretary may waive part or all of the tax imposed by
subsection (a) to the extent that the payment of such tax
would be excessive relative to the failure involved.
``(d) Liability for Tax.--The following shall be liable for
the tax imposed by subsection (a):
``(1) In the case of a plan other than a multiemployer
plan, the employer.
``(2) In the case of a multiemployer plan, the plan.
``(e) Notice Requirements for Plans Significantly Reducing
Benefit Accruals.--
``(1) In general.--If an applicable pension plan is amended
to provide for a significant reduction in the rate of future
benefit accrual, the plan administrator shall provide written
notice to each applicable individual (and to each employee
organization representing applicable individuals).
``(2) Notice.--The notice required by paragraph (1) shall
be written in a manner calculated to be understood by the
average plan participant and shall provide sufficient
information (as determined in accordance with regulations
prescribed by the Secretary) to allow applicable individuals
to understand the effect of the plan amendment.
``(3) Timing of notice.--Except as provided in regulations,
the notice required by paragraph (1) shall be provided within
a reasonable time before the effective date of the plan
amendment.
``(4) Designees.--Any notice under paragraph (1) may be
provided to a person designated, in writing, by the person to
which it would otherwise be provided.
``(5) Notice before adoption of amendment.--A plan shall
not be treated as failing to meet the requirements of
paragraph (1) merely because notice is provided before the
adoption of the plan amendment if no material modification of
the amendment occurs before the amendment is adopted.
``(f ) Applicable Individual; Applicable Pension Plan.--For
purposes of this section--
``(1) Applicable individual.--The term `applicable
individual' means, with respect to any plan amendment--
``(A) any participant in the plan, and
``(B) any beneficiary who is an alternate payee (within the
meaning of section 414(p)(8)) under an applicable qualified
domestic relations order (within the meaning of section
414(p)(1)(A)),
who may reasonably be expected to be affected by such plan
amendment.
``(2) Applicable pension plan.--The term `applicable
pension plan' means--
``(A) any defined benefit plan, or
``(B) an individual account plan which is subject to the
funding standards of section 412,
which had 100 or more participants who had accrued a benefit,
or with respect to whom contributions were made, under the
plan (whether or not vested) as of the last day of the plan
year preceding the plan year in which the plan amendment
becomes effective. Such term shall not include a governmental
plan (within the meaning of section 414(d)) or a church plan
(within the meaning of section 414(e)) with respect to which
the election provided by section 410(d) has not been made.''.
(b) Clerical Amendment.--The table of sections for chapter
43 is amended by adding at the end the following new item:
``Sec. 4980F. Failure of applicable plans reducing benefit accruals to
satisfy notice requirements.''.
(c) Effective Dates.--
(1) In general.--The amendments made by this section shall
apply to plan amendments taking effect on or after the date
of the enactment of this Act.
(2) Transition.--Until such time as the Secretary of the
Treasury issues regulations under sections 4980F(e)(2) and
(3) of the Internal Revenue Code of 1986 (as added by the
amendments made by this section), a plan shall be treated as
meeting the requirements of such sections if it makes a good
faith effort to comply with such requirements.
(3) Special rule.--The period for providing any notice
required by the amendments made by this section shall not end
before the date which is 3 months after the date of the
enactment of this Act.
SEC. 245. TREATMENT OF MULTIEMPLOYER PLANS UNDER SECTION 415.
(a) Compensation Limit.--Paragraph (11) of section 415(b)
(relating to limitation for defined benefit plans) is amended
to read as follows:
``(11) Special limitation rule for governmental and
multiemployer plans.--In the case of a governmental plan (as
defined in section 414(d)) or a multiemployer plan (as
defined in section 414(f )), subparagraph (B) of paragraph
(1) shall not apply.''.
(b) Effective Date.--The amendment made by this section
shall apply to years beginning after December 31, 2000.
Subtitle E--Reducing Regulatory Burdens
SEC. 261. MODIFICATION OF TIMING OF PLAN VALUATIONS.
(a) Amendments to 1986 Code.--Section 412(c)(9) (relating
to annual valuation) is amended--
(1) by striking ``For purposes'' and inserting the
following:
``(A) In general.--For purposes'', and
(2) by adding at the end the following:
``(B) Election to use prior year valuation.--
``(i) In general.--Except as provided in clause (ii), if,
for any plan year--
``(I) an election is in effect under this subparagraph with
respect to a plan, and
``(II) the assets of the plan are not less than 125 percent
of the plan's current liability (as defined in paragraph
(7)(B)), determined as of the valuation date for the
preceding plan year,
then this section shall be applied using the information
available as of such valuation date.
``(ii) Exceptions.--
``(I) Actual valuation every 3 years.--Clause (i) shall not
apply for more than 2 consecutive plan years and valuation
shall be under subparagraph (A) with respect to any plan year
to which clause (i) does not apply by reason of this
subclause.
``(II) Regulations.--Clause (i) shall not apply to the
extent that more frequent valuations are required under the
regulations under subparagraph (A).
``(iii) Adjustments.--Information under clause (i) shall,
in accordance with regulations, be actuarially adjusted to
reflect significant differences in participants.
[[Page H832]]
``(iv) Election.--An election under this subparagraph, once
made, shall be irrevocable without the consent of the
Secretary.''.
(b) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2000.
SEC. 262. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT LOSS OF
DIVIDEND DEDUCTION.
(a) In General.--Section 404(k)(2)(A) (defining applicable
dividends) is amended by striking ``or'' at the end of clause
(ii), by redesignating clause (iii) as clause (iv), and by
inserting after clause (ii) the following new clause:
``(iii) is, at the election of such participants or their
beneficiaries--
``(I) payable as provided in clause (i) or (ii), or
``(II) paid to the plan and reinvested in qualifying
employer securities, or''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2000.
SEC. 263. REPEAL OF TRANSITION RULE RELATING TO CERTAIN
HIGHLY COMPENSATED EMPLOYEES.
(a) In General.--Paragraph (4) of section 1114(c) of the
Tax Reform Act of 1986 is hereby repealed.
(b) Effective Date.--The repeal made by subsection (a)
shall apply to plan years beginning after December 31, 2000.
SEC. 264. EMPLOYEES OF TAX-EXEMPT ENTITIES.
(a) In General.--The Secretary of the Treasury shall modify
Treasury Regulations section 1.410(b)-6(g) to provide that
employees of an organization described in section
403(b)(1)(A)(i) of the Internal Revenue Code of 1986 who are
eligible to make contributions under section 403(b) of such
Code pursuant to a salary reduction agreement may be treated
as excludable with respect to a plan under section 401 (k) or
(m) of such Code that is provided under the same general
arrangement as a plan under such section 401(k), if--
(1) no employee of an organization described in section
403(b)(1)(A)(i) of such Code is eligible to participate in
such section 401(k) plan or section 401(m) plan, and
(2) 95 percent of the employees who are not employees of an
organization described in section 403(b)(1)(A)(i) of such
Code are eligible to participate in such plan under such
section 401 (k) or (m).
(b) Effective Date.--The modification required by
subsection (a) shall apply as of the same date set forth in
section 1426(b) of the Small Business Job Protection Act of
1996.
SEC. 265. CLARIFICATION OF TREATMENT OF EMPLOYER-PROVIDED
RETIREMENT ADVICE.
(a) In General.--Subsection (a) of section 132 (relating to
exclusion from gross income) is amended by striking ``or'' at
the end of paragraph (5), by striking the period at the end
of paragraph (6) and inserting ``, or'', and by adding at the
end the following new paragraph:
``(7) qualified retirement planning services.''.
(b) Qualified Retirement Planning Services Defined.--
Section 132 is amended by redesignating subsection (m) as
subsection (n) and by inserting after subsection (l) the
following:
``(m) Qualified Retirement Planning Services.--
``(1) In general.--For purposes of this section, the term
`qualified retirement planning services' means any retirement
planning service provided to an employee and his spouse by an
employer maintaining a qualified employer plan.
``(2) Nondiscrimination rule.--Subsection (a)(7) shall
apply in the case of highly compensated employees only if
such services are available on substantially the same terms
to each member of the group of employees normally provided
education and information regarding the employer's qualified
employer plan.
``(3) Qualified employer plan.--For purposes of this
subsection, the term `qualified employer plan' means a plan,
contract, pension, or account described in section
219(g)(5).''.
(c) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2000.
SEC. 266. REPORTING SIMPLIFICATION.
(a) Simplified Annual Filing Requirement for Owners and
Their Spouses.--
(1) In general.--The Secretary of the Treasury shall modify
the requirements for filing annual returns with respect to
one-participant retirement plans to ensure that such plans
with assets of $250,000 or less as of the close of the plan
year need not file a return for that year.
(2) One-participant retirement plan defined.--For purposes
of this subsection, the term ``one-participant retirement
plan'' means a retirement plan that--
(A) on the first day of the plan year--
(i) covered only the employer (and the employer's spouse)
and the employer owned the entire business (whether or not
incorporated), or
(ii) covered only one or more partners (and their spouses)
in a business partnership (including partners in an S or C
corporation),
(B) meets the minimum coverage requirements of section
410(b) of the Internal Revenue Code of 1986 without being
combined with any other plan of the business that covers the
employees of the business,
(C) does not provide benefits to anyone except the employer
(and the employer's spouse) or the partners (and their
spouses),
(D) does not cover a business that is a member of an
affiliated service group, a controlled group of corporations,
or a group of businesses under common control, and
(E) does not cover a business that leases employees.
(3) Other definitions.--Terms used in paragraph (2) which
are also used in section 414 of the Internal Revenue Code of
1986 shall have the respective meanings given such terms by
such section.
(b) Simplified Annual Filing Requirement for Plans With
Fewer Than 25 Employees.--In the case of a retirement plan
which covers less than 25 employees on the first day of the
plan year and meets the requirements described in
subparagraphs (B), (D), and (E) of subsection (a)(2), the
Secretary of the Treasury shall provide for the filing of a
simplified annual return that is substantially similar to the
annual return required to be filed by a one-participant
retirement plan.
(c) Effective Date.--The provisions of this section shall
take effect on January 1, 2001.
SEC. 267. IMPROVEMENT OF EMPLOYEE PLANS COMPLIANCE RESOLUTION
SYSTEM.
The Secretary of the Treasury shall continue to update and
improve the Employee Plans Compliance Resolution System (or
any successor program) giving special attention to--
(1) increasing the awareness and knowledge of small
employers concerning the availability and use of the program,
(2) taking into account special concerns and circumstances
that small employers face with respect to compliance and
correction of compliance failures,
(3) extending the duration of the self-correction period
under the Administrative Policy Regarding Self-Correction for
significant compliance failures,
(4) expanding the availability to correct insignificant
compliance failures under the Administrative Policy Regarding
Self-Correction during audit, and
(5) assuring that any tax, penalty, or sanction that is
imposed by reason of a compliance failure is not excessive
and bears a reasonable relationship to the nature, extent,
and severity of the failure.
SEC. 268. MODIFICATION OF EXCLUSION FOR EMPLOYER PROVIDED
TRANSIT PASSES.
(a) In General.--Section 132(f )(3) (relating to cash
reimbursements) is amended by striking the last sentence.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2000.
SEC. 269. REPEAL OF THE MULTIPLE USE TEST.
(a) In General.--Paragraph (9) of section 401(m) is amended
to read as follows:
``(9) Regulations.--The Secretary shall prescribe such
regulations as may be necessary to carry out the purposes of
this subsection and subsection (k), including regulations
permitting appropriate aggregation of plans and
contributions.''.
(b) Effective Date.--The amendment made by this section
shall apply to years beginning after December 31, 2000.
SEC. 270. FLEXIBILITY IN NONDISCRIMINATION, COVERAGE, AND
LINE OF BUSINESS RULES.
(a) Nondiscrimination.--
(1) In general.--The Secretary of the Treasury shall, by
regulation, provide that a plan shall be deemed to satisfy
the requirements of section 401(a)(4) of the Internal Revenue
Code of 1986 if such plan satisfies the facts and
circumstances test under section 401(a)(4) of such Code, as
in effect before January 1, 1994, but only if--
(A) the plan satisfies conditions prescribed by the
Secretary to appropriately limit the availability of such
test, and
(B) the plan is submitted to the Secretary for a
determination of whether it satisfies such test.
Subparagraph (B) shall only apply to the extent provided by
the Secretary.
(2) Effective dates.--
(A) Regulations.--The regulation required by paragraph (1)
shall apply to years beginning after December 31, 2000.
(B) Conditions of availability.--Any condition of
availability prescribed by the Secretary under paragraph
(1)(A) shall not apply before the first year beginning not
less than 120 days after the date on which such condition is
prescribed.
(b) Coverage Test.--
(1) In general.--Section 410(b)(1) (relating to minimum
coverage requirements) is amended by adding at the end the
following:
``(D) In the case that the plan fails to meet the
requirements of subparagraphs (A), (B) and (C), the plan--
``(i) satisfies subparagraph (B), as in effect immediately
before the enactment of the Tax Reform Act of 1986,
``(ii) is submitted to the Secretary for a determination of
whether it satisfies the requirement described in clause (i),
and
``(iii) satisfies conditions prescribed by the Secretary by
regulation that appropriately limit the availability of this
subparagraph.
Clause (ii) shall apply only to the extent provided by the
Secretary.''.
(2) Effective dates.--
(A) In general.--The amendment made by paragraph (1) shall
apply to years beginning after December 31, 2000.
(B) Conditions of availability.--Any condition of
availability prescribed by the Secretary under regulations
prescribed by the Secretary under section 410(b)(1)(D) of the
Internal Revenue Code of 1986 shall not apply
[[Page H833]]
before the first year beginning not less than 120 days after
the date on which such condition is prescribed.
(c) Line of Business Rules.--The Secretary of the Treasury
shall, on or before December 31, 2000, modify the existing
regulations issued under section 414(r) of the Internal
Revenue Code of 1986 in order to expand (to the extent that
the Secretary determines appropriate) the ability of a
pension plan to demonstrate compliance with the line of
business requirements based upon the facts and circumstances
surrounding the design and operation of the plan, even though
the plan is unable to satisfy the mechanical tests currently
used to determine compliance.
SEC. 271. EXTENSION TO INTERNATIONAL ORGANIZATIONS OF
MORATORIUM ON APPLICATION OF CERTAIN
NONDISCRIMINATION RULES APPLICABLE TO STATE AND
LOCAL PLANS.
(a) In General.--Subparagraph (G) of section 401(a)(5),
subparagraph (H) of section 401(a)(26), subparagraph (G) of
section 401(k)(3), and paragraph (2) of section 1505(d) of
the Taxpayer Relief Act of 1997 are each amended by inserting
``or by an international organization which is described in
section 414(d)'' after ``or instrumentality thereof)''.
(b) Conforming Amendments.--
(1) The headings for subparagraph (G) of section 401(a)(5)
and subparagraph (H) of section 401(a)(26) are each amended
by inserting ``and international organization'' after
``governmental''.
(2) Subparagraph (G) of section 401(k)(3) is amended by
inserting ``State and local governmental and international
organization plans.--'' after ``(G)''.
(c) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2000.
SEC. 272. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.
(a) Expansion of Period.--
(1) Amendment to 1986 code.--Subparagraph (A) of section
417(a)(6) is amended by striking ``90-day'' and inserting
``180-day''.
(2) Modification of regulations.--The Secretary of the
Treasury shall modify the regulations under sections 402(f),
411(a)(11), and 417 of the Internal Revenue Code of 1986 to
substitute ``180 days'' for ``90 days'' each place it appears
in Treasury Regulations sections 1.402(f)-1, 1.411(a)-11(c),
and 1.417(e)-1(b).
(3) Effective date.--The amendment made by paragraph (1)
and the modifications required by paragraph (2) shall apply
to years beginning after December 31, 2000.
(b) Consent Regulation Inapplicable to Certain
Distributions.--
(1) In general.--The Secretary of the Treasury shall modify
the regulations under section 411(a)(11) of the Internal
Revenue Code of 1986 to provide that the description of a
participant's right, if any, to defer receipt of a
distribution shall also describe the consequences of failing
to defer such receipt.
(2) Effective date.--The modifications required by
paragraph (1) shall apply to years beginning after December
31, 2000.
Subtitle F--Plan Amendments
SEC. 281. PROVISIONS RELATING TO PLAN AMENDMENTS.
(a) In General.--If this section applies to any plan or
contract amendment--
(1) such plan or contract shall be treated as being
operated in accordance with the terms of the plan during the
period described in subsection (b)(2)(A), and
(2) such plan shall not fail to meet the requirements of
section 411(d)(6) of the Internal Revenue Code of 1986 by
reason of such amendment.
(b) Amendments to Which Section Applies.--
(1) In general.--This section shall apply to any amendment
to any plan or annuity contract which is made--
(A) pursuant to any amendment made by this title, or
pursuant to any regulation issued under this title, and
(B) on or before the last day of the first plan year
beginning on or after January 1, 2003.
In the case of a governmental plan (as defined in section
414(d) of the Internal Revenue Code of 1986), this paragraph
shall be applied by substituting ``2005'' for ``2003''.
(2) Conditions.--This section shall not apply to any
amendment unless--
(A) during the period--
(i) beginning on the date the legislative or regulatory
amendment described in paragraph (1)(A) takes effect (or in
the case of a plan or contract amendment not required by such
legislative or regulatory amendment, the effective date
specified by the plan), and
(ii) ending on the date described in paragraph (1)(B) (or,
if earlier, the date the plan or contract amendment is
adopted),
the plan or contract is operated as if such plan or contract
amendment were in effect, and
(B) such plan or contract amendment applies retroactively
for such period.
TITLE III--ESTATE TAX RELIEF
Subtitle A--Reductions of Estate and Gift Tax Rates
SEC. 301. REDUCTIONS OF ESTATE AND GIFT TAX RATES.
(a) Maximum Rate of Tax Reduced to 50 Percent.--
(1) In general.--The table contained in section 2001(c)(1)
is amended by striking the two highest brackets and inserting
the following:
$1,025,800, plus 50% of the excess over $2,500,000.''..................
(2) Phase-in of reduced rate.--Subsection (c) of section
2001 is amended by adding at the end the following new
paragraph:
``(3) Phase-in of reduced rate.--In the case of decedents
dying, and gifts made, during 2001, the last item in the
table contained in paragraph (1) shall be applied by
substituting `53%' for `50%'.''.
(b) Repeal of Phaseout of Graduated Rates.--Subsection (c)
of section 2001 is amended by striking paragraph (2) and
redesignating paragraph (3), as added by subsection (a), as
paragraph (2).
(c) Additional Reductions of Rates of Tax.--Subsection (c)
of section 2001, as so amended, is amended by adding at the
end the following new paragraph:
``(3) Phasedown of tax.--In the case of estates of
decedents dying, and gifts made, during any calendar year
after 2002--
``(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:
2003.........................................................1.0
2004.........................................................2.0.
``(C) Table for years after 2004.--The table applicable
under this subsection to estates of decedents dying, and
gifts made, during calendar year 2004 shall apply to estates
of decedents dying, and gifts made, after calendar year 2004.
``(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, 2002.
SEC. 302. SENSE OF THE CONGRESS CONCERNING REPEAL OF THE
DEATH TAX.
(a) Findings.--Congress finds the following:
(1) The death tax stifles economic growth by taking
productive resources out of the private sector, thereby
causing unemployment and inhibiting job creation.
(2) The death tax penalizes hard work and entrepreneurial
activity by causing the demise of small, family-owned
businesses when an owner dies.
(3) The death tax rates in the United States are the second
highest among all industrialized nations.
(4) The death tax prevents minorities from gaining an
economic foothold in the economy since it limits the inter-
generational transfer of wealth, which is critical to
establishing a legacy and power base for minorities in our
society.
(5) The death tax presents serious challenges for farmers
whose value is in their land, not liquid assets, and who must
sell land to pay the tax, thereby jeopardizing the future
existence of the already-struggling family farm.
(6) The death tax contributes to the development of rural
areas by causing farms and ranches to be sold and subdivided.
(7) Previous attempts by Congress to create death tax
exemptions have been ineffective due to an inability to
legislatively duplicate the complex family relationships that
exist in our society.
(8) Increasing entrepreneurship and investment in
retirement will bring a whole new class of people under the
death tax.
(b) Sense of Congress.--It is the sense of Congress that
the death tax relief in this Act is considered a first step
in our effort to ultimately repeal this onerous tax.
Subtitle B--Unified Credit Replaced With Unified Exemption Amount
SEC. 311. UNIFIED CREDIT AGAINST ESTATE AND GIFT TAXES
REPLACED WITH UNIFIED EXEMPTION AMOUNT.
(a) In General.--
(1) Estate tax.--Subsection (b) of section 2001 (relating
to computation of tax) is amended to read as follows:
``(b) Computation of Tax.--
``(1) In general.--The tax imposed by this section shall be
the amount equal to the excess (if any) of--
``(A) the tentative tax determined under paragraph (2),
over
``(B) the aggregate amount of tax which would have been
payable under chapter 12 with respect to gifts made by the
decedent after December 31, 1976, if the provisions of
subsection (c) (as in effect at the decedent's death) had
been applicable at the time of such gifts.
``(2) Tentative tax.--For purposes of paragraph (1), the
tentative tax determined under
[[Page H834]]
this paragraph is a tax computed under subsection (c) on the
excess of--
``(A) the sum of--
``(i) the amount of the taxable estate, and
``(ii) the amount of the adjusted taxable gifts, over
``(B) the exemption amount for the calendar year in which
the decedent died.
``(3) Exemption amount.--For purposes of paragraph (2), the
term `exemption amount' means the amount determined in
accordance with the following table:
``In the case of The exemption
calendar year: amount is:
2001........................................................$675,000
2002 and 2003...............................................$700,000
2004........................................................$850,000
2005........................................................$950,000
2006 or thereafter........................................$1,000,000.
``(4) Adjusted taxable gifts.--For purposes of paragraph
(2), the term `adjusted taxable gifts' means the total amount
of the taxable gifts (within the meaning of section 2503)
made by the decedent after December 31, 1976, other than
gifts which are includible in the gross estate of the
decedent.''
(2) Gift tax.--Subsection (a) of section 2502 (relating to
computation of tax) is amended to read as follows:
``(a) Computation of Tax.--
``(1) In general.--The tax imposed by section 2501 for each
calendar year shall be the amount equal to the excess (if
any) of--
``(A) the tentative tax determined under paragraph (2),
over
``(B) the tax paid under this section for all prior
calendar periods.
``(2) Tentative tax.--For purposes of paragraph (1), the
tentative tax determined under this paragraph for a calendar
year is a tax computed under section 2001(c) on the excess
of--
``(A) the aggregate sum of the taxable gifts for such
calendar year and for each of the preceding calendar periods,
over
``(B) the exemption amount under section 2001(b)(3) for
such calendar year.''
(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) Subsection (b) of section 2011 is amended--
(i) by striking ``adjusted'' in the table, and
(ii) by striking the last sentence.
(B) Subsection (f ) of section 2011 is amended by striking
``, reduced by the amount of the unified credit provided by
section 2010''.
(2) Subsection (a) of section 2012 is amended by striking
``and the unified credit provided by section 2010''.
(3) Subparagraph (A) of section 2013(c)(1) is amended by
striking ``2010,''.
(4) Paragraph (2) of section 2014(b) is amended by striking
``2010,''.
(5) 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 the Small Business Tax Fairness Act of 2000) or
the exemption amount allowable under section 2001(b) with
respect to the decedent as a credit under section 2505 (as so
in effect) or exemption under section 2521 (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,''.
(6) Subsection (a) of section 2057 is amended by striking
paragraphs (2) and (3) and inserting the following new
paragraph:
``(2) Maximum deduction.--The deduction allowed by this
section shall not exceed the excess of $1,300,000 over the
exemption amount (as defined in section 2001(b)(3)).''
(7)(A) Subsection (b) of section 2101 is amended amended to
read as follows:
``(b) Computation of Tax.--
``(1) In general.--The tax imposed by this section shall be
the amount equal to the excess (if any) of--
``(A) the tentative tax determined under paragraph (2),
over
``(B) a tentative tax computed under section 2001(c) on the
amount of the adjusted taxable gifts.
``(2) Tentative tax.--For purposes of paragraph (1), the
tentative tax determined under this paragraph is a tax
computed under section 2001(c) on the excess of--
``(A) the sum of--
``(i) the amount of the taxable estate, and
``(ii) the amount of the adjusted taxable gifts, over
``(B) the exemption amount for the calendar year in which
the decedent died.
``(3) Exemption amount.--
``(A) In general.--The term `exemption amount' means
$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 amount under this paragraph shall be the greater
of--
``(i) $60,000, or
``(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 amount allowed under this paragraph shall be equal
to the amount which bears the same ratio to the exemption
amount under section 2001(b)(3) (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 the Small
Business Tax Fairness Act of 2000) 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).''.
(8) Section 2102 is amended by striking subsection (c).
(9)(A) Subsection (a) of section 2107 is amended by adding
at the end the following new paragraph:
``(3) Limitation on exemption amount.--Subparagraphs (B)
and (C) of section 2101(b)(3) shall not apply in applying
section 2101 for purposes of this section.''.
(B) Subsection (c) of section 2107 is amended--
(i) by striking paragraph (1) and by redesignating
paragraphs (2) and (3) as paragraphs (1) and (2),
respectively, and
(ii) by striking the second sentence of paragraph (2) (as
so redesignated).
(10) Paragraph (1) of section 6018(a) is amended by
striking ``the applicable exclusion amount in effect under
section 2010(c)'' and inserting ``the exemption amount under
section 2001(b)(3)''.
(11) Subparagraph (A) of section 6601( j)(2) is amended to
read as follows:
``(A) the amount of the tentative tax which would be
determined under the rate schedule set forth in section
2001(c) if the amount with respect to which such tentative
tax is to be computed were $1,000,000, or''.
(12) The table of sections for part II of subchapter A of
chapter 11 is amended by striking the item relating to
section 2010.
(20) The table of sections for subchapter A of chapter 12
is amended by striking the item relating to section 2505.
(13) The table of sections for subchapter C of chapter 12
is amended by inserting before the item relating to section
2522 the following new item:
``Sec. 2521. Exemption.''.
(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.
Subtitle C--Modifications of Generation-skipping Transfer Tax
SEC. 321. DEEMED ALLOCATION OF GST EXEMPTION TO LIFETIME
TRANSFERS TO TRUSTS; RETROACTIVE ALLOCATIONS.
(a) In General.--Section 2632 (relating to special rules
for allocation of GST exemption) is amended by redesignating
subsection (c) as subsection (e) and by inserting after
subsection (b) the following new subsections:
``(c) Deemed Allocation to Certain Lifetime Transfers to
GST Trusts.--
``(1) In general.--If any individual makes an indirect skip
during such individual's lifetime, any unused portion of such
individual's GST exemption shall be allocated to the property
transferred to the extent necessary to make the inclusion
ratio for such property zero. If the amount of the indirect
skip exceeds such unused portion, the entire unused portion
shall be allocated to the property transferred.
``(2) Unused portion.--For purposes of paragraph (1), the
unused portion of an individual's GST exemption is that
portion of such exemption which has not previously been--
``(A) allocated by such individual,
``(B) treated as allocated under subsection (b) with
respect to a direct skip occurring during or before the
calendar year in which the indirect skip is made, or
``(C) treated as allocated under paragraph (1) with respect
to a prior indirect skip.
``(3) Definitions.--
``(A) Indirect skip.--For purposes of this subsection, the
term `indirect skip' means any transfer of property (other
than a direct skip) subject to the tax imposed by chapter 12
made to a GST trust.
``(B) GST trust.--The term `GST trust' means a trust that
could have a generation-skipping transfer with respect to the
transferor unless--
``(i) the trust instrument provides that more than 25
percent of the trust corpus must be distributed to or may be
withdrawn by 1 or more individuals who are non-skip persons--
``(I) before the date that the individual attains age 46,
``(II) on or before one or more dates specified in the
trust instrument that will occur
[[Page H835]]
before the date that such individual attains age 46, or
``(III) upon the occurrence of an event that, in accordance
with regulations prescribed by the Secretary, may reasonably
be expected to occur before the date that such individual
attains age 46;
``(ii) the trust instrument provides that more than 25
percent of the trust corpus must be distributed to or may be
withdrawn by one or more individuals who are non-skip persons
and who are living on the date of death of another person
identified in the instrument (by name or by class) who is
more than 10 years older than such individuals;
``(iii) the trust instrument provides that, if one or more
individuals who are non-skip persons die on or before a date
or event described in clause (i) or (ii), more than 25
percent of the trust corpus either must be distributed to the
estate or estates of one or more of such individuals or is
subject to a general power of appointment exercisable by one
or more of such individuals;
``(iv) the trust is a trust any portion of which would be
included in the gross estate of a non-skip person (other than
the transferor) if such person died immediately after the
transfer;
``(v) the trust is a charitable lead annuity trust (within
the meaning of section 2642(e)(3)(A)) or a charitable
remainder annuity trust or a charitable remainder unitrust
(within the meaning of section 664(d)); or
``(vi) the trust is a trust with respect to which a
deduction was allowed under section 2522 for the amount of an
interest in the form of the right to receive annual payments
of a fixed percentage of the net fair market value of the
trust property (determined yearly) and which is required to
pay principal to a non-skip person if such person is alive
when the yearly payments for which the deduction was allowed
terminate.
For purposes of this subparagraph, the value of transferred
property shall not be considered to be includible in the
gross estate of a non-skip person or subject to a right of
withdrawal by reason of such person holding a right to
withdraw so much of such property as does not exceed the
amount referred to in section 2503(b) with respect to any
transferor, and it shall be assumed that powers of
appointment held by non-skip persons will not be exercised.
``(4) Automatic allocations to certain gst trusts.--For
purposes of this subsection, an indirect skip to which
section 2642(f ) applies shall be deemed to have been made
only at the close of the estate tax inclusion period. The
fair market value of such transfer shall be the fair market
value of the trust property at the close of the estate tax
inclusion period.
``(5) Applicability and effect.--
``(A) In general.--An individual--
``(i) may elect to have this subsection not apply to--
``(I) an indirect skip, or
``(II) any or all transfers made by such individual to a
particular trust, and
``(ii) may elect to treat any trust as a GST trust for
purposes of this subsection with respect to any or all
transfers made by such individual to such trust.
``(B) Elections.--
``(i) Elections with respect to indirect skips.--An
election under subparagraph (A)(i)(I) shall be deemed to be
timely if filed on a timely filed gift tax return for the
calendar year in which the transfer was made or deemed to
have been made pursuant to paragraph (4) or on such later
date or dates as may be prescribed by the Secretary.
``(ii) Other elections.--An election under clause (i)(II)
or (ii) of subparagraph (A) may be made on a timely filed
gift tax return for the calendar year for which the election
is to become effective.
``(d) Retroactive Allocations.--
``(1) In general.--If--
``(A) a non-skip person has an interest or a future
interest in a trust to which any transfer has been made,
``(B) such person--
``(i) is a lineal descendant of a grandparent of the
transferor or of a grandparent of the transferor's spouse or
former spouse, and
``(ii) is assigned to a generation below the generation
assignment of the transferor, and
``(C) such person predeceases the transferor,
then the transferor may make an allocation of any of such
transferor's unused GST exemption to any previous transfer or
transfers to the trust on a chronological basis.
``(2) Special rules.--If the allocation under paragraph (1)
by the transferor is made on a gift tax return filed on or
before the date prescribed by section 6075(b) for gifts made
within the calendar year within which the non-skip person's
death occurred--
``(A) the value of such transfer or transfers for purposes
of section 2642(a) shall be determined as if such allocation
had been made on a timely filed gift tax return for each
calendar year within which each transfer was made,
``(B) such allocation shall be effective immediately before
such death, and
``(C) the amount of the transferor's unused GST exemption
available to be allocated shall be determined immediately
before such death.
``(3) Future interest.--For purposes of this subsection, a
person has a future interest in a trust if the trust may
permit income or corpus to be paid to such person on a date
or dates in the future.''.
(b) Conforming Amendment.--Paragraph (2) of section 2632(b)
is amended by striking ``with respect to a direct skip'' and
inserting ``or subsection (c)(1)''.
(c) Effective Dates.--
(1) Deemed allocation.--Section 2632(c) of the Internal
Revenue Code of 1986 (as added by subsection (a)), and the
amendment made by subsection (b), shall apply to transfers
subject to chapter 11 or 12 made after December 31, 1999, and
to estate tax inclusion periods ending after December 31,
1999.
(2) Retroactive allocations.--Section 2632(d) of the
Internal Revenue Code of 1986 (as added by subsection (a))
shall apply to deaths of non-skip persons occurring after
December 31, 1999.
SEC. 322. SEVERING OF TRUSTS.
(a) In General.--Subsection (a) of section 2642 (relating
to inclusion ratio) is amended by adding at the end the
following new paragraph:
``(3) Severing of trusts.--
``(A) In general.--If a trust is severed in a qualified
severance, the trusts resulting from such severance shall be
treated as separate trusts thereafter for purposes of this
chapter.
``(B) Qualified severance.--For purposes of subparagraph
(A)--
``(i) In general.--The term `qualified severance' means the
division of a single trust and the creation (by any means
available under the governing instrument or under local law)
of two or more trusts if--
``(I) the single trust was divided on a fractional basis,
and
``(II) the terms of the new trusts, in the aggregate,
provide for the same succession of interests of beneficiaries
as are provided in the original trust.
``(ii) Trusts with inclusion ratio greater than zero.--If a
trust has an inclusion ratio of greater than zero and less
than 1, a severance is a qualified severance only if the
single trust is divided into two trusts, one of which
receives a fractional share of the total value of all trust
assets equal to the applicable fraction of the single trust
immediately before the severance. In such case, the trust
receiving such fractional share shall have an inclusion ratio
of zero and the other trust shall have an inclusion ratio of
1.
``(iii) Regulations.--The term `qualified severance'
includes any other severance permitted under regulations
prescribed by the Secretary.
``(C) Timing and manner of severances.--A severance
pursuant to this paragraph may be made at any time. The
Secretary shall prescribe by forms or regulations the manner
in which the qualified severance shall be reported to the
Secretary.''.
(b) Effective Date.--The amendment made by this section
shall apply to severances after December 31, 1999.
SEC. 323. MODIFICATION OF CERTAIN VALUATION RULES.
(a) Gifts for Which Gift Tax Return Filed or Deemed
Allocation Made.--Paragraph (1) of section 2642(b) (relating
to valuation rules, etc.) is amended to read as follows:
``(1) Gifts for which gift tax return filed or deemed
allocation made.--If the allocation of the GST exemption to
any transfers of property is made on a gift tax return filed
on or before the date prescribed by section 6075(b) for such
transfer or is deemed to be made under section 2632 (b)(1) or
(c)(1)--
``(A) the value of such property for purposes of subsection
(a) shall be its value as finally determined for purposes of
chapter 12 (within the meaning of section 2001(f )(2)), or,
in the case of an allocation deemed to have been made at the
close of an estate tax inclusion period, its value at the
time of the close of the estate tax inclusion period, and
``(B) such allocation shall be effective on and after the
date of such transfer, or, in the case of an allocation
deemed to have been made at the close of an estate tax
inclusion period, on and after the close of such estate tax
inclusion period.''.
(b) Transfers at Death.--Subparagraph (A) of section
2642(b)(2) is amended to read as follows:
``(A) Transfers at death.--If property is transferred as a
result of the death of the transferor, the value of such
property for purposes of subsection (a) shall be its value as
finally determined for purposes of chapter 11; except that,
if the requirements prescribed by the Secretary respecting
allocation of post-death changes in value are not met, the
value of such property shall be determined as of the time of
the distribution concerned.''.
(c) Effective Date.--The amendments made by this section
shall apply to transfers subject to chapter 11 or 12 of the
Internal Revenue Code of 1986 made after December 31, 1999.
SEC. 324. RELIEF PROVISIONS.
(a) In General.--Section 2642 is amended by adding at the
end the following new subsection:
``(g) Relief Provisions.--
``(1) Relief for late elections.--
``(A) In general.--The Secretary shall by regulation
prescribe such circumstances and procedures under which
extensions of time will be granted to make--
``(i) an allocation of GST exemption described in paragraph
(1) or (2) of subsection (b), and
``(ii) an election under subsection (b)(3) or (c)(5) of
section 2632.
Such regulations shall include procedures for requesting
comparable relief with respect to transfers made before the
date of the enactment of this paragraph.
[[Page H836]]
``(B) Basis for determinations.--In determining whether to
grant relief under this paragraph, the Secretary shall take
into account all relevant circumstances, including evidence
of intent contained in the trust instrument or instrument of
transfer and such other factors as the Secretary deems
relevant. For purposes of determining whether to grant relief
under this paragraph, the time for making the allocation (or
election) shall be treated as if not expressly prescribed by
statute.
``(2) Substantial compliance.--An allocation of GST
exemption under section 2632 that demonstrates an intent to
have the lowest possible inclusion ratio with respect to a
transfer or a trust shall be deemed to be an allocation of so
much of the transferor's unused GST exemption as produces the
lowest possible inclusion ratio. In determining whether there
has been substantial compliance, all relevant circumstances
shall be taken into account, including evidence of intent
contained in the trust instrument or instrument of transfer
and such other factors as the Secretary deems relevant.''.
(b) Effective Dates.--
(1) Relief for late elections.--Section 2642(g)(1) of the
Internal Revenue Code of 1986 (as added by subsection (a))
shall apply to requests pending on, or filed after, December
31, 1999.
(2) Substantial compliance.--Section 2642(g)(2) of such
Code (as so added) shall take effect on the date of the
enactment of this Act and shall apply to transfers subject to
chapter 11 or 12 of the Internal Revenue Code of 1986 made
after December 31, 1999.
Subtitle D--Conservation Easements
SEC. 331. EXPANSION OF ESTATE TAX RULE FOR CONSERVATION
EASEMENTS.
(a) Where Land Is Located.--
(1) In general.--Clause (i) of section 2031(c)(8)(A)
(defining land subject to a conservation easement) is
amended--
(A) by striking ``25 miles'' both places it appears and
inserting ``50 miles'', and
(B) striking ``10 miles'' and inserting ``25 miles''.
(2) Effective date.--The amendments made by this subsection
shall apply to estates of decedents dying after December 31,
1999.
(b) Clarification of Date for Determining Value of Land and
Easement.--
(1) In general.--Section 2031(c)(2) (defining applicable
percentage) is amended by adding at the end the following new
sentence: ``The values taken into account under the preceding
sentence shall be such values as of the date of the
contribution referred to in paragraph (8)(B).''.
(2) Effective date.--The amendment made by this subsection
shall apply to estates of decedents dying after December 31,
1997.
TITLE IV--TAX RELIEF FOR DISTRESSED COMMUNITIES AND INDUSTRIES
Subtitle A--American Community Renewal Act of 2000
SEC. 401. SHORT TITLE.
This subtitle may be cited as the ``American Community
Renewal Act of 2000''.
SEC. 402. DESIGNATION OF AND TAX INCENTIVES FOR RENEWAL
COMMUNITIES.
(a) In General.--Chapter 1 is amended by adding at the end
the following new subchapter:
``Subchapter X--Renewal Communities
``Part I. Designation.
``Part II. Renewal community capital gain; renewal community business.
``Part III. Family development accounts.
``Part IV. Additional incentives.
``PART I--DESIGNATION
``Sec. 1400E. Designation of renewal communities.
``SEC. 1400E. DESIGNATION OF RENEWAL COMMUNITIES.
``(a) Designation.--
``(1) Definitions.--For purposes of this title, the term
`renewal community' means any area--
``(A) which is nominated by one or more local governments
and the State or States in which it is located for
designation as a renewal community (hereinafter in this
section referred to as a `nominated area'); and
``(B) which the Secretary of Housing and Urban Development
designates as a renewal community, after consultation with--
``(i) the Secretaries of Agriculture, Commerce, Labor, and
the Treasury; the Director of the Office of Management and
Budget; and the Administrator of the Small Business
Administration; and
``(ii) in the case of an area on an Indian reservation, the
Secretary of the Interior.
``(2) Number of designations.--
``(A) In general.--The Secretary of Housing and Urban
Development may designate not more than 15 nominated areas as
renewal communities.
``(B) Minimum designation in rural areas.--Of the areas
designated under paragraph (1), at least 3 must be areas--
``(i) which are within a local government jurisdiction or
jurisdictions with a population of less than 50,000,
``(ii) which are outside of a metropolitan statistical area
(within the meaning of section 143(k)(2)(B)), or
``(iii) which are determined by the Secretary of Housing
and Urban Development, after consultation with the Secretary
of Commerce, to be rural areas.
``(3) Areas designated based on degree of poverty, etc.--
``(A) In general.--Except as otherwise provided in this
section, the nominated areas designated as renewal
communities under this subsection shall be those nominated
areas with the highest average ranking with respect to the
criteria described in subparagraphs (B), (C), and (D) of
subsection (c)(3). For purposes of the preceding sentence, an
area shall be ranked within each such criterion on the basis
of the amount by which the area exceeds such criterion, with
the area which exceeds such criterion by the greatest amount
given the highest ranking.
``(B) Exception where inadequate course of action, etc.--An
area shall not be designated under subparagraph (A) if the
Secretary of Housing and Urban Development determines that
the course of action described in subsection (d)(2) with
respect to such area is inadequate.
``(C) Priority for empowerment zones and enterprise
communities with respect to first 10 designations.--With
respect to the first 10 designations made under this
section--
``(i) all shall be chosen from nominated areas which are
empowerment zones or enterprise communities (and are
otherwise eligible for designation under this section); and
``(ii) two shall be areas described in paragraph (2)(B).
``(4) Limitation on designations.--
``(A) Publication of regulations.--The Secretary of Housing
and Urban Development shall prescribe by regulation no later
than 4 months after the date of the enactment of this
section, after consultation with the officials described in
paragraph (1)(B)--
``(i) the procedures for nominating an area under paragraph
(1)(A);
``(ii) the parameters relating to the size and population
characteristics of a renewal community; and
``(iii) the manner in which nominated areas will be
evaluated based on the criteria specified in subsection (d).
``(B) Time limitations.--The Secretary of Housing and Urban
Development may designate nominated areas as renewal
communities only during the 36-month period beginning on the
first day of the first month following the month in which the
regulations described in subparagraph (A) are prescribed.
``(C) Procedural rules.--The Secretary of Housing and Urban
Development shall not make any designation of a nominated
area as a renewal community under paragraph (2) unless--
``(i) the local governments and the States in which the
nominated area is located have the authority--
``(I) to nominate such area for designation as a renewal
community;
``(II) to make the State and local commitments described in
subsection (d); and
``(III) to provide assurances satisfactory to the Secretary
of Housing and Urban Development that such commitments will
be fulfilled,
``(ii) a nomination regarding such area is submitted in
such a manner and in such form, and contains such
information, as the Secretary of Housing and Urban
Development shall by regulation prescribe; and
``(iii) the Secretary of Housing and Urban Development
determines that any information furnished is reasonably
accurate.
``(5) Nomination process for indian reservations.--For
purposes of this subchapter, in the case of a nominated area
on an Indian reservation, the reservation governing body (as
determined by the Secretary of the Interior) shall be treated
as being both the State and local governments with respect to
such area.
``(b) Period for Which Designation Is in Effect.--
``(1) In general.--Any designation of an area as a renewal
community shall remain in effect during the period beginning
on the date of the designation and ending on the earliest
of--
``(A) December 31, 2007,
``(B) the termination date designated by the State and
local governments in their nomination, or
``(C) the date the Secretary of Housing and Urban
Development revokes such designation.
``(2) Revocation of designation.--The Secretary of Housing
and Urban Development may revoke the designation under this
section of an area if such Secretary determines that the
local government or the State in which the area is located--
``(A) has modified the boundaries of the area, or
``(B) is not complying substantially with, or fails to make
progress in achieving, the State or local commitments,
respectively, described in subsection (d).
``(c) Area and Eligibility Requirements.--
``(1) In general.--The Secretary of Housing and Urban
Development may designate a nominated area as a renewal
community under subsection (a) only if the area meets the
requirements of paragraphs (2) and (3) of this subsection.
``(2) Area requirements.--A nominated area meets the
requirements of this paragraph if--
``(A) the area is within the jurisdiction of one or more
local governments;
``(B) the boundary of the area is continuous; and
``(C) the area--
``(i) has a population, of at least--
``(I) 4,000 if any portion of such area (other than a rural
area described in subsection (a)(2)(B)(i)) is located within
a metropolitan
[[Page H837]]
statistical area (within the meaning of section 143(k)(2)(B))
which has a population of 50,000 or greater; or
``(II) 1,000 in any other case; or
``(ii) is entirely within an Indian reservation (as
determined by the Secretary of the Interior).
``(3) Eligibility requirements.--A nominated area meets the
requirements of this paragraph if the State and the local
governments in which it is located certify (and the Secretary
of Housing and Urban Development, after such review of
supporting data as he deems appropriate, accepts such
certification) that--
``(A) the area is one of pervasive poverty, unemployment,
and general distress;
``(B) the unemployment rate in the area, as determined by
the most recent available data, was at least 1\1/2\ times the
national unemployment rate for the period to which such data
relate;
``(C) the poverty rate for each population census tract
within the nominated area is at least 20 percent; and
``(D) in the case of an urban area, at least 70 percent of
the households living in the area have incomes below 80
percent of the median income of households within the
jurisdiction of the local government (determined in the same
manner as under section 119(b)(2) of the Housing and
Community Development Act of 1974).
``(4) Consideration of high incidence of crime.--The
Secretary of Housing and Urban Development shall take into
account, in selecting nominated areas for designation as
renewal communities under this section, the extent to which
such areas have a high incidence of crime.
``(5) Consideration of communities identified in gao
study.--The Secretary of Housing and Urban Development shall
take into account, in selecting nominated areas for
designation as renewal communities under this section, if the
area has census tracts identified in the May 12, 1998, report
of the Government Accounting Office regarding the
identification of economically distressed areas.
``(d) Required State and Local Commitments.--
``(1) In general.--The Secretary of Housing and Urban
Development may designate any nominated area as a renewal
community under subsection (a) only if--
``(A) the local government and the State in which the area
is located agree in writing that, during any period during
which the area is a renewal community, such governments will
follow a specified course of action which meets the
requirements of paragraph (2) and is designed to reduce the
various burdens borne by employers or employees in such area;
and
``(B) the economic growth promotion requirements of
paragraph (3) are met.
``(2) Course of action.--
``(A) In general.--A course of action meets the
requirements of this paragraph if such course of action is a
written document, signed by a State (or local government) and
neighborhood organizations, which evidences a partnership
between such State or government and community-based
organizations and which commits each signatory to specific
and measurable goals, actions, and timetables. Such course of
action shall include at least five of the following:
``(i) A reduction of tax rates or fees applying within the
renewal community.
``(ii) An increase in the level of efficiency of local
services within the renewal community.
``(iii) Crime reduction strategies, such as crime
prevention (including the provision of such services by
nongovernmental entities).
``(iv) Actions to reduce, remove, simplify, or streamline
governmental requirements applying within the renewal
community.
``(v) Involvement in the program by private entities,
organizations, neighborhood organizations, and community
groups, particularly those in the renewal community,
including a commitment from such private entities to provide
jobs and job training for, and technical, financial, or other
assistance to, employers, employees, and residents from the
renewal community.
``(vi) State or local income tax benefits for fees paid for
services performed by a nongovernmental entity which were
formerly performed by a governmental entity.
``(vii) The gift (or sale at below fair market value) of
surplus real property (such as land, homes, and commercial or
industrial structures) in the renewal community to
neighborhood organizations, community development
corporations, or private companies.
``(B) Recognition of past efforts.--For purposes of this
section, in evaluating the course of action agreed to by any
State or local government, the Secretary of Housing and Urban
Development shall take into account the past efforts of such
State or local government in reducing the various burdens
borne by employers and employees in the area involved.
``(3) Economic growth promotion requirements.--The economic
growth promotion requirements of this paragraph are met with
respect to a nominated area if the local government and the
State in which such area is located certify in writing that
such government and State, respectively, have repealed or
otherwise will not enforce within the area, if such area is
designated as a renewal community--
``(A) licensing requirements for occupations that do not
ordinarily require a professional degree;
``(B) zoning restrictions on home-based businesses which do
not create a public nuisance;
``(C) permit requirements for street vendors who do not
create a public nuisance;
``(D) zoning or other restrictions that impede the
formation of schools or child care centers; and
``(E) franchises or other restrictions on competition for
businesses providing public services, including but not
limited to taxicabs, jitneys, cable television, or trash
hauling,
except to the extent that such regulation of businesses and
occupations is necessary for and well-tailored to the
protection of health and safety.
``(e) Coordination With Treatment of Empowerment Zones and
Enterprise Communities.--For purposes of this title, if there
are in effect with respect to the same area both--
``(1) a designation as a renewal community; and
``(2) a designation as an empowerment zone or enterprise
community,
both of such designations shall be given full effect with
respect to such area.
``(f ) Definitions and Special Rules.--For purposes of this
subchapter--
``(1) Governments.--If more than one government seeks to
nominate an area as a renewal community, any reference to, or
requirement of, this section shall apply to all such
governments.
``(2) State.--The term `State' includes Puerto Rico, the
Virgin Islands of the United States, Guam, American Samoa,
the Northern Mariana Islands, and any other possession of the
United States.
``(3) Local government.--The term `local government'
means--
``(A) any county, city, town, township, parish, village, or
other general purpose political subdivision of a State;
``(B) any combination of political subdivisions described
in subparagraph (A) recognized by the Secretary of Housing
and Urban Development; and
``(C) the District of Columbia.
``(4) Application of rules relating to census tracts and
census data.--The rules of sections 1392(b)(4) and 1393(a)(9)
shall apply.
``PART II--RENEWAL COMMUNITY CAPITAL GAIN; RENEWAL COMMUNITY BUSINESS
``Sec. 1400F. Renewal community capital gain.
``Sec. 1400G. Renewal community business defined.
``SEC. 1400F. RENEWAL COMMUNITY CAPITAL GAIN.
``(a) General Rule.--Gross income does not include any
qualified capital gain recognized on the sale or exchange of
a qualified community asset held for more than 5 years.
``(b) Qualified Community Asset.--For purposes of this
section--
``(1) In general.--The term `qualified community asset'
means--
``(A) any qualified community stock;
``(B) any qualified community partnership interest; and
``(C) any qualified community business property.
``(2) Qualified community stock.--
``(A) In general.--Except as provided in subparagraph (B),
the term `qualified community stock' means any stock in a
domestic corporation if--
``(i) such stock is acquired by the taxpayer after December
31, 2000, and before January 1, 2008, at its original issue
(directly or through an underwriter) from the corporation
solely in exchange for cash;
``(ii) as of the time such stock was issued, such
corporation was a renewal community business (or, in the case
of a new corporation, such corporation was being organized
for purposes of being a renewal community business); and
``(iii) during substantially all of the taxpayer's holding
period for such stock, such corporation qualified as a
renewal community business.
``(B) Redemptions.--A rule similar to the rule of section
1202(c)(3) shall apply for purposes of this paragraph.
``(3) Qualified community partnership interest.--The term
`qualified community partnership interest' means any capital
or profits interest in a domestic partnership if--
``(A) such interest is acquired by the taxpayer after
December 31, 2000, and before January 1, 2008;
``(B) as of the time such interest was acquired, such
partnership was a renewal community business (or, in the case
of a new partnership, such partnership was being organized
for purposes of being a renewal community business); and
``(C) during substantially all of the taxpayer's holding
period for such interest, such partnership qualified as a
renewal community business.
A rule similar to the rule of paragraph (2)(B) shall apply
for purposes of this paragraph.
``(4) Qualified community business property.--
``(A) In general.--The term `qualified community business
property' means tangible property if--
``(i) such property was acquired by the taxpayer by
purchase (as defined in section 179(d)(2)) after December 31,
2000, and before January 1, 2008;
[[Page H838]]
``(ii) the original use of such property in the renewal
community commences with the taxpayer; and
``(iii) during substantially all of the taxpayer's holding
period for such property, substantially all of the use of
such property was in a renewal community business of the
taxpayer.
``(B) Special rule for substantial improvements.--The
requirements of clauses (i) and (ii) of subparagraph (A)
shall be treated as satisfied with respect to--
``(i) property which is substantially improved (within the
meaning of section 1400B(b)(4)(B)(ii)) by the taxpayer before
January 1, 2008; and
``(ii) any land on which such property is located.
``(c) Certain Rules To Apply.--Rules similar to the rules
of paragraphs (5), (6), and (7) of subsection (b), and
subsections (e), (f ), and (g), of section 1400B shall apply
for purposes of this section.
``SEC. 1400G. RENEWAL COMMUNITY BUSINESS DEFINED.
``For purposes of this part, the term `renewal community
business' means any entity or proprietorship which would be a
qualified business entity or qualified proprietorship under
section 1397B if--
``(1) references to renewal communities were substituted
for references to empowerment zones in such section; and
``(2) `80 percent' were substituted for `50 percent' in
subsections (b)(2) and (c)(1) of such section.
``PART III--FAMILY DEVELOPMENT ACCOUNTS
``Sec. 1400H. Family development accounts for renewal community EITC
recipients.
``Sec. 1400I. Designation of earned income tax credit payments for
deposit to family development account.
``SEC. 1400H. FAMILY DEVELOPMENT ACCOUNTS FOR RENEWAL
COMMUNITY EITC RECIPIENTS.
``(a) Allowance of Deduction.--
``(1) In general.--There shall be allowed as a deduction--
``(A) in the case of a qualified individual, the amount
paid in cash for the taxable year by such individual to any
family development account for such individual's benefit; and
``(B) in the case of any person other than a qualified
individual, the amount paid in cash for the taxable year by
such person to any family development account for the benefit
of a qualified individual but only if the amount so paid is
designated for purposes of this section by such individual.
``(2) Limitation.--
``(A) In general.--The amount allowable as a deduction to
any individual for any taxable year by reason of paragraph
(1)(A) shall not exceed the lesser of--
``(i) $2,000, or
``(ii) an amount equal to the compensation includible in
the individual's gross income for such taxable year.
``(B) Persons donating to family development accounts of
others.--The amount which may be designated under paragraph
(1)(B) by any qualified individual for any taxable year of
such individual shall not exceed $1,000.
``(3) Special rules for certain married individuals.--Rules
similar to rules of section 219(c) shall apply to the
limitation in paragraph (2)(A).
``(4) Coordination with iras.--No deduction shall be
allowed under this section for any taxable year to any person
by reason of a payment to an account for the benefit of a
qualified individual if any amount is paid for such taxable
year into an individual retirement account (including a Roth
IRA) for the benefit of such individual.
``(5) Rollovers.--No deduction shall be allowed under this
section with respect to any rollover contribution.
``(b) Tax Treatment of Distributions.--
``(1) Inclusion of amounts in gross income.--Except as
otherwise provided in this subsection, any amount paid or
distributed out of a family development account shall be
included in gross income by the payee or distributee, as the
case may be.
``(2) Exclusion of qualified family development
distributions.--Paragraph (1) shall not apply to any
qualified family development distribution.
``(c) Qualified Family Development Distribution.--For
purposes of this section--
``(1) In general.--The term `qualified family development
distribution' means any amount paid or distributed out of a
family development account which would otherwise be
includible in gross income, to the extent that such payment
or distribution is used exclusively to pay qualified family
development expenses for the holder of the account or the
spouse or dependent (as defined in section 152) of such
holder.
``(2) Qualified family development expenses.--The term
`qualified family development expenses' means any of the
following:
``(A) Qualified higher education expenses.
``(B) Qualified first-time homebuyer costs.
``(C) Qualified business capitalization costs.
``(D) Qualified medical expenses.
``(E) Qualified rollovers.
``(3) Qualified higher education expenses.--
``(A) In general.--The term `qualified higher education
expenses' has the meaning given such term by section
72(t)(7), determined by treating postsecondary vocational
educational schools as eligible educational institutions.
``(B) Postsecondary vocational education school.--The term
`postsecondary vocational educational school' means an area
vocational education school (as defined in subparagraph (C)
or (D) of section 521(4) of the Carl D. Perkins Vocational
and Applied Technology Education Act (20 U.S.C. 2471(4)))
which is in any State (as defined in section 521(33) of such
Act), as such sections are in effect on the date of the
enactment of this section.
``(C) Coordination with other benefits.--The amount of
qualified higher education expenses for any taxable year
shall be reduced as provided in section 25A(g)(2).
``(4) Qualified first-time homebuyer costs.--The term
`qualified first-time homebuyer costs' means qualified
acquisition costs (as defined in section 72(t)(8) without
regard to subparagraph (B) thereof) with respect to a
principal residence (within the meaning of section 121) for a
qualified first-time homebuyer (as defined in section
72(t)(8)).
``(5) Qualified business capitalization costs.--
``(A) In general.--The term `qualified business
capitalization costs' means qualified expenditures for the
capitalization of a qualified business pursuant to a
qualified plan.
``(B) Qualified expenditures.--The term `qualified
expenditures' means expenditures included in a qualified
plan, including capital, plant, equipment, working capital,
and inventory expenses.
``(C) Qualified business.--The term `qualified business'
means any trade or business other than any trade or
business--
``(i) which consists of the operation of any facility
described in section 144(c)(6)(B), or
``(ii) which contravenes any law.
``(D) Qualified plan.--The term `qualified plan' means a
business plan which meets such requirements as the Secretary
may specify.
``(6) Qualified medical expenses.--The term `qualified
medical expenses' means any amount paid during the taxable
year, not compensated for by insurance or otherwise, for
medical care (as defined in section 213(d)) of the taxpayer,
his spouse, or his dependent (as defined in section 152).
``(7) Qualified rollovers.--The term `qualified rollover'
means any amount paid from a family development account of a
taxpayer into another such account established for the
benefit of--
``(A) such taxpayer, or
``(B) any qualified individual who is--
``(i) the spouse of such taxpayer, or
``(ii) any dependent (as defined in section 152) of the
taxpayer.
Rules similar to the rules of section 408(d)(3) shall apply
for purposes of this paragraph.
``(d) Tax Treatment of Accounts.--
``(1) In general.--Any family development account is exempt
from taxation under this subtitle unless such account has
ceased to be a family development account by reason of
paragraph (2). Notwithstanding the preceding sentence, any
such account is subject to the taxes imposed by section 511
(relating to imposition of tax on unrelated business income
of charitable, etc., organizations). Notwithstanding any
other provision of this title (including chapters 11 and 12),
the basis of any person in such an account is zero.
``(2) Loss of exemption in case of prohibited
transactions.--For purposes of this section, rules similar to
the rules of section 408(e) shall apply.
``(3) Other rules to apply.--Rules similar to the rules of
paragraphs (4), (5), and (6) of section 408(d) shall apply
for purposes of this section.
``(e) Family Development Account.--For purposes of this
title, the term `family development account' means a trust
created or organized in the United States for the exclusive
benefit of a qualified individual or his beneficiaries, but
only if the written governing instrument creating the trust
meets the following requirements:
``(1) Except in the case of a qualified rollover (as
defined in subsection (c)(7))--
``(A) no contribution will be accepted unless it is in
cash; and
``(B) contributions will not be accepted for the taxable
year in excess of $3,000.
``(2) The requirements of paragraphs (2) through (6) of
section 408(a) are met.
``(f ) Qualified Individual.--For purposes of this section,
the term `qualified individual' means, for any taxable year,
an individual--
``(1) who is a bona fide resident of a renewal community
throughout the taxable year; and
``(2) to whom a credit was allowed under section 32 for the
preceding taxable year.
``(g) Other Definitions and Special Rules.--
``(1) Compensation.--The term `compensation' has the
meaning given such term by section 219(f )(1).
``(2) Married individuals.--The maximum deduction under
subsection (a) shall be computed separately for each
individual, and this section shall be applied without regard
to any community property laws.
``(3) Time when contributions deemed made.--For purposes of
this section, a taxpayer shall be deemed to have made a
contribution to a family development account on the last day
of the preceding taxable year if the contribution is made on
account of such taxable year and is made not later than
[[Page H839]]
the time prescribed by law for filing the return for such
taxable year (not including extensions thereof).
``(4) Employer payments; custodial accounts.--Rules similar
to the rules of sections 219(f )(5) and 408(h) shall apply
for purposes of this section.
``(5) Reports.--The trustee of a family development account
shall make such reports regarding such account to the
Secretary and to the individual for whom the account is
maintained with respect to contributions (and the years to
which they relate), distributions, and such other matters as
the Secretary may require under regulations. The reports
required by this paragraph--
``(A) shall be filed at such time and in such manner as the
Secretary prescribes in such regulations; and
``(B) shall be furnished to individuals--
``(i) not later than January 31 of the calendar year
following the calendar year to which such reports relate; and
``(ii) in such manner as the Secretary prescribes in such
regulations.
``(6) Investment in collectibles treated as
distributions.--Rules similar to the rules of section 408(m)
shall apply for purposes of this section.
``(h) Penalty for Distributions Not Used for Qualified
Family Development Expenses.--
``(1) In general.--If any amount is distributed from a
family development account and is not used exclusively to pay
qualified family development expenses for the holder of the
account or the spouse or dependent (as defined in section
152) of such holder, the tax imposed by this chapter for the
taxable year of such distribution shall be increased by 10
percent of the portion of such amount which is includible in
gross income.
``(2) Exception for certain distributions.--Paragraph (1)
shall not apply to distributions which are--
``(A) made on or after the date on which the account holder
attains age 59\1/2\,
``(B) made to a beneficiary (or the estate of the account
holder) on or after the death of the account holder, or
``(C) attributable to the account holder's being disabled
within the meaning of section 72(m)(7).
``(i) Application of Section.--This section shall apply to
amounts paid to a family development account for any taxable
year beginning after December 31, 2000, and before January 1,
2008.
``SEC. 1400I. DESIGNATION OF EARNED INCOME TAX CREDIT
PAYMENTS FOR DEPOSIT TO FAMILY DEVELOPMENT
ACCOUNT.
``(a) In General.--With respect to the return of any
qualified individual (as defined in section 1400H(f )) for
the taxable year of the tax imposed by this chapter, such
individual may designate that a specified portion (not less
than $1) of any overpayment of tax for such taxable year
which is attributable to the earned income tax credit shall
be deposited by the Secretary into a family development
account of such individual. The Secretary shall so deposit
such portion designated under this subsection.
``(b) Manner and Time of Designation.--A designation under
subsection (a) may be made with respect to any taxable year--
``(1) at the time of filing the return of the tax imposed
by this chapter for such taxable year, or
``(2) at any other time (after the time of filing the
return of the tax imposed by this chapter for such taxable
year) specified in regulations prescribed by the Secretary.
Such designation shall be made in such manner as the
Secretary prescribes by regulations.
``(c) Portion Attributable to Earned Income Tax Credit.--
For purposes of subsection (a), an overpayment for any
taxable year shall be treated as attributable to the earned
income tax credit to the extent that such overpayment does
not exceed the credit allowed to the taxpayer under section
32 for such taxable year.
``(d) Overpayments Treated as Refunded.--For purposes of
this title, any portion of an overpayment of tax designated
under subsection (a) shall be treated as being refunded to
the taxpayer as of the last date prescribed for filing the
return of tax imposed by this chapter (determined without
regard to extensions) or, if later, the date the return is
filed.
``(e) Termination.--This section shall not apply to any
taxable year beginning after December 31, 2007.
``PART IV--ADDITIONAL INCENTIVES
``Sec. 1400K. Commercial revitalization deduction.
``Sec. 1400L. Increase in expensing under section 179.
``SEC. 1400K. COMMERCIAL REVITALIZATION DEDUCTION.
``(a) General Rule.--At the election of the taxpayer,
either--
``(1) one-half of any qualified revitalization expenditures
chargeable to capital account with respect to any qualified
revitalization building shall be allowable as a deduction for
the taxable year in which the building is placed in service,
or
``(2) a deduction for all such expenditures shall be
allowable ratably over the 120-month period beginning with
the month in which the building is placed in service.
The deduction provided by this section with respect to such
expenditure shall be in lieu of any depreciation deduction
otherwise allowable on account of such expenditure.
``(b) Qualified Revitalization Buildings and
Expenditures.--For purposes of this section--
``(1) Qualified revitalization building.--The term
`qualified revitalization building' means any building (and
its structural components) if--
``(A) such building is located in a renewal community and
is placed in service after December 31, 2000;
``(B) a commercial revitalization deduction amount is
allocated to the building under subsection (d); and
``(C) depreciation (or amortization in lieu of
depreciation) is allowable with respect to the building
(without regard to this section).
``(2) Qualified revitalization expenditure.--
``(A) In general.--The term `qualified revitalization
expenditure' means any amount properly chargeable to capital
account--
``(i) for property for which depreciation is allowable
under section 168 (without regard to this section) and which
is--
``(I) nonresidential real property; or
``(II) an addition or improvement to property described in
subclause (I);
``(ii) in connection with the construction of any qualified
revitalization building which was not previously placed in
service or in connection with the substantial rehabilitation
(within the meaning of section 47(c)(1)(C)) of a building
which was placed in service before the beginning of such
rehabilitation; and
``(iii) for land (including land which is functionally
related to such property and subordinate thereto).
``(B) Dollar limitation.--The aggregate amount which may be
treated as qualified revitalization expenditures with respect
to any qualified revitalization building for any taxable year
shall not exceed the excess of--
``(i) $10,000,000, reduced by
``(ii) any such expenditures with respect to the building
taken into account by the taxpayer or any predecessor in
determining the amount of the deduction under this section
for all preceding taxable years.
``(C) Certain expenditures not included.--The term
`qualified revitalization expenditure' does not include--
``(i) Acquisition costs.--The costs of acquiring any
building or interest therein and any land in connection with
such building to the extent that such costs exceed 30 percent
of the qualified revitalization expenditures determined
without regard to this clause.
``(ii) Credits.--Any expenditure which the taxpayer may
take into account in computing any credit allowable under
this title unless the taxpayer elects to take the expenditure
into account only for purposes of this section.
``(c) When Expenditures Taken Into Account.--Qualified
revitalization expenditures with respect to any qualified
revitalization building shall be taken into account for the
taxable year in which the qualified revitalization building
is placed in service. For purposes of the preceding sentence,
a substantial rehabilitation of a building shall be treated
as a separate building.
``(d) Limitation on Aggregate Deductions Allowable With
Respect to Buildings Located in a State.--
``(1) In general.--The amount of the deduction determined
under this section for any taxable year with respect to any
building shall not exceed the commercial revitalization
deduction amount (in the case of an amount determined under
subsection (a)(2), the present value of such amount as
determined under the rules of section 42(b)(2)(C) by
substituting `100 percent' for `72 percent' in clause (ii)
thereof) allocated to such building under this subsection by
the commercial revitalization agency. Such allocation shall
be made at the same time and in the same manner as under
paragraphs (1) and (7) of section 42(h).
``(2) Commercial revitalization deduction amount for
agencies.--
``(A) In general.--The aggregate commercial revitalization
deduction amount which a commercial revitalization agency may
allocate for any calendar year is the amount of the State
commercial revitalization deduction ceiling determined under
this paragraph for such calendar year for such agency.
``(B) State commercial revitalization deduction ceiling.--
The State commercial revitalization deduction ceiling
applicable to any State--
``(i) for each calendar year after 2000 and before 2008 is
$6,000,000 for each renewal community in the State; and
``(ii) zero for each calendar year thereafter.
``(C) Commercial revitalization agency.--For purposes of
this section, the term `commercial revitalization agency'
means any agency authorized by a State to carry out this
section.
``(e) Responsibilities of Commercial Revitalization
Agencies.--
``(1) Plans for allocation.--Notwithstanding any other
provision of this section, the commercial revitalization
deduction amount with respect to any building shall be zero
unless--
``(A) such amount was allocated pursuant to a qualified
allocation plan of the commercial revitalization agency which
is approved (in accordance with rules similar to the rules of
section 147(f )(2) (other than subparagraph (B)(ii) thereof))
by the governmental unit of which such agency is a part; and
``(B) such agency notifies the chief executive officer (or
its equivalent) of the local jurisdiction within which the
building is located of such allocation and provides such
individual a reasonable opportunity to comment on the
allocation.
[[Page H840]]
``(2) Qualified allocation plan.--For purposes of this
subsection, the term `qualified allocation plan' means any
plan--
``(A) which sets forth selection criteria to be used to
determine priorities of the commercial revitalization agency
which are appropriate to local conditions;
``(B) which considers--
``(i) the degree to which a project contributes to the
implementation of a strategic plan that is devised for a
renewal community through a citizen participation process;
``(ii) the amount of any increase in permanent, full-time
employment by reason of any project; and
``(iii) the active involvement of residents and nonprofit
groups within the renewal community; and
``(C) which provides a procedure that the agency (or its
agent) will follow in monitoring compliance with this
section.
``(f ) Regulations.--For purposes of this section, the
Secretary shall, by regulations, provide for the application
of rules similar to the rules of section 49 and subsections
(a) and (b) of section 50.
``(g) Termination.--This section shall not apply to any
building placed in service after December 31, 2007.
``SEC. 1400L. INCREASE IN EXPENSING UNDER SECTION 179.
``(a) General Rule.--In the case of a renewal community
business (as defined in section 1400G), for purposes of
section 179--
``(1) the limitation under section 179(b)(1) shall be
increased by the lesser of--
``(A) $35,000; or
``(B) the cost of section 179 property which is qualified
renewal property placed in service during the taxable year;
and
``(2) the amount taken into account under section 179(b)(2)
with respect to any section 179 property which is qualified
renewal property shall be 50 percent of the cost thereof.
``(b) Recapture.--Rules similar to the rules under section
179(d)(10) shall apply with respect to any qualified renewal
property which ceases to be used in a renewal community by a
renewal community business.
``(c) Qualified Renewal Property.--For purposes of this
section--
``(1) In general.--The term `qualified renewal property'
means any property to which section 168 applies (or would
apply but for section 179) if--
``(A) such property was acquired by the taxpayer by
purchase (as defined in section 179(d)(2)) after December 31,
2000, and before January 1, 2008; and
``(B) such property would be qualified zone property (as
defined in section 1397C) if references to renewal
communities were substituted for references to empowerment
zones in section 1397C.
``(2) Certain rules to apply.--The rules of subsections
(a)(2) and (b) of section 1397C shall apply for purposes of
this section.''.
SEC. 403. EXTENSION OF EXPENSING OF ENVIRONMENTAL REMEDIATION
COSTS TO RENEWAL COMMUNITIES.
(a) Extension.--Paragraph (2) of section 198(c) (defining
targeted area) is amended by redesignating subparagraph (C)
as subparagraph (D) and by inserting after subparagraph (B)
the following new subparagraph:
``(C) Renewal communities included.--Except as provided in
subparagraph (B), such term shall include a renewal community
(as defined in section 1400E) with respect to expenditures
paid or incurred after December 31, 2000.''.
(b) Extension of Termination Date for Renewal
Communities.--Subsection (h) of section 198 is amended by
inserting before the period ``(December 31, 2007, in the case
of a renewal community, as defined in section 1400E).''.
SEC. 404. EXTENSION OF WORK OPPORTUNITY TAX CREDIT FOR
RENEWAL COMMUNITIES.
(a) Extension.--Subsection (c) of section 51 (relating to
termination) is amended by adding at the end the following
new paragraph:
``(5) Extension of credit for renewal communities.--
``(A) In general.--In the case of an individual who begins
work for the employer after the date contained in paragraph
(4)(B), for purposes of section 38--
``(i) in lieu of applying subsection (a), the amount of the
work opportunity credit determined under this section for the
taxable year shall be equal to--
``(I) 15 percent of the qualified first-year wages for such
year; and
``(II) 30 percent of the qualified second-year wages for
such year;
``(ii) subsection (b)(3) shall be applied by substituting
`$10,000' for `$6,000';
``(iii) paragraph (4)(B) shall be applied by substituting
for the date contained therein the last day for which the
designation under section 1400E of the renewal community
referred to in subparagraph (B)(i) is in effect; and
``(iv) rules similar to the rules of section 51A(b)(5)(C)
shall apply.
``(B) Qualified first- and second-year wages.--For purposes
of subparagraph (A)--
``(i) In general.--The term `qualified wages' means, with
respect to each 1-year period referred to in clause (ii) or
(iii), as the case may be, the wages paid or incurred by the
employer during the taxable year to any individual but only
if--
``(I) the employer is engaged in a trade or business in a
renewal community throughout such 1-year period;
``(II) the principal place of abode of such individual is
in such renewal community throughout such 1-year period; and
``(III) substantially all of the services which such
individual performs for the employer during such 1-year
period are performed in such renewal community.
``(ii) Qualified first-year wages.--The term `qualified
first-year wages' means, with respect to any individual,
qualified wages attributable to service rendered during the
1-year period beginning with the day the individual begins
work for the employer.
``(iii) Qualified second-year wages.--The term `qualified
second-year wages' means, with respect to any individual,
qualified wages attributable to service rendered during the
1-year period beginning on the day after the last day of the
1-year period with respect to such individual determined
under clause (ii).''.
(b) Congruent Treatment of Renewal Communities and
Enterprise Zones for Purposes of Youth Residence
Requirements.--
(1) High-risk youth.--Subparagraphs (A)(ii) and (B) of
section 51(d)(5) are each amended by striking ``empowerment
zone or enterprise community'' and inserting ``empowerment
zone, enterprise community, or renewal community''.
(2) Qualified summer youth employee.--Clause (iv) of
section 51(d)(7)(A) is amended by striking ``empowerment zone
or enterprise community'' and inserting ``empowerment zone,
enterprise community, or renewal community''.
(3) Headings.--Paragraphs (5)(B) and (7)(C) of section
51(d) are each amended by inserting ``or community'' in the
heading after ``zone''.
(4) Effective date.--The amendments made by this subsection
shall apply to individuals who begin work for the employer
after December 31, 2000.
SEC. 405. CONFORMING AND CLERICAL AMENDMENTS.
(a) Deduction for Contributions to Family Development
Accounts Allowable Whether or Not Taxpayer Itemizes.--
Subsection (a) of section 62 (relating to adjusted gross
income defined) is amended by inserting after paragraph (19)
the following new paragraph:
``(20) Family development accounts.--The deduction allowed
by section 1400H(a)(1).''.
(b) Tax on Excess Contributions.--
(1) Tax imposed.--Subsection (a) of section 4973 is amended
by striking ``or'' at the end of paragraph (3), adding ``or''
at the end of paragraph (4), and inserting after paragraph
(4) the following new paragraph:
``(5) a family development account (within the meaning of
section 1400H(e)),''.
(2) Excess contributions.--Section 4973 is amended by
adding at the end the following new subsection:
``(g) Family Development Accounts.--For purposes of this
section, in the case of family development accounts, the term
`excess contributions' means the sum of--
``(1) the excess (if any) of--
``(A) the amount contributed for the taxable year to the
accounts (other than a qualified rollover, as defined in
section 1400H(c)(7)), over
``(B) the amount allowable as a deduction under section
1400H for such contributions; and
``(2) the amount determined under this subsection for the
preceding taxable year reduced by the sum of--
``(A) the distributions out of the accounts for the taxable
year which were included in the gross income of the payee
under section 1400H(b)(1);
``(B) the distributions out of the accounts for the taxable
year to which rules similar to the rules of section 408(d)(5)
apply by reason of section 1400H(d)(3); and
``(C) the excess (if any) of the maximum amount allowable
as a deduction under section 1400H for the taxable year over
the amount contributed to the account for the taxable year.
For purposes of this subsection, any contribution which is
distributed from the family development account in a
distribution to which rules similar to the rules of section
408(d)(4) apply by reason of section 1400H(d)(3) shall be
treated as an amount not contributed.''.
(c) Tax on Prohibited Transactions.--Section 4975 is
amended--
(1) by adding at the end of subsection (c) the following
new paragraph:
``(6) Special rule for family development accounts.--An
individual for whose benefit a family development account is
established and any contributor to such account shall be
exempt from the tax imposed by this section with respect to
any transaction concerning such account (which would
otherwise be taxable under this section) if, with respect to
such transaction, the account ceases to be a family
development account by reason of the application of section
1400H(d)(2) to such account.''; and
(2) in subsection (e)(1), by striking ``or'' at the end of
subparagraph (E), by redesignating subparagraph (F) as
subparagraph (G), and by inserting after subparagraph (E) the
following new subparagraph:
``(F) a family development account described in section
1400H(e), or''.
(d) Information Relating to Certain Trusts and Annuity
Plans.--Subsection (c) of section 6047 is amended--
(1) by inserting ``or section 1400H'' after ``section
219''; and
(2) by inserting ``, of any family development account
described in section 1400H(e),'', after ``section 408(a)''.
[[Page H841]]
(e) Inspection of Applications for Tax Exemption.--Clause
(i) of section 6104(a)(1)(B) is amended by inserting ``a
family development account described in section 1400H(e),''
after ``section 408(a),''.
(f ) Failure To Provide Reports on Family Development
Accounts.--Paragraph (2) of section 6693(a) is amended by
striking ``and'' at the end of subparagraph (C), by striking
the period and inserting ``, and'' at the end of subparagraph
(D), and by adding at the end the following new subparagraph:
``(E) section 1400H(g)(6) (relating to family development
accounts).''.
(g) Conforming Amendments Regarding Commercial
Revitalization Deduction.--
(1) Section 172 is amended by redesignating subsection ( j)
as subsection (k) and by inserting after subsection (i) the
following new subsection:
``( j) No carryback of section 1400k Deduction Before Date
of the Enactment.--No portion of the net operating loss for
any taxable year which is attributable to any commercial
revitalization deduction determined under section 1400K may
be carried back to a taxable year ending before the date of
the enactment of section 1400K.''.
(2) Subparagraph (B) of section 48(a)(2) is amended by
inserting ``or commercial revitalization'' after
``rehabilitation'' each place it appears in the text and
heading.
(3) Subparagraph (C) of section 469(i)(3) is amended--
(A) by inserting ``or section 1400K'' after ``section 42'';
and
(B) by inserting ``and commercial revitalization
deduction'' after ``credit'' in the heading.
(h) Clerical Amendments.--The table of subchapters for
chapter 1 is amended by adding at the end the following new
item:
``Subchapter X. Renewal Communities.''.
Subtitle B--Timber Incentives
SEC. 411. TEMPORARY SUSPENSION OF MAXIMUM AMOUNT OF
AMORTIZABLE REFORESTATION EXPENDITURES.
(a) Increase in Dollar Limitation.--Paragraph (1) of
section 194(b) (relating to amortization of reforestation
expenditures) is amended by striking ``$10,000 ($5,000'' and
inserting ``$25,000 ($12,500''.
(b) Temporary Suspension of Increased Dollar Limitation.--
Subsection (b) of section 194(b) (relating to amortization of
reforestation expenditures) is amended by adding at the end
the following new paragraph:
``(5) Suspension of dollar limitation.--Paragraph (1) shall
not apply to taxable years beginning after December 31, 2000,
and before January 1, 2004.
(c) Conforming Amendment.--Paragraph (1) of section 48(b)
is amended by striking ``section 194(b)(1)'' and inserting
``section 194(b)(1) and without regard to section
194(b)(5)''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2000.
TITLE V--REAL ESTATE PROVISIONS
Subtitle A--Improvements in Low-Income Housing Credit
SEC. 501. MODIFICATION OF STATE CEILING ON LOW-INCOME HOUSING
CREDIT.
(a) In General.--Clauses (i) and (ii) of section
42(h)(3)(C) (relating to State housing credit ceiling) are
amended to read as follows:
``(i) the unused State housing credit ceiling (if any) of
such State for the preceding calendar year,
``(ii) the greater of--
``(I) the applicable amount under subparagraph (H)
multiplied by the State population, or
``(II) $2,000,000,''.
(b) Applicable Amount.--Paragraph (3) of section 42(h)
(relating to housing credit dollar amount for agencies) is
amended by adding at the end the following new subparagraph:
``(H) Applicable amount of state ceiling.--For purposes of
subparagraph (C)(ii), the applicable amount shall be
determined under the following table:
The applicable amount is:
2001......................................................$1.35
2002..................................................... 1.45
2003..................................................... 1.55
2004 and thereafter.................................. 1.65.''.
(c) Adjustment of State Ceiling for Increases in Cost-of-
Living.--Paragraph (3) of section 42(h) (relating to housing
credit dollar amount for agencies), as amended by subsection
(c), is amended by adding at the end the following new
subparagraph:
``(I) Cost-of-living adjustment.--
``(i) In general.--In the case of a calendar year after
2004, the $2,000,000 in subparagraph (C) and the $1.65 amount
in subparagraph (H) shall each be increased by an amount
equal to--
``(I) such dollar amount, multiplied by
``(II) the cost-of-living adjustment determined under
section 1(f )(3) for such calendar year by substituting
`calendar year 2003' for `calendar year 1992' in subparagraph
(B) thereof.
``(ii) Rounding.--
``(I) In the case of the amount in subparagraph (C), any
increase under clause (i) which is not a multiple of $5,000
shall be rounded to the next lowest multiple of $5,000.
``(II) In the case of the amount in subparagraph (H), any
increase under clause (i) which is not a multiple of 5 cents
shall be rounded to the next lowest multiple of 5 cents.''.
(d) Conforming Amendments.--
(1) Section 42(h)(3)(C), as amended by subsection (a), is
amended--
(A) by striking ``clause (ii)'' in the matter following
clause (iv) and inserting ``clause (i)'', and
(B) by striking ``clauses (i)'' in the matter following
clause (iv) and inserting ``clauses (ii)''.
(2) Section 42(h)(3)(D)(ii) is amended--
(A) by striking ``subparagraph (C)(ii)'' and inserting
``subparagraph (C)(i)'', and
(B) by striking ``clauses (i)'' in subclause (II) and
inserting ``clauses (ii)''.
(e) Effective Date.--The amendments made by this section
shall apply to calendar years after 2000.
SEC. 502. MODIFICATION OF CRITERIA FOR ALLOCATING HOUSING
CREDITS AMONG PROJECTS.
(a) Selection Criteria.--Subparagraph (C) of section
42(m)(1) (relating to certain selection criteria must be
used) is amended--
(1) by inserting ``, including whether the project includes
the use of existing housing as part of a community
revitalization plan'' before the comma at the end of clause
(iii), and
(2) by striking clauses (v), (vi), and (vii) and inserting
the following new clauses:
``(v) tenant populations with special housing needs,
``(vi) public housing waiting lists,
``(vii) tenant populations of individuals with children,
and
``(viii) projects intended for eventual tenant
ownership.''.
(b) Preference for Community Revitalization Projects
Located in Qualified Census Tracts.--Clause (ii) of section
42(m)(1)(B) is amended by striking ``and'' at the end of
subclause (I), by adding ``and'' at the end of subclause
(II), and by inserting after subclause (II) the following new
subclause:
``(III) projects which are located in qualified census
tracts (as defined in subsection (d)(5)(C)) and the
development of which contributes to a concerted community
revitalization plan,''.
SEC. 503. ADDITIONAL RESPONSIBILITIES OF HOUSING CREDIT
AGENCIES.
(a) Market Study; Public Disclosure of Rationale for Not
Following Credit Allocation Priorities.--Subparagraph (A) of
section 42(m)(1) (relating to responsibilities of housing
credit agencies) is amended by striking ``and'' at the end of
clause (i), by striking the period at the end of clause (ii)
and inserting a comma, and by adding at the end the following
new clauses:
``(iii) a comprehensive market study of the housing needs
of low-income individuals in the area to be served by the
project is conducted before the credit allocation is made and
at the developer's expense by a disinterested party who is
approved by such agency, and
``(iv) a written explanation is available to the general
public for any allocation of a housing credit dollar amount
which is not made in accordance with established priorities
and selection criteria of the housing credit agency.''.
(b) Site Visits.--Clause (iii) of section 42(m)(1)(B)
(relating to qualified allocation plan) is amended by
inserting before the period ``and in monitoring for
noncompliance with habitability standards through regular
site visits''.
SEC. 504. MODIFICATIONS TO RULES RELATING TO BASIS OF
BUILDING WHICH IS ELIGIBLE FOR CREDIT.
(a) Adjusted Basis To Include Portion of Certain Buildings
Used by Low-Income Individuals Who Are Not Tenants and by
Project Employees.--Paragraph (4) of section 42(d) (relating
to special rules relating to determination of adjusted basis)
is amended--
(1) by striking ``subparagraph (B)'' in subparagraph (A)
and inserting ``subparagraphs (B) and (C)'',
(2) by redesignating subparagraph (C) as subparagraph (D),
and
(3) by inserting after subparagraph (B) the following new
subparagraph:
``(C) Inclusion of basis of property used to provide
services for certain nontenants.--
``(i) In general.--The adjusted basis of any building
located in a qualified census tract (as defined in paragraph
(5)(C)) shall be determined by taking into account the
adjusted basis of property (of a character subject to the
allowance for depreciation and not otherwise taken into
account) used throughout the taxable year in providing any
community service facility.
``(ii) Limitation.--The increase in the adjusted basis of
any building which is taken into account by reason of clause
(i) shall not exceed 10 percent of the eligible basis of the
qualified low-income housing project of which it is a part.
For purposes of the preceding sentence, all community service
facilities which are part of the same qualified low-income
housing project shall be treated as one facility.
``(iii) Community service facility.--For purposes of this
subparagraph, the term `community service facility' means any
facility designed to serve primarily individuals whose income
is 60 percent or less of area median income (within the
meaning of subsection (g)(1)(B)).''.
(b) Certain Native American Housing Assistance Disregarded
in Determining Whether Building Is Federally Subsidized for
Purposes of the Low-Income Housing Credit.--Subparagraph (E)
of section 42(i)(2) (relating to determination of whether
building is federally subsidized) is amended--
[[Page H842]]
(1) in clause (i), by inserting ``or the Native American
Housing Assistance and Self-Determination Act of 1996 (25
U.S.C. 4101 et seq.) (as in effect on October 1, 1997)''
after ``this subparagraph)'', and
(2) in the subparagraph heading, by inserting ``or native
american housing assistance'' after ``home assistance''.
SEC. 505. OTHER MODIFICATIONS.
(a) Allocation of Credit Limit to Certain Buildings.--
(1) The first sentence of section 42(h)(1)(E)(ii) is
amended by striking ``(as of'' the first place it appears and
inserting ``(as of the later of the date which is 6 months
after the date that the allocation was made or''.
(2) The last sentence of section 42(h)(3)(C) is amended by
striking ``project which'' and inserting ``project which
fails to meet the 10 percent test under paragraph (1)(E)(ii)
on a date after the close of the calendar year in which the
allocation was made or which''.
(b) Determination of Whether Buildings Are Located in High
Cost Areas.--The first sentence of section 42(d)(5)(C)(ii)(I)
is amended--
(1) by inserting ``either'' before ``in which 50 percent'',
and
(2) by inserting before the period ``or which has a poverty
rate of at least 25 percent''.
SEC. 506. CARRYFORWARD RULES.
(a) In General.--Clause (ii) of section 42(h)(3)(D)
(relating to unused housing credit carryovers allocated among
certain States) is amended by striking ``the excess'' and all
that follows and inserting ``the excess (if any) of--
``(I) the unused State housing credit ceiling for the year
preceding such year, over
``(II) the aggregate housing credit dollar amount allocated
for such year.''.
(b) Conforming Amendment.--The second sentence of section
42(h)(3)(C) (relating to State housing credit ceiling) is
amended by striking ``clauses (i) and (iii)'' and inserting
``clauses (i) through (iv)''.
SEC. 507. EFFECTIVE DATE.
Except as otherwise provided in this subtitle, the
amendments made by this subtitle shall apply to--
(1) housing credit dollar amounts allocated after December
31, 2000, and
(2) buildings placed in service after such date to the
extent paragraph (1) of section 42(h) of the Internal Revenue
Code of 1986 does not apply to any building by reason of
paragraph (4) thereof, but only with respect to bonds issued
after such date.
Subtitle B--Private Activity Bond Volume Cap
SEC. 511. ACCELERATION OF PHASE-IN OF INCREASE IN VOLUME CAP
ON PRIVATE ACTIVITY BONDS.
(a) In General.--The table contained in section 146(d)(2)
(relating to per capita limit; aggregate limit) is amended to
read as follows:
``Calendar Year Per Capita Limit Aggregate Limit
------------------------------------------------------------------------
2001....................... $55.00 $165,000,000
2002....................... 60.00 180,000,000
2003....................... 65.00 195,000,000
2004, 2005, and 2006....... 70.00 210,000,000
2007 and thereafter........ 75.00 225,000,000.''.
(b) Effective Date.--The amendment made by this section
shall apply to calendar years beginning after 2000.
Subtitle C--Exclusion From Gross Income for Certain Forgiven Mortgage
Obligations
SEC. 512. EXCLUSION FROM GROSS INCOME FOR CERTAIN FORGIVEN
MORTGAGE OBLIGATIONS.
(a) In General.--Paragraph (1) of section 108(a) (relating
to exclusion from gross income) is amended by striking ``or''
at the end of both subparagraphs (A) and (C), by striking the
period at the end of subparagraph (D) and inserting ``, or'',
and by inserting after subparagraph (D) the following new
subparagraph:
``(E) in the case of an individual, the indebtedness
discharged is qualified residential indebtedness.''.
(b) Qualified Residential Indebtedness Shortfall.--Section
108 (relating to discharge of indebtedness) is amended by
adding at the end the following new subsection:
``(h) Qualified Residential Indebtedness.--
``(1) Limitations.--The amount excluded under subparagraph
(E) of subsection (a)(1) with respect to any qualified
residential indebtedness shall not exceed the excess (if any)
of--
``(A) the outstanding principal amount of such indebtedness
(immediately before the discharge), over
``(B) the sum of--
``(i) the amount realized from the sale of the real
property securing such indebtedness reduced by the cost of
such sale, and
``(ii) the outstanding principal amount of any other
indebtedness secured by such property.
``(2) Qualified residential indebtedness.--
``(A) In general.--The term `qualified residential
indebtedness' means indebtedness which--
``(i) was incurred or assumed by the taxpayer in connection
with real property used as the principal residence (within
the meaning of section 121) of the taxpayer and is secured by
such real property,
``(ii) is incurred or assumed to acquire, construct,
reconstruct, or substantially improve such real property, and
``(iii) with respect to which such taxpayer makes an
election to have this paragraph apply.
``(B) Refinanced indebtedness.--Such term shall include
indebtedness resulting from the refinancing of indebtedness
under subparagraph (A)(ii), but only to the extent the amount
of the indebtedness resulting from such refinancing does not
exceed the amount of the refinanced indebtedness.
``(C) Exceptions.--Such term shall not include qualified
farm indebtedness or qualified real property business
indebtedness.''.
(c) Conforming Amendments.--
(1) Paragraph (2) of section 108(a) is amended--
(A) in subparagraph (A) by striking ``and (D)'' and
inserting ``(D), and (E)'', and
(B) by amending subparagraph (B) to read as follows:
``(B) Insolvency exclusion takes precedence over qualified
farm exclusion; qualified real property business exclusion;
and qualified residential shortfall exclusion.--Subparagraphs
(C), (D), and (E) of paragraph (1) shall not apply to a
discharge to the extent the taxpayer is insolvent.''.
(2) Paragraph (1) of section 108(b) is amended by striking
``or (C)'' and inserting ``(C), or (E)''.
(3) Subsection (c) of section 121 of such Code is amended
by adding at the end the following new paragraph:
``(4) Special rule relating to discharge of indebtedness.--
The amount of gain which (but for this paragraph) would be
excluded from gross income under subsection (a) with respect
to a principal residence shall be reduced by the amount
excluded from gross income under section 108(a)(1)(E) with
respect to such residence.''.
(d) Effective Date.--The amendments made by this section
shall apply to discharges after December 31, 2000.
The SPEAKER pro tempore. The gentleman from Texas (Mr. Archer) and
the gentleman from New York (Mr. Rangel) each will control 1 hour.
The Chair recognizes the gentleman from Texas (Mr. Archer).
General Leave
Mr. ARCHER. Mr. Speaker, I ask unanimous consent that all Members may
have 5 legislative days in which to revise and extend their remarks and
include extraneous material on the bill, H.R. 3081.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Texas?
There was no objection.
{time} 1530
Mr. ARCHER. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, today will be another day of accomplishment for the
American people because today Congress will once again do the right
thing and pass a plan to help make health care more affordable and
accessible for hard-working, middle-income, self-employed Americans. We
will also strengthen our pension system for millions of Americans and
make it better for working women and people who switch jobs so often
and in that way all Americans can be more secure in their retirement.
Mr. Speaker, I am proud that Congress is here today once again
pushing to remove the gruesome death tax penalty from the Tax Code and
to send it one step closer to the grave. Clearly, the death tax is one
of the most unfair taxes in the Tax Code today. It is terribly complex
and, what is worse, at a time when the only economic cloud on our
horizon is our negative private savings rate, the death tax is a dollar
for dollar tax on the personal savings of Americans. That is wrong.
Furthermore, it often prevents families from being able to see their
small businesses go down to their heirs and forced to be sold in order
to pay the tax. No one should have to visit the undertaker and the IRS
on the same day.
Today the House considers the Small Business Tax Fairness Act to help
the diesel engine of our economy and the job creation factory of our
country. That factory is America's small businesses. More than 6 out of
every 10 American workers is employed by a small business. Small
businesses have created two-thirds of the new jobs since 1970, and
small businesses account for close to 40 percent of the GNP.
American women are starting new businesses at twice the rate of men.
This year, in fact, will be the first year in our entire history where
women will own more than half of all businesses,
[[Page H843]]
about 8 million across the Nation. The Small Business Tax Fairness Act
is aimed to help those hard-working, middle-income Americans, the
shopkeeper in South Carolina, the restaurant owner in California, and
the small family in Ohio. These Americans are not rich. The average
small business owner makes about $40,000 a year, and the average
restaurant owner makes about $50,000 a year; but as we have heard
already this morning, and it is really a shame, Democrats who want to
divide our country are making the same old class warfare arguments that
do nothing to help unite us; do nothing to help recognize the ladder of
upward mobility for all Americans and that no one stays fixed in where
they are today.
We should be expanding opportunity for all, not pitting one group of
Americans against another. Is expanding the low-income housing tax
credit a tax break for the rich? Is creating new renewal communities in
America's most poverty stricken communities a tax break for the rich?
Is helping self-employed Americans get health insurance at a tax break,
is that helping the rich? Is strengthening our pension system a tax
break for the rich?
All these provisions are included in this bill, but Democrats still
cannot stop the tax cut for the rich broken record. Why can Democrats
not leave the divisive class warfare rhetoric back in the 20th century
where it belongs?
Once again, Democrats are fighting tax relief, any tax relief and all
tax relief, whether it is for married couples or whether it is for
small businesses.
Mr. Speaker, today Congress is once again doing the right thing. It
was right to balance the budget and to pay down the debt, and we did
that. It was right to strengthen Medicare, and we did that. It was
right to cut taxes for families, promote higher education, expand
health care, and we have done that. It was right to fix the failed
welfare system so Americans can discover the freedom of independence
and personal responsibility. It was right to reform the IRS, and we did
that. It was right to help our school children and help parents and
teachers with education reform. It was right to stop the raid on the
Social Security trust fund and protect every dime of Social Security
from being spent on other programs, and we have done that.
It is right to pass this plan today, a plan to help more Americans
get health insurance, to give millions of Americans more retirement
security, to help small businesses continue to create jobs and economic
growth, and to put a nail in the coffin of one of the worst taxes in
America today, the death tax.
Mr. Speaker, I urge the passage of this bill, and I would like to
submit for the Record the following correspondence between Chairman
Goodling and myself:
Committee on Ways and Means,
Washington, DC, March 7, 2000.
Hon. William F. Goodling,
Chairman, Committee on Education and the Workforce, Rayburn
House Office Building, Washington, DC.
Dear Chairman Goodling: I write to confirm our mutual
understanding with respect to further consideration of H.R.
3801, the ``Wage and Employment Growth Act.'' H.R. 3801 was
favorable reported by the Committee on Ways and Means on
November 11, 1999.
In addition to the tax items considered by the Committee on
Ways and Means, H.R. 3081 contains a number of provisions
within the jurisdiction of the Education and Workforce
Committee. In addition to the amendments to the Fair Labor
Standards Act in Title I, the bill also contains provisions
in Title III relating to the Employee Retirement Income
Security Act (ERISA) and other pension related matters, which
were previously approved by your Committee and included in
the conference report for H.R. 2488, the ``Taxpayer Refund
and Relief Act.'' You may recall that, in order to expedite
consideration of H.R. 2488, you agreed to withhold the ERISA
related items when the bill was considered on the floor
pending subsequent action in conference.
Similarly, in order to expedite consideration of H.R. 3081,
it is my understanding that you will agree to withhold
consideration on the floor of the ERISA and pension related
items within your Committee's jurisdiction at this time. This
is being done based on the understanding that I will support
efforts to include the agreed upon provisions in the final
conference report on H.R. 3081, and that I will not object to
a request for conferees with respect to matters within the
jurisdiction of your Committee when a House-Senate conference
is convened on this legislation.
Finally, I will include in the Record a copy of our
exchange of letters on this matter during floor
consideration. Thank you for your assistance and cooperation
in this matter. With best personal regards,
Sincerely,
Bill Archer,
Chairman.
____
Committee on Education
and the Workforce,
Washington, DC, March 7, 2000.
Hon. Bill Archer,
Chairman, Committee on Ways and Means, Longworth HOB,
Washington, DC.
Dear Chairman Archer: Thank you for your letter and for
working with me regarding H.R. 3081, the Wage and Employment
Growth Act. As you have correctly noted H.R. 3081 contains a
number of provisions within the jurisdiction of the Committee
on Education and the Workforce. I understand that in order to
expedite consideration of the bill, all provisions within the
sole jurisdiction of the Committee on Education and the
Workforce will be deleted from the bill, including Title I,
Amendments to the Fair Labor Standards Act; Section 377, a
free standing provision dealing with the clarification of
church plans under state insurance law; and all pension
amendments to ERISA contained in Title III.
I appreciate your support and efforts to include the above
referenced pension provisions in the final conference
agreement on H.R. 3081. I also appreciate your support in my
request to the Speaker for the appointment of conferees from
my Committee with respect to matters within the jurisdiction
of my Committee when a conference with the Senate is convened
on this legislation.
Thank you for working with me to develop this legislation
and for agreeing to include this exchange of letters in the
Congressional Record during the House debate on H.R. 3081. I
look forward to working with you on these issues in the
future.
Sincerely,
Bill Goodling,
Chairman.
Mr. Speaker, I reserve the balance of my time.
Mr. RANGEL. Mr. Speaker, I yield myself such time as I may consume.
(Mr. RANGEL asked and was given permission to revise and extend his
remarks.)
Mr. RANGEL. Mr. Speaker, when we are talking about justice, equity,
and fair play, it is not right to call this a class war. While it is
true that in the Republican tax bill, which basically came out of the
Committee on Rules, that there are some democratic principles that we
can support, the truth of the matter is one does not have to be an
accountant or H&R Block or a tax lawyer to see that the $120 billion
tax cut is not for the small business person. So take a look at it.
Clearly, it is targeted for the wealthiest Americans that we have.
Now, it may not be bad to do that, but do not pile up on a bill that
is just trying to give a dollar extra in terms of minimum wage. If
these things want to be done, come out and let the Committee on Ways
and Means have hearings, vote on it and bring it to the floor so that
the floor can work its will.
What my colleagues are basically doing today is to say how can we
kill the minimum wage bill. Now, the gentleman from California (Mr.
Dreier), the chairman of the Committee on Rules, he stood up in this
well and he said he thought it was bad to superimpose congressional
rule on employers, and I know a lot of my colleagues think that is
true. So why not just take the minimum wage bill, leave the tax portion
to the Committee on Ways and Means, and vote up or down on what is
right on minimum wage. Or do it their way and say, hey, the President
is inclined to support minimum wage; maybe politically we can vote for
it and have the President to veto it.
Now, how can one get the President to veto it? Load it up with
provisions of the tax bill that passed last year because he would veto
it.
Now, it just seems to me that if my colleagues on the other side did
not have the political courage to get a vote to override the
President's veto, we should not do on legislation for minimum wage what
the Committee on Ways and Means and what this House is not prepared to
do with a straight shot.
Everything that the people want is going to be taken, whether it is
the Patients' Bill of Rights, affordable drugs, and it is going to be
said that my colleagues on the other side are for these things and then
add on to it substantial tax cuts that is not for the working people
but for those who really have the highest earnings and deserve the
benefits the least.
If one takes a look at the alternative that we asked for, many of the
things
[[Page H844]]
that are in their bill we have, but what we do is close the loopholes
of Americans that after enjoying the benefits of the great prosperity
that we have renounce their citizenship, renounce their country,
renounce the American flag and flee off to foreign countries. For
crying out loud, why would anyone be opposed to closing up that
loophole? It is in our alternative.
We then will target the tax money, not $122 billion but $36 billion,
to the small farmers, the small businesspeople, and this is what they
want and this is what the President is willing to sign.
We have targeted relief for people that need and deserve it. So if
what my colleagues on the other side are trying to say is that they are
for an increase in the minimum wage but they want to help the small
businessman, how do they explain that three-fourths of the bill, in
terms of tax cuts, is not going to the small businessman, not going to
the small farmer? Is this their way to kill a bill by having the
President to veto it and then wait until their whole legislative
process collapses and then we negotiate with the President?
We should not have to negotiate with any President. We should
legislate, and we should also give the minority an opportunity to
express its will.
What does that mean? Why would the rule deny us an opportunity just
for an alternative, just to give Republicans and Democrats an
opportunity to say that we have a better way to do it?
Well, we know one thing, that what is really trying to be done is to
get that 800 pound billion dollar gorilla back up here to the tax floor
in smaller pieces. It did not work last year. It was vetoed last year.
An override for the veto last year was not run for, and an override
this year is not being thought about to try for.
There are things that we should be working together on: Fixing up
Social Security, Medicare, Patients' Bill of Rights, affordable drugs,
education; not to do it as Democrats, not to do it as Republicans but
to do it as Americans and as Members of Congress and working with the
President. One does not have to like the President to work with him,
but they cannot do it alone and the only time we can accomplish
something is by cooperation, as the chairman and I did when we brought
to the floor removing the penalty for people who want to work after 65.
That is what is called cooperation. That is how bills are not vetoed,
and that is how we can work again.
Mr. Speaker, I reserve the balance of my time.
Mr. ARCHER. Mr. Speaker, I yield 2\1/2\ minutes to the gentleman from
Illinois (Mr. Crane), the ranking Republican member of the Committee on
Ways and Means.
Mr. CRANE. Mr. Speaker, I thank the chairman, the gentleman from
Texas (Mr. Archer), for yielding me this time.
Mr. Speaker, we stand on this floor, representatives of a country
that is basking in a time of great economic prosperity. The United
States is at full employment and business is expanding with new jobs
being created at a rate rarely experienced in anyone's lifetime. Today
we have an opportunity to return money to Americans who work hard and,
based on that work, pay too much in taxes.
While I wish it could be more, it is time to give a little back. I am
particularly pleased with the death tax relief provisions and delighted
that we continue our efforts to eradicate it. Whether it is the family
farm or a more traditional business, the death tax is an assault upon
the moral values of every family in this country that has had the
wherewithal to create a business from nothing, persevere through the
bad times and hope to leave it to their children.
Unfortunately, it is all too often that a family is forced to sell
its business because the Federal Government has decreed that it is
entitled to a disproportionate share of a family's business once the
owner has died. In effect, Uncle Sam put a bounty on family-owned
businesses. The old saying is that death and taxes are sure things, and
years ago the Federal Government made certain that through the death
tax the two are inextricably intertwined.
This bill gives us an opportunity to loosen just a little the
stranglehold the Tax Code has on these families and their livelihoods.
I also want to convey my support for accelerating the 100 percent
health insurance deduction for the self-employed. Being able to
purchase health care insurance means that more children and men and
women will have access to the best health care system in the world.
I was pleased we were able to include a reinstatement of the
installment method of accounting for accrual basis taxpayers, which has
been so detrimental to hundreds of thousands of businesses across the
country, many of them in my home State of Illinois.
{time} 1545
Mr. Speaker, I will continue my fight to drastically reform our tax
system and reduce the tax burden our American families struggle with
every day.
I urge my colleagues to vote in support of H.R. 3081, the Small
Business Tax Fairness Act of 2000.
Mr. RANGEL. Mr. Speaker, I yield 3 minutes to the gentleman from
Michigan (Mr. Levin), a senior member of the Committee on Ways and
Means.
(Mr. LEVIN asked and was given permission to revise and extend his
remarks.)
Mr. LEVIN. Mr. Speaker, there has been a lot of talk on the
Republican side about the ``straight-talk express.'' This bill is the
``double-talk express.''
These are the facts: our Democratic bill does more, does more for
small business than the Republican bill. The Republican bill does most
for the very wealthy. As the gentleman from New York (Mr. Rangel)
eloquently stated, about three-quarters of the tax relief in this bill
goes to the upper 1 percent, and this is called a small business bill.
This is called a minimum wage bill.
Mr. Speaker, we are not fighting any tax relief; we are fighting for
the right kind of tax relief. What the Republicans are doing here is
using the minimum wage as a bargaining chip, and the very wealthy pick
up most of the winnings.
The class warfare here, if there is any, is against the working poor.
A Member of Congress earns in one month what a low-income family
working hard earns in about a year. I do not demean the work of those
of us in Congress, and we should not demean the work of those who are
in low-income categories.
We passed a welfare reform bill here; and I voted for it, people
moving from welfare to work. Tens of thousands of them who have moved
from welfare to work under the present minimum wage cannot earn enough
to get above the poverty line; cannot earn enough when they work hard
40 hours a week to get above the poverty line. What my colleagues are
trying to do is to nickel and dime this bill and tie it to a bill that
is going to be vetoed. Why pass a bill through here that the President
says he is going to veto? What is the sense of doing that? This is the
same old same old Republican majority.
Mr. Speaker, it is time to turn a new leaf in this House. The people
who work hard for a living at a minimum wage deserve an increase. They
are way behind in terms of real dollars where they were 15 years ago,
even after the action of a couple of years ago. It is a disgrace to tie
this bill to something else. Bring it up alone. Mr. Speaker, we know
why they will not do it, because they know it will pass. Eventually, we
are going to pass a bill here that addresses the needs of hard-working,
low-income families, and not a bill that gives almost 75 percent to the
most wealthy 1 percent in the United States of America.
Mr. ARCHER. Mr. Speaker, I yield 3 minutes to the gentlewoman from
the State of Washington (Ms. Dunn), a respected Member of the Committee
on Ways and Means.
Ms. DUNN. Mr. Speaker, I want to thank the gentleman from Texas (Mr.
Archer) and all of the other people, Republicans and Democrats, who
worked so hard and so fairly to put the provisions together that we
will be voting on today. This bill provides essential relief that is a
down payment toward the ultimate repeal of the devastating death tax.
The freedom to attain prosperity and to accumulate wealth is uniquely
American; and when unfettered, it is a wonderful thing to behold. Yet,
the current tax treatment of a person's life savings is so onerous that
children are often forced to turn over more than half of their
inheritance to the Federal
[[Page H845]]
Government, in cash, within 9 months of the death of the parent. We all
know stories about the basic unfairness of this tax. It is just as
wrong as it is tragic, and it dishonors the hard work of those who have
passed on.
As a result, in the past, Congress has tried to provide targeted
death tax relief to certain people. In 1997, a new death tax provision
was enacted to provide additional relief to smaller family-held
businesses and farms. Although it was a good idea at the time, this
exemption has proven to be a boondoggle for attorneys who are hired by
families trying to navigate their way through the 14-point eligibility
test.
The Democrats now propose to increase this family-owned business
exemption under the guise of relief. Well, it will not work. Many
estate planners have told us that this exemption is so complex that
fewer than 2 percent of businesses or farms even qualify. As much as we
try, it is simply impossible to duplicate in law the complex family
relationships that exist in the real world.
Democrats will also argue today that this tax only hits a select few.
This argument is misleading because it only focuses on a portion of the
debate: who pays the tax. What they do not tell us is that the mere
existence of the tax forces businesses to spend an average of $67,000
per year in life insurance premiums and attorneys and accountant fees
in order to prepare for the tax. The total cost of compliance in the
private sector alone is about equal to the total dollars collected in
this tax each year. In addition, their argument does not account for
the number of businesses who sell before the owner dies in order to pay
a lower capital gains tax.
The Chicago-based Vanguard, one of America's last remaining black-
owned newspapers, was forced to sell last year because they could not
pay the millions of dollars they owed in death tax. As a result, that
community lost an important voice. This is typical of what happens when
a family-owned enterprise cannot afford to pay the high after-death
taxes.
That is also why the Black Chamber of Commerce, the Hispanic Chamber
of Commerce, and the National Indian Business Council all support the
repeal of the death tax. They argue that it takes 2 or 3 generations to
gain an economic foothold in the community. To them, the death tax is
an enemy.
Mr. Speaker, I urge every single one of my colleagues on the floor of
this House to vote against the repeal of the unfair death tax that we
can do away with in this bill.
Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentleman from
Illinois (Mr. Phelps).
(Mr. PHELPS asked and was given permission to revise and extend his
remarks.)
Mr. PHELPS. Mr. Speaker, I rise in strong opposition today to the
Republican tax cut package. I urge that all Members who support fair,
affordable, small business tax relief to instead cosponsor the
Democratic alternative which we should have been allowed to consider on
the floor today.
Yesterday I testified before the Committee on Rules in favor of a
rule that made in order both the wage and tax provisions of the
Democratic alternative. This alternative, originally sponsored by the
gentleman from Michigan (Mr. Bonior), the gentleman from New York (Mr.
Rangel), the gentleman from Texas (Mr. Sandlin), and myself included a
two-step, one-dollar minimum wage increase and a $32 billion package of
targeted small business tax relief. It had strong support in the House
and across the country, and it merited an opportunity for debate in a
clean up or down vote. Unfortunately, perhaps because they too were
aware of our proposal's popularity, the committee recommended a closed
rule on H.R. 3081.
This should not be a partisan issue. This is an issue of fairness and
fiscal responsibility of making it easier for working men and women to
provide for their families and making it easier for employers to help
them do so. Members on both sides of the aisle deserve the chance to
vote on a package of sensible, targeted tax provisions that are fully
paid for and that serve the specific purpose of helping to offset the
burdens that result from an increased minimum wage.
Instead, we have before us a sprawling, incredibly expensive tax cut
bill which lavishes the vast majority of its benefits on the wealthiest
one-third or 1 percent of taxpayers. In fact, the portion of the
Republican bill which actually helps small businesses is less than the
$32 billion provided by our substitute. Yet, the Republican bill
carries a cost of $122 billion over 10 years. Unlike the Democratic
package, which is fully offset, H.R. 3081 jeopardizes not only the
future of Social Security and Medicare, but also our ability to give
Americans the biggest tax break of all by paying down the national
debt.
At the conclusion of this debate, a motion to recommit will be
offered that will contain the Democratic tax statistic. I urge support
of the Democratic alternative.
Mr. ARCHER. Mr. Speaker, I yield 2\1/2\ minutes to the gentleman from
Florida (Mr. Foley), a respected member of the Committee on Ways and
Means.
Mr. FOLEY. Mr. Speaker, let me thank the chairman of the committee
for the excellent bill that is on the floor today, and let me urge the
members of the minority to use a little caution when characterizing
these bills.
First and foremost, I supported increasing minimum wage and will vote
again that same way today. But let me also detail for my colleagues the
fact that the process today in the bill we are debating are in fact
sponsored largely by a number of prominent Democrats. Pension
modernization that is coming within this bill is known as the Portman-
Cardin bill; distressed communities, which does not sound like
something that is for the rich in Palm Beach, known as Watts-Talent-
Frost and 19 others. Low income housing, Johnson-Rangel, the ranking
member of the committee, on a bill that I have sponsored with the
gentleman from New Jersey (Mr. Andrews) for forgiving mortgage
obligations, that is, forgiving debt for somebody who has gone
bankrupt. We are trying to help those that need help rebuilding their
lives.
Why do we debate this bill if it is going to be vetoed by the
President? I heard that question asked by my colleague. We have to do
that until the President finally gets it right. We did that three times
with welfare reform and finally, finally the President signed the bill.
Lo and behold, every Member running for Congress for reelection,
Democrat or Republican, gets up and says, we have reformed welfare. Now
they take credit for it because it is a good bill.
The other thing that bothers me in this process is many of the people
that advocate putting another dollar burden on the average small
business owner are those same people who have never actually worked
outside this process in their life. They have not had a small business.
I owned a restaurant. It was difficult to make ends meet, difficult to
make payroll; and at times, I went without a paycheck because I had to
pay my staff. Yes, I agree increasing the minimum wage will help, but I
certainly do not find it a problem to at least assist the small
businesses in making that increase in payroll costs softened at least
by some important tax provisions.
Now, we can sit here and wrangle all day about a bad bill, a good
bill, this bill, that bill. I have heard many Members of Congress today
say, help the small people out, and I agree. People at minimum wage are
seeing increased fuel costs. I am not hearing much being done by the
Energy Department or the White House, other than to say, my God, gas
prices are up. I think we need some help for people that are, in fact,
paying for gas at the pump. But one thing we can do certainly today is
help provide some incentives for small business.
Mr. Speaker, again, if people would look carefully at what is in this
bill, they will not be taken in by the persuasive arguments of some on
the other side that this is for the wealthy. That is an easy argument.
They always come with that wealthy argument: it is for the rich; it is
for the rich. Folks, look at the bill. Health insurance, pension
modernization, distressed communities, low-income housing. These issues
are not for the rich; these are for every American.
Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentleman from
Texas (Mr. Doggett).
Mr. DOGGETT. Mr. Speaker, Members may not recognize this fellow in
[[Page H846]]
the fedora standing in the shadows, but they ought to be aware of what
he is doing. He is a caricature of America's leading tax shelter
hustlers. This bill is his bill. By restricting amendments, by assuring
that we cannot deal with the leading causes of injustice in our tax
system today, Republicans have protected the tax shelter hustlers.
Only yesterday, the Secretary of the Treasury, Larry Summers, told
the Senate Finance Committee that failure to address this issue of tax
shelters ``in a meaningful way puts the fairness and efficacy of our
tax system at risk.'' He has also said that the most serious compliance
problem we have in the American tax system today is the failure to deal
with tax shelter hustlers. This bill in particular, like the Committee
on Ways and Means, in general does absolutely nothing to stop the tax
shelter hustlers that are robbing the Treasury of upwards of $10
billion a year.
Only this week we learned that the tax shelter problem has gotten so
serious that one insurance company after another is moving to Bermuda.
It is so bad that even some of the insurance companies that remain in
this country are saying, our competitors are gaining an unfair
advantage through their tax shelters.
{time} 1600
It is wrong, and that is why the substitute that the gentleman from
New York (Mr. Rangel) has proposed incorporates a bill that I wrote
concerning abusive tax shelters. It would do something about the most
serious compliance problem with our tax system. The instant bill does
absolutely nothing.
There is another problem that the gentleman from New York (Mr.
Rangel) addresses. As incredible as this tax shelter hustler problem
is, there is even one greater problem. Some Americans have grown so
prosperous that they can afford the arrogance of renouncing their
citizenship and discovering one day that the Port Royal Golf Course in
Bermuda is their hometown, that they have new citizenship. This
expatriotism problem represents a multi-billion dollar scandal of
people renouncing their citizenship for the sole purpose of dodging
taxes.
Once again, like the fellow in the fedora, those who have so little
patriotism, those scoundrels, who would renounce their American
citizenship to evade their taxes, they are fully protected in this
bill. But they are fully dealt with in the substitute of the gentleman
from New York (Mr. Rangel). Republicans are so fearful of dealing with
these real tax problems in this country.
And who do Members think picks up the tax tab for the hustler in the
fedora and the scoundrel, who renounces his American citizenship? Small
business and individual taxpayer because who else is left to pick up
the tab? So by dodging these serious problems of tax dodging our
Republican colleagues are actually imposing more burden on the small
businesses of America.
Mr. ARCHER. Mr. Speaker, I yield 2\1/2\ minutes to the respected
gentlewoman from Connecticut (Mrs. Johnson), a member of the Committee
on Ways and Means.
Mrs. JOHNSON of Connecticut. Mr. Speaker, I rise in strong support of
this legislation. Small business is the engine of our growing economy.
It also creates more new jobs than all the big business put together.
Yet, it finds it very difficult to pay higher wages for entry level
jobs.
Today, between the various bills that we will pass, we will increase
the minimum wage, but we will also cut costs for our small businesses
so they will have the revenues to pay the higher wage without laying
people off.
I am proud that the Republican approach very carefully and
realistically focuses on job retention, as well as fair wages. I am
also pleased that this bill has lots of things in it for working
people, not just about wages, but in this bill we pass pension
legislation that allows women over 50 to make catch-up contributions to
pension plans. This means women who stay home and take care of their
children, when they return to the work force, can make those catch-up
contributions and retire with the level of security that, frankly, they
need, and we in America need them to have.
It is also true that this bill allows portability, makes it much
easier to carry your pension from one job to another without fear of
loss. It also allows faster vesting.
This is terrific legislation for working people. It will enable small
businesses to offer pension plans. It will give women a fair shake in
the retirement security business. In addition, it will spread and
encourage the building of affordable housing in our cities.
If there is one crisis that is looming that we are not talking about,
it is the need for low-wage earners to have decent places to live and
rent in our cities. This bill addresses that issue, as well.
It also cuts costs for small business in other ways, allowing them to
expense the cost of equipment so they can hire more people and do
better strengthening our economy and the fabric of our communities.
This is broad-based tax reform for small business. It helps working
people, not only through wages, when it is coupled with the following
bill, but through housing, pension reform, health care deductibility
for premiums.
We need to think holistically about opportunity in America. That is
what this tax bill does. Cutting taxes means we can save for our
retirement. Cutting taxes strengthens our economy and helps our people.
Mr. RANGEL. Mr. Speaker, I yield 3 minutes to the gentleman from
Washington (Mr. McDermott).
(Mr. McDERMOTT asked and was given permission to revise and extend
his remarks.)
Mr. McDERMOTT. Mr. Speaker, Yogi Berra says, it is deja vu all over
again, and here we are again. It is another month. We saw the February
tax bill, and now we have the March tax bill. This one cuts $120
billion out of the tax base with no budget, no concern for Medicare, no
concern for social security. We are simply giving it away again.
This one has an interesting twist to it, because it says, you small
business guys, we are going to do something for you. We are going to
raise the minimum wage for your workers, and that is going to be a cost
to you. Now we have to give something to the small business people.
But let me tell the Members, it is premised on the idea that small
business people must be stupid, that they cannot read tax law, because
this bill is not designed for small business people. Two-thirds of the
$120 billion in tax breaks goes for the estate tax. That affects the 2
percent richest people at the top of the society. That is why this
graph is so illustrative. The Republican tax bill is all loaded on the
end of the rich people.
The gentleman from New York (Mr. Rangel) has put a bill forward that
says, yes, we believe there ought to be some estate tax changes, but
like this blue line, it ought to start way back with small people's
estates and sort of be equal all the way. Not the Republicans, give it
all to the rich. That is why we have a spike down here in accounts of
$25 million and more. That is not for small business people.
We talk about what we are going to do for pension changes. Eighty-
seven percent of the pension changes go to the 5 percent of the people
at the top. It is, again, a bill skewed to the people at the top. That
is in the face of not doing anything about Medicare, not doing anything
about social security. Let us just shovel the money out the door.
Now, between the February bill and this bill, we have served up to
the American people the belief that they are going to get $375 billion
in taxes, a reduction. Now wait for the April bill and the May bill and
the June bill. They will be right back where they were last year with a
tax cut of over $792 billion, which the President vetoed.
If Members think that the President is not paying attention, and that
if they send it to him one piece at a time he will not understand what
they are doing, they are really kind of underestimating the intellect
of the President. He can add. He can add the February bill to the March
bill to the April bill to the May bill, and he is going to veto them
all. This is a poison pill for a raise in the minimum wage. That is all
it is designed to do.
Mr. ARCHER. Mr. Speaker, I yield myself 30 seconds.
Mr. Speaker, the gentleman has an interesting chart. The fascinating
thing about it is, though, that the people that he claims will get the
benefit
[[Page H847]]
of the reduction in the death tax are dead. They do not get any
benefit. They are gone. The real issue is, who are their heirs? How is
it distributed?
But they do not want to talk about that. That is the reason why there
is no official distribution table on the death tax, because it is not
going to benefit the people who have died, it is the people who lose
their jobs and it is the people who have the distribution.
Mr. Speaker, I yield 2 minutes to the gentleman from Louisiana (Mr.
McCrery), a respected member of the Committee on Ways and Means.
Mr. McCRERY. Mr. Speaker, I thank the gentleman for yielding time to
me.
Mr. Speaker, every time we bring a bill to the floor to cut taxes,
the Democrats come up with the same old objection: ``Oh, it is a tax
cut for the rich.'' The way they define rich, I just want all those
folks out in America who are middle class to know that they are
actually rich, because they are among those defined to be rich by the
Democrats. So keep that in mind.
Let me just enumerate a few provisions of this bill that are clearly
not for the rich: a 100 percent health insurance deductibility for the
self-employed. Those are not rich folks, those are folks that have
started their own business and worked for years and years at those
razor-thin margins to keep it going, and they do not get the same
health care treatment as big corporations. This bill will do that.
Community renewal, tax breaks to build the inner city and rural areas
to try to provide jobs in those areas. That is not for the rich. A low-
income housing tax credit. We are going to increase the amount of money
available for low-income housing in this country. That is not for the
rich. There is pension reform, and 77 percent of people on pensions are
middle class and lower-income workers, not rich.
Finally, if we want to talk about the estate tax, yes, if we count
all the assets and the income of the folks who are affected by the
death tax, we could think they are rich. The fact is that a great many
of those folks, like farmers, like small business owners, are asset
rich and cash poor. When they die, for their small business or their
farm to keep alive, to keep going, we had better have death tax relief,
or those small farms and small businesses are going to go away because
their heirs are cash poor. They cannot afford to pay the tax, so they
have to sell the farm or sell the business in order to pay the tax.
That is not right.
This bill will get us just a little way down the road towards
correcting the inequity in the Tax Code of America.
Mr. RANGEL. Mr. Speaker, I yield 3 minutes to the gentleman from
Tennessee (Mr. Tanner), a member of the committee.
(Mr. TANNER asked and was given permission to revise and extend his
remarks.)
Mr. TANNER. Mr. Speaker, I thank the gentleman for yielding time to
me. I want to thank the gentleman from New York (Mr. Rangel) for the
opportunity to say a few words.
Mr. Speaker, I am still, as a Blue Dog, mystified as to this
procedure, this process. The majority party continues to bring bills to
the floor when we do not have a budget. We owe $3.7 trillion in hard
cash, and we are paying $240 billion year in interest alone. One-third
of all of the individual and corporate taxes being collected on April
15 go to pay nothing but interest. Yet, we bring these tax measures to
the floor.
If we pass this one, this body will have passed over $300 billion
worth of tax cuts with no budget, not doing anything about the debt,
nothing about social security, energy, nothing about Medicare,
recruitment and retention in the military, readiness of the country. We
need military modernization, we need a pay raise for the troops. The
veterans, it will take $3 billion to help the veterans.
We do not have time for that, but we do have time for $300 billion
worth of tax cuts over the next 10 years on money that is not even
here. This money is projected. They have to be living in a cave not to
understand that oil prices are rising, if Members do not understand
that. That puts tremendous inflationary pressure on the system. This
projection of a huge surplus could go away just as easily as it came
about with rising oil prices, rising interest rates. That surplus that
all of these tax cuts come out of may never get here.
Mr. Speaker, the other part I want to talk about is the estate tax. I
do not like estate taxes. I am responsible for a bill to do away with
them. But politics is the art of the possible. Here it is not, in this
day, in this time, possible politically to do away with the estate tax.
What did the gentleman from New York (Mr. Rangel) write? He wrote
true estate tax relief for the small family farmer. Tim and Susan Lucky
live in my district in Gibson County, Tennessee. They have a farm that
is worth about $3 million. They do not have any money, but they have a
farm worth about $3 million. Do Members know what they pay, under the
bill of the gentleman from New York (Mr. Rangel) in estate taxes?
Nothing. Do Members know what they pay under the Republican plan in
estate taxes? It would be $336,000. Tell me who is interested in estate
tax relief for the family farmer and the small businessman.
This is a fact, under these bills that are mentioned. We did not get
to offer the bill of the gentleman from New York (Mr. Rangel). Do
Members know why? Because it will pass.
So legislative malpractice in bringing tax bills to the floor without
a budget is the same legislative malpractice in shutting out a bill
like this.
Mr. ARCHER. Mr. Speaker, I yield 2\1/2\ minutes to the gentleman from
California (Mr. Herger), another respected member of the Committee on
Ways and Means.
Mr. HERGER. Mr. Speaker, small businesses are the backbone of our
Nation's economy, creating jobs, economic growth, and innovation. The
legislation before us today, the Small Business Tax Fairness Act,
provides the tax reform necessary to ensure that small businesses will
continue to prosper.
For example, this legislation will help the self-employed afford
health care by providing full deductibility of health insurance
premiums. It will help small businesses acquire the tools they need to
compete by increasing the amount small businesses can expense.
This legislation also provides much needed assistance to families
attempting to pass a business from one generation to the next by
reducing the burdensome death tax.
{time} 1615
Furthermore, this legislation will help Americans save for their
retirement by modernizing pension laws.
Mr. Speaker, I am especially pleased that the legislation before us
today includes a provision I authored, which will restore peace of mind
to small business owners by allowing small businesses to once again
make use of installment sales. This provision will correct an urgent
situation whereby thousands of small business owners have seen the
value of their businesses drop by 10 to 20 percent.
Enactment of the Installment Tax Correction Act aspect of this
legislation will mean real relief and fairness for those who have spent
a lifetime building a business only to see a change in tax law threaten
their retirement.
I urge all my colleagues to support tax fairness by supporting this
legislation.
Mr. RANGEL. Mr. Speaker, I yield 2\1/2\ minutes to the gentlewoman
from Florida (Mrs. Thurman), a member of the Committee on Ways and
Means.
Mrs. THURMAN. Mr. Speaker, I thank the gentleman from New York (Mr.
Rangel) for his work on this piece of legislation.
Mr. Speaker, today in America, there are about 203,000 women working
full time for minimum wage. These women are working to support their
families. These are not high school students working for extra spending
money.
Raising the Federal minimum wage by $1 would give these mothers an
extra $2,000 a year. That $2,000 would feed a family of four for 7
months.
Mr. Speaker, look around in these neighborhoods. These are the
nursing aids who attend to our mothers and our fathers, the day care
workers who care for our children, the clerks who help us at the
grocery store. But do my colleagues know what? This raise is in
jeopardy today because the Republican leadership has attached a risky
tax scheme and doing little for small businesses of America. I support
raising the minimum wage and providing tax cuts for small businesses,
but not this way.
[[Page H848]]
Today, this House is considering $122 billion tax scheme that,
according to Citizens for Tax Justice, will give 73 percent of the tax
cut to people who make $319,000 and higher, while doing little for
working families and small business.
It is irresponsible for us, once again, to be bullied into voting for
a tax bill that is not paid for, breaking our own rules in this House.
If this economy should falter and this surplus is not real, then we are
going to put it back on the children and back on the grandchildren. Do
my colleagues know what? The ones that we are raising that we want them
to have the opportunity to have a small business will not be there
because they will have debt because we do not pay for it.
However, the gentleman from New York (Mr. Rangel) and Members put
together a Democratic substitute like the rules tell us to do, paid
for, which should be considered here today. But guess what? We are not
even going to be given the opportunity other than talk about it. We
will not even get any votes on it.
It would have provided $32 billion in targeted tax cuts designed to
help small businesses offset the cost of implementing the minimum wage.
These targeted cuts include 100 percent deductibility for health
insurance for self-employed, a permanent extension of the Work
Opportunity Tax Credit, and Welfare to Work Tax Credit, and estate tax
relief. The gentleman from Tennessee (Mr. Tanner) said it better than
anybody.
The SPEAKER pro tempore (Mr. Pease). Without objection, the gentleman
from Ohio (Mr. Portman) will control the time of the gentleman from
Texas (Mr. Archer).
There was no objection.
Mr. PORTMAN. Mr. Speaker, I yield 2 minutes to the gentleman from
Pennsylvania (Mr. English).
Mr. ENGLISH. Mr. Speaker, I thank the gentleman from Ohio (Mr.
Portman), who has been one of our most vigorous advocates of pension
reform, for yielding me this time. I am happy to see that this
legislation has some of his work included.
Mr. Speaker, I rise in strong support of this legislation. This
package provides much needed relief to small businesses that, combined
with an increase in the minimum wage, is a win-win situation for
workers and entry-level positions who are trying to work their way into
the mainstream of our strong economy.
I have been a long-time supporter of raising the minimum wage, and
this $1 increase that we have proposed is the equivalent of a 20
percent raise over 3 years. That sends a strong positive message to
working seniors, first-time workers, and those striving to work their
way out of the welfare system.
Combined with that minimum wage increase, this legislation provides
much-needed tax relief that will assist small businesses and their
workers. For example, it enhances the retirement security of all
Americans by increasing pension portability, allowing workers over 50
to catch up on contributions and increasing the contribution and
benefits limits in defined contribution and benefits plans.
It encourages job creation among small businesses through increasing
the expense and write-off for equipment, an important pro-growth
initiative.
This legislation also reforms a section of the code that punishes
people by artificially lowering the value of their pension through
caps.
It also creates tax incentives to lure investment back into some of
our most depressed communities so that they can share in our economic
prosperity. It expands incentive for the creation of affordable
housing.
Notwithstanding all of that, we are hearing rhetoric on the other
side of the aisle, as incredible as it may sound, that this is all tax
cuts for the rich. In reality, we are simply helping all American
workers partake of the current financial prosperity of our country.
I urge all of my colleagues to look beyond the rhetoric and to
support this important fairness legislation.
Mr. RANGEL. Mr. Speaker, I yield 3 minutes to the distinguished
gentleman from Massachusetts (Mr. Neal), a member of the Committee on
Ways and Means.
Mr. NEAL of Massachusetts. Mr. Speaker, the Republican leadership in
the House is finally dealing with the minimum wage issue. We are going
to do something for millions of wage earners making $10,712 annually. I
just cannot figure out what the long-term goal is, to kill a bill
before it gets to the President? To get the President to veto it? Or
simply to get this hot potato off of their hands?
The issue is not going to go away simply because a poison pill is
added to the minimum wage increase in the form of a tax bill, a tax
bill that has such little support today that the Republican leadership
did not even dare to give the gentleman from New York (Mr. Rangel) a
substitute, because they knew that Democratic substitute, with the help
of their own Members, would prevail.
I support a number of items in this proposal today, but not allowing
the Democratic substitute has stifled debate in an irresponsible way
here. Our bill was targeted and paid for and, most importantly, had the
most votes.
The fact that it is not paid for today is crucial because this is
just one of the several bills that will come to the House floor this
year, all designed to have a dramatic revenue loss in the future,
justified by questionable estimates about the budget situation,
estimates that can change very quickly in any sign of a downturn. That
is the context in which this debate takes place today.
Moreover, there are provisions in this bill before us that overreach,
especially in the estate and pension areas and should be opposed on the
merits.
In the pension area, the bill does contain a number of proposals that
everyone supports. These proposals are in the administration's bill.
These proposals are in my bill. They are in the Portman bill. They are
in the Democratic Caucus bill. But there are also, in this bill today,
many provisions lobbied extensively by the business community that are
highly controversial; and that in the end is the problem.
Let me read from a quote that the administration has offered on this
proposal. ``H.R. 3832 contains pension provisions that would raise the
maximum retirement plan contribution and compensation limits for
business owners and executives. This would weaken the pension anti-
discrimination and top-heavy protections for moderate- and lower-income
workers. These provisions are regressive, would not significantly
increase plan coverage or national savings, and could lead to cuts in
retirement benefits for moderate- and lower-income workers while
benefits for the highly paid executives are maintained or even
increased.''
I cannot support this proposal. As I have suggested in the past, and
I will suggest again today, the proponents of pension legislation
should meet with the administration, develop a consensus package on
these items that might well be enacted this year, especially those
items involving pension portability. That would clear away the
underbrush, if I may use that word, and allow us to focus on the more
serious differences between us.
I believe that all of us want to expand pension coverage for those
who do not have it and want the current employer-based pension system
to simply work better.
Mr. PORTMAN. Mr. Speaker, I yield myself 2\1/2\ minutes to respond to
some of the comments that were just made and talk a little bit about
this package.
First, I want to commend the gentleman from Texas (Chairman Archer)
for putting this good tax relief package together.
We have to recall where we are. We are in the process of raising the
minimum wage, and this is simply an attempt to try to cushion the
impact of that minimum wage on job loss in this country, because all
the studies show there will be an impact on the economy particularly
among smaller businesses. So these proposals are focused on smaller
businesses.
In the pension area in particular, the problem we have of a gap of
people not having pensions is primarily among smaller businesses. There
are about 70 million Americans today who do not have pension coverage.
That is unacceptable. That has happened increasingly with the
administration's position that I just heard announced about pension
reform. It will continue to happen. It will continue to have fewer and
fewer people getting pensions because
[[Page H849]]
the administration seems to be taking the position that any kind of
pension reform that would at all incur, increase, and expand coverage
for defined contribution plans and defined benefit plans somehow is
going to help the rich too much.
Let me tell my colleagues about the limits that the gentleman from
Massachusetts (Mr. Neal) just talked about. He said the administration
is opposed to raising the limits, the contribution limits and the
benefit limits on pensions. Somehow this would be counterproductive. It
would hurt low-wage workers.
Let me tell my colleagues what the limits are today. Today the limit
is about $170,000 compensation limit under defined contribution plan
and defined benefit plan. We propose raising it to $200,000 a year. In
1993, under a Democrat Congress, I might say, that limit was at
$235,000. It was reduced over time, strictly as a revenue grab, in
order to effect the deficit we lived in and had in this country.
If that $235,000 were adjusted to inflation today, it would be
$290,000 limit. Now, tell me, if the Treasury Department opposes this
pension provision because the limits are too high, why did a Democrat
Congress have $235,000 limit that would now be almost $300,000?
We are talking about just raising it up to $200,000 because, yes, we
believe that those 70 million Americans who do not have a pension now,
particularly in small businesses, where only 19 percent of small
businesses because of the costs and the burdens and the liabilities now
have any coverage. We believe those small businesses ought to be able
to offer a pension plan to their employees. We want every employee in
America to have a pension plan. That is the purpose of this
legislation.
It is focused on small business because that is where most of the
problem is with regard to the pension coverage, but it is going to help
every American be able to put more aside for retirement.
It also provides for portability and people to take a pension from
job to job. Finally, it provides, yes, for some common sense regulatory
relief so that the costs and burdens are reduced for those smaller
businesses.
Mr. Speaker, I reserve the balance of my time.
Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the distinguished
gentlewoman from California (Ms. Waters).
Ms. WATERS. Mr. Speaker, I join in this discussion because I want to
raise the question of why we are using this time to try and talk about
the need for tax cuts for the wealthy. This is all about increasing
minimum wage. We are being sidetracked. We are being taken off course
while the Republicans are attempting one more time to get their
outrageous tax cuts into law by any means necessary.
Whether we are talking about the tax cuts that are being indicated in
order, as they would say, to do minimum wage increase, or whether we
are talking about the ongoing, continuing effort to just give more tax
breaks to the rich, we find ourselves having to defend time and time
again against trying to do more and more for the rich corporations and
the richest Americans in this country.
Let us force this discussion on whether or not there is a need for an
increase in the minimum wage for the poorest of the working people in
this Nation at a time when everyone is touting how well we are doing in
this economy, how well people are doing in Silicon Valley. There are
260,000 millionaires in Silicon Valley alone. My colleagues would dare
say that we cannot have this modest increase in minimum wage until we
do some more tax cuts for the rich. This is outrageous. We have had to
fight our Republican friends every step of the way.
The alternative that we have designed would, of course, take care of
some of those areas where we could do some targeted tax cuts. This is
not the way to do it. I would ask my friends and my colleagues to
resist this effort to give more tax cuts to the rich.
Mr. PORTMAN. Mr. Speaker, I yield 2 minutes to the gentleman from
California (Mr. Calvert).
{time} 1630
Mr. CALVERT. Mr. Speaker, I thank the gentleman for yielding me this
time.
I am a former small business owner. I understand what overregulation
does to small business. I understand what overtaxation does to small
business. I understand what too much litigation does to a small
business. I understand what happens when the Government increases the
cost to stay in business. And I know that a lot of businesses do not
stay in business.
A lot of small businesses are not in Silicon Valley; they are in our
hometowns. They are our local dry cleaners, our local drive-thru
restaurants, the local carryout. These are not big corporations. These
are small mom and pop businesses. Matter of fact, two-thirds of the job
creation in this country is by small businesses, and we need to help
them. We need to help them stay in business because, without some of
these minor changes in the Tax Code, they are not going to be around.
What is wrong with allowing small businesses an opportunity to deduct
their health care expenses? What is wrong with some changes in the
death tax, which everyone agrees is a disgrace? We should not have a
death tax in this country, a tax of up to 55 percent of the value of
one's estate, when they have paid taxes all of their lives.
Small business is important. And as one of the few people in the
House that actually operated a small business, I would like to see it
stay around, so I am hoping my colleagues will get together and vote on
this and vote to support this Tax Relief Act.
Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentleman from
Maryland (Mr. Wynn), who has committed his career to the protection of
small business.
Mr. WYNN. Mr. Speaker, I thank the gentleman for yielding me this
time.
I never cease to be amazed at how my Republican colleagues can take
basically a good idea and turn it into a vehicle to give more tax
relief to the very wealthy. It absolutely amazes me.
We do have a good idea here. We ought to help small businesses. Small
businesses are the engine of America's economy. They create half of the
jobs and contribute to half of the gross domestic product. So there are
things we can do to help small business. On the other hand, however,
when we look at this Republican proposal, we find it is not small
businesses, not the mom and pop neighborhood restaurants and groceries;
it is the real fat cats who get the lion's share of the benefits.
Let me talk about first what the Democrats want to do to help small
business. First of all, we want to give 100 percent deductibility for
health insurance. That is something small businesses want. We also want
to increase small business deductions for investments in plants and
equipment. We want to extend the work opportunity tax credit and the
welfare-to-work tax credit. These are tax benefits that actually
benefit small businesses and help them hire workers. We also want to
address the estate tax issue, and we want to raise up to $4 million,
the exemption, for estate taxes. So we are concerned about that issue.
We want to give an increase in the meals deduction for small
neighborhood restaurants, so they can benefit from that.
There is a package of things that we want to do, that I actually
believe some Republicans want to do, that we ought to do. That package
is reasonable, about $36 billion, and we can pay for it with the
offsets in the Democratic proposal. Unfortunately, the Republicans
would not allows us to bring this proposal to the floor.
Now, let us look at the Republican plan. It is bloated: $120 billion.
And when we ask ourselves if small businesses are not benefiting from
this, the question then becomes, who is? I can tell my colleagues who
is: 73 percent of the benefit in the Republican plan goes to the
richest 1 percent of Americans. These people are already doing very
well in our current economy. They have stocks, they have bonds, they do
not need this massive tax relief package.
On the other hand, our approach says let us help small business; let
us save Social Security and Medicare by being fiscally prudent. I ask
my colleagues to consider the Democratic alternative and reject the
Republican approach.
Mr. PORTMAN. Mr. Speaker, I yield 2 minutes to the gentleman from New
York (Mr. Sweeney).
Mr. SWEENEY. Mr. Speaker, I am here to talk about a specific
provision
[[Page H850]]
that is part of this bill, and I think it really points out the
difference between what our philosophy is and what the other side
believes in. It is the installment tax consumer credit that is part of
this bill, repealed last year by the administration as a revenue
enhancer.
What the administration prefers to do is force the hard-working
American families, those in the small business community, to pay taxes
even before they receive payment for the sale of their business. And it
has real human impact.
For example, several months ago Dorothy and George Long arranged for
the sale of their bed and breakfast in my district in Upstate New York.
They had worked for over 30 years to build this business, and now they
were looking forward to the sale of the business so they could retire.
Unfortunately, they may have to reconsider those plans because they
are, with the current structure, left with three very tough choices:
take a loan out in order to pay for the capital gains tax immediately
due, break their contract and face a lawsuit, or suffer the
consequences of nonpayment of taxes.
Mr. Speaker, I think that it is very important that we pass this bill
today because we have to ensure that small businesses remain healthy.
And providing for these kinds of tax reductions in small business will
do that.
Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentleman from New
Jersey (Mr. Menendez).
(Mr. MENENDEZ asked and was given permission to revise and extend his
remarks.)
Mr. MENENDEZ. Mr. Speaker, I thank the gentleman for yielding me this
time.
The Republican proposal we have before us today, I believe, is
shameful. The Republicans claim that small businesses need tax breaks
to offset an increase in the minimum wage, and we Democrats have a
proposal that would do just that. But what Republicans are not telling
us is that they offer the wealthiest Americans a tax cut of $123
billion but fail to provide working families a decent wage. Under the
Republican proposal, minimum wage workers would have to wait 3 years to
receive a mere dollar increase in their wages.
Tell the woman working 40 hours a week, breaking her back pressing
garments or cleaning hotel rooms, that she has to wait 3 years to get a
dollar increase in her wage while the wealthiest Americans are getting
a $123 billion tax cut.
Tell a father, laboring all day in the field or in a factory, facing
the indignity of a poverty-level wage, that he has to wait 3 years to
get a dollar increase in pay while the wealthy are getting a $123
billion tax cut.
Tell a single mom, who leaves her child in the care of strangers,
with no idea about the quality of care they receive while she waits on
tables, that she has to wait 3 years for a dollar increase in her wages
while the wealthy are getting a $123 billion tax cut.
We Democrats are not willing to tell those people who get up every
day, work hard, play by the rules and at the end of the week find
themselves in such circumstances that they must wait.
Rather than proposing a timely increase in their wages, our
Republican colleagues have opted to sacrifice these families in the
name of tax cuts for the wealthy. This is a lose-lose scenario for
minimum-wage workers.
First, the Republican proposal jeopardizes their ability to provide
for their children and denies them basic health and retirement
security, and then Republicans propose an excessive tax cut for the
wealthy that will jeopardize Medicare and Social Security.
We must prevent this double jeopardy for working families.
The SPEAKER pro tempore (Mr. Pease). Without objection, the gentleman
from Illinois (Mr. Weller) will control the time of the gentleman from
Ohio (Mr. Portman).
There was no objection.
Mr. WELLER. Mr. Speaker, I yield myself 4 minutes.
Mr. Speaker, I rise in support of increasing the minimum wage by a
dollar. I also rise in support of helping small business and low-wage
workers save for their retirement. This is a good package of
legislation, raising the minimum wage and helping small employers and
little guys and gals who work.
We give 100 percent deductibility for the self-employed, to make
health insurance more affordable and increase access to health care. We
expand the low-income housing tax credit, a public-private partnership
to help provide affordable housing for low-income working families. We
increase the meal deduction, which helps truck drivers and traveling
salesmen who have to travel for their work. And we also expand pension
opportunities, which particularly benefit working women, and that is
one of our goals.
But, my colleagues, I wanted to talk about one particular provision
in this legislation, and it is legislation that works towards the goals
of this Congress, to make our Tax Code more fair, particularly for
working Americans. This is an issue that has been brought to my
attention usually by a spouse of a construction worker, someone who has
seen their spouse get up early in the morning for the last 30 years, go
out and work, come home dead tired from back-breaking construction
labor. These are folks who work hard, get callouses on their hands, get
their hands dirty, but they work hard.
This legislation addresses a fairness issue for the building trades,
dealing with the section 415 pension limitations. Those are limitations
on multi-employer pension funds usually managed by a building trade
union, like the operating engineers or the laborers or the
electricians, even maritime unions. It is important legislation because
what this legislation does is it gives those construction workers and
those maritime workers the pension benefits they were promised and
deserve. Currently we have limits in section 415 of the pension code
that prevent them from getting what they were promised. In fact, no
matter how many hours they work, no matter how many hours they put in
each day, whether they have overtime and what is contributed, there is
a cap. And, unfortunately, that cap is not fair.
And I want to thank the chairman of the Committee on Ways and Means,
the gentleman from Texas (Mr. Archer), for including this important
provision, which helps 10 million working Americans. When I think of
the section 415 issue I think of the working couple that first brought
it to my attention, Lori and Larry Kohr from Peru, Illinois. Larry's a
retired laborer, and he recently told me, when he retired, that his
benefit should have been just a little under $40,000 a year in pension
benefits from his laborer's pension fund, or about $3,300 a month. But
he was shocked to learn that once he retired he only got about half of
it because of that 415 pension limitation.
My colleagues, this is a fairness issue. These individuals have
worked hard. For people like Lori and Larry Kohr, where Larry Kohr
should be getting about $3,300 a month, Larry Kohr, like 10 million
other construction workers, is seeing only about half what he should
get. This Republican Congress is working to bring fairness so that
these kind of construction workers, as well as maritime workers, get
their full pension benefits. Right now they only get about half. We
want to give them the full amount.
That is the goal of this legislation. That is why I urge my
colleagues to support H.R. 3081, to fix the 415 pension limitations, to
help couples like Lori and Larry Kohr of Peru, Illinois, to make our
Tax Code more fair. Let us vote ``aye'' to help the self-employed make
health insurance more affordable, with 100 percent deductibility; let
us help the poor find affordable housing by expanding the low-income
housing tax credit; and let us expand pension opportunities,
particularly to help working women; and let us help those traveling
salespeople and truck drivers who are forced to be on the road to work;
and let us lift that 415 pension cap.
Mr. Speaker, I reserve the balance of my time.
Mr. RANGEL. Mr. Speaker, I yield 3 minutes to the gentleman from
Hawaii (Mr. Abercrombie).
Mr. ABERCROMBIE. Mr. Speaker, I realize that not all of our
colleagues are on the floor at the moment, but for those who are paying
attention to this discussion here today, how is it possible for us to
make any progress in this at all if we are going to sit here and talk
about let us help. The gentleman who spoke previously knows perfectly
well that the 415 provision he is talking about is in both bills.
[[Page H851]]
This is not a Republican issue or a Democratic issue, and it has been
made that way. If those of us who are genuinely interested in the
minimum wage, and in tax breaks for businesses that deserve it with
respect to the minimum wage, had been allowed to carry on our
negotiations, Republicans and Democrats alike, we would have that
legislation on this floor and we would not have this agonizing session
that we are having today. The reason that we are not here today on a
bill that Republicans and Democrats can get together on is because the
Republican leadership has said they do not want that to happen.
How can we turn the poorest of the poor into an issue that we then
utilize to try to hurt them because we think it is going to benefit us
somehow? I appeal to my Republican colleagues and to those Democrats
who may be concerned about it in terms of small business implications.
We have crafted a bill which is essentially the Republican-Democratic
compromise that we wanted in the first place. It is not our fault; it
is not the fault of the gentleman from New York (Mr. Rangel) that that
is appearing as ``the Democratic substitute.''
I wish it would say just the substitute on this issue, because
Republicans and Democrats can support it and take credit. The Democrats
will say, hey, yes, we were for the minimum wage; but we were not
hurting small business. We are actually benefiting small business with
targeted tax credits for small business. That was not something I
dreamed up as a Democrat. There is no such thing as a business meal
entertainment deduction for Republicans and a spousal travel deduction
for Democrats. It helps everybody connected with the travel industry,
with the tourism industry, for those who want to take people off
welfare and put them to work. That is Republicans and Democrats.
My plea to my colleagues, Mr. Speaker, is to pass the so-called
Democratic substitute because it is really the congressional
substitute, to see to it that small businesses and those directly
affected by the minimum wage will have the benefit of it. Please take
this off the ideological lines. Mr. Bush and Mr. Gore are going to beat
each other up for 7 months and 27 days after today.
{time} 1645
The poor people in this country who deserve the tax break, the small
business people who deserve the benefit of the minimum wage combination
of tax incentives and a minimum wage raise will be the beneficiaries
and we can all take credit.
My bottom line plea to you, Mr. Speaker, and to my colleagues,
Republicans and Democrats alike, let us put this together, a minimum
wage increase and a small business tax incentive that makes some sense,
that blends together. We can all claim credit for it. We can all come
out of this institution today feeling that we have accomplished
something not as Democrats or Republicans but as Americans who are
concerned about other Americans.
The SPEAKER pro tempore (Mr. Pease). Without objection, the gentleman
from Ohio (Mr. Portman) will reclaim control of his time.
There was no objection.
Mr. PORTMAN. Mr. Speaker, I yield myself 30 seconds.
Mr. Speaker, I certainly agree with my colleague the gentleman from
Hawaii (Mr. Abercrombie) that we need to work together on these
proposals. I would just suggest to him that many of the proposals that
he talked about, the 415 changes from multi-employer plans that are so
important to unions, the health care insurance for those who are self-
employed, the provisions in here for community renewal I certainly
think should be bipartisan. The pension provisions have been bipartisan
from the start. We have 80 Democrat cosponsors and 80 Republican
cosponsors. I think this is sort of America's bill. There are people
who think the Democrat bill does not do that.
The Small Business Survival Committee has written us a letter saying
that the Democrat alternative is a de facto tax increase on small
businesses. We can talk more about that later.
Mr. Speaker, I yield 3 minutes to the distinguished gentlewoman from
New York (Mrs. Kelly).
Mrs. KELLY. Mr. Speaker, I rise for the purpose of entering into a
colloquy with my friend the gentleman from Ohio (Mr. Portman).
Mr. Speaker, I am grateful for the hard work my colleagues on the
Committee on Ways and Means have done in putting together a strong
package of tax relief for America's small businesses.
Unfortunately, I have been contacted by constituents concerned about
potential interpretations of sections 235, 241 and 281 of H.R. 3081.
They fear these could negatively affect pension benefits.
I have written the distinguished gentleman from Texas (Mr. Archer)
and the distinguished gentleman from Ohio (Mr. Boehner) detailing these
concerns, which I will insert into the Record.
Over the past months, I appreciate the time the gentleman from Ohio
and all the members of the committee concerned with pension issues have
spent as we have worked to ensure that these concerns are properly
addressed.
Mr. Speaker, I would like to get assurances from the gentleman from
Ohio (Mr. Portman) that these sections that I have mentioned are not
intended to harm participants.
It is my understanding that these provisions are not intended to be
interpreted in such a way as to reduce pension benefits, discourage
companies from increasing pension benefits, or allow for violations of
the Tax Code.
So I ask my friend from the State of Ohio (Mr. Portman) is my
understanding correct?
Mr. PORTMAN. Mr. Speaker, will the gentlewoman yield?
Mrs. KELLY. I yield to the gentleman from Ohio.
Mr. PORTMAN. Mr. Speaker, I thank the gentlewoman from New York (Mrs.
Kelly) for yielding.
Mr. Speaker, I would say absolutely that her understanding is
correct. In fact, just the opposite is intended by these provisions and
will be the effect of these provisions, which is to say that they will
expand pension coverage for American workers.
Mrs. KELLY. Mr. Speaker, reclaiming my time, I thank the gentleman
very much for his comments. I really appreciate his assurances and his
continuing efforts on this legislation.
With these efforts, we can assure concerned individuals that pensions
are enhanced and protected by this legislation. We have the opportunity
to level the playing field for small businesses today with this
legislation that provides, among other things, millions of
entrepreneurs with 100-percent health insurance deductibility next year
and increases the business meal deduction to 60 percent.
Most importantly, the bill repeals the unfair installment sales tax
that has already impacted small businesses by drastically reducing
their value and blocking their sale.
I look forward to voting in favor of this important legislation
today, and I urge all of my colleagues to join me in strong support.
Mr. RANGEL. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, my friend, the gentleman from Ohio (Mr. Portman) just
got finished talking about the degree of bipartisanship that went into
this bill; and if he is talking about his willingness to work with
Democrats in order to reach bipartisanship, nobody in this House works
harder than he does in order to accomplish that end.
But my friend knows that, as relates to this particular bill, that
his colleagues on the other side of the aisle put tax cuts on top of
tax cuts on top of tax cuts until they were convinced that the
President of the United States would veto this bill.
This has nothing to do with the degree of cooperation that the
gentleman from Ohio (Mr. Portman) has given to us in the Committee on
Ways and Means over the years. But that small bit of bipartisanship
that is displayed in this bill is overwhelmingly knocked out by the
degree of partisanship to make this bill be vetoed.
I look forward to the day that we will not be talking about one part
of a bill but that we will be talking about an entire bill as we work
together, Republicans and Democrats, not for our parties but for our
Congress and for our country.
Mr. Speaker, I yield 2 minutes to the gentleman from Maine (Mr.
Allen).
Mr. ALLEN. Mr. Speaker, I thank the gentleman for yielding me the
time.
[[Page H852]]
Mr. Speaker, we need to reject this Republican tax plan. Despite its
title, this is no small business tax cut. Moreover, this proposal would
cut taxes before we even have the outlines of a budget resolution.
In reality with this bill, the top one percent of taxpayers will get
an average tax cut of $6,000 and the top one percent of taxpayers of
those earning over $319,000 a year. The lower 60 percent get an average
of $4 each, $4, not even enough to buy a movie ticket. For 60 percent
of the public, this is no tax cut at all.
Now, we are used to seeing Republican tax plans that favor the
wealthy, but this one has to set a record. Seventy-three percent of the
benefits go to the wealthiest one percent in this country.
Moreover, this bill is premature. We have not passed a budget
resolution, but the Republicans are coming in with yet another huge tax
cut. We have done nothing in this House to secure the solvency of
Social Security, nothing to protect the future of Medicare, nothing to
provide prescription drug coverage for seniors, and nothing to pay down
the national debt.
This bill jeopardizes our ability to achieve any of these goals. We
should reject this misleading, irresponsible Republican tax plan. And I
have to say, simple fairness would require that we be given a chance to
vote on the Rangel alternative Democratic plan, which was a real small
business tax cut and which would not disrupt our ability to achieve
other important national priorities.
Mr. PORTMAN. Mr. Speaker, I yield 2 minutes to the gentleman from
Illinois (Mr. Manzullo).
Mr. MANZULLO. Mr. Speaker, as chairman of the Subcommittee on Tax,
Finance and Exports of the Small Business Committee, this bill is the
bare minimum we should do to help small businesses prosper. We must
remember that our economy thrives and unemployment is low primarily
because of small businesses.
I want to commend the gentleman from Texas (Chairman Archer) for
quickly resolving the installment sales issue. Without this reform,
thousands of small business owners will have seen their lifetime of
investment and hard work erode all because the Federal Government wants
to collect taxes early.
This legislation also addresses many of the unresolved priorities
still left over from the 1995 White House Conference on Small Business.
The number two issue at that conference was full deduction of meals
expense. This bill increases the meals deduction to 60 percent. More
importantly, it provides relief for our truckers by allowing them to
deduct 80 percent of their meals expense.
The number four issue at the conference was estate, or death tax,
relief. This bill provides meaningful death tax reform. This will help
small businesses pass their businesses on to the children.
The number five issue for the conference was health care reform. This
bill provides immediate 100 percent deductibility of health insurance
for the self-employed.
Finally, the number seven issue at the White House Conference on
Small Business was pension reform. The bill contains many of the
bipartisan reforms championed by the gentleman from Ohio (Mr. Portman)
and the gentleman from Maryland (Mr. Cardin). The legislation is
another in a series of tax relief bills by the Republicans.
Contrast this to the President's budget, where he proposes 106
separate tax increases totaling $181 billion. I will not support the
increase of the minimum wage, which is tampering with the free
enterprise system. But to offset that, Mr. Speaker, let us help the
small businesses by having a very modest tax cut.
Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentlewoman from
Texas (Ms. Jackson-Lee).
Ms. JACKSON-LEE of Texas. Mr. Speaker, I thank the ranking member for
his kindness.
Mr. Speaker, I hope that my staff accepts my apology for discarding
the comments that have been prepared for me and allow me to speak from
the heart. Though, when we begin to speak about tax issues, one would
think that our focus should be basically on the analytical numbers. But
this is an issue of the heart.
My hometown newspaper accounts for what we do up here every week and
gives a recording of how we voted. Sometimes they do an excellent job,
many times, but I take issue sometimes because they do not account for
some of the very good legislative initiatives that are in fact
alternatives or substitutes.
Today I rise to support the substitute for the minimum wage, because
it is from the heart that I speak. Today I also rise to support the
Democratic alternative to give small businesses a real tax cut. And the
reason, Mr. Speaker, is because Americans want us to do business here.
They do not want us to make political havoc.
Believe it or not, the Republican legislation does nothing to help
small businesses with respect to tax cuts because it does not help the
lowest of those at 2.5 million, but really this tax cut is for those
whose net is $30 million.
I support tax cuts for small businesses, and I go on record today
supporting the alternative that the Democrats have offered that will
provide estate tax relief for family farms and small businesses, give
small businesses a greater tax increase. And, yes, I support the
alternative for an increase in the minimum wage, Mr. Speaker. Because I
asked a sixth grader today whether $5 was any money. It is not. And
that is what the minimum wage is right now, $5.15.
The Democratic alternative will give us 50 cents for 2 years, which
means a dollar to $6.15. Can we do any less for a women who works, has
four children, and has a disabled husband?
Today I speak to the heart. Let us not play to the politics of this.
Let us vote for real tax relief for small business and let us provide
those with an income who need minimum wage.
I would say, Mr. Speaker, let us not support bills that will be
vetoed by the President of the United States.
Mr. PORTMAN. Mr. Speaker, I yield 3\1/2\ minutes to the gentleman
from Arizona (Mr. Hayworth) a member of the Committee on Ways and
Means.
Mr. HAYWORTH. Mr. Speaker, I thank my colleague from Ohio for
yielding me the time.
Mr. Speaker, let us speak from the heart. Let us engage in this
debate. With the American people watching, Mr. Speaker, let us take a
look at who benefits from tax reductions.
It is sad to hear my friends on the left reminiscent of that scene in
motion pictures. ``No tax relief, not for nobody, not for no how, not
for no reason'' seems to be the canard of the day.
Who do they think is helped by reducing the death tax? It is the
family farmer. It is the small business person in rural communities
throughout Arizona and throughout America. Because time after time we
have seen it.
Gene Stenson, for example. His dad founded a railroad track
manufacturing company down in Florida in 1967. But after his dad's
death in 1976, the Stensons had to shut down a facility not in Florida
but in North Carolina, laying off two-thirds of their 110 employees to
pay the death tax.
Is that compassion? Is that a tax cut only for the wealthy? No. It
exposes the canard of the left and their philosophy that was bent on
bankrupting this country with deficit budget after deficit budget. Now
that we are putting our House in order for Main Street and Wall Street,
Mr. Speaker, we want to put it in order for every street.
Is it not compassionate to offer 100 percent health insurance
deductibility for the self-employed? Of course it is compassionate.
Again, we heard from my friend the gentleman from Maine (Mr. Allen)
just a few minutes ago, saying, oh, listen, we need to get to work on
these vital issues.
I hear from my friends on the left how important it is to have health
insurance coverage. This is a major step forward. Time and again I hear
from my constituents, why can we not enjoy what major corporations
enjoy, 100 percent deductibility of health insurance?
This tax relief is offered. The community renewal portion of this tax
relief legislation is something that is bipartisan in nature. It helps
America's most low-income areas. Family development accounts help the
working poor save for lifetime needs. The working poor, the family with
two children earning just a little bit over $12,000. Nineteen million
Americans qualified
[[Page H853]]
for the EIC in 1999, low-income housing tax credit.
{time} 1700
Pension reform that my colleague from Ohio has worked on, that the
ranking member talked about being so important in a bipartisan fashion,
the portability to take your benefits in your personal retirement and
move them from job to job.
Mr. Speaker, we have a fundamental choice here. We can embrace the
canards and the class warfare of the left to have issues to squabble
about in the campaign, or we can embrace common sense tax relief,
pension reform, health insurance deductibility for all Americans. That
is the true measure of compassion, not the subjugation to the lowest
rung of the economic ladder but the empowerment of all Americans. That
is what we will do with this legislation.
Mr. RANGEL. Mr. Speaker, I yield myself such time as I may consume.
The senior Senator from Arizona would be proud of the gentleman that
represents the 6th Congressional District of Arizona as related to 100
percent deductibility of health insurance because that is in the
Democratic bill and in the Republican bill and so many other things he
speaks well of; but he would be sorely disappointed that you would just
ignore the needs for Social Security and Medicare as you go on and take
75 percent of that amount, of the $122 billion tax bill, and make
certain that those who are the wealthiest benefit most. You did a
fantastic job up until Tuesday, and I hate to see you losing those
principles now.
Mr. Speaker, I yield 2 minutes to the gentleman from Vermont (Mr.
Sanders).
Mr. SANDERS. I thank the gentleman for yielding me this time.
Mr. Speaker, I rise in strong opposition to this Republican
legislation and to all the proposals that the Republican Party is
offering today. In fact, what they are offering is not only absurd but
it is an insult to American working people. They are proposing a paltry
increase in the minimum wage of $1 over 3 years, and at the same time
they are proposing a huge tax break for the richest people in this
country.
Millions of low wage-workers are working 40 or 50 hours a week
struggling to keep their heads above water. In terms of the purchasing
power of the minimum wage, it is lower today than it was 20 years ago.
And in hearing this cry of working people, the Republicans are
proposing a 33-cent-an-hour increase in the minimum wage. But at the
same time they are proposing a gigantic tax break for the people who do
not need it, the people who are making over $300,000 a year. And 75
percent of their tax proposal goes to those people.
To add insult to injury, in my State of Vermont where the legislature
had the decency to raise the minimum wage to at least $5.75 an hour,
the Republican proposal will mean nothing for the next 2 years. And
Vermont is not alone. Many other States have moved to raise the minimum
wage. So right now, at a time when this country has the greatest gap
between the rich and the poor of any industrialized nation, where we
have the richest 1 percent owning more wealth than the bottom 95
percent, where we have millions of workers working longer hours for
lower wages than was the case 20 years ago, what the Republicans are
saying is, that is not bad enough, let us make it worse.
Let us reject this proposal.
Mr. Speaker, I rise in strong opposition to H.R. 3832. This bill is
being touted as a package of tax provisions designed to offset the
impacts of an increase in the minimum wage on small business. Yet some
of the pension provisions included in the bill don't have a single
thing to do with small business tax relief and are simply new tax
breaks that mostly accrue to the wealthiest Americans.
The pension provisions in this legislation will not increase pension
coverage for millions of Americans that currently lack it, and may even
reduce coverage for lower and middle-income employees according to the
Center on Budget and Policy Priorities.
According to the non-partisan Institute for Taxation and Economic
Policy:
The 20 percent of individuals with the highest incomes would receive
96.5 percent of the new pension tax breaks.
By contrast, the bottom 60 percent of the population would receive
less than one percent of the benefits of the new pension provisions.
Last November, Treasury Secretary Summers and Labor Secretary Herman,
criticized these pension provisions, saying that they ``could lead to
reductions in retirement benefits for moderate and lower-income
workers.''
Mr. Speaker, if the Congress is really concerned about protecting the
pensions of American workers it should quickly address the cash balance
pension rip off scheme being implemented by hundreds of large
corporations all over this country. In fact if this Congress is really
concerned about protecting the pensions of American workers it should
pass H.R. 2902, the Pension Benefits Preservation and Protection Act,
legislation that I authored and that now has a total of 80 co-sponsors.
Mr. Speaker, all across this country, American workers are deeply
concerned about the status of their pension plans. That concern is well
founded. Sine 1985, despite large profits and growing surpluses in
their pension funds, twenty percent of Fortune 500 companies and over
300 companies in all have slashed the retirement benefits that they
promised their employees. Many more companies are contemplating similar
action. Not only is this trend outrageous, it is also illegal under
current law. Cash balance schemes violate age discrimination laws
because they cut the accrual rate of pension benefits as a worker gets
older. Workers should not have their pension benefits reduced just
because of their age.
Frankly, it is simply unacceptable that during a time of record
breaking corporate profits, huge pension fund surpluses, massive
compensation for CEOs (including very generous retirement benefits),
that corporate America renege on the commitments that they have made to
workers by slashing their pensions.
Just last month I authored comments to the Internal Revenue Service
stating that these cash balance schemes violate the pension age
discrimination laws. 59 other Members of Congress joined me in signing
on to these IRS comments. These comments detail how corporations are
stealing the benefits of their most loyal and experienced workers.
Consider this: if a company reduced pension benefits based on race,
or religion, or gender, the federal government would be sure to take
appropriate action against the company. But, when it comes to enforcing
the pension age discrimination laws, the federal government has clearly
been asleep at the wheel. Fortunately, some of us in Congress are
beginning to wake them up.
Corporations currently receive over $80 billion a year in federal
government subsidies through the tax code. American taxpayers have a
right to expect that corporations who take advantage of this special
tax treatment will not blatantly violate the law.
Yet, hundreds of corporations throughout the country from IBM to AT&T
are doing just that by converting their traditional defined benefit
pension plans to these cash balance schemes.
Cash balance schemes are nothing but a replay of the corporate
pension raids we experienced during the 1980's. While these companies
claim that they are converting to cash balance plans to attract younger
workers into their workforce, the fact of the matter is that cash
balance plans are intentional attempts to slash the pension benefits of
older workers.
The reason why large corporations are targeting their older workers'
pensions is easy to understand. Millions and millions of Americans in
the so-called ``baby boom'' generation are rapidly approaching
retirement age. Companies that reduce the pensions of older workers
will thus realize tremendous cost savings when these people retire.
Companies claim that they are converting to cash balance schemes to
attract a younger, more mobile workforce. But, worker mobility is not
the rationale for converting to a cash balance plan, money is. As
11,000 people a day turn 50, which cash balance promoter Watson Wyatt
claims will turn us into a ``Nation of Floridas,'' employers are
looking for any way possible to reduce older workers' promised
benefits. This is outrageous.
But, what is even more outrageous is that they are not being honest
to the employees whose pensions they are slashing. As Joseph Edmunds
stated at a 1987 Conference of Consulting Actuaries, ``It is easy to
install a cash balance plan in place of a traditional defined benefit
plan and cover up cutbacks in future benefits.''
Despite the protestations of cash balance promoters, cash balance
schemes are implemented to unlawfully cut the benefits of older
employees and to disguise those cuts by implementing a plan that makes
it virtually impossible for employees to make an ``apples to apples''
comparison of their benefits under the old and new plans.
Not only does the federal government need to enforce the laws that
are on the books, Congress also must pass meaningful pension
protections right now. That is why I introduced H.R. 2902. This
legislation would primarily do three things:
First, it would send a directive to the Secretary of Treasury to
enforce the laws that are already on the books;
[[Page H854]]
Second, it would provide a safe harbor making cash balance plans
legal only if employees are given the choice to remain in their old
pension plan with detailed disclosure; and
Third, it would provide a major disincentive for companies to slash
the future pension benefits of employees.
Mr. Speaker, H.R. 2902 would provide meaningful pension protection to
millions of Americans, unlike the current bill being considered right
now. My legislation is being supported by the Pension Rights Center,
the National Council of Senior Citizens, the Communications Workers of
America, the IBM Employees Benefits Action Coalition, and several other
groups. I urge my colleagues to defeat H.R. 3832, and work with me to
pass real pension protection.
I include my letter to the IRS signed by 50 other Members, as
follows:
Congress of the United States,
House of Representatives,
Washington, DC.
Department of Treasury,
Internal Revenue Service, Ben Franklin Station Washington,
DC.
Attn: CC:DOM:CORP:R (Cash Balance Plans and Conversions).
We, the undersigned Members of Congress, are pleased to
respond to your request for comments on cash balance pension
plans. (64 Fed. Reg. 56578.)
introduction
We commend the Internal Revenue Service and Department of
Treasury for the decision to further evaluate your position
on the conversion of traditional defined benefit pension
plans to so-called ``cash balance'' pension plans, and for
soliciting public comments on this matter. Although such
conversions have been occurring for many years, increased
understanding of these conversions has raised serious
questions, particularly whether they violate federal anti-age
discrimination statutes.\1\
---------------------------------------------------------------------------
Footnotes at end of letter.
---------------------------------------------------------------------------
Prior to the recent, and growing, scrutiny of cash balance
conversions by employees, Members of Congress, and some
actuaries, the complexity of these plans have made it
understandably difficult for the cognizant federal agencies
to fairly evaluate the age discriminatory effect of these
plans. In this instance, the problem has been exacerbated by
what--in the most generous terms--can be described as an
almost complete lack of candor on the part of many proponents
of cash balance conversions in communications with their
employees and the media.\2\
Numerous respected national journals have played a critical
role in bringing to light not only the age discriminatory
impact of these conversions but also the clear age
discriminatory intent of at least some cash balance backers.
Given the large volume of new information and concern about
cash balance plan conversions, we urge the Department of
Treasury, IRS, and all other cognizant federal agencies to
thoroughly reexamine the existing legal requirements for
defined benefit pension plans and the extent to which cash
balance conversions fail to comply therewith. Workers and
members of Congress do not have access to the full
documentation related to these conversions on an
individualized basis, making it critical that the key
government oversight agencies use their access to plan
documents to fully examine and understand the nature and
effect of these conversions. We urge all of the involved
agencies to act quickly within their respective regulatory
authority to remedy the significant legal irregularities that
appear to permeate these conversions, and if it is concluded
that the agencies do not have sufficient authority, to
propose legislation to Congress to address any outstanding
legal issues.
The comments that follow address the following topics:
(1) Cash balance conversions are often intentional attempts
to cut the pension benefits of older employees and increase
the operating income of employers.
(2) Cash balance plans are defined benefit plans, not
defined contribution plans.
(3) Cash balance plans fail to meet the requirements for
defined benefit plans and violate federal anti-age
discrimination statutes.
(4) The ``wear-away'' feature of many cash balance
conversions violate federal anti-age discrimination statutes.
(5) Cash balance conversions should therefore be
disqualified under existing law.
(6) A safe harbor should be established allowing cash
balance plans to meet existing legal requirements only if all
employees are allowed to choose which pension plan works best
for them with detailed disclosure.
Throughout your consideration of cash balance conversions,
we ask the IRS and the Department of the Treasury to bear in
mind, that while the United States has a ``voluntary''
pension system, that system is, and should be, subject to
rigorous statutory and regulatory oversight. This voluntary
pension system receives over $80 billion a year in federal
government subsidies through, inter alia, the tax code. It
will always be the case that corporations will favor public
subsidies without any governmental oversight. However, the
taxpayers have a right to expect that corporations who take
advantage of this special tax treatment will adhere to
requirements of the law, including federal age discrimination
statutes. Given the substantial sums of money in corporate
pension plans, experience has repeatedly shown that, without
governmental vigilance, corporations will attempt to
manipulate their pension plans at the expense of their
employees. Cash balance conversions are just the latest
vehicle to accomplish that goal. In this case, federal age
discrimination statutes provide the IRS and other federal
agencies with the means to stop these schemes, which are
intentional efforts to wring savings from the pensions of
older employers.
(1) Cash balance conversions are often intentional attempts
to cut the pension benefits of older employees and increase
the operating income of employers.
Cash balance plans are a relatively recent innovation. The
first cash balance plan was implemented in 1984, according to
the consulting firm Watson Wyatt Worldwide.\3\ Almost
universally, companies implementing a cash balance plan are
converting from some other type of defined benefit plan.\4\
To date, 22% of the Fortune 100 companies have converted to
some sort of hybrid pension plan, over 70% of which are cash
balance plans.\5\ It is estimated that 20% of those in the
Fortune 500 have converted to a cash balance plan.\6\
Cash balance promoters explain the popularity of cash
balance conversions by arguing that cash balance plans
provide employers with a competitive advantage because these
plans better suit the desires of an increasingly mobile
workforce.\7\ Promoters have also stated that cash balance
plans are easier for employees to understand because the
benefit is expressed in terms of a lump sum dollar amount as
opposed to a monthly benefit under a traditional defined
benefit plan.\8\ These rationales for cash balance
conversions are frequently pretextual.
In truth, a significant reason that corporations convert to
a cash balance plan is to cut the pension benefits of older
workers--workers who comprise a larger and larger percentage
of the workforce.\9\ That cash balance plans reduce the
accrual rate for older workers is not a well-kept secret.
Kyle N. Brown, a retirement and pension lawyer with Watson
Wyatt Worldwide said to a Society of Actuaries Conference in
October of 1998: ``The economic value that is accrued, is
different in hybrid plans than it is for traditional plans.
In essence, that is part of the reason why you want to put
these plans in. You know you are trying to get a different
pattern of accrual. Well, what that means is that for your
older, longer service workers, that their rate of accrual is
going to go down. There is going to be a reduction in their
rate of accrual.''
The reason why large corporations are targeting their older
workers' pensions is easy to understand. Millions and
millions of Americans in the so-called ``baby boomer''
generation are rapidly approaching retirement age. In Watson
Wyatt's July 1998 edition of its Insider newsletter, the
aging of the U.S. labor market is carefully detailed.\10\ As
the newsletter demonstrates, the number of workers in the 55-
64 age category is expected to grow by 54% in the decade from
1996 to 2006.\11\ Companies that target the pensions of older
workers will thus realize tremendous cost savings when these
people retire.
In addition, Watson Wyatt's Insider dispels one of the
other myths advanced by cash balance proponents, namely, that
these plans are a response to an increasingly mobile American
workforce: ``Contrary to popular belief, Americans are not
changing jobs faster than ever before. According to an in-
depth study of employment records by Watson Wyatt, as baby
boomers are driving up the average age of the workforce, job
mobility is decreasing.'' \12\
Cash balance plans are thus not a response to a more mobile
work force. In fact, as Watson Wyatt admits, the percentage
of workers staying at a single employer for 10 years has
risen in the last ten years, as has the percentage staying
with the same company for 20 years.\13\
Worker mobility is not the rationale for converting to a
cash balance plan, money is. As 11,000 people a day turn 50,
which Watson Wyatt posits will turn us into a ``Nation of
Floridas,'' employers need to find ways to retain them.
Instead of creating incentives to retain older workers,
companies have turned to cash balance plans, which make it
much more likely that older workers will have to delay
retirement.\14\ Employers who convert to a cash balance plan
thus see a two-fold benefit. Companies retain older
workers who can no longer afford to retire and the
benefits the employees do receive at retirement will be
significantly lower.
Just as with the worker mobility argument, cash balance
promoters are disingenuous when they argue that the ``lump
sum'' feature of cash balance plans are easier for employees
to understand. To the contrary, cash balance proponents have
argued in favor of these plans because they make it more
difficult for employees to understand that their benefits are
being reduced.\15\
Again, cash balance promoters have been very open amongst
themselves about the ability of these plans to mask benefit
cuts. In a July 27, 1989 letter from Kwasha Lipton to Onan
Corporation, the consultant notes, ``One feature which might
come in handy is that it is difficult for employees to
compare prior pension benefits formulas to the cash balance
approach.''
Similarly, Joseph Edmunds stated at a 1987 Conference of
Consulting Actuaries, ``[I]t is easy to install a cash
balance plan in place of a traditional defined benefit plan
and cover up cutbacks in future benefits.''
Likewise, William Torrie of PriceWaterhouseCoopers at the
October 18-
[[Page H855]]
23, 1998 Society of Actuaries meeting said, ``[C]onverting to
a cash balance plan does have an advantage of it masks a lot
of the changes. . . .''
In addition, current accounting rules actually encourage
the practice of reducing pension benefits. Due to Financial
Accounting Standard (FAS) 87, companies are able to report
pension assets as operating income. By listing pension assets
as operating income, companies can increase their bottom line
by cutting the pension benefits of their workforce, which is
exactly what is happening today.\16\ This is wrong, and must
be put to an end immediately.
We understand that the intended purpose of FAS 87 was to
require the disclosure of pension liabilities. While
transparency regarding an employer's pension situation--both
as to liabilities and surpluses--would appear to be proper,
clearly pension assets are not operating income.\17\ And
allowing them to be characterized as such creates two
perverse incentives. First, it encourages employers to reduce
pension benefits in order to create large pension surpluses.
Second, it distorts the financial health of the company,
making investors believe the company is more profitable than
it actually is. Surplus pension assets should be used for
cost of living increases for pensioned retirees, and other
retirement benefits. Unfortunately, that is not happening
today.\18\ We believe that FAS 87 should be changed to
require employers to list net pension cost as investment
income instead of operating income.\19\
In summary, despite the protestations of cash balance
promoters, these conversions are implemented to unlawfully
cut the benefits of older employees and to disguise those
cuts by implementing a plan that makes it virtually
impossible for employees to make an ``apples to apples''
comparison of their benefits under the old and new plans.\20\
We ask that the Treasury Department, the IRS, and other
federal agencies keep the admissions of cash balance
promoters in mind when evaluating cash balance plans'
compliance with federal age discrimination statutes.\21\
(2) Cash balance plans are defined benefit plans, not
defined contribution plans.
Although there seems to be little dispute that cash balance
plans are defined benefit plans and not defined contribution
plans, we address it briefly.\22\ ERISA and the Code
recognize only two types of pension plans: defined benefit
and defined contribution plans. In the most basic terms, the
distinction between the two is who bears the risk of
investment gains and losses. In defined benefit plans, the
employer bears the risk and in defined contribution plans, it
is the participant. ERISA defines a defined contribution
or individual account plan as, ``[A] pension plan which
provides for an individual account for each participant
and for benefits based solely on the amount contributed to
the participant's account, and any income, expenses,
gains, and losses, and any forfeitures of accounts of
other participants which may be allocated to such
participant's account.'' \23\
A defined benefit plan is any other pension plan which is
not a defined contribution plan.\24\
Cash balance pension plans are not defined contribution
plans because they are employer-funded and participants do
not bear the risk (nor reap the benefits) of investment gains
and losses. Nor, despite the fact that participants are
presented with hypothetical ``cash balances'' do they have
segregated accounts.
Employer cash balance contributions are typically comprised
of two components: a pay credit and an interest credit. The
pay credit is generally a fixed rate of an employee's salary.
The interest credit is designed to mimic defined contribution
plans by providing a hypothetical investment return, usually
calculated as a fixed interest rate or tied to an index such
as the yield on 30-year U.S. Treasury Bonds. Because this
interest credit is calculated based on the difference between
an employee's age and normal retirement age, the amount of
this interest credit relative to the pay credit decreases as
the employee ages.
(3) Cash balance plans fail to meet the requirements for
defined benefit plans and violate federal anti-age
discrimination statutes.
Because cash balance plans are defined benefit plans, they
must comply with the letter of the relevant provisions of
ERISA, the Internal Revenue Code and the ADEA. All three
legal regimes provide that the rate of pension benefit
accruals not be reduced based on the employee's age.\25\ Cash
balance pension conversions violate these provisions because
the rate of benefit accrual is reduced and is reduced because
of the employee's age. This problem is exacerbated by plan
provisions commonly referred to as ``wear away,'' which
prevents older workers from earning new benefits under the
new plan until they exceed those that the employee accrued
under the former plan.
As the IRS is aware, the Code and ERISA contains a detailed
set of standards with which defined benefit plans must
comply. Those standards include rules for reporting and
disclosure, participation and vesting, funding, fiduciary
responsibility, and administration and enforcement. The
benefit accrual requirements, which are contained in the
participation and vesting requirements, are fundamental and
critical protections to ensure that pension plan participants
fairly accrue and receive benefits under their pension plans.
The benefit accrual rules are an important assurance that
participants are treated fairly and that the plan sponsor
does not design the plan to benefit only certain types of
workers.
Under section 204(b)(1)(G) of ERISA, defined benefit plans
are not in compliance with the law ``. . . if the
participant's accrued benefit is reduced on account of an
increase in his age or service.'' Furthermore, under ERISA
Sec. 204(b)(1)(H)(i) and Code Sec. 411(b)(1)(H)(i) and ADEA
Sec. 4(i)(1)(A), a defined benefit shall not be treated as in
compliance ``. . . if, under the plan, an employee's benefit
accrual is ceased, or the rate of an employee's benefit
accrual is reduced, because of the attainment of any age.''
In addition, one of the key elements of a defined benefit
plan is that it promises and provides benefits in the form of
an annuity, a monthly or regular stream of payments at
retirement. ERISA Sec. 3(23) expressly requires that defined
benefit plans determine an individual's accrued benefit ``. .
. expressed in the form of an annual benefit commencing at
normal retirement age.'' And, Code Sec. 411(a)(7), for
purposes of section 411 vesting and accrual rules, defines
``accrued benefit'' in the case of a defined benefit plan as
``the employee's accrued benefit determined under the plan
and, except as provided in subsection 9(c)(3), expressed in
the form of an annual benefit commencing at normal retirement
age.'' We firmly believe that the age-neutrality of benefit
accruals must be assessed based upon a normal retirement age
annuity and not on the basis of cash balance plan
``hypothetical accounts'' which have no legal status under
current law.
Based upon these requirements, cash balance conversions are
in violation of ERISA, the Internal Revenue Code and ADEA. By
definition, older participants accrue benefits at a lesser
rate because they have a shorter period of time to earn
interest than younger workers do. Under a cash balance
scheme, the interest credit is tied directly to the
employee's age.
As Lee Sheppard observed in her January 11, 1999 article in
Tax Notes Today (emphasis added), ``Whether a cash balance
plan would satisfy the proposed [IRS] regulation depends on
the definition of `rate of accrual.' If rate of accrual is
defined by projecting the participant's benefit to an annual
benefit beginning at normal retirement age, then cash balance
plans flunk, because the size of the participant's
actuarially determined benefit is purely a function of his or
her age. Indeed, it is impossible to estimate a cash balance
plan participant's pension benefit without knowing his or her
age.''
Professor Edward Zelinsky of the Benjamin N. Cardozo School
of Law came to the same conclusion in his October 1999 paper,
entitled, ``The Cash Balance Controversy'' (emphasis added),
``As a matter of law, the typical cash balance plan violates
the statutory prohibition on age-based reductions in the rate
at which participants accrue their benefits * * *. There is
no dispute about the underlying arithmetic: as cash balance
participants age, the contributions made for them decline in
value in annuity terms. Moreover, cash balance arrangements
are defined benefit plans and therefore measure accrued
benefits in terms of annuity equivalents, not in terms of the
contributions themselves.''
Cash balance promoters attempt to counter conclusions such
as Ms. Sheppard's and Professor Zelinsky's by arguing that
the rate of benefit accrual under a cash balance plan should
not be calculated by projecting the pension benefits into an
annuity beginning at normal retirement age. They point out
that neither the Code nor ERISA define ``rate of benefit
accrual.'' Instead, some suggest that the IRS should look at
the absolute dollar amount ``credited'' to employees' cash
balance ``accounts'' annually or that the IRS should remove
cash balance interest credits from its analysis.
This argument is generally founded on statutory
construction that is nonsensical. The accepted canons of
statutory construction dictate that words and phrases should
not be interpreted in isolation, but rather in the context in
which they are used. Section 411(a)(7) of the Code requires
an employees ``accrued benefit'' to be expressed in terms of
an annual benefit commencing at normal retirement age * *
*.'' The term ``accrued benefit'' is used throughout section
411(b)(1). Cash balance promoters opine that, because the
term ``rate of benefit accrual'' is used instead of ``accrued
benefit'' in section 411(b)(1)(H)(i), Congress did not intend
that the IRS should evaluate compliance with
Sec. 411(b)(1)(H)(i) by projecting an employee's annual
benefit beginning at normal retirement age.
It is not surprising that the term accrued benefit is not
used in Sec. 411(b)(1)(H)(i). This subparagraph is concerned
with the pace at which the accrued benefit grows. To insert
the term ``accrued benefit'' in this section would make it
nonsensical. However, by reference to the provisions in the
same paragraph, it is obvious that the benefit that is
accruing is the projected annual benefit at normal retirement
age.\26\
Any doubt about the meaning of the language of
Sec. 411(b)(1)(H)(i) is resolved by comparing it to the
Sec. 411(b)(2)(A), which states in relevant part, ``A defined
contribution plan satisfies the requirements of this
paragraph if * * * the rate at which amounts are allocated to
the employee's account is not reduced, because of the
attainment of any age.''
In essence, cash balance promoters argue that the IRS
should apply Sec. 411(b)(2)(A) in determining whether cash
balance conversions violate the age discrimination statute.
But,
[[Page H856]]
cash balance plans are defined benefit plans, not defined
contribution plans. As such, cash balance plans must comply
with Sec. 411(b)(1)(H)(i). A comparison of the language of
these two sections evidences a different standard. The only
interpretation that makes sense given the context of
Sec. 411(b)(1)(H)(i) and a comparison with the language of
Sec. 411(b)(2)(A) is that the rate of benefit accrual is
evaluated in terms of the projected annual benefit at normal
retirement age.
This interpretation is borne out in the comments of Paul
Strella--currently at the pension consultant firm of William
M. Mercer and formerly a Tax Benefit Counsel at the
Department of Treasury--at a 1992 Enrolled Actuaries Meeting:
``There is a rule in the Internal Revenue Code, along with
ERISA, that says that the rate of accrual, the rate of
benefit accrual in a pension plan can not decline merely on
account of increasing age. Well, a cash balance plan does
exactly that.''
This view is also apparently shared by some within the IRS.
For example, a September 3, 1998 memorandum from the District
Director of the Ohio Key District in Cincinnati, Ohio to the
Director of Employee Plans Division in Washington, DC states
that at least one cash balance plan ``does not satisfy the
clear and straightforward requirement of Sec. 411(b)(1)(H)(i)
of the Code because the plan's benefit accrual rate decreases
as a participant attains each additional year of age.''
(4) The ``wear-away'' feature of many cash balance
conversions violate federal anti-age discrimination statutes.
In addition to violating Code Sec. 411(b)(1)(H)(i), and
related sections of ERISA and the ADEA, by reducing benefit
accruals based on age, many cash balance plans violate
federal age discrimination law, including Sec. 411(d)(6) of
the Code, through their use of the wear-away mechanism. It
was only during the past year that members of Congress became
aware that in many cash balance conversions, older workers do
not accrue new pension benefits until they have ``worn away''
their previously earned benefits. To permit pension plans to
include ``wear away'' violates both the letter and spirit of
two key ERISA [and ADEA] principles: (1) that accrued
benefits cannot be reduced, and (2) that pension plans cannot
discriminate on the basis of age. To deny participants
additional accruals on the basis of years of service and
benefits already accrued under the plan before the amendment
is contrary to public policy. In this situation, benefits
accrued based on years of service absolutely is a proxy for
age. Plan wear-away provisions do not meet the ERISA/IRC
exception for explicit uniform limitations on benefit
accruals for all workers based upon a maximum number of years
of service. Under wear-away clauses, the only workers who do
not receive continued accruals are the oldest workers. To
claim that they always remain entitled to their accrued
benefit, even though every day it is being eroded and used
against their ability to earn new benefits, makes a mockery
of ERISA's accrued benefit protections.
There is little doubt that the wear-away feature of cash
balance plans is targeted at older workers. The wear-away
takes place because the benefits the employee is entitled to
under the traditional defined benefit plan are greater than
those under the cash balance plan. By definition, the
employees that fit this profile are older workers because
benefits under a traditional defined benefit plan accrue more
quickly for the older, more senior workers while the rate of
accrual under a cash balance plan accrue more slowly for this
group of employees. Given the age discriminatory intent of
cash balance promoters, the IRS should cast a jaundiced eye
at their claims that the disproportionate impact of wear-away
on older workers is not by design.
In our mind, the practice of wear-away is contrary to the
law and public policy and cannot be allowed to continue. The
fact that the IRS has not objected to these provisions in the
past, and may have given some plan sponsors prefatory
language refuting any age discrimination questions, should
not stand in the way of the IRS and other agencies fresh
assessment of whether cash balance plans comply with the law.
In light of the wealth of new information that has become
public in the past year, it is critical that the IRS take all
needed steps to ensure that all pension plans comply with the
law.
(5) Cash balance conversions should therefore be
disqualified under existing law.
As we have discussed, cash balance pension conversion are
illegal under Sec. 411(b)(1)(H) of the Internal Revenue Code,
Sec. 204(b)(1)(H) of ERISA, and Sec. 4(i)(1)(A) of ADEA in
terms of accrual rates. We have also indicated that most cash
balance conversions are in violation of Sec. 411(d)(6) of the
Internal Revenue Code dealing with wear away.
Since, cash balance conversions are in violation of these
laws, we believe that the IRS should disqualify these
conversions under current law. Cash balance promoters have
appealed for regulatory relief on the grounds that they were
lulled into a false sense of security about the legality of
cash balance conversions. We have little sympathy for their
arguments. Much of the difficulty in uncovering the age
discriminatory nature of cash balance conversions lies with
the promoters themselves and they are entitled to no benefit
from the confusion of their own making.
Finally on this point, we note that most of the arguments
made by cash balance promoters are policy arguments for why
hybrid pension plans, including cash balance plans, are a
positive development that deserve the support of the federal
government. Even if those arguments had some merit, which in
our strong view they do not, those arguments are
inappropriate in this regulatory context. Cash balance
conversions violate federal anti-age discrimination statutes.
(6) A safe harbor should be established allowing cash
balance plans to meet existing legal requirements only if all
employees are allowed to choose which pension plan works best
for them with detailed disclosure.
In consideration of the goals of the age discrimination
regimes in the Code, ERISA, and the ADEA, and based on our
considerable consultation with employees affected by cash
balance conversions, we also believe that a safe harbor
should be established that would protect the tax-exempt
status of cash balance conversions if the employers offer all
current employees the choice to remain in the traditional
defined benefit plan. We believe that such a safe harbor
would come the closest to proverbial ``win-win'' outcome for
all stakeholders in the cash balance pension debate.
The safe harbor that we are recommending would necessarily
require the employer to provide a detailed individualized
statement allowing the employees to easily compare between
the traditional defined benefit plan and the cash balance
plan. If the company does not want to provide these
individualized statements, the company may be exempted from
this requirement only if they allow their employees to
choose which pension plan works best for them on the date
that they leave the company. On this date, the company
must also allow the employees to compare exactly how much
they would receive under the traditional defined benefit
plan and the cash balance plan.
Due to the complexities involved, we believe that companies
that have already converted to cash balance plans should be
given at least 90 days to make the above changes in their
pension plan. As we noted above, from a policy standpoint we
believe this represents a middle ground that would most
effectively address the concerns of all involved. For the
employers, their pension plans would continue to enjoy tax-
exempt status. And, for the employees, they would be able to
continue to receive the pension benefits that were promised
to them.
We do not, however, offer here an opinion about whether the
IRS has the authority to implement such a safe harbor under
current federal law. If the IRS determines that it does not
have the authority to do so, we stand ready to support an IRS
request to implement the necessary statutory changes.
Thank you for giving us this opportunity to express our
views. We look forward to working with you to address the
serious age discriminatory impact of cash balance
conversions.
Sincerely,
Bernard Sanders, George Miller, William Clay, Martin
Frost, Barney Frank, Edward J. Markey, Patsy Mink,
Marcy Kaptur, Peter J. Visclosky, Rush D. Holt, Carolyn
B. Maloney, Lynn C. Woolsey, Sherrod Brown, John
Conyers, Jr., Jerrold Nadler, Martin Olav Sabo, Nancy
Pelosi, Luis V. Gutierrez, John Elias Baldacci, Cynthia
A. McKinney, Donald M. Payne, Peter A. DeFazio.
Tammy Baldwin, Lane Evans, Frank Pallone, Jr., Sheila
Jackson-Lee, Tom Lantos, Steven R. Rothman, Dennis J.
Kucinich, Janice D. Schakowsky, Eleanor Holmes Norton,
Robert A. Brady, Corrine Brown, Michael P. Forbes, Gary
L. Ackerman, John Joseph Moakley, James P. McGovern,
John F. Tierney, Neil Abercrombie, Bob Filner.
Michael F. Doyle, Major R. Owens, Michael E. Capuano,
Danny K. Davis, Alcee L. Hastings, Carolyn McCarthy,
Bobby Rush, Barbara Lee, Ron Klink, Tom Barrett, John
W. Olver, Bennie G. Thompson, Sanford D. Bishop, Jr.,
Ted Strickland, Jesse L. Jackson, Jr., Bobby Scott,
Stephanie Tubbs Jones, Pat Danner, James Traficant,
Bill Luther.
footnotes
\1\ These anti-age discrimination statutes include not only
the ADEA, but also the Internal Revenue Code, and ERISA as
amended.
\2\ Outside pension advisors who promote the cash balance
concept as a way to cut pension benefits were well aware of
the age discriminatory impact of these conversions as
evidenced by comments made in correspondence and at actuarial
meetings. For instance, comments made at numerous American
Society of Actuaries meetings bear out the widespread
understanding that cash balance conversions targeted the
benefits of older workers. This does not, however, in any way
absolve the many corporations--including many Fortune 500
companies--who have made these conversions and who all
ostensibly have sufficient inhouse expertise to understand
the impact of these plans. We are not aware of any companies
who have implemented a cash balance conversion based on the
advice of outside consultations but who lacked a full
understanding of the ramifications for their older workers.
If they do exist, they have yet to come forward.
\3\ See www.watsonwyatt.com/homepage/us/news/pres_rel/Jan99/
hybrid-tm.htm.
\4\ Based on unconfirmed anecdotal evidence, there may be one
or two companies that have implemented a cash balance ``from
scratch.'' However, given the hundreds of companies that have
implemented conversions, federal agencies' review of cash
balance plans should focus on them in the context of
conversions.
\5\ See www.watsonwyatt.com/homepage/us/news/pres_rel/Jan99/
hybrid-tm.htm.
\6\ Daniel Eisenberg, ``The Big Pension Swap,'' Time Magazine
(April 19, 1999) at 36 (``20% of Fortune 500
[[Page H857]]
companies, including AT&T and Xerox, now offer these plans
which cover close to 10 million workers nationwide.'').
\7\ Ellen Schultz, ``The Young and Vestless,'' The Wall
Street Journal (December 16, 1999) at A1. (``Employers . . .
increasingly acknowledge that switching to the new plans does
reduce benefits for many veteran employees. But compensating
for this, they say, is that the plans are better for a
younger, more mobile workforce.'').
\8\ The ERISA Industry Committee, Understanding Cash Balance
Plan: (``Unlike traditional defined benefit plans, cash
balance plans provide an easily understood account balance
for each participant.'').
\9\ There is also growing evidence that cash balance
conversions do not benefit younger workers. Ellen Shultz,
``The Young and Vestless.'' The Wall Street Journal (December
16, 1999) at A1. (``Many younger workers are no more likely
to collect a benefit from these new-fangled plans than they
are from traditional pensions. And when they do collect, they
often fare only a little better under a cash-balance
system.''
\10\ See www.watsonwyatt.com/hompage/us/new/Insider/6_98.HTM.
\11\ See id.
\12\ See id. (emphasis added).
\13\ See id.
\14\See www.watsonwyatt.com/homepage/us/res/workmgmt-tm.htm
(``Are you paying for performance or for tenure and age:'')
(emphasis added).
\15\ The authors understand that no current federal law
prevents a company from reducing future pension benefits.
However, federal law prohibits such cuts from being
implemented in an age discriminatory fashion. In this case,
companies are using cash balance plans to conceal
impermissible age discrimination.
\16\ Ellen Shultz, ``Joy of Overfunding: Companies Reap a
Gain Off Fat Pension Plans,'' The Wall Street Journal (June
15, 1999) at A1. (``Thanks to an accounting rule that is
little known to either shareholders or analysts, and that was
written for a very different era, there is a way to gain from
the pension surplus. The rule provides that if investment
returns on pension assets exceed the pension plans' current
costs, a company can report the excess as a credit on its
income statement. Voila: higher earnings.'').
\17\ Ellen Shultz, ``How Pension Surpluses Lift Profits,''
The Wall Street Journal (September 20, 1999) at C1.
(``Pension income isn't what you would consider operating
income at these companies; it is more along the lines of
investment income.'').
\18\ Ellen Shultz, ``Joy of Overfunding: Companies Reap a
Gain Off Fat Pension Plans,'' The Wall Street Journal (June
15, 1999) at A1. (``In the early 1980s, 60% of large
companies provided regular cost-of-living increases for
pensioned retirees; today, with the plans in better financial
shape, fewer than 4% do.)
\19\ A September 17, 1999 Bear Stearns Study, entitled
``Retirement Benefits Impact Operating Income,'' reached a
similar conclusion. (``We . . . recommend that the components
of net pension cost be disaggregated for purposes of
financial analysis.)
\20\ While not the focus of these comments, the authors do
believe that current federal law needs to be amended to
increase the disclosure requirements when companies decrease
their employees' future pension benefits.
\21\ In light of these statements, in the event of litigation
challenging the legality of cash balance conversions, the
authors believe plaintiffs would have little difficulty
establishing the discriminatory intent of the actuaries and
companies promoting cash balance plans.
\22\ The authors have omitted a lengthy discussion of the
differences between defined contribution and defined benefit
plans because the IRS is well versed in those distinctions.
\23\ ERISA Sec. 3(34).
\24\ ERISA Sec. 3(35) (describing a defined benefit plan as
``a pension plan other than an individual account plan.'')
\25\ See ERISA Sec. 204(b)(1)(H)(i), Code
Sec. 411(b)(1)(H)(i) and ADEA Sec. 4(i)(1)(A).
\26\ See, e.g., NRLB v. Federbush Co. Inc., 121 F. 2d 954,
957 (2d 1941) (``Words are not pebbles in alien
juxtaposition; they have only a communal existence; and not
only does the meaning of each interpenetrate the other, but
all in their aggregate take their purport from the setting in
which they are used. . . .'')
Mr. PORTMAN. Mr. Speaker, I yield myself 1 minute to respond briefly.
We are going to hear a lot about tax cuts for the rich from the other
side apparently. I would just like to remind Members about what is
actually in this legislation. There is health insurance for those who
are self-employed. Those are people who are primarily small
businesspeople. These are not the rich. There is community renewal here
for our very poorest neighborhoods, rural and urban neighborhoods
around America. Those are the people who will benefit. With regard to
the low-income tax credit, that is going to benefit not the rich; it is
going to benefit people who need the benefit of government help in
housing.
With regard to pensions, and I see my colleague here from North
Dakota. Let us look at the benefits. Seventy-seven percent of the
people who are currently participating in pensions make less than
$50,000 a year. These are not rich people. These are people who need
our help. I would just say, I have now had a chance to look at the
Democratic alternative, as I have been sitting here, in more detail. It
provides a net $8 million in tax relief as I see it over 5 years. The
Republican alternative provides through all those items I just
mentioned about $48 billion worth of needed tax relief that is going to
help all Americans.
Mr. Speaker, I yield 1 minute to the gentleman from New York (Mr.
Reynolds).
Mr. REYNOLDS. Mr. Speaker, I think my colleague from Ohio outlined
specifically that anyone who tries to sell this tax plan as a tax cut
for the rich has not read the legislation introduced by my Republican
colleagues. This bill clearly goes after taking an opportunity to take
care of middle America and our low-income families, whether it is
addressing low-income tax credits or housing or more particularly
looking at those people who pay insurance.
To have an opportunity as self-employed individuals to begin to have
some relief on the cost of paying for that insurance while self-
employed is an opportunity that this bill begins to address. Quite
frankly we need to do more than what the $28 billion that has been
afforded in this tax package has done for Americans.
Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the distinguished
gentleman from North Dakota (Mr. Pomeroy).
Mr. POMEROY. Mr. Speaker, I thank the gentleman for yielding me the
time. I want to begin by commending the gentleman from Ohio (Mr.
Portman), who is truly a leader in retirement savings initiatives. How
I wish that the provisions in this bill that reflect his very good work
were before us in a fair and thoroughly considered way. I think we
could have a 100 percent vote out of this House as we advance the
opportunities for Americans to save for retirement. But unfortunately,
that is anything but the bill that is in front of us.
They will talk about this good thing, and they will talk about that
good thing and let us recognize them for what they are, window dressing
on a bill, the heart of which is an estate tax cut giving direct tax
benefit to the wealthiest people in the country. It is a fine thing to
do, but is that our first priority for tax relief?
Some will say our farmers need this, and I want to contrast in the
balance of my remarks their plan versus our plan as it regards farmers.
An analysis of their proposal shows that farms under $13 million, farms
and small businesses with assets under $13 million fare better under
the Democrat substitute. The Democrat substitute effectively takes up
to $4 million for estate tax relief. Checking with the census on data
in North Dakota, the State I represent, 99.7 percent of the farms fare
better under the Democrat plan because they are under that $13 million
figure. That lets us know the amount in their plan that goes toward the
wealthiest, the very wealthiest people in this country.
Only this majority could take what was initially designed to be
minimum wage legislation and lard it up with a huge windfall for the
wealthiest people in this country. I particularly resent saying that
theirs is the one that helps the family farmer. If Members want to help
the family farmer, vote for the Democrat substitute that effectively
takes estate tax relief to $4 million, not their plan.
The SPEAKER pro tempore (Mr. Pease). Without objection, the gentleman
from Arizona (Mr. Hayworth) will control the time of the gentleman from
Ohio (Mr. Portman).
There was no objection.
Mr. HAYWORTH. Mr. Speaker, I yield myself 1 minute to make a couple
of points in response to my good friend from North Dakota. I am pleased
that he embraces the notion of death tax relief for family farms. I am
sorry he neglected to offer us the name of the source for his analysis
that smaller farms would be helped. I look forward to a response on
their side on their time with that information.
What I would also like to point out is correspondence that the
Speaker has received from the Small Business Survival Committee, Mr.
Speaker. It reads, and I quote, ``The alternative offered by the
minority, the alternative is a de facto tax increase on small
businesses, that are the leading source of new jobs and economic
expansion in America. The alternative to the tax plan being considered
today would severely jeopardize the financial security of the small
business community.''
I would reiterate that when we take a look at the package being
offered as the alternative, Mr. Speaker, it offers a net $8 million of
tax relief as opposed to the majority common sense plan, $48 billion in
tax relief.
Mr. Speaker, I reserve the balance of my time.
Mr. RANGEL. Mr. Speaker, I yield 2 minutes to the gentleman from
California (Mr. Sherman).
[[Page H858]]
Mr. SHERMAN. Mr. Speaker, this budget-busting, Social Security-
risking tax bill would cause the sheriff of Nottingham to cringe in
embarrassment because it is the most regressive tax bill in recent
history. Three-quarters of the benefits go to the top 1 percent, a
group of people with an average income of $900,000. Its estate tax
provisions are even more regressive. We are denounced for class warfare
rhetoric, but this bill is a sneak attack against working Americans.
Mr. Speaker, in the spirit of today's game shows, this bill does not
ask who wants to be a millionaire, nor does it ask who wants to marry a
multimillionaire. It asks who wants to give huge tax breaks to multi-
multimillionaires. And I emphasize ``million heirs,'' because the
breaks go chiefly not to those who are rich because of their efforts
but those who become rich because of their clever selection of parents.
Ninety-five percent of Americans get 13 bucks out of this bill. There
are some pennies for average Americans. But the top 1 percent get
$6,000 of tax relief, or as we say in L.A., dinner at Spagos. This bill
is so obnoxious, so regressive, that it is being packaged in the
rhetoric of talking about the average beauty shop owner. But to get the
benefits, you need an estate of $4 million and more. That is a lot of
beauty shops. And then they take this deceptively packaged tax bill and
they feel they cannot conceal it enough, so they wrap it in an increase
in the minimum wage. This bill provides over $100 billion of tax relief
to the superrich, and it provides $11 billion of wage increases to
those who make $5.15 an hour.
Mr. Speaker, I include for the Record the following documents from
the Citizens for Tax Justice:
House GOP Minimum Wage Plan Offers $11 in Upper-Income Tax Breaks for
Every $1 in Wage Hikes for Low Earners
The House GOP leadership's $123 billion tax-cut/minimum
wage plan, to be voted on this week, would give upper-income
taxpayers $11 in tax breaks over the next decade for every
dollar in increased wages paid to low-wage workers.
Unbalanced Acts, a joint analysis of the GOP proposal by
Citizens for Tax Justice and the Economic Policy Institute,
finds:
Over the next decade, the proposed tax cuts will total
$122.8 billion. Over the same period, wage increases stemming
from the $1 boost in the minimum wage will total only $11.2
billion. This means that over ten years, for every dollar in
higher wages for low-wage workers, $10.90 in upper-income tax
breaks will be provided.
Almost all the tax cuts (91.4%) would go to the best-off
tenth of all taxpayers. In fact, the top one percent of all
taxpayers, those making more than $319,000 a year, would get
almost three-quarters of the tax reductions. Their average
annual tax cut under the plan would be $6,128 each (in 1999
dollars). That compares to only a $4 average tax cut for the
bottom 60 percent.
While the tax bill's permanent tax cuts grow to $17.6
billion by 2010, the effect of the minimum wage proposals
will be totally eroded by inflation after 2006.
``The minimum wage hike will allow low-wage workers to
share in the gains of this economic recovery, while the
proposed tax cuts will needlessly provide a second helping of
the economic pie to the wealthiest taxpayers,'' said EPI Vice
President Lawrence Mishel.
``It's ridiculous that a minimum wage bill supposedly
designed to aid low-wage workers would actually give its
biggest benefits to the highest-income people in the
country.'' said Citizens for Tax Justice, director Robert S.
McIntyre.
EPI's minimum wage analysis compares the wage hikes under
the GOP plan, which would boost the minimum wage by $1 over
three years, to the wages that affected workers would earn if
their wages merely keep up with inflation over the next
decade. The GOP's three-year phase-in of the wage boost
provides an $11.2 billion gain to these workers over ten
years--$3.8 billion less than the Bonior-Kennedy proposal's
two-year implementation plan, which would produce a total of
$15 billion in higher wages.
The distributional effects of the tax cuts were analyzed by
CTJ using the Institution on Taxation and Economic Policy Tax
Model. The $123 billion estimated ten-year cost of the tax
cuts is based on preliminary, March 1, 2000 estimates from
the Joint Committee on Taxation. (The tax cut plan would,
among other things: cut estate taxes by $79 billion over ten
years--representing almost two-thirds of the total proposed
tax cuts; increase the write-off for business meals to 60% of
cost from 50% under current law; provide added tax breaks for
pensions and 401(k) plans; increase the limits on immediate
write-offs of business capital investments; speed up the date
when 100% of self-employed health insurance can be deducted;
restore a loophole for installment sales that was repealed in
1999; expand enterprise zones; expand the tax credit for
investors in low-income housing; expand the tax credit for
investors in low-income housing; and augment tax breaks for
private tax-exempt bonds.)
A table detailing the distributional effects of the tax
cuts follows:
EFFECTS OF THE TAX CUTS IN THE HOUSE GOP 2000 MINIMUM WAGE BILL
[Annual effects at 1999 levels; $-billion except averages.]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percent of
Income group Income range Average Estate tax Corporate Pensions & Total tax Average tax total tax
income cuts tax breaks 401Ks cuts cut cut
--------------------------------------------------------------------------------------------------------------------------------------------------------
Lowest 20%..................... Less than $13,600........... $8,600 -0.0 -0.0 -0.0 -0.0 -1 0.3%
Second 20%..................... 13,600-24,400............... 18,800 -0.0 -0.1 -0.0 -0.1 -4 0.9%
Middle 20%..................... 24,400-39,300............... 31,100 -0.0 -0.2 -0.0 -0.2 -7 1.7
Fourth 20%..................... 39,300-64,900............... 50,700 -0.0 -0.3 -0.0 -0.3 -13 3.0
Next 15%....................... 64,900-130,000.............. 86,800 -0.0 -0.4 -0.1 -0.6 -29 5.3%
Next 4%........................ 130,000-319,000............. 183,000 -0.8 -0.5 -0.4 -1.7 -329 15.7%
Top 1%......................... 319,000 or more............. 915,000 -5.7 -1.4 -0.7 -7.7 -6,128 73.1%
-----------------------------------------------------------------------------
All............................ ............................ ........... -6.5 -2.8 -1.2 -10.6 -83 100.0%
Addendum:
Bottom 60%................. Less than $39,300........... $19,500 0.0 -0.3 -0.0 -0.3 -4 2.8%
Top 10%.................... 92,500 or more.............. 218,000 -6.5 -2.0 -1.1 -9.7 -765 91.4%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: Figures show the annual effects of the approximately $123 billion in tax cuts over the next 10 years included in the GOP minimum wage increase
plan to be voted on by the House on March 9 or 10. All provisions are measured as fully effective, at 1999 income levels. Distributional figures do
not include the faster phase-in of the self-employed health insurance deduction.
Source: Institute on Taxation and Economic Policy Tax Model. Citizens for Tax Justice, March 7, 2000.
The report, Unbalanced Acts, is available on-line at both
www.epinet.org and www.ctj.org. It can also be obtained by
calling 1-800-374-4844.
____
Unbalanced Acts
a comparison of the proposed minimum wage and tax bills
(By Jared Bernstein, Robert S. McIntyre, and Lawrence Mishel)
The good news is that an increase in the federal minimum
wage looks like a real possibility. How good the news is,
however, depends on which of the two competing proposals wins
out. The differences between the two proposals are not
insignificant, especially when considering the billions of
dollars in tax cuts in which the GOP leadership has couched
its minimum wage proposal. A comparison of the size and
phase-in periods of the competing minimum wage proposals in
relation to the proposed $123 billion GOP tax cut package
finds that:
The $123 billion in tax reductions proposed by the House
GOP leadership over the 2000-10 period is nearly 11 times
greater than the $11.2 billion in wage hikes that would be
generated by its accompanying minimum wage proposal.
Over the course of a decade, for every dollar in higher
wages generated for low-wage workers by the House GOP plan,
$10.90 in tax cuts will be provided, mostly for those with
the highest incomes.
While the tax bill's permanent tax cuts grow to $17.6
billion in fiscal year 2010, the effect of both of the
minimum wage proposals will be totally eroded by inflation
after fiscal year 2006.
The Bonior-Kennedy minimum wage proposal's two-year
implementation plan providers a total of $15 billion in
higher wages, while the GOP plan's three-year schedule
provides an $11.2 billion gain to these workers, or $3.8
billion less.
Ninety-one percent of the gains from the GOP's proposed tax
reductions are targeted to the wealthiest 10%, with 73.1%
accruing to the richest 1% of households. In contrast, the
minimum wage proposals are designed to aid the lowest-income
workers.
an analysis of the gains from the tax and minimum wage proposals
Quantifying the aggregate wage gains over the next 10 years
under both the Bonior-Kennedy and the House GOP minimum wage
proposals (see appendix for methodology) allows for a clear
comparison of the proposed minimum wage increases and the
proposed tax legislation (Table 1).
[[Page H859]]
TABLE 1.--COMPARISON OF ANNUAL AND CUMULATIVE IMPACT OF HOUSE GOP TAX
AND MINIMUM WAGE PLANS, 2000-10
[amounts in billions]
------------------------------------------------------------------------
House GOP Comparison of
-------------------- House GOP tax and
min wage plan
-------------------
Ratio of
Fiscal year tax cuts
Tax cuts Min wage to MW
(1)-(2) plan (in
percent)
(1)/(2)
------------------------------------------------------------------------
Annual impact:
2000........................ $0.5 $0.7 -$0.2 73
2001........................ 2.4 1.7 0.7 142
2002........................ 9.2 3.2 6.1 292
2003........................ 10.6 2.7 7.9 395
2004........................ 10.8 1.7 9.1 626
2005........................ 12.3 0.9 11.4 1,301
2006........................ 13.4 0.4 13.0 3,421
2007........................ 14.4 ........ 14.4 (\1\)
2008........................ 15.2 ........ 15.2 (\1\)
2009........................ 16.3 ........ 16.3 (\1\)
2010........................ 17.6 ........ 17.5 (\1\)
Cumulative impact:
2000-10..................... 122.8 11.2 111.6 1,093
2000-05..................... 45.8 10.8 35.0 422
------------------------------------------------------------------------
\1\ Cannot calculate ratio with zero as denominator.
Source: EPI/Joint Committee on Taxation.
The GOP minimum wage proposal would be phased in over three
years, with two annual increases of $0.33 and one of $0.34;
the Bonior-Kennedy plan would involve two annual $0.50
increases. After the full implementation of these increases,
the effects of the minimum wage hike will decline as
inflation continues its ongoing erosion of the value of the
minimum wage. After fiscal year 2006, inflation will have
eroded the new minimum to the point that it will represent no
improvement over the current level. Since it takes the GOP
plan an additional year to push the minimum wage to the
$6.15 level, the $11.2 billion in cumulative gains under
the House GOP plan are significantly less than the $15
billion impact of the Bonior-Kennedy plan.
Ultimately, though, the size of the GOP's proposed tax cuts
quickly dwarfs that of either minimum wage proposal. By
fiscal year 2002, the $9.2 billion in proposed tax cuts are
nearly three times as large as the cumulative $3.2 billion in
minimum wage hikes up to that point. The annual tax cuts
eventually rise to $17.6 billion in 2010, but the minimum
wage increase's effect falls to zero after 2006. Thus, the
tax cuts grow over time and are permanent, but the minimum
wage legislation, while important, has but a temporary impact
because neither of the current proposals guarantee further
increases after the $6.15 level is reached. (Indexing the
minimum wage to inflation or wage growth would remedy this
problem of minimum wage erosion.)
The 10-year impact of the House GOP tax legislation--$122.8
billion over the 2000-10 period--is 10.9 times as large as
the $11.2 billion in total wage hikes that the GOP's minimum
wage boost would produce. Thus, over the course of 10 years,
for every dollar in higher wages generated for low-wage
workers by the House GOP plan, $10.90 in tax cuts will be
provided for mostly those with the highest incomes in the
nation.
the distributional impact of the gop tax proposal
The distributional assessment of the tax plan (Table 2) is
based on the Institute on Taxation and Economic Policy Tax
Model, Among other things, the GOP tax cuts would:
Cut the top estate tax rate from 55% to 48%; eliminate the
5% surtax that recaptures the benefits of the lower estate
tax rates; reduce other estate tax rates by 2 percentage
points; and replace the credit against estate taxes with an
exemption (worth more to the largest estates). The $79
billion in estate tax cuts over 10 years are almost two-
thirds of the total tax cuts proposed in the bill.
In crease the write-off for business meals from 50% to 60%
of cost under current law.
Provide added tax breaks for pensions and 401(k) plans.
Increase the limits on immediate write-offs of business
capital investments.
Speed up the date when 100% of self-employed health
insurance can be deducted.
Restore a loophole for installment sales that was repealed
in 1999.
Expand enterprise zones.
Provide tax breaks for timber companies.
Expenad the tax credit for investors in low-income housing.
Augment tax breaks for private tax-exempt bonds.
Table 2 shows that almost all of the benefits of the tax
legislation (91.4%) would accrue to the wealthiest 10% of the
population. In fact, the wealthiest 1% would get 73.1% of the
proposed tax reductions.
A one-dollar increase in the minimum wage provides no
economic rationale for tax cuts of the magnitude proposed in
the GOP legislation. Yet, as with the last minimum wage
increase, Congress again intends to use this opportunity to
implement a regressive tax cut. As the above analysis has
shown, the benefits to the wealthy from this proposal far
outweigh the benefits of the wage increase.
TABLE 2.--EFFECTS OF THE TAX CUTS IN THE HOUSE GOP 2000 MINIMUM WAGE BILL
[Annual effects at 1999 levels; $ billion except averages]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percent of
Income group Income range Average Estate tax Corporate Pensions & Total tax Average tax total tax
income cuts tax breaks 401Ks cuts cut cut
--------------------------------------------------------------------------------------------------------------------------------------------------------
Lowest 20%.......................... Less than $13,600...... $8,600 $0.0 $0.0 $0.0 $0.0 $-1 0.3
Second 20%.......................... 13,600-24,400.......... 18,800 0.0 -0.1 0.0 -0.1 -4 0.9
Middle 20%.......................... 24,400-39,300.......... 31,100 0.0 -0.2 0.0 -0.2 -7 1.7
Fourth 20%.......................... 39,300-64,900.......... 50,700 0.0 -0.3 0.0 -0.3 -13 3.0
Next 15%............................ 64,900-130,000......... 86,800 0.0 -0.4 -0.1 -0.6 -29 5.3
Next 4%............................. 130,000-319,000........ 183,000 -0.8 -0.5 -0.4 -1.7 -329 15.7
Top 1%.............................. 319,000 or more........ 915,000 -5.7 -1.4 -0.7 -7.7 -6,128 73.1
-----------------------------------------------------------------------------
All........................... ....................... ........... -6.5 -2.8 -1.2 -10.6 -83 100.0
Addendum:
Bottom 60%...................... Less than $39,300...... 19,500 0.0 -0.3 0.0 -0.3 -4 2.8
Top 10%......................... $92,500 or more........ 218,000 -6.5 -2.0 -1.1 -9.7 -765 91.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Figures show the annual effects of the approximately $123 billion in tax cuts over the next 10 years included in the GOP minimum wage increase plan to
be voted on by the House on March 9 or 10. All provisions are measured as fully effective, at 1999 income levels. Distributional figures do not
include the faster phase-in of the self-employed health insurance deduction. Source: Institute on Taxation and Economic Policy Tax Model. Citizens for
Tax Justice, March 7, 2000.
appendix: minimum wage simulation methodology
To determine the aggregate wages generated by a minimum
wage increase, one needs to identify the hourly wages and
weekly hours of workers in the ``affected range,'' i.e.,
those whose wages fall below the proposed new minimum wage.
We identify those in the ``affected range'' by ``aging'' the
1999 hourly wage distribution found in the Outgoing Rotation
Group files of the Current Population Survey by a 2.5% rate
of inflation (the long-term rate projected by the
Congressional Budget Office). Our analysis assumes that in
the absence of a minimum wage increase, low-wage workers
would maintain their real wage, seeing no improvement or
deterioration. This assumes wage growth depletes the size of
the working population in the affected range, as some
workers' wages will eventually exceed that of the newly
established minimum wage. (The minimum wage would rise in two
annual $0.50 increments in the Bonior-Kennedy version and two
$0.33 annual increments and a $0.34 increment in House GOP
plan). When those earning $5.15 in 1999 see their earnings
reach $6.15, then the minimum wage legislation no longer has
any effect, which under our assumptions would take place
eight years from now. We assume that the minimum wage
increases take effect in April of the relevant year.
The aggregate wage benefit is computed for workers in the
affected range as the difference between their simulated wage
level and the new minimum ($6.15 in later years; other values
in the transition years) multiplied by their average weekly
hours for 52 weeks. We increase the wage gain to reflect a
labor force growing by 1% annually.
The wage gains associated with minimum wage increases in
this simulation would be smaller (larger) if we assumed
either a faster (slower) inflation rate or real wage gains
(declines).
Mr. HAYWORTH. Mr. Speaker, I yield myself 1 minute in brief response
to my colleague from California. Mr. Speaker, it was interesting to
listen to the litany of game shows. Perhaps one we might call on our
friends on the left to actually watch and live up to is the game show
``To Tell the Truth'' because that seems to be sadly, noticeably absent
from the litany of lines we are hearing today from the left.
My friend from California and others in this Chamber are well aware
that small business owners, family farmers, actually create jobs for
other Americans, so reducing the tax bite, saying death to the death
tax actually empowers Americans to keep their jobs, rather than seeing
family farms sold off to pay off a huge tax bill, and the same thing
with businesses.
Mr. Speaker, I yield 4\1/2\ minutes to the gentleman from New York
(Mr. Lazio), a member of the Committee on Commerce.
Mr. LAZIO. Mr. Speaker I want to thank the gentleman from Arizona, I
want to thank the chairman of the Committee on Ways and Means for his
leadership in bringing this to the floor, and I want to thank the
Republicans and Democrats that helped shape this bill. These tax
provisions that represent, let us put this in perspective,
[[Page H860]]
about 1 percent of the non-Social Security surplus that we will
generate, about one penny out of every dollar.
This Small Business Tax fairness Act that is under debate today was
drafted in the spirit of mutual respect, Republicans and Democrats not
presuming to know what the final product was; but we have come together
to try and craft something from the start. This bill was introduced by
myself and cosponsored by colleagues from both sides of the aisle. I
want to, if I can, pay special tribute to the gentleman from Illinois
(Mr. Shimkus), who played a key role in drafting this legislation.
Additional Republican cosponsors included the gentleman from Illinois
(Mr. Weller), the gentleman from Pennsylvania (Mr. Sherwood), and the
gentleman from Mississippi (Mr. Pickering). And on the Democratic side
of the aisle, the gentleman from California (Mr. Condit) and the
gentleman from Alabama (Mr. Cramer) helped craft this bill, were
involved from the beginning. Additional Democratic cosponsors,
including the gentleman from Georgia (Mr. Bishop), the gentleman from
Mississippi (Mr. Shows), and the gentleman from Minnesota (Mr.
Peterson), also played key roles.
{time} 1715
These Members came together in the spirit of bipartisan cooperation.
They gathered with goodwill to come to grips with a complex and
tangible problem.
This bill represents a credible and honest effort to find a workable
balance between the contending viewpoints that are found both in this
House and in the American public at large.
We came to the table with the realization that a wage increase was
fair but we also came to the table with a desire to protect the small
business people who will end up bearing the direct burden of any wage
increase that we pass here today. We wanted to avoid the real life
situations in which low-wage workers would be laid off because of the
increased pressure this bill places on small employers' bottom lines.
In short, we wanted to find a win/win. In fact, Mr. Speaker, that is
exactly what we have done.
Mr. Speaker, we all wish to ensure that American workers at the
bottom of the economic ladder are fairly compensated for their hard and
honest labor. Yet we must also recognize that Federal wage mandates
imposed from on high in Washington can have a particularly negative
impact on the small businesses where these very same low-wage earners
are employed.
For those who wish to say that they want to balance the minimum wage
increase with tax relief for America's small businesses, they can do
that here today. For those who say that they favor letting the self-
employed deduct health insurance costs, they can do precisely that
today. For those who say they wish to vote for low-income housing tax
credits, they can do precisely that today. If, however, they wish to
conjure up reasons to vote against this bill, they may be able to do
that.
Mr. Speaker, we here in Washington are about to impose higher payroll
payments upon mom and pop stores throughout the country. Is it not only
fair that we should also offer these same small business owners Federal
help and not make them shoulder this burden alone?
I would like to know what the opponents of this bill find so
objectionable about provisions that help small business owners offer
pensions to their workers. I would like to understand why anyone would
oppose the community renewal provisions of this bill that help bring
hope to America's most economically troubled regions. What is wrong
with balancing this wage increase that elevates salaries at double the
rate of inflation, with aid to the small businesses who in the end will
be forced to pay the bill for what we pass here on Capitol Hill?
Mr. Speaker, the energy of entrepreneurs, people who have the courage
to risk all to realize their vision and dreams, should be rewarded, not
punished. Do we really wish to leave the owners of small computer
firms, restaurants, and mom and pop stores hanging out on a limb where
we shove them off alone? I think not, Mr. Speaker. Let us offer those
owners of mom and pop stores a helping hand.
In the beginning, I must admit that I was a bit perturbed and
perplexed and even puzzled by the opposition to this bill; but upon
reflection, I am not so perplexed after all.
No, Mr. Speaker, I am neither perplexed nor puzzled by the opposition
to this bill.
I remain, however, perturbed. I am perturbed by the fact that many of
the people in opposition would be motivated by the other ``P'' word:
Politics, to injure the small business owners and workers who form the
backbone of the American economy.
This bill represents an honest and good faith effort in which
representatives from both sides of the partisan divide came together to
achieve the best possible results, and the best possible result is
precisely what we shall achieve here on the floor of the Chamber today
when we pass this bill.
Mr. Speaker, we are first and foremost public servants. Let us put
election year political jockeying aside and do what the people of
America expect us to do. Let us do what we came here to Washington to
do. Let us make people's lives better. Let us pass this bill.
Mr. RANGEL. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I do not care how much time they give my friend, the
gentleman from New York (Mr. Lazio), to speak. He has to be pretty hard
put to find any bipartisanship on the tax provisions in this bill. We
can rest assured if there was any attempt, we would not find 90 percent
of the tax cuts going to 10 percent of the highest income people here.
If we did have a bipartisanship, we would not find three-fourths of the
tax cuts going to the highest income people.
Let me say this to my friend, the gentleman from Arizona (Mr.
Hayworth). He came pretty close to calling one of our colleagues a liar
that was speaking. He came very, very close. I do hope that a
reflection on the Record might bring out the best that he has in his
personality and his character so that we can continue to work together
as friends in this legislature, notwithstanding the TV shows that he
watches.
Mr. Speaker, I yield 2 minutes to my friend, the gentleman from
California (Mr. Filner).
Mr. FILNER. Mr. Speaker, there they go again. The majority is once
again bringing up legislation that purports to help the average hard-
working, taxpaying American but in reality is just more relief for
their well-to-do friends and business partners.
The gentleman from Arizona (Mr. Hayworth) watches television. He is
telling his friends that the price is right, yet he is putting all of
America into jeopardy.
We cannot continue to widen the gap between those who have and those
who have less. Just like the majority's so-called marriage penalty
relief, this tax cut/minimum wage increase does just that. It actually
widens the income gap.
Billions and billions in tax cut benefits for the majority's rich
friends and one dollar to America's working people; one dollar to
America's working people.
All Americans should share in the prosperity of this booming economy,
not just America's corporate CEOs. The Democratic substitute would
allow those at the low end of the wage scale to share in this
prosperity. I urge my colleagues on both sides of the aisle to remember
the priorities of the average American. Let us raise the minimum wage,
save Social Security and Medicare, pay down the national debt and stop
helping the wealthy under the pretense of helping the average hard-
working American.
Mr. Speaker, the saying goes, a rising tide lifts all boats but it is
very clear that if this is approved the majority's proposal will leave
an awful lot of smaller boats stuck in the muck of economic misery.
Defeat this bill and let us have all America set sail on the ship of
prosperity.
Mr. HAYWORTH. Mr. Speaker, I yield myself 1 minute to respond to some
of the rhetorical fireworks in the past couple of minutes.
Mr. Speaker, I appreciate my good friend, the ranking member of the
committee, the gentleman from New York (Mr. Rangel), and I am sorry
that he felt it necessary to offer a personal attack by way of
rhetoric, but we will
[[Page H861]]
look past that and go to the facts because as we know facts are
stubborn things.
When we examine the alternative offered by the minority, it is
actually cruel because it offers tax relief with one hand and takes it
away with the other. I point specifically to two increases, two estate
tax increases, in the Democratic alternative; and I would point out,
Mr. Speaker, that Americans for Tax Reform have sent a letter to the
chairman of the Committee on Ways and Means where they state
specifically the Democratic alternative would result in new taxes on
estates, corporate income, and capital gains alone.
So I think that is important to remember.
Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentleman from
Maryland (Mr. Cummings).
Mr. CUMMINGS. Mr. Speaker, America's labor force is the backbone of
our flourishing economy. Without the efforts of workers in America's
industries, big business could not thrive. When we do our job, we
receive due compensation. The American people should be no different.
It is our job to ensure that America's workers are not taken advantage
of.
It is convenient for big business to forget those whose labor helps
their companies thrive. Well, it is our job to remind them. It is our
job to ensure that the minimum wage levels will afford our Nation's
workforce with a decent life-style. It is our job to ensure that the
Social Security trust fund is intact when they retire.
It amazes me that while colleagues on the other side of the aisle
profess to raise the minimum wage, they continue in their quest to
provide careless tax benefits to the wealthy and threaten the Social
Security trust fund.
Raising the minimum wage over the course of 3 years is not enough.
Our workers deserve more. Our workers deserve better. America's workers
are doing their jobs and now is the time that we do ours.
Mr. Speaker, I urge that we reject this bill and fully support the
Democratic alternative.
Mr. HAYWORTH. Mr. Speaker, I yield 2 minutes to the gentleman from
California (Mr. Royce).
Mr. ROYCE. Mr. Speaker, I thank the gentleman from Arizona (Mr.
Hayworth) for yielding me this time.
Mr. Speaker, small businesses are the backbone of our economy. They
employ over half the private workforce in this country. They contribute
half of all sales. They are responsible for half the private gross
domestic product in the United States.
Now, what this bill will provide is needed relief for small business
and for America's workers. The new tax relief provisions will create
new jobs. They will promote continued economic growth. They will
continue to promote the type of employment policies in which people can
find jobs.
The reforms in the pension system will enhance retirement security.
The acceleration of the 100 percent health deduction for the self-
employed will help ensure that workers will be able to afford quality
health care in the private marketplace.
It is time to remove some of the government ties that still bind the
engine behind America's unprecedented economic prosperity. It is small
business that leads to this prosperity, and I urge my colleagues to
pass this bill.
Mr. RANGEL. Mr. Speaker, I yield 1\1/2\ minutes to the distinguished
gentleman from Mississippi (Mr. Taylor).
Mr. TAYLOR of Mississippi. Mr. Speaker, on the 29th of September, 1.4
million Americans will go to the mailbox looking for their paycheck.
They are the young people who serve in the Army, the Navy, the Air
Force and the Marines. It will not be there because the same people who
claim to be for national defense, the same people who claim that there
is this huge surplus out there, have seen to it that they are not going
to get paid until two days later, October 1. That is so there can be an
accounting gimmick and their pay counts against next year's budget and
not this year's budget.
Now, if one is a Congressman and they make about $130,000, waiting 2
extra days for their pay is no big deal but if one is an E-4 with a
child and a wife waiting that extra weekend to buy the Pampers or the
baby formula, it is a big deal.
So the same folks who did this are saying we have over $100 billion
to give away in tax breaks, 90 percent of which is going to the richest
Americans, but we do not have enough for someone if they serve in the
Armed Forces, and we are going to delay their pay. That is how much we
think of them.
It gets even worse. If one served their Nation honorably, they were
promised health care for the rest of their life if they served 20
years. Those same people who show up at the base hospitals they are
being told, we are sorry, there is not enough money to take care of
them; they are to go out and fend for themselves on Medicare; but there
is $120 billion in tax breaks for the wealthiest Americans.
It gets even worse. For 3 years the same folks who are saying there
is all this money laying around, that is why we have to have these tax
breaks, froze the budget for the VA. They froze it.
Mr. Speaker, if there is not enough money to take care of those who
need it the most, then there is not tax breaks for the least.
Mr. HAYWORTH. Mr. Speaker, I yield myself 1 minute in response to my
colleague, the gentleman from Mississippi (Mr. Taylor), with whom I see
eye to eye on many issues of national security.
I appreciate his points but it is interesting that it is somewhat of
a selective outrage at the majority in this legislative body because I
can remember the President of the United States, Mr. Speaker, visiting
this Chamber for a State of the Union message and in outlining budget
priorities failed to even articulate just a bit of rhetoric for those
veterans who have served our country.
Indeed, as the record reflects, it was the majority adding
$1,700,000,000 in health care benefits for our veterans. The other
irony, I would point out to my friends in the minority, is this, just a
few short months ago they embraced tax relief to the tune of $300
billion and yet now, Mr. Speaker, they tell us it is risky to propose
real tax relief of even $48 billion to help America's working families.
{time} 1730
Mr. RANGEL. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman from
Texas (Mr. Stenholm).
(Mr. STENHOLM asked and was given permission to revise and extend his
remarks.)
Mr. STENHOLM. Mr. Speaker, I need to remind my colleague from Arizona
that it is the House's responsibility to deal with the House's
business. The gentleman from Mississippi was talking about what we do,
not what the President does, and that needs to be taken into account.
What we are about to do today is add-to. When we add up all of the
tax cuts that have now been proposed by the majority in the House and
the Senate, it is $500 billion. This is money that is saying our debt
continues to go up and the risk to Social Security increases with every
bill that is passed like the one before us today.
Mr. Speaker, we do not with small businesses any favors or family
farmers any favors by enacting a tax cut which brings them minimal
relief, minimal relief at the same time it undermines the fiscal
discipline that has produced the longest economic expansion period in
the history of our country. The Democratic alternative would provide an
immediate $4 million exclusion for estate tax that would exempt more
than 90 percent of the family farms from paying any estate tax at all.
I would welcome the opportunity today on this floor to debate between
the bill of the majority and the bill of the minority on a line-by-line
basis. Then the rhetoric would stop, I say to my friend from Arizona,
and we could have an honest discussion. Why would you not permit an
honest discussion of these issues? Why do you pass over the fact that
the statement of the gentleman from Mississippi was 100 percent true?
Why do you continue to do that with rhetoric? Why is it so important to
continue to discuss tax cuts when we ought to be debating the very
issues that we seem to all be agreed to.
Vote against this bill and vote for the motion to recommit.
Mr. Speaker, I rise in opposition to this fiscally irresponsible tax
bill and in strong support of the Democratic alternative which will be
offered as the motion to recommit.
[[Page H862]]
I said on many occasions that the tax bill that this body passed and
the President vetoed last year was the most fiscally irresponsible
legislation in my 21 years in Congress. We are well on our way to
replicating that dubious achievement this year. If we pass this bill
today, the total cost of tax bills passed by the House or the Senate to
date will total nearly $500 billion when the interest costs are taken
into account. More costly tax bills stand in line to follow.
The tax bill before us is simply a political document that never will
become law. Worse, this tax bill put forward by the Majority does not
provide meaningful relief from the estate taxes for small businesses
and farmers. It may be a good deal for wealthy individuals with estates
of $10 million or more, but it doesn't do much for the vast majority of
small businesses and family farmers in my district.
We do small businesses, family farmers and ranchers no favor by
enacting a tax cut which brings them minimal relief at the same time it
undermines the fiscal discipline which has produced the longest
economic expansion period in the history of our country.
The Democratic alternative developed by Charlie Rangel and John
Tanner is a fiscally responsible tax proposal which would provide real
and meaningful tax relief for the largest number of small businesses.
Incidentally, it also could be signed into law.
The Democratic alternative would provide an immediate $4 million
exclusion for the estate tax which would exempt more than 90% of family
owned farms from paying any estate tax at all. There are 193,024 family
farmers in the State of Texas with farms valued at less than 5 million
dollars who would benefit from the estate tax relief in the Democratic
substitute. The bill before us does very little for these family farms.
The Democratic alternative contains several other important tax
breaks for small businesses that I have long supported. It immediately
implements the 100% deduction of health insurance for the self-
employed. It makes permanent both the Work Opportunity Credit and the
Welfare-to-Work Credit for businesses which hire disadvantaged workers.
It increases the business meal deduction and the first-year 100%
deduction for investment expenses. And, importantly, the Democratic
alternative will maintain the fiscal discipline that has produced our
strong economy because the tax cuts in the Democratic alternative are
paid for. No wonder the small business community has been so impressed
with this proposal.
The President has promised that he will sign into law the Democratic
tax package. The fact that the leadership left only a procedural vote
to indicate support of this amendment raises the question of what is
more important to them: actually providing tax relief to small
businesses or keeping a political issue alive.
Vote against this bill and vote for the motion to recommit so we can
pass business tax relief which genuinely has been targeted towards
small businesses and which can be signed into law.
Mr. HAYWORTH. Mr. Speaker, I yield myself 1 minute.
In response to my colleague from Texas, the reason we engage in this
debate, and it is good that there are honest, philosophical
differences; but I think all Members of the House, Mr. Speaker, need to
be reminded that the money we are talking about does not belong to the
Federal Government; it serves no higher purpose when we leave it in the
lands of Washington bureaucrats, and the best way to empower all
Americans is to make sure that all Americans hold on to more of their
hard-earned money.
I would be happy to point out again that if we examine the
alternative offered by the minority, it offers tax relief in one hand,
it takes it away with estate tax increases on the other hand. The net
tax relief of the minority package is a total of $8 million as opposed
to $48 billion of comprehensive relief offered by a bipartisan
majority. Again, I would point out that many Members of the minority,
just a few short weeks ago, embraced a $300 billion tax relief package.
Mr. RANGEL. Mr. Speaker, I yield 10 seconds to the gentleman from
Texas (Mr. Stenholm) to respond to what the gentleman from Arizona just
alleged.
Mr. STENHOLM. Mr. Speaker, I appreciate my friend's comments. I would
also point out that we have a $5.6 trillion debt that needs to be
addressed. That is what we are talking about on this side. Pay down the
debt first, and then let us deal with tax cuts and other priorities.
Mr. HAYWORTH. Mr. Speaker, I yield myself 30 seconds.
The SPEAKER pro tempore (Mr. Pease). The gentleman from New York (Mr.
Rangel) controls the time.
Mr. RANGEL. Mr. Speaker, I yield 1 minute to the gentleman from
California (Mr. Baca).
(Mr. BACA asked and was given permission to revise and extend his
remarks.)
Mr. BACA. Mr. Speaker, I rise in behalf of the working families. I am
speaking about the $1 increase in the minimum wage over the next 2
years, and I oppose the passage of the tax scheme provision, the
Republican tax bill, H.R. 3081, that benefits the wealthy. We are
talking about a cost over 10 years of $122 billion. That is not being
fiscally responsible. We are talking about the need to be fiscally
responsible, and we have that responsibility. We have the
responsibility to do the death tax reduction. This bill is not dealing
with the death tax reduction. We have the responsibility to working
families, families right now that need an increase. There are many
individuals that are struggling right now.
I myself come from a poor family and know what it is like to
struggle, when one is just making minimum wage. Many of our students
that are up in the gallery and others are saying look, we need an
increase right now. We want to make sure that we can afford to put food
on the table. We want to enjoy the same things that other individuals
enjoy. We want to enjoy the quality of life. We want to make sure that
we do not have to struggle like many others. We are very fortunate in
our country that we have the ability for those of us who earn the
money, but for those individuals that are poor and disadvantaged, we
need to help them.
Mr. Speaker, I rise today to speak on behalf of working families
across America.
I am speaking about a one-dollar increase in minimum wage over the
next two years and opposing the passage of the tax provisions of the
Republican tax bill, H.R. 3081.
The minimum wage proposal would benefit millions of families and
allow them some comfort and economic dignity.
40% of minimum wage workers are the sole breadwinners in their
families.
It is our responsibility to allow everyone--everyone--a chance at the
American Dream and opportunity to bridge together and help improve the
quality of life for all Americans.
The working people of America--the ones who built this country--
deserve the opportunity to provide for themselves and their family.
You can't raise a family on $5.15 an hour.
You can't house a family on $5.15 an hour.
And you certainly can't put a decent roof over their heads for $5.15
an hour.
Parents who are forced to work two jobs are unable to spend much time
with their children. That is wrong.
Democrats have been pushing for an increase since January of 1998 and
it has taken the Republican leadership too long to respond.
How can they give themselves a $4,600 pay raise last year and then
deny Labor a $1 pay raise over two years?
Republicans have used up all their excuses.
Now is the time to give these Americans a raise.
This issue is not about politics but about women . . . about children
. . . and most importantly . . . about fairness.
Why should we vote for open markets in China and then deny the
American worker his overdue benefits?
Why should we vote for a tax bill that will benefit only the wealthy
and do nothing for the working class?
These votes are simple . . . yes to minimum wage and no to the tax.
I say we pass the minimum wage bill and change the slanted tax bill .
. . and give laboring Americans the dignity to live.
Announcement by the Speaker Pro Tempore
The SPEAKER pro tempore. Members are reminded not to address comments
about occupants of the gallery.
Mr. HAYWORTH. Mr. Speaker, I yield myself 1 minute. Welcome, my
colleague from California, to this Chamber and to the debate. To my
colleagues on the left and my friend from Texas, whom I guess left the
Chamber, I would simply point out again that facts are stubborn things.
It is a fact that we have paid down over $140 billion of this debt.
It is a fact that the budgeteers not here in Congress, but down at the
other end of Pennsylvania Avenue at the White House who assessed what
has transpired here with our budget, say that in 1999, for the first
time since 1960, the United States Government offered a budget surplus
over and above those funds of the Social Security Trust Fund. I would
remind my colleagues that it was the efforts of this majority to lock
away 100 percent of the Social
[[Page H863]]
Security surplus for Social Security in stark contrast to previous
majorities in earlier years where that Social Security money was spent
just as fast as it could be printed.
Mr. RANGEL. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman from
New Jersey (Mr. Holt).
Mr. HOLT. Mr. Speaker, this week I visited a beautiful farm, 85 acres
in Holmdel, New Jersey, the Garden State. This property is one of the
largest parcels of undeveloped land in that township. The farm has
survived two world wars, the Great Depression, the advent of the
technological revolution, and the factory farm. But today, because of
the estate tax, family members may have to sell the property to
developers. This is true even though some of the survivors would like
to keep the land in the family and preserve it as open space and
farmland.
Well, when a government policy robs families of their heritage and
forces communities to develop land instead of preserving it, something
needs to be changed. I am proud to cosponsor the legislation introduced
by the gentleman from New York (Mr. Rangel) that would help mitigate
this unfair tax which hits so many in New Jersey.
The Rangel small business tax package would relieve the estate tax
burden for family-owned farms and small businesses, and also includes
other helpful tax cuts, including a provision to make permanent the
work opportunity and welfare-to-work tax credits. The proposal would
also accelerate 100 percent health insurance deduction for the self-
employed and increase the tax deductions for business expenses. This is
a responsible package to preserve family farms and small businesses and
is compatible with efforts to shore up Social Security and Medicare and
pay down the debt.
Central New Jersey supports eliminating the estate tax for family-
owned farms and businesses. I urge my colleagues to support responsible
estate tax relief.
Mr. HAYWORTH. Mr. Speaker, I yield 2 minutes to the gentleman from
California (Mr. Gary Miller).
Mr. GARY MILLER of California. Mr. Speaker, this bill is about
cleaning up neighborhoods and helping people afford housing. It would
increase the State authority for the low-income housing tax credit from
$1.25 per person to $1.65 per person, and it will index that cap to
inflation. What does that mean to people in your district and mine
struggling to afford housing?
Here are some statistics: the current credit on caps is $1.25 per
person. It has not been changed since 1986, which means that while
housing is currently affordable and the buying power of taxpayers has
been decreased by almost 50 percent, it is not what it used to be. Mr.
Speaker, 12 million Americans who are eligible for this program are not
benefiting, which means that they are paying a very high portion of
their income for rent or they are living in substandard housing.
Also, this legislation helps distressed areas by creating renewal
communities with pro-growth tax initiatives to create jobs, encourage
personal savings, and clean up neighborhoods on former industrial sites
so new businesses can grow.
Some people have said this tax cut is for the rich, but obviously
that is not true. The truth is that those who argue against this kind
of a tax cut are simply against any kind of a tax cut. They are
terrified about letting any money get away from the Government because
they honestly believe government is a solution to all of our problems.
Mr. Speaker, I urge all of my colleagues to support this bill that
will help people improve their communities and afford housing.
Mr. RANGEL. Mr. Speaker, I yield myself such time as I may consume.
For someone to say that Democrats are against any tax cuts, they
obviously did not read the substitute. We have $36 billion worth of tax
cuts here. The only difference is that we give a clear, no-tax status
to those people who have estates that are $4 million tax free and we
give relief up to $13 million. The Republicans have most all of their
tax cut going to people in higher incomes. So one cannot say that when
we look at the substitute, we have a $36 billion tax cut there, that we
do not believe in tax cuts.
The truth of the matter is that the majority does not believe in a
one-dollar increase in the minimum wage, because if they did believe in
it, they would have worked out in a bipartisan way how we could bring
the President to sign a bill. It is as simple as that. As a matter of
fact, if they had just stopped at $36 billion, we could have walked out
of here, men and women, Republican and Democrats, going to our home
districts and saying, not only did we help those that work every day,
even though it is at near-poverty wages, but we gave relief to small
employers who may not be able to afford that $1. That is what we could
have done. That could have been the beginning of us working together
toward other tax cuts after we take care of Social Security and
Medicare and affordable drugs, after we make certain that we protect
the patient's right to be able to sue, after we do those basic things,
again, not as the majority and minority, not as Republicans and
Democrats, but as Members of Congress working together to improve the
quality of life for most Americans, especially working Americans.
There will be enough differences for us to go to the polls and to
campaign, but we do not have to fight on each and every issue. Why
cannot the majority take a deep breath, get a life, and try to do some
of the things that the senior Senator from Arizona was saying. Be
responsible. Stop thinking only in terms of tax cuts.
The American people say, I want a tax cut. They are saying, that is
my money. But we have a responsibility to take care of that over $5
billion of Federal debt that we have to pay down. We have to take care
of Medicare. We have to take care of Social Security. While we are at
it, they say, yes, take care of cutting my taxes; but during this
period of prosperity, do not deny the working poor a $1 increase in the
minimum wage.
So I suggest to the other side that they know that they have begged
for a veto. The worst thing that could happen to my colleagues is for
the President to decide not to be held hostage and to swallow these
irresponsible tax cuts, but that is not going to happen. Because it was
this President that has led us to this period of prosperity and he is
not going to allow politically motivated Members of this House to drive
them into doing something this irresponsible because he wants a minimum
wage.
Mr. Speaker, it is not too late for my colleagues to change their
wayward ways and to attempt to sit down and to work with Democrats and
to work with the President and to do the right thing. My Republican
colleagues could not get this 800-pound gorilla off the floor last
year, and you will not be able to do it this year.
Mr. HAYWORTH. Mr. Speaker, I yield myself such time as I may consume.
I thank my colleague from New York. I thought for a moment there he
was engaged in self-analysis when he talked about playing politics and
who was holding whom hostage over reasonable relief for working
Americans when it comes to taxation.
Again, facts are stubborn things. It is worth noting that this
Congress together, in a bipartisan fashion, joined to create a lockbox
for Social Security that kept the Social Security surplus, 100 percent
of it, intact and reserved for Social Security; that it is this
Congress, working together, that paid down $143 billion of a $5
trillion national debt that hangs over the heads of our children; that
it is this common sense Congress, working in a bipartisan fashion, with
sober, business-minded friends in the minority in a bipartisan fashion
to offer reasonable tax relief and search for a way to find common
ground. Indeed, that is what this legislation provides.
Mr. Speaker, we offer tax relief for working Americans. We offer
empowerment for the economically downtrodden. We offer a way to say
death to the death tax and make sure that people stay gainfully
employed and that family farms and small businesses are not sold off to
satisfy the insatiable desire of those who always seek for the public
Treasury personal funds. That, in the final analysis, is what this
debate comes down to, Mr. Chairman. It is this question: To whom does
the money belong? Does it belong to Washington bureaucrats, or does it
belong to the American people who work hard, pay their taxes, and play
by the rules?
[[Page H864]]
Mr. Speaker, a bipartisan majority supports the notion that the money
belongs to the people who earn it, who work hard and play by the rules,
and who deserve to have a good chunk of their money stay in their
pockets.
In conclusion, I would simply point out that the minority alternative
offers, are we ready for this, a net tax relief package of $8 million
as opposed to broad-based tax relief of $48 billion under the
bipartisan majority plan.
{time} 1745
That is what we must work for, economic empowerment, not only through
wages, but allowing all Americans to keep more of their hard-earned
money. That is why I am pleased to support the commonsense majority
plan that passed out of the Committee on Ways and Means and comes to
this floor for the consideration of all my colleagues.
Mr. MOORE. Mr. Speaker, I rise today in support of H.R. 3832, the
Small Business Tax Fairness Act of 2000.
I have long been a supporter of targeted tax relief that will help
sustain the growth of economy, support the continued health of our
nation's small businesses, restore and rehabilitate our rural and urban
communities, and provide incentives for individuals to save for their
retirement.
While I would have included provisions that differ somewhat from this
version had I drafted this bill myself, I strongly support the
following provisions that will benefit small businesses and the self
employed, low-income and rural areas, and the working poor and middle-
income America:
100 Percent Deductibility of Health Insurance Costs: This provision
will level the playing field for the self-employed and reduce the
burden on the over 44 million Americans currently without health
insurance.
Small Business Expensing: A majority of our nation's small businesses
exceed the current small-business expensing limits in only three
months. This bill would raise the threshold from $20,000 to $30,000,
which will free up capital resources for additional investment in small
businesses to expand and create new jobs.
Installment Sales Tax Correction: Last year, Congress passed and the
President signed into law a bill that provided much needed tax relief
to individuals and businesses through extending certain tax credits.
Unfortunately, this law contained a provision, which will be repealed
by H.R. 3832, that prohibits small businesses that use accrual
accounting methods from selling assets in installments.
Community Development and Low-Income Assistance: The measure also
provides for the creation of ``renewal communities'' to assist low-
income and rural areas with tax relief that will help spur economic
growth. Additionally, the bill includes an expansion of the low-income
housing tax credit to help build and support more low-income housing
for the working poor.
Enhancing Retirement Security: In an increasingly mobile workforce,
it is critically important that we allow for shorter vesting schedules
and increased portability of retirement benefits between jobs. This
bill does that. By removing artificial and administrative barriers,
these provisions will make it significantly easier for working
Americans to save and invest for their retirement. Other provisions in
this bill will increase limits on employer-sponsored retirement plans,
increase pension opportunities for women who have historically been
left out of retirement savings plans, and provide new and expanded
opportunities for all Americans to save and invest for their future.
This bill also reduces the estate tax. While I support providing
estate tax relief to American families, small business owners, and
farmers who have worked their entire lives to transfer a portion of
their estates upon their death, I do not advocate a full repeal of the
estate tax. I therefore object to the provision in Section 302 of the
bill that expresses the sense of Congress that the estate tax should be
repealed. Simply, a full repeal of the estate tax will have budget
implications that this country simply cannot afford. With over $200
billion in lost revenue, this has the potential to put this country
back on the wrong fiscal track of increased deficit spending and an
exploding national debt.
Mr. Speaker, this year the House of Representatives has already
passed a $182 billion marriage penalty relief bill. I supported that
measure because that bill provided needed tax relief for married
couples by reducing the marriage tax penalty while strengthening the
financial resources of the American family and fostering economic
prosperity into the 21st century. Today, we will likely pass a $122
billion tax relief bill. That brings the total tax relief approved by
the House to date up to $304 billion or a little more than 30 percent
of the projected on budget surplus of $930 billion.
I warned the House when we passed the marriage penalty tax and I will
warn the House again today: This Congress has yet to act on a budget
resolution and, as such, has no knowledge about how this legislation
will fit into our other collective commitments to extend the solvency
of Social Security and Medicare and reduce our national debt. Although
the majority claims to support retiring the publicly held debt, they
have begun the session by scheduling several tax bills funded by the
projected budget surplus without giving any consideration to the impact
that the bills will have on the ability to retire our $5.6 trillion
national debt.
We can, we should, and we have cut taxes. I have supported these
bills because each has had a relatively modest cost when considered in
isolation; and I will support one more bill--clean legislation that
will increase the deductible contribution limits to Individual
Retirement Accounts. Today, the Wall Street Journal reported that the
majority is contemplating bringing a bill to the floor that would
increase IRA limits to $5000. I have such a bill and I urge the
leadership in both parties to consider H.R. 802 because it will help
increase national savings and encourage individual private retirement
accounts to supplement Social Security benefits.
I am concerned, however, that the total costs of these bills will be
nearly as much as the vetoed tax bill, and could even be more
expensive. These tax cuts, however, must be made in the context of a
fiscally responsible budget that eliminated the publicly held debt,
strengthens Social Security and Medicare, and addresses our other other
priorities. While I will be supporting this legislation, I will also be
redoubling my efforts to push fiscal responsibility--to call for a plan
I voted for last summer that would reserve 50 percent of on-budget
surpluses for debt reduction, 25 percent for securing Social Security
and protecting Medicare, and 25 percent for tax cuts.
We have exceeded that threshold and I urge the leadership to
recognize that enough is enough. I urge my colleagues to move forward
in a bipartisan manner to address these other important issues and
place all of our priorities in context of a responsible budget
resolution.
Ms. JACKSON-LEE of Texas. Mr. Speaker, today I rise in strong
opposition to the Small Business Tax Legislation coupled with the
Minimum Wage Increase bill. This Republican Tax Bill is a poison pill
designed to defeat the increase in the minimum wage--the President has
indicated that he would veto the Republican tax bill even if it were
included in legislation increasing minimum wage.
I have long supported estate tax relief for American families;
however, this bill is not a responsible measure in providing such
relief. I reject the Republican bill and its solution to estate tax
relief and strongly support the Democratic alternative.
The Democratic alternative provides greater tax relief to small
businesses in the following respects:
A. It liberalizes and makes permanent the Work Opportunity Tax
Credit, a credit that will directly benefit many small businesses
employing minimum wage workers. The Republican bill does nothing.
B. It provides far greater estate tax relief for family farms and
small businesses than the Republican bill. The overwhelming percentage
of estates with farms and small business interests will receive greater
estate tax relief.
C. It provides small businesses a greater increase in the business
meal deduction than the Republican bill.
D. It contains provisions identical to those contained in the
Republican bill on priority issues such as 100% deductibility for
health insurance premiums for the self employed, increase in small
business expensing, and repeal of the provision enacted last year
changing installment method.
E. The Democratic alternative will be signed by the President.
Therefore, these priority provisions actually could become law if the
Democratic alternative passes. Otherwise, they merely will be contained
in yet another bill vetoed by the President.
During 1995 and 1996, the House Republicans alone defeated meaningful
reforms that would have stopped a few extraordinarily wealthy
individuals from gaining large tax benefits by renouncing their
allegiance to this country.
The House Republicans succeeded in overcoming the opposition of the
Senate Republicans and Democrats, the Administration, and the House
Democrats. They insisted on tax expatriation legislation with many
loopholes that enable wealthy individuals to turn their backs on this
country and walk away with large accumulations of wealth.
The Democratic alternative contains provisions that effectively will
eliminate the tax expatriation loophole. Voting for the Republican bill
will be a vote to place the interests of wealthy expatriates ahead of
minimum wage workers.
The Democratic alternative also contains provisions to close down the
aggressive use
[[Page H865]]
of corporate tax shelters. Again, voting for the Republican bill is a
vote to place the interests of large corporations using aggressive tax
avoidance schemes ahead of minimum wage workers.
The Republican bill would cost approximately $122 billion over the
next 10 years and is part of their strategy to enact their
irresponsible $800 billion tax bill in a piecemeal fashion. The
Republicans once again are asking the House to vote for tax cuts before
knowing whether there is a budget framework that will protect Social
Security and Medicare, provide a prescription drug benefit, and pay
down the national debt. These are the priorities of our constituents.
How can we support a bill that threatens fiscal discipline and the
welfare of our families?
The Small Business Tax Legislation bill, is highly misleading. The
overwhelming bulk of the tax relief contained in the Republican bill
will go to the estates of extremely wealthy individuals and not to
small businesses.
According to the Center On Budget and Policy Priorities this
Republican sponsored bill contains an array of tax cuts that would
mostly benefit high-income individuals, and likely lead to reductions
in pension benefits for lower-income working families.
The pension provisions mentioned in this bill would be a major
expansion of pension-related tax preferences for high-income persons.
The proposed pension changes relax some provisions of current law that
limit contributions that highly paid individuals may make to pension
plans, as well as the amount of the pension payments that such high-
income individuals receive when they retire.
Some of the pension provisions in this bill would reduce the pension
coverage for lower- and middle-income workers. For example, increasing
pension contribution limits for well compensated executives and owners,
then they could maintain contributions for their own pension plans
while reducing contributions for other employees.
The estate tax reductions in this legislation would go to the estates
of wealthy people who are investors with extensive holdings in real
estate and/or stocks or other financial instruments and who were NOT
owners of small businesses. An estate tax reduction of this magnitude
would not justify an offset for the effects of a higher minimum wage on
small businesses.
The Minimum Wage legislation rightfully seeks to increase the minimum
wage from $5.15 to $6.15 an hour for the millions of hard working
people in our country. However, the coupling of this minimum wage
increase with alleged small business tax measures is a poor match.
According to the Center On Budget and Policy Priorities there is little
evidence that modest minimum-wage increases have significant negative
effects on small businesses.
Voting for this Republican bill is a vote to place the interests of
large corporations using aggressive tax avoidance schemes ahead of
minimum wage workers. I will always advocate for the benefit of those
hardworking Americans that so desperately need a minimum wage increase
and tax cut.
Mr. BENTSEN. Mr. Speaker, I rise in opposition to H.R. 3081, the
``Wage Employment Growth Act of 1999.'' The short title of the
Republican bill is highly misleading. My Republican colleagues assert
that this measure is targeted to offset the financial hardship on small
businesses resulting from increasing the minimum wage.
The GOP bill would cost approximately $122 billion over the next ten
years and is part of Republicans' strategy to enact their failed and
irresponsible $800 billion tax bill incrementally. This is the second
tax bill the House has considered this year, spending the projected
surplus before we have even passed a budget resolution to determine the
nation's overall tax spending and debt reduction plans. The Republican
leadership seems intent on scoring political points rather than
governing. They determine fiscal policy by election strategy not
financial prudence.
H.R. 3081 also purports to promote the establishment of pension plans
by small employers. As an advocate for removing barriers to employer-
sponsored pension programs, I am disappointed with what the Republicans
have set out before us. Mr. Blunt (D-Mo.) and I have sponsored H.R.
352, a measure aimed at helping small business owners set up pension
plans so their employees may save for their retirement. H.R. 352
proposes to ease the regulatory and administrative burdens on small
businesses and includes a five-year tax credit for employers that
establishes any type of qualified retirement plan. Many of the main
concepts in H.R. 352 were incorporated in H.R. 1102 which was
supposedly subsumed into H.R. 3081. Unfortunately, what has emerged
from the Republicans does not resemble H.R. 352 nor does it encourage
small business employers to help their employees save for retirement.
Today, only 21 percent of all individuals employed by small
businesses with less than 100 employees participate in an employer-
sponsored plan, compared to 64 percent of those who work for businesses
with more than 100 employees. The Republican bill squanders an
unprecedented opportunity to address an impending crisis--the
retirement of nearly 76 million Baby Boomers. Even as incomes rise, we
have an abysmally low savings rate of 3.8 percent of disposable
personal income. If the economy slows in the near future, that figure
may rise by only one or two percentage points, which is still low by
historical standards.
There are many provisions in H.R. 3081 which are meritorious and
should be enacted by the House including resolving the question of
installment sales, estate tax which really helps family-owned
businesses and farms and expands pension opportunities. But, Congress
must first adopt a budget plan which prudently allocates the projected
budget surplus which does not lead us toward renewed deficit spending.
As a member of the Budget Committee, I continue to advocate that
Congress preserve the budget surplus and use it to pay off the national
debt while strengthening Social Security. The $3.7 trillion dollar
public debt is a tremendous burden on the economy. By forcing the
government to borrow money in private markets, the debt drives up
interest rates and takes investment capital away from private
companies, thereby reducing productivity. As interest payments on the
debt grow, it saps both private investment and vital programs such as
Medicare and education. Regrettably, H.R. 3081 jeopardizes our ability
to protect Social Security and Medicare and pay down the national debt.
Mr. WELDON of Florida. Mr. Speaker, today I rise in support of the
Small Business Tax Fairness Act and increasing the federal minimum wage
one dollar over three years.
The nearly 3 million small business owners and their employees in the
state of Florida deserve this tax fairness package, which will save
American small businessowners $45.3 billion over the next five years.
Let's remember that most Americans work for small businesses and
strengthening them will help us create good jobs here in America.
Liberals who oppose this package use outrageous language to describe
our proposal which will help not only the owners of small businesses
and farms, but their employees.
The Small Business Tax Fairness Act continues the Republican
commitment to rework the tax code to provide tax fairness to all hard-
working Americans. Tragically, owners of mom and pop stores,
restaurants, and farms have been unfairly saddled with these tax
burdens for decades. They are called ``rich'' because of their
holdings; but almost all of them would agree that those holdings are
necessary tools and materials for the success of their businesses.
For example a tractor and a plow can easily cost upwards of $50,000.
Helping farmers to purchase new farm equipment may be labeled as a tax
cut for the rich by liberal opponents of this bill. But, because of
their narrow vision and interest in partisan rhetoric they fail to
acknowledge and see everyone who benefits. I can guarantee you that the
benefits flow to American workers who manufactured the tractor, the
truckers who shipped it, the miners who mined the raw materials, and
those who work in the factory where the tires and other components are
made, The tax relief package clearly is good for all Americans.
With regard to estate taxes, as someone who represents Florida, I
know about the loss of farm land and open spaces. Estate taxes force
too many families to sell the farmland to developers just to pay the
taxes. I have seen it time and again in my congressional district where
families have been forced to sell citrus farms in order to pay estate
taxes when a parent dies. The bill provides some tax relief that will
help farmers and their families keep the family farm.
The bill also encourages savings. We have the lowest savings rate in
American history. Our bill helps Americans save money for the future.
It helps make pension plans more portable so that Americans workers who
have placed money in a company pension plan can move to another job
more easily without losing all that they have put in a pension plan.
This will help all American workers and their families.
We provide Americans with a tax deduction for the purchase of health
insurance so that they are not impoverished when faced with a serious
illness. I am disappointed that the liberals have labeled as a ``tax
break for the rich,'' a bill that allows the uninsured to fully deduct
the costs of purchasing health insurance premiums. I think we should be
about helping the uninsured, not sticking it to them.
We also authorize HUD to designate 15 ``renewal communities'' in both
urban and rural areas. This will help these economically depressed
communities recover.
We also increase the business meal deduction to 60%. This will spur
economic growth. It will help the waiter, the waitress, and the cook
who will have more customers.
[[Page H866]]
Not only does our package spur economic growth by providing this tax
relief, but it provides a reasonable increase in the minimum wage. As
in the base bill, I support raising the minimum wage by a dollar over
the next three years. The phased-in wage increase will help employees
and it will give those small businesses who operate at the margins an
opportunity to adjust so that they can remain competitive and ensure
that jobs are not lost.
I would ask my colleagues to support this bill.
Mrs. MINK of Hawaii. Mr. Speaker, I rise in opposition to the H.R.
3081.
H.R. 3081 provides irresponsible tax cuts that will do nothing to
help the people that need it the most--the working families.
Instead, H.R. 3081 will spend over $100 billion of the taxpayer's
money over the next ten years to provide tax relief to some of the
wealthiest families.
In contrast, the Democratic tax proposal focuses on working families.
It would raise the estate tax exclusion for family farms and
businesses to $4 million. Under current law, it is now $1.3 million.
With this change, the Democrats would be helping families save their
businesses so it can be passed on to the next generation.
This would help the neighborhood pharmacist pass his drug store on to
his daughter. It would help the Mom and Pop store continue thriving
with a son or daughter. It would allow the family farm to stay in the
family.
The Democratic substitute will repeal a provision that currently
disallows a business deduction for travel expenses incurred when your
spouse or child accompanies you on a business trip. This deduction
would allow the family to spend more time together. It would make it
easier for a working mom to take her daughter on a business trip with
her. It would make it easier for a husband and father to include his
family. It would help keep the family together.
The Democrats are committed to putting families first. Our tax
proposals focus on the family.
In addition, it provides an exclusion for postsecondary educational
benefits provided for employee's children; it provides funding for
school construction; it extends the Work Opportunity and the welfare-
to-work tax credits. And it makes changes to Section 415 affecting
pensions to help workers save for retirement.
And it does all of this and more at a cost of $30 billion over ten
years--a fraction of the cost of the Republican bill.
Perhaps that is why the Republicans would not allow the Democrats to
offer this tax proposal as a substitute to their bill. We have targeted
our tax cuts to help the people that really need it and at a cost that
is much more responsible.
The Republicans want their bill or no bill. We have another choice.
The motion to recommit will give you the opportunity to vote for the
Democratic substitute.
We are experiencing great financial times right now; some Americans
are getting rich, but most poor working families are getting nowhere.
Since 1979, 98 percent of the increase in incomes in America has gone
to the top 20 percent.
We must not enact irresponsible tax cuts that will benefit only the
wealthiest families in this country as a trade-off for a $1 minimum
wage increase spread over 3 years.
I urge a ``no'' vote on H.R. 3081 and an ``aye'' vote on the motion
to recommit.
Mr. BALLENGER. Mr. Speaker, I am pleased that the House is voting on
a package of tax relief designed to help America's small businessmen
and women shoulder the burden of another increase in the federal
minimum wage.
Congress has already voted on many of the changes contained in the
Small Business Tax Fairness Act (H.R. 3081) in the context of previous
Republican-authored tax relief bills which either died in the other
body or were vetoed by President Clinton. In the interest of protecting
the small businesses and the jobs they create in my congressional
district and around the nation, I believe this bill is needed and must
accompany any proposed increase in the federal minimum wage. As such, I
applaud Ways and Means Committee Chairman Bill Archer for his
persistence in fighting for tax relief in this context as well as for
measures which he championed to relieve the tax burden on working
families.
Although I believe the $45.8 billion price tag of H.R. 3081 is modest
in comparison to earlier bills, it makes some important changes in the
tax code which will help to insure the strength of the small business
sector, the backbone of the American economy. First, the bill further
reduces over five years a tax, created in 1916 in order to break up and
redistribute a concentration of the nation's wealth, which was used to
help fund World War I. This war was won in 1918, but the tax on estates
remains. It is important to note that this tax penalizes not only so-
called rich families, but the workers employed by these family
businesses or farms if the 55% federal tax rate destroys or financially
cripples these enterprises. I found this fact to be startling, only
one-third of family-owned businesses survive into the next generation
in many cases because of this so-called death tax.
In addition, Congress needs to correct a problem created by Public
Law 106-170 and once again allow accrual basis businesses to use the
installment method of accounting on the sale of assets and the
business. Congressional Republicans have continued the fight to provide
the self-employed with 100 percent deductibility for their health
insurance costs and have included it in this bill. As a small
businessman myself, I know the importance of the increase from $19,000
to $30,000 in the amount of equipment eligible for expensing which H.R.
3081 seeks. Needless to say, the comprehensive package of pension
reforms in the bill have widespread support and include provisions
which in the past enjoyed the support of business and labor.
I've mentioned the changes in H.R. 3081 which my constituents have
consistently advocated. I hope we will see a large bipartisan majority
voting for this tax relief package today. It is in everyone's interest
to see to it that our nation's small businesses continue to flourish.
The SPEAKER pro tempore (Mr. Pease). All time having expired,
pursuant to House Resolution 434, the previous question is ordered on
the bill, as amended.
The question is on the engrossment and third reading of the bill.
The bill was ordered to be engrossed and read a third time, and was
read the third time.
Motion to Recommit
Mr. RANGEL. Mr. Speaker, I offer a motion to recommit.
The SPEAKER pro tempore. Is the gentleman opposed to the bill?
Mr. RANGEL. Yes, Mr. Speaker.
The SPEAKER pro tempore. The Clerk will report the motion.
The Clerk read as follows:
Mr. Rangel moves to recommit the bill, H.R. 3081, to the
Committee on Ways and Means with instructions to report the
same forthwith back to the House with the following
amendment:
Strike all after the enacting clause, and insert the
following:
TITLE II--AMENDMENTS OF INTERNAL REVENUE CODE OF 1986
SEC. 200. SHORT TITLE.
(a) Short Title.--This title may be cited as the ``Small
Business Tax Relief Act of 2000''.
(b) Table of Contents.--
TITLE II--AMENDMENTS OF INTERNAL REVENUE CODE OF 1986
Sec. 200. Table of contents.
Subtitle A--Permanent Extension of Work Opportunity Credit and Welfare-
to-Work Credit
Sec. 201. Work opportunity credit and welfare-to-work credit; repeal of
age limitation on eligibility of food stamp recipients.
Subtitle B--Deduction for 100 Percent of Health Insurance Costs of
Self-Employed Individuals
Sec. 211. Deduction for 100 percent of health insurance costs of self-
employed individuals.
Subtitle C--Pension Provisions
Sec. 221. Treatment of multiemployer plans under section 415.
Sec. 222. Early retirement limits for certain plans.
Sec. 223. Certain post-secondary educational benefits provided by an
employer to children of employees excludable from gross
income as a scholarship.
Subtitle D--Business Tax Relief
Sec. 231. Increase in expense treatment for small businesses.
Sec. 232. Small businesses allowed increased deduction for meal and
entertainment expenses.
Sec. 233. Restoration of deduction for travel expenses of spouse, etc.
accompanying taxpayer on business travel.
Sec. 234. Increased credit and amortization deduction for reforestation
expenditures.
Sec. 235. Repeal of modification of installment method.
Subtitle E--Expansion of Incentives for Public Schools
Sec. 241. Expansion of incentives for public schools.
Subtitle F--Increased Estate Tax Relief for Family-Owned Business
Interests
Sec. 251. Increase in estate tax benefit for family-owned business
interests.
Subtitle G--Revenue Offsets
Part I--Revision of Tax Rules on Expatriation
Sec. 261. Revision of tax rules on expatriation.
[[Page H867]]
Part II--Disallowance of Noneconomic Tax Attributes
SUBPART A--DISALLOWANCE OF NONECONOMIC TAX ATTRIBUTES; INCREASE IN
PENALTY WITH RESPECT TO DISALLOWED NONECONOMIC TAX ATTRIBUTES
Sec. 266. Disallowance of noneconomic tax attributes.
Sec. 267. Increase in substantial underpayment penalty with respect to
disallowed noneconomic tax attributes.
Sec. 268. Penalty on marketed tax avoidance strategies which have no
economic substance, etc.
Sec. 269. Effective dates.
SUBPART B--LIMITATIONS ON IMPORTATION OR TRANSFER OF BUILT-IN LOSSES
Sec. 271. Limitation on importation of built-in losses.
Sec. 272. Disallowance of partnership loss transfers.
Part III--Estate and Gift Tax Offsets
Sec. 276. Valuation rules for transfers involving nonbusiness assets.
Sec. 277. Correction of technical error affecting largest estates.
Part IV--Other Offsets
Sec. 281. Consistent amortization periods for intangibles.
Sec. 282. Modification of foreign tax credit carryover rules.
Sec. 283. Recognition of gain on transfers to swap funds.
(c) Coordination with Budget Rules.--If, without regard to
this sentence, any provision of this Act would result in an
increase or decrease in revenue in fisal year 2001,
notwithstanding any other provision of this Act, such
provision shall be first effective on October 1, 2001, except
that the determination of amounts required to be paid (or
refunds required to be allowed) on or after such date shall
be made as if this sentence had not been enacted.
Subtitle A--Permanent Extension of Work Opportunity Credit and Welfare-
to-Work Credit
SEC. 201. WORK OPPORTUNITY CREDIT AND WELFARE-TO-WORK CREDIT;
REPEAL OF AGE LIMITATION ON ELIGIBILITY OF FOOD
STAMP RECIPIENTS.
(a) Permanent Extension.--
(1) In general.--
(A) Section 51(c) of the Internal Revenue Code of 1986 is
amended by striking paragraph (4).
(B) Section 51A of such Code is amended by striking
subsection (f).
(2) Effective date.--The amendments made by this subsection
shall apply to individuals who begin work for the employer
after December 31, 2001.
(b) Repeal of Age Limitation on Eligibility of Food Stamp
Recipients.--
(1) In general.--Subparagraph (A) of section 51(d)(8) of
such Code is amended to read as follows:
``(A) In general.--The term `qualified food stamp
recipient' means any individual who is certified by the
designated local agency as being a member of a family--
``(i) receiving assistance under a food stamp program under
the Food Stamp Act of 1977 for the 6- month period ending on
the hiring date, or
``(ii) receiving such assistance for at least 3 months of
the 5-month period ending on the hiring date, in the case of
a member of a family who ceases to be eligible for such
assistance under section 6(o) of the Food Stamp Act of
1977.''
(2) Effective date.--The amendment made by this subsection
shall apply to individuals who begin work for the employer
after the date of the enactment of this Act.
Subtitle B--Deduction for 100 Percent of Health Insurance Costs of
Self-Employed Individuals
SEC. 211. DEDUCTION FOR 100 PERCENT OF HEALTH INSURANCE COSTS
OF SELF-EMPLOYED INDIVIDUALS.
(a) In General.--Paragraph (1) of section 162(l) of the
Internal Revenue Code of 1986 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 and the taxpayer's spouse and dependents.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2000.
Subtitle C--Pension Provisions
SEC. 221. TREATMENT OF MULTIEMPLOYER PLANS UNDER SECTION 415.
(a) Compensation Limit.--Paragraph (11) of section 415(b)
of the Internal Revenue Code of 1986 (relating to limitation
for defined benefit plans) is amended to read as follows:
``(11) Special limitation rule for governmental and
multiemployer plans.--In the case of a governmental plan (as
defined in section 414(d)) or a multiemployer plan (as
defined in section 414(f)), subparagraph (B) of paragraph (1)
shall not apply.''.
(b) Combining and Aggregation of Plans.--
(1) Combining of plans.--Subsection (f) of section 415 of
such Code (relating to combining of plans) is amended by
adding at the end the following:
``(3) Exception for multiemployer plans.--Notwithstanding
paragraph (1) and subsection (g), a multiemployer plan (as
defined in section 414(f)) shall not be combined or
aggregated with any other plan maintained by an employer for
purposes of applying the limitations established in this
section, except that such plan shall be combined or
aggregated with another plan which is not such a
multiemployer plan solely for purposes of determining whether
such other plan meets the requirements of subsection
(b)(1)(A).''.
(2) Conforming amendment for aggregation of plans.--
Subsection (g) of section 415 of such Code (relating to
aggregation of plans) is amended by striking ``The
Secretary'' and inserting ``Except as provided in subsection
(f)(3), the Secretary''.
(c) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 1999.
SEC. 222. EARLY RETIREMENT LIMITS FOR CERTAIN PLANS.
(a) In General.--Subparagraph (F) of section 415(b)(2) of
the Internal Revenue Code of 1986 is amended to read as
follows:
``(F) Multiemployer plans and plans maintained by
governments and tax exempt organizations.--In the case of a
governmental plan (within the meaning of section 414(d)), a
plan maintained by an organization (other than a governmental
unit) exempt from tax under this subtitle, a multiemployer
plan (as defined in section 414(f)), or a qualified merchant
marine plan--
``(i) subparagraph (C) shall be applied--
``(I) by substituting `age 62' for `social security
retirement age' each place it appears, and
``(II) as if the last sentence thereof read as follows:
`The reduction under this subparagraph shall not reduce the
limitation of paragraph (1)(A) below (i) 80 percent of such
limitation as in effect for the year, or (ii) if the benefit
begins before age 55, the equivalent of such 80 percent
amount for age 55.', and
``(ii) subparagraph (D) shall be applied by substituting
`age 65' for `social security retirement age' each place it
appears.
For purposes of this subparagraph, the term `qualified
merchant marine plan' means a plan in existence on January 1,
1986, the participants in which are merchant marine officers
holding licenses issued by the Secretary of Transportation
under title 46, United States Code.''.
(b) Effective Date.--The amendment made by this section
shall apply to years beginning after December 31, 1999.
SEC. 223. CERTAIN POST-SECONDARY EDUCATIONAL BENEFITS
PROVIDED BY AN EMPLOYER TO CHILDREN OF
EMPLOYEES EXCLUDABLE FROM GROSS INCOME AS A
SCHOLARSHIP.
(a) In General.--Section 117 of the Internal Revenue Code
of 1986 (relating to qualified scholarships) is amended by
adding at the end the following:
``(e) Employer-Provided Post-Secondary Educational Benefits
Provided to Children of Employees.--
``(1) In general.--In determining whether any amount is a
qualified scholarship for purposes of subsection (a), the
fact that such amount is provided in connection with an
employment relationship shall be disregarded if--
``(A) such amount is provided by the employer to a child
(as defined in section 151(c)(3)) of an employee or former
employee of such employer,
``(B) such amount is provided pursuant to a plan which
meets the nondiscrimination requirements of subsection
(d)(3), and
``(C) amounts provided under such plan are in addition to
any other compensation payable to employees and such plan
does not provide employees with a choice between such amounts
and any other benefit.
For purposes of subparagraph (C), the business practices of
the employer (as well as such plan) shall be taken into
account.
``(2) Dollar limitations.--
``(A) Per child.--The amount excluded from the gross income
of the employee by reason of paragraph (1) for a taxable year
with respect to amounts provided to each child of such
employee shall not exceed $2,000.
``(B) Aggregate limit.--The amount excluded from the gross
income of the employee by reason of paragraph (1) for a
taxable year (after the application of subparagraph (A))
shall not exceed the excess of the dollar amount contained in
section 127(a)(2) over the amount excluded from the
employee's gross income under section 127 for such year.
``(3) Principal shareholders and owners.--Paragraph (1)
shall not apply to any amount provided to any child of any
individual if such individual (or such individual's spouse)
owns (on any day of the year) more than 5 percent of the
stock or of the capital or profits interest in the employer.
``(4) Special rules of application.--In the case of an
amount which is treated as a qualified scholarship by reason
of this subsection--
``(A) subsection (a) shall be applied without regard to the
requirement that the recipient be a candidate for a degree,
and
``(B) subsection (b)(2)(A) shall be applied by substituting
`section 529(e)(5)' for `section 170(b)(1)(A)(ii)'.
``(5) Certain other rules to apply.--Rules similar to the
rules of paragraphs (4), (5), and (7) of section 127(c) shall
apply for purposes of this subsection.''
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2000.
[[Page H868]]
Subtitle D--Business Tax Relief
SEC. 231. INCREASE IN EXPENSE TREATMENT FOR SMALL BUSINESSES.
(a) In General.--Paragraph (1) of section 179(b) of the
Internal Revenue Code of 1986 (relating to dollar limitation)
is amended to read as follows:
``(1) Dollar limitation.--The aggregate cost which may be
taken into account under subsection (a) for any taxable year
shall not exceed $30,000.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2000.
SEC. 232. SMALL BUSINESSES ALLOWED INCREASED DEDUCTION FOR
MEAL AND ENTERTAINMENT EXPENSES.
(a) In General.--Subsection (n) of section 274 (relating to
only 50 percent of meal and entertainment expenses allowed as
deduction) is amended by adding at the end the following new
paragraph:
``(4) Special rule for small businesses.--
``(A) In general.--In the case of any taxpayer which is a
small business, paragraph (1) shall be applied by
substituting for `50 percent'--
``(i) `55 percent' in the case of taxable years beginning
in 2001 and 2002, and
``(ii) `60 percent' in the case of taxable years beginning
in 2003, 2004, 2005 and 2006, and
``(iii) `65 percent' in the case of taxable years beginning
after 2006.
``(B) Small business.--For purposes of this paragraph, the
term `small business' means, with respect to expenses paid or
incurred during any taxable year--
``(i) any C corporation which meets the requirements of
section 55(e)(1) for such year, and
``(ii) any S corporation, partnership, or sole
proprietorship which would meet such requirements if it were
a C corporation.''
(b) Effective Date.--The amendment made by subsection (a)
shall apply to taxable years beginning after December 31,
2000.
SEC. 233. RESTORATION OF DEDUCTION FOR TRAVEL EXPENSES OF
SPOUSE, ETC. ACCOMPANYING TAXPAYER ON BUSINESS
TRAVEL.
(a) In General.--Subsection (m) of section 274 of the
Internal Revenue Code of 1986 (relating to additional
limitations on travel expenses) is amended by striking
paragraph (3).
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2000.
SEC. 234. INCREASED CREDIT AND AMORTIZATION DEDUCTION FOR
REFORESTATION EXPENDITURES.
(a) Increase in Credit.--Paragraph (1) of section 48(b) of
the Internal Revenue Code of 1986 (relating to reforestation
credit) is amended by striking ``10 percent'' and inserting
``20 percent''.
(b) Reduction in Amortization Period.--Subsection (a) of
section 194 of such Code (relating to amortization of
reforestation expenditures) is amended--
(1) by striking ``84 months'' and inserting ``36 months'',
and
(2) by striking ``84-month period'' and inserting ``36-
month period''.
(c) Increase in Maximum Amount Which May Be Amortized.--
Paragraph (1) of section 194(b) of such Code is amended by
striking ``$10,000 ($5,000'' and inserting ``$20,000
($10,000''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2000.
SEC. 235. REPEAL OF MODIFICATION OF INSTALLMENT METHOD.
(a) In General.--Subsection (a) of section 536 of the
Ticket to Work and Work Incentives Improvement Act of 1999
(relating to modification of installment method and repeal of
installment method for accrual method taxpayers) is repealed
effective with respect to sales and other dispositions
occurring on or after the date of the enactment of such Act.
(b) Applicability.--The Internal Revenue Code of 1986 shall
be applied and administered as if that subsection (and the
amendments made by that subsection) had not been enacted.
Subtitle E--Expansion of Incentives for Public Schools
SEC. 241. EXPANSION OF INCENTIVES FOR PUBLIC SCHOOLS.
(a) In General.--Chapter 1 of the Internal Revenue Code of
1986 is amended by adding at the end the following new
subchapter:
``Subchapter X--Public School Modernization Provisions
``Part I. Credit to holders of qualified public school modernization
bonds.
``Part II. Qualified school construction bonds.
``Part III. Incentives for education zones.
``PART I--CREDIT TO HOLDERS OF QUALIFIED PUBLIC SCHOOL MODERNIZATION
BONDS
``Sec. 1400F. Credit to holders of qualified public school
modernization bonds.
``SEC. 1400F. CREDIT TO HOLDERS OF QUALIFIED PUBLIC SCHOOL
MODERNIZATION BONDS.
``(a) Allowance of Credit.--In the case of a taxpayer who
holds a qualified public school modernization bond on a
credit allowance date of such bond which occurs during the
taxable year, there shall be allowed as a credit against the
tax imposed by this chapter for such taxable year an amount
equal to the sum of the credits determined under subsection
(b) with respect to credit allowance dates during such year
on which the taxpayer holds such bond.
``(b) Amount of Credit.--
``(1) In general.--The amount of the credit determined
under this subsection with respect to any credit allowance
date for a qualified public school modernization bond is 25
percent of the annual credit determined with respect to such
bond.
``(2) Annual credit.--The annual credit determined with
respect to any qualified public school modernization bond is
the product of--
``(A) the applicable credit rate, multiplied by
``(B) the outstanding face amount of the bond.
``(3) Applicable credit rate.--For purposes of paragraph
(1), the applicable credit rate with respect to an issue is
the rate equal to an average market yield (as of the day
before the date of issuance of the issue) on outstanding
long-term corporate debt obligations (determined under
regulations prescribed by the Secretary).
``(4) Special rule for issuance and redemption.--In the
case of a bond which is issued during the 3-month period
ending on a credit allowance date, the amount of the credit
determined under this subsection with respect to such credit
allowance date shall be a ratable portion of the credit
otherwise determined based on the portion of the 3-month
period during which the bond is outstanding. A similar rule
shall apply when the bond is redeemed.
``(c) Limitation Based on Amount of Tax.--
``(1) In general.--The credit allowed under subsection (a)
for any taxable year shall not exceed the excess of--
``(A) the sum of the regular tax liability (as defined in
section 26(b)) plus the tax imposed by section 55, over
``(B) the sum of the credits allowable under part IV of
subchapter A (other than subpart C thereof, relating to
refundable credits).
``(2) Carryover of unused credit.--If the credit allowable
under subsection (a) exceeds the limitation imposed by
paragraph (1) for such taxable year, such excess shall be
carried to the succeeding taxable year and added to the
credit allowable under subsection (a) for such taxable year.
``(d) Qualified Public School Modernization Bond; Credit
Allowance Date.--For purposes of this section--
``(1) Qualified public school modernization bond.--The term
`qualified public school modernization bond' means--
``(A) a qualified zone academy bond, and
``(B) a qualified school construction bond.
``(2) Credit allowance date.--The term `credit allowance
date' means--
``(A) March 15,
``(B) June 15,
``(C) September 15, and
``(D) December 15.
Such term includes the last day on which the bond is
outstanding.
``(e) Other Definitions.--For purposes of this subchapter--
``(1) Local educational agency.--The term `local
educational agency' has the meaning given to such term by
section 14101 of the Elementary and Secondary Education Act
of 1965. Such term includes the local educational agency that
serves the District of Columbia but does not include any
other State agency.
``(2) Bond.--The term `bond' includes any obligation.
``(3) State.--The term `State' includes the District of
Columbia and any possession of the United States.
``(4) Public school facility.--The term `public school
facility' shall not include--
``(A) any stadium or other facility primarily used for
athletic contests or exhibitions or other events for which
admission is charged to the general public, or
``(B) any facility which is not owned by a State or local
government or any agency or instrumentality of a State or
local government.
``(f) Credit Included in Gross Income.--Gross income
includes the amount of the credit allowed to the taxpayer
under this section (determined without regard to subsection
(c)) and the amount so included shall be treated as interest
income.
``(g) Bonds Held by Regulated Investment Companies.--If any
qualified public school modernization bond is held by a
regulated investment company, the credit determined under
subsection (a) shall be allowed to shareholders of such
company under procedures prescribed by the Secretary.
``(h) Credits May Be Stripped.--Under regulations
prescribed by the Secretary--
``(1) In general.--There may be a separation (including at
issuance) of the ownership of a qualified public school
modernization bond and the entitlement to the credit under
this section with respect to such bond. In case of any such
separation, the credit under this section shall be allowed to
the person who on the credit allowance date holds the
instrument evidencing the entitlement to the credit and not
to the holder of the bond.
``(2) Certain rules to apply.--In the case of a separation
described in paragraph (1), the rules of section 1286 shall
apply to the qualified public school modernization bond as if
it were a stripped bond and to the credit under this section
as if it were a stripped coupon.
``(i) Treatment for Estimated Tax Purposes.--Solely for
purposes of sections 6654 and 6655, the credit allowed by
this section to a taxpayer by reason of holding a qualified
public school modernization bonds on a
[[Page H869]]
credit allowance date shall be treated as if it were a
payment of estimated tax made by the taxpayer on such date.
``(j) Credit May Be Transferred.--Nothing in any law or
rule of law shall be construed to limit the transferability
of the credit allowed by this section through sale and
repurchase agreements.
``(k) Reporting.--Issuers of qualified public school
modernization bonds shall submit reports similar to the
reports required under section 149(e).
``(l) Penalty on Contractors Failing To Pay Prevailing
Wage.--
``(1) In general.--If any contractor on any project funded
by any qualified public school modernization bond has failed,
during any portion of such contractor's taxable year, to pay
prevailing wages that would be required under section 439 of
the General Education Provisions Act if such funding were an
applicable program under such section, the tax imposed by
chapter 1 on such contractor for such taxable year shall be
increased by 200 percent of the amount involved in such
failure.
``(2) Amount involved.--For purposes of paragraph (1), the
amount involved with respect to any failure is the excess of
the amount of wages such contractor would be so required to
pay under such section over the amount of wages paid.
``(3) Abatement of tax if failure corrected.--If a failure
to pay prevailing wages is corrected within a reasonable
period, then any tax imposed by paragraph (1) with respect to
such failure (including interest, additions to the tax, and
additional amounts) shall not be assessed, and if assessed
the assessment shall be abated, and if collected shall be
credited or refunded as an overpayment.
``(4) No credits against tax.--The tax imposed by paragraph
(1) shall not be treated as a tax imposed by this chapter for
purposes of determining--
``(A) the amount of any credit allowable under this
chapter, or
``(B) the amount of the minimum tax imposed by section 55.
``(m) Termination.--This section shall not apply to any
bond issued after December 31, 2004.
``PART II--QUALIFIED SCHOOL CONSTRUCTION BONDS
``Sec. 1400G. Qualified school construction bonds.
``SEC. 1400G. QUALIFIED SCHOOL CONSTRUCTION BONDS.
``(a) Qualified School Construction Bond.--For purposes of
this subchapter, the term `qualified school construction
bond' means any bond issued as part of an issue if--
``(1) 95 percent or more of the proceeds of such issue are
to be used for the construction, rehabilitation, or repair of
a public school facility or for the acquisition of land on
which such a facility is to be constructed with part of the
proceeds of such issue,
``(2) the bond is issued by a State or local government
within the jurisdiction of which such school is located,
``(3) the issuer designates such bond for purposes of this
section, and
``(4) the term of each bond which is part of such issue
does not exceed 15 years.
``(b) Limitation on Amount of Bonds Designated.--The
maximum aggregate face amount of bonds issued during any
calendar year which may be designated under subsection (a) by
any issuer shall not exceed the sum of--
``(1) the limitation amount allocated under subsection (d)
for such calendar year to such issuer, and
``(2) if such issuer is a large local educational agency
(as defined in subsection (e)(4)) or is issuing on behalf of
such an agency, the limitation amount allocated under
subsection (e) for such calendar year to such agency.
``(c) National Limitation on Amount of Bonds Designated.--
There is a national qualified school construction bond
limitation for each calendar year. Such limitation is--
``(1) $11,000,000,000 for 2001,
``(2) except as provided in subsection (f), zero after
2001.
``(d) Half of Limitation Allocated Among States.--
``(1) In general.--One-half of the limitation applicable
under subsection (c) for any calendar year shall be allocated
among the States under paragraph (2) by the Secretary. The
limitation amount allocated to a State under the preceding
sentence shall be allocated by the State to issuers within
such State and such allocations may be made only if there is
an approved State application.
``(2) Allocation formula.--The amount to be allocated under
paragraph (1) for any calendar year shall be allocated among
the States in proportion to the respective amounts each such
State received for Basic Grants under subpart 2 of part A of
title I of the Elementary and Secondary Education Act of 1965
(20 U.S.C. 6331 et seq.) for the most recent fiscal year
ending before such calendar year. For purposes of the
preceding sentence, Basic Grants attributable to large local
educational agencies (as defined in subsection (e)) shall be
disregarded.
``(3) Minimum allocations to states.--
``(A) In general.--The Secretary shall adjust the
allocations under this subsection for any calendar year for
each State to the extent necessary to ensure that the sum
of--
``(i) the amount allocated to such State under this
subsection for such year, and
``(ii) the aggregate amounts allocated under subsection (e)
to large local educational agencies in such State for such
year,
is not less than an amount equal to such State's minimum
percentage of the amount to be allocated under paragraph (1)
for the calendar year.
``(B) Minimum percentage.--A State's minimum percentage for
any calendar year is the minimum percentage described in
section 1124(d) of the Elementary and Secondary Education Act
of 1965 (20 U.S.C. 6334(d)) for such State for the most
recent fiscal year ending before such calendar year.
``(4) Allocations to certain possessions.--The amount to be
allocated under paragraph (1) to any possession of the United
States other than Puerto Rico shall be the amount which would
have been allocated if all allocations under paragraph (1)
were made on the basis of respective populations of
individuals below the poverty line (as defined by the Office
of Management and Budget). In making other allocations, the
amount to be allocated under paragraph (1) shall be reduced
by the aggregate amount allocated under this paragraph to
possessions of the United States.
``(5) Allocations for indian schools.--In addition to the
amounts otherwise allocated under this subsection,
$200,000,000 for calendar year 2001 shall be allocated by the
Secretary of the Interior for purposes of the construction,
rehabilitation, and repair of schools funded by the Bureau of
Indian Affairs. In the case of amounts allocated under the
preceding sentence, Indian tribal governments (as defined in
section 7871) shall be treated as qualified issuers for
purposes of this subchapter.
``(6) Approved state application.--For purposes of
paragraph (1), the term `approved State application' means an
application which is approved by the Secretary of Education
and which includes--
``(A) the results of a recent publicly-available survey
(undertaken by the State with the involvement of local
education officials, members of the public, and experts in
school construction and management) of such State's needs for
public school facilities, including descriptions of--
``(i) health and safety problems at such facilities,
``(ii) the capacity of public schools in the State to house
projected enrollments, and
``(iii) the extent to which the public schools in the State
offer the physical infrastructure needed to provide a high-
quality education to all students, and
``(B) a description of how the State will allocate to local
educational agencies, or otherwise use, its allocation under
this subsection to address the needs identified under
subparagraph (A), including a description of how it will--
``(i) give highest priority to localities with the greatest
needs, as demonstrated by inadequate school facilities
coupled with a low level of resources to meet those needs,
``(ii) use its allocation under this subsection to assist
localities that lack the fiscal capacity to issue bonds on
their own, and
``(iii) ensure that its allocation under this subsection is
used only to supplement, and not supplant, the amount of
school construction, rehabilitation, and repair in the State
that would have occurred in the absence of such allocation.
Any allocation under paragraph (1) by a State shall be
binding if such State reasonably determined that the
allocation was in accordance with the plan approved under
this paragraph.
``(e) Half of Limitation Allocated Among Largest School
Districts.--
``(1) In general.--One-half of the limitation applicable
under subsection (c) for any calendar year shall be allocated
under paragraph (2) by the Secretary among local educational
agencies which are large local educational agencies for such
year. No qualified school construction bond may be issued by
reason of an allocation to a large local educational agency
under the preceding sentence unless such agency has an
approved local application.
``(2) Allocation formula.--The amount to be allocated under
paragraph (1) for any calendar year shall be allocated among
large local educational agencies in proportion to the
respective amounts each such agency received for Basic Grants
under subpart 2 of part A of title I of the Elementary and
Secondary Education Act of 1965 (20 U.S.C. 6331 et seq.) for
the most recent fiscal year ending before such calendar year.
``(3) Allocation of unused limitation to state.--The amount
allocated under this subsection to a large local educational
agency for any calendar year may be reallocated by such
agency to the State in which such agency is located for such
calendar year. Any amount reallocated to a State under the
preceding sentence may be allocated as provided in subsection
(d)(1).
``(4) Large local educational agency.--For purposes of this
section, the term `large local educational agency' means,
with respect to a calendar year, any local educational agency
if such agency is--
``(A) among the 100 local educational agencies with the
largest numbers of children aged 5 through 17 from families
living below the poverty level, as determined by the
Secretary using the most recent data available from the
Department of Commerce that are satisfactory to the
Secretary, or
``(B) 1 of not more than 25 local educational agencies
(other than those described in subparagraph (A)) that the
Secretary of
[[Page H870]]
Education determines (based on the most recent data available
satisfactory to the Secretary) are in particular need of
assistance, based on a low level of resources for school
construction, a high level of enrollment growth, or such
other factors as the Secretary deems appropriate.
``(5) Approved local application.--For purposes of
paragraph (1), the term `approved local application' means an
application which is approved by the Secretary of Education
and which includes--
``(A) the results of a recent publicly-available survey
(undertaken by the local educational agency or the State with
the involvement of school officials, members of the public,
and experts in school construction and management) of such
agency's needs for public school facilities, including
descriptions of--
``(i) the overall condition of the local educational
agency's school facilities, including health and safety
problems,
``(ii) the capacity of the agency's schools to house
projected enrollments, and
``(iii) the extent to which the agency's schools offer the
physical infrastructure needed to provide a high-quality
education to all students,
``(B) a description of how the local educational agency
will use its allocation under this subsection to address the
needs identified under subparagraph (A), and
``(C) a description of how the local educational agency
will ensure that its allocation under this subsection is used
only to supplement, and not supplant, the amount of school
construction, rehabilitation, or repair in the locality that
would have occurred in the absence of such allocation.
A rule similar to the rule of the last sentence of subsection
(d)(6) shall apply for purposes of this paragraph.
``(f) Carryover of Unused Limitation.--If for any calendar
year--
``(1) the amount allocated under subsection (d) to any
State, exceeds
``(2) the amount of bonds issued during such year which are
designated under subsection (a) pursuant to such allocation,
the limitation amount under such subsection for such State
for the following calendar year shall be increased by the
amount of such excess. A similar rule shall apply to the
amounts allocated under subsection (d)(5) or (e).
``(g) Special Rules Relating to Arbitrage.--
``(1) In general.--A bond shall not be treated as failing
to meet the requirement of subsection (a)(1) solely by reason
of the fact that the proceeds of the issue of which such bond
is a part are invested for a temporary period (but not more
than 36 months) until such proceeds are needed for the
purpose for which such issue was issued.
``(2) Binding commitment requirement.--Paragraph (1) shall
apply to an issue only if, as of the date of issuance, there
is a reasonable expectation that--
``(A) at least 10 percent of the proceeds of the issue will
be spent within the 6-month period beginning on such date for
the purpose for which such issue was issued, and
``(B) the remaining proceeds of the issue will be spent
with due diligence for such purpose.
``(3) Earnings on proceeds.--Any earnings on proceeds
during the temporary period shall be treated as proceeds of
the issue for purposes of applying subsection (a)(1) and
paragraph (1) of this subsection.
``PART III--INCENTIVES FOR EDUCATION ZONES
``Sec. 1400H. Qualified zone academy bonds.
``SEC. 1400H. QUALIFIED ZONE ACADEMY BONDS.
``(a) Qualified Zone Academy Bond.--For purposes of this
subchapter--
``(1) In general.--The term `qualified zone academy bond'
means any bond issued as part of an issue if--
``(A) 95 percent or more of the proceeds of such issue are
to be used for a qualified purpose with respect to a
qualified zone academy established by a local educational
agency,
``(B) the bond is issued by a State or local government
within the jurisdiction of which such academy is located,
``(C) the issuer--
``(i) designates such bond for purposes of this section,
``(ii) certifies that it has written assurances that the
private business contribution requirement of paragraph (2)
will be met with respect to such academy, and
``(iii) certifies that it has the written approval of the
local educational agency for such bond issuance, and
``(D) the term of each bond which is part of such issue
does not exceed 15 years.
Rules similar to the rules of section 1400G(g) shall apply
for purposes of paragraph (1).
``(2) Private business contribution requirement.--
``(A) In general.--For purposes of paragraph (1), the
private business contribution requirement of this paragraph
is met with respect to any issue if the local educational
agency that established the qualified zone academy has
written commitments from private entities to make qualified
contributions having a present value (as of the date of
issuance of the issue) of not less than 10 percent of the
proceeds of the issue.
``(B) Qualified contributions.--For purposes of
subparagraph (A), the term `qualified contribution' means any
contribution (of a type and quality acceptable to the local
educational agency) of--
``(i) equipment for use in the qualified zone academy
(including state-of-the-art technology and vocational
equipment),
``(ii) technical assistance in developing curriculum or in
training teachers in order to promote appropriate market
driven technology in the classroom,
``(iii) services of employees as volunteer mentors,
``(iv) internships, field trips, or other educational
opportunities outside the academy for students, or
``(v) any other property or service specified by the local
educational agency.
``(3) Qualified zone academy.--The term `qualified zone
academy' means any public school (or academic program within
a public school) which is established by and operated under
the supervision of a local educational agency to provide
education or training below the postsecondary level if--
``(A) such public school or program (as the case may be) is
designed in cooperation with business to enhance the academic
curriculum, increase graduation and employment rates, and
better prepare students for the rigors of college and the
increasingly complex workforce,
``(B) students in such public school or program (as the
case may be) will be subject to the same academic standards
and assessments as other students educated by the local
educational agency,
``(C) the comprehensive education plan of such public
school or program is approved by the local educational
agency, and
``(D)(i) such public school is located in an empowerment
zone or enterprise community (including any such zone or
community designated after the date of the enactment of this
section), or
``(ii) there is a reasonable expectation (as of the date of
issuance of the bonds) that at least 35 percent of the
students attending such school or participating in such
program (as the case may be) will be eligible for free or
reduced-cost lunches under the school lunch program
established under the National School Lunch Act.
``(4) Qualified purpose.--The term `qualified purpose'
means, with respect to any qualified zone academy--
``(A) constructing, rehabilitating, or repairing the public
school facility in which the academy is established,
``(B) acquiring the land on which such facility is to be
constructed with part of the proceeds of such issue,
``(C) providing equipment for use at such academy,
``(D) developing course materials for education to be
provided at such academy, and
``(E) training teachers and other school personnel in such
academy.
``(b) Limitations on Amount of Bonds Designated.--
``(1) In general.--There is a national zone academy bond
limitation for each calendar year. Such limitation is--
``(A) $400,000,000 for 1998,
``(B) $400,000,000 for 1999,
``(C) $400,000,000 for 2000,
``(D) $1,400,000,000 for 2001,
``(E) except as provided in paragraph (3), zero after 2001.
``(2) Allocation of limitation.--
``(A) Allocation among states.--
``(i) 1998, 1999, and 2000 limitations.--The national zone
academy bond limitations for calendar years 1998, 1999, and
2000 shall be allocated by the Secretary among the States on
the basis of their respective populations of individuals
below the poverty line (as defined by the Office of
Management and Budget).
``(ii) Limitation after 2000.--The national zone academy
bond limitation for any calendar year after 2000 shall be
allocated by the Secretary among the States in the manner
prescribed by section 1400G(d); except that in making the
allocation under this clause, the Secretary shall take into
account--
``(I) Basic Grants attributable to large local educational
agencies (as defined in section 1400G(e)).
``(II) the national zone academy bond limitation.
``(B) Allocation to local educational agencies.--The
limitation amount allocated to a State under subparagraph (A)
shall be allocated by the State education agency to qualified
zone academies within such State.
``(C) Designation subject to limitation amount.--The
maximum aggregate face amount of bonds issued during any
calendar year which may be designated under subsection (a)
with respect to any qualified zone academy shall not exceed
the limitation amount allocated to such academy under
subparagraph (B) for such calendar year.
``(3) Carryover of unused limitation.--If for any calendar
year--
``(A) the limitation amount under this subsection for any
State, exceeds
``(B) the amount of bonds issued during such year which are
designated under subsection (a) (or the corresponding
provisions of prior law) with respect to qualified zone
academies within such State,
the limitation amount under this subsection for such State
for the following calendar year shall be increased by the
amount of such excess.''.
(b) Reporting.--Subsection (d) of section 6049 of such Code
(relating to returns regarding payments of interest) is
amended by adding at the end the following new paragraph:
``(8) Reporting of credit on qualified public school
modernization bonds.--
``(A) In general.--For purposes of subsection (a), the term
`interest' includes amounts includible in gross income under
section 1400F(f) and such amounts shall be
[[Page H871]]
treated as paid on the credit allowance date (as defined in
section 1400F(d)(2)).
``(B) Reporting to corporations, etc.--Except as otherwise
provided in regulations, in the case of any interest
described in subparagraph (A) of this paragraph, subsection
(b)(4) of this section shall be applied without regard to
subparagraphs (A), (H), (I), (J), (K), and (L)(i).
``(C) Regulatory authority.--The Secretary may prescribe
such regulations as are necessary or appropriate to carry out
the purposes of this paragraph, including regulations which
require more frequent or more detailed reporting.''
(c) Other Conforming Amendments.--
(1) Subchapter U of chapter 1 of such Code is amended by
striking part IV, by redesignating part V as part IV, and by
redesignating section 1397F as section 1397E.
(2) The table of subchapters for chapter 1 of such Code is
amended by adding at the end the following new item:
``Subchapter X. Public school modernization provisions.''
(3) The table of parts of subchapter U of chapter 1 of such
Code is amended by striking the last 2 items and inserting
the following item:
``Part IV. Regulations.''
(d) Effective Dates.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply
to obligations issued after December 31, 2000.
(2) Repeal of restriction on zone academy bond holders.--In
the case of bonds to which section 1397E of the Internal
Revenue Code of 1986 (as in effect before the date of the
enactment of this Act) applies, the limitation of such
section to eligible taxpayers (as defined in subsection
(d)(6) of such section) shall not apply after the date of the
enactment of this Act.
Subtitle F--Increased Estate Tax Relief for Family-Owned Business
Interests
SEC. 251. INCREASE IN ESTATE TAX BENEFIT FOR FAMILY-OWNED
BUSINESS INTERESTS.
(a) Transfer to Credit Provisions.--Section 2057 of the
Internal Revenue Code of 1986 (relating to family-owned
business interests) is hereby moved to part II of subchapter
A of chapter 11 of such Code, inserted after section 2010,
and redesignated as section 2010A.
(b) Increase in Credit; Surviving Spouse Allowed Unused
Credit of Decedent.--Subsection (a) of section 2010A of such
Code, as redesignated by subsection (a) of this section, is
amended to read as follows:
``(a) Increase in United Credit.--For purposes of
determining the unified credit under section 2010 in the case
of an estate of a decedent to which this section applies--
``(1) In general.--The applicable exclusion amount under
section 2010(c) shall be increased (but not in excess of
$2,000,000) by the adjusted value of the qualified family-
owned business interests of the decedent which are described
in subsection (b)(2) and for which no deduction is allowed
under section 2056.
``(2) Treatment of unused limitation of predeceased
spouse.--In the case of a decedent--
``(A) having no surviving spouse, but
``(B) who was the surviving spouse of a decedent--
``(i) who died after December 31, 2000, and
``(ii) whose estate met the requirements of subsection
(b)(1) other than subparagraph (B) thereof,
there shall be substituted for `$2,000,000' in paragraph (1)
an amount equal to the excess of $4,000,000 over the
exclusion equivalent of the credit allowed under section 2010
(as increased by this section) to the estate of the decedent
referred to in subparagraph (B). For purposes of the
preceding sentence, the exclusion equivalent of the credit is
the amount on which a tentative tax under section 2001(c)
equal to such credit would be imposed.''
(c) Conforming Amendments.--
(1) The table of sections for part IV of subchapter A of
chapter 11 of such Code is amended by striking the item
relating to section 2057.
(2) Paragraph (10) of section 2031(c) of such Code is
amended by striking ``section 2057(e)(3)'' and inserting
``section 2010A(e)(3)''.
(3) The table of sections for part II of subchapter A of
chapter 11 of such Code is amended by inserting after the
item relating to section 2010 the following new item:
``Sec. 2010A. Family-owned business interests.''
(d) Effective date.--The amendments made by this section
shall apply to estates of decedents dying after December 31,
2000.
Subtitle G--Revenue Offsets
PART I--REVISION OF TAX RULES ON EXPATRIATION
SEC. 261. REVISION OF TAX RULES ON EXPATRIATION.
(a) In General.--Subpart A of part II of subchapter N of
chapter 1 of the Internal Revenue Code of 1986 is amended by
inserting after section 877 the following new section:
``SEC. 877A. TAX RESPONSIBILITIES OF EXPATRIATION.
``(a) General Rules.--For purposes of this subtitle--
``(1) Mark to market.--Except as provided in subsection
(f), all property of a covered expatriate to whom this
section applies shall be treated as sold on the day before
the expatriation date for its fair market value.
``(2) Recognition of gain or loss.--In the case of any sale
under paragraph (1)--
``(A) notwithstanding any other provision of this title,
any gain arising from such sale shall be taken into account
for the taxable year of the sale, and
``(B) any loss arising from such sale shall be taken into
account for the taxable year of the sale to the extent
otherwise provided by this title, except that section 1091
shall not apply to any such loss.
Proper adjustment shall be made in the amount of any gain or
loss subsequently realized for gain or loss taken into
account under the preceding sentence.
``(3) Exclusion for certain gain.--The amount which would
(but for this paragraph) be includible in the gross income of
any individual by reason of this section shall be reduced
(but not below zero) by $600,000. For purposes of this
paragraph, allocable expatriation gain taken into account
under subsection (f)(2) shall be treated in the same manner
as an amount required to be includible in gross income.
``(b) Election To Defer Tax.--
``(1) In general.--If the taxpayer elects the application
of this subsection with respect to any property treated as
sold by reason of subsection (a), the payment of the
additional tax attributable to such property shall be
postponed until the due date of the return for the taxable
year in which such property is disposed of (or, in the case
of property disposed of in a transaction in which gain is not
recognized in whole or in part, until such other date as the
Secretary may prescribe).
``(2) Determination of tax with respect to property.--For
purposes of paragraph (1), the additional tax attributable to
any property is an amount which bears the same ratio to the
additional tax imposed by this chapter for the taxable year
solely by reason of subsection (a) as the gain taken into
account under subsection (a) with respect to such property
bears to the total gain taken into account under subsection
(a) with respect to all property to which subsection (a)
applies.
``(3) Termination of postponement.--No tax may be postponed
under this subsection later than the due date for the return
of tax imposed by this chapter for the taxable year which
includes the date of death of the expatriate (or, if earlier,
the time that the security provided with respect to the
property fails to meet the requirements of paragraph (4),
unless the taxpayer corrects such failure within the time
specified by the Secretary).
``(4) Security.--
``(A) In general.--No election may be made under paragraph
(1) with respect to any property unless adequate security is
provided with respect to such property.
``(B) Adequate security.--For purposes of subparagraph (A),
security with respect to any property shall be treated as
adequate security if--
``(i) it is a bond in an amount equal to the deferred tax
amount under paragraph (2)(A) for the property, or
``(ii) the taxpayer otherwise establishes to the
satisfaction of the Secretary that the security is adequate.
``(5) Waiver of certain rights.--No election may be made
under paragraph (1) unless the taxpayer consents to the
waiver of any right under any treaty of the United States
which would preclude assessment or collection of any tax
imposed by reason of this section.
``(6) Elections.--An election under paragraph (1) shall
only apply to property described in the election and, once
made, is irrevocable. An election may be under paragraph (1)
with respect to an interest in a trust with respect to which
gain is required to be recognized under subsection (f)(1).
``(7) Interest.--For purposes of section 6601, the last
date for the payment of tax shall be determined without
regard to the election under this subsection.
``(c) Covered Expatriate.--For purposes of this section--
``(1) In general.--The term `covered expatriate' means an
expatriate who meets the requirements of subparagraph (A) or
(B) of section 877(a)(2).
``(2) Exceptions.--An individual shall not be treated as a
covered expatriate if--
``(A) the individual--
``(i) became at birth a citizen of the United States and a
citizen of another country and, as of the expatriation date,
continues to be a citizen of, and is taxed as a resident of,
such other country, and
``(ii) has been a resident of the United States (as defined
in section 7701(b)(1)(A)(ii)) for not more than 8 taxable
years during the 15-taxable year period ending with the
taxable year during which the expatriation date occurs, or
``(B)(i) the individual's relinquishment of United States
citizenship occurs before such individual attains age 18\1/
2\, and
``(ii) the individual has been a resident of the United
States (as so defined) for not more than 5 taxable years
before the date of relinquishment.
``(d) Section Not To Apply to Certain Property.--This
section shall not apply to the following property:
``(1) United states real property interests.--Any United
States real property interest (as defined in section
897(c)(1)), other than stock of a United States real property
holding corporation which does not, on the day before the
expatriation date, meet the requirements of section
897(c)(2).
``(2) Interest in certain retirement plans.--
[[Page H872]]
``(A) In general.--Any interest in a qualified retirement
plan (as defined in section 4974(c)), other than any interest
attributable to contributions which are in excess of any
limitation or which violate any condition for tax-favored
treatment.
``(B) Foreign pension plans.--
``(i) In general.--Under regulations prescribed by the
Secretary, interests in foreign pension plans or similar
retirement arrangements or programs.
``(ii) Limitation.--The value of property which is treated
as not sold by reason of this subparagraph shall not exceed
$500,000.
``(e) Definitions.--For purposes of this section--
``(1) Expatriate.--The term `expatriate' means--
``(A) any United States citizen who relinquishes his
citizenship, and
``(B) any long-term resident of the United States who--
``(i) ceases to be a lawful permanent resident of the
United States (within the meaning of section 7701(b)(6)), or
``(ii) commences to be treated as a resident of a foreign
country under the provisions of a tax treaty between the
United States and the foreign country and who does not waive
the benefits of such treaty applicable to residents of the
foreign country.
``(2) Expatriation date.--The term `expatriation date'
means--
``(A) the date an individual relinquishes United States
citizenship, or
``(B) in the case of a long-term resident of the United
States, the date of the event described in clause (i) or (ii)
of paragraph (1)(B).
``(3) Relinquishment of citizenship.--A citizen shall be
treated as relinquishing his United States citizenship on the
earliest of--
``(A) the date the individual renounces his United States
nationality before a diplomatic or consular officer of the
United States pursuant to paragraph (5) of section 349(a) of
the Immigration and Nationality Act (8 U.S.C. 1481(a)(5)),
``(B) the date the individual furnishes to the United
States Department of State a signed statement of voluntary
relinquishment of United States nationality confirming the
performance of an act of expatriation specified in paragraph
(1), (2), (3), or (4) of section 349(a) of the Immigration
and Nationality Act (8 U.S.C. 1481(a)(1)-(4)),
``(C) the date the United States Department of State issues
to the individual a certificate of loss of nationality, or
``(D) the date a court of the United States cancels a
naturalized citizen's certificate of naturalization.
Subparagraph (A) or (B) shall not apply to any individual
unless the renunciation or voluntary relinquishment is
subsequently approved by the issuance to the individual of a
certificate of loss of nationality by the United States
Department of State.
``(4) Long-term resident.--The term `long-term resident'
has the meaning given to such term by section 877(e)(2).
``(f) Special Rules Applicable to Beneficiaries' Interests
in Trust.--
``(1) In general.--Except as provided in paragraph (2), if
an individual is determined under paragraph (3) to hold an
interest in a trust on the day before the expatriation date--
``(A) the individual shall not be treated as having sold
such interest,
``(B) such interest shall be treated as a separate share in
the trust, and
``(C)(i) such separate share shall be treated as a separate
trust consisting of the assets allocable to such share,
``(ii) the separate trust shall be treated as having sold
its assets on the day before the expatriation date for their
fair market value and as having distributed all of its assets
to the individual as of such time, and
``(iii) the individual shall be treated as having
recontributed the assets to the separate trust.
Subsection (a)(2) shall apply to any income, gain, or loss of
the individual arising from a distribution described in
subparagraph (C)(ii).
``(2) Special rules for interests in qualified trusts.--
``(A) In general.--If the trust interest described in
paragraph (1) is an interest in a qualified trust--
``(i) paragraph (1) and subsection (a) shall not apply, and
``(ii) in addition to any other tax imposed by this title,
there is hereby imposed on each distribution with respect to
such interest a tax in the amount determined under
subparagraph (B).
``(B) Amount of tax.--The amount of tax under subparagraph
(A)(ii) shall be equal to the lesser of--
``(i) the highest rate of tax imposed by section 1(e) for
the taxable year which includes the day before the
expatriation date, multiplied by the amount of the
distribution, or
``(ii) the balance in the deferred tax account immediately
before the distribution determined without regard to any
increases under subparagraph (C)(ii) after the 30th day
preceding the distribution.
``(C) Deferred tax account.--For purposes of subparagraph
(B)(ii)--
``(i) Opening balance.--The opening balance in a deferred
tax account with respect to any trust interest is an amount
equal to the tax which would have been imposed on the
allocable expatriation gain with respect to the trust
interest if such gain had been included in gross income under
subsection (a).
``(ii) Increase for interest.--The balance in the deferred
tax account shall be increased by the amount of interest
determined (on the balance in the account at the time the
interest accrues), for periods after the 90th day after the
expatriation date, by using the rates and method applicable
under section 6621 for underpayments of tax for such periods.
``(iii) Decrease for taxes previously paid.--The balance in
the tax deferred account shall be reduced--
``(I) by the amount of taxes imposed by subparagraph (A) on
any distribution to the person holding the trust interest,
and
``(II) in the case of a person holding a nonvested
interest, to the extent provided in regulations, by the
amount of taxes imposed by subparagraph (A) on distributions
from the trust with respect to nonvested interests not held
by such person.
``(D) Allocable expatriation gain.--For purposes of this
paragraph, the allocable expatriation gain with respect to
any beneficiary's interest in a trust is the amount of gain
which would be allocable to such beneficiary's vested and
nonvested interests in the trust if the beneficiary held
directly all assets allocable to such interests.
``(E) Tax deducted and withheld.--
``(i) In general.--The tax imposed by subparagraph (A)(ii)
shall be deducted and withheld by the trustees from the
distribution to which it relates.
``(ii) Exception where failure to waive treaty rights.--If
an amount may not be deducted and withheld under clause (i)
by reason of the distributee failing to waive any treaty
right with respect to such distribution--
``(I) the tax imposed by subparagraph (A)(ii) shall be
imposed on the trust and each trustee shall be personally
liable for the amount of such tax, and
``(II) any other beneficiary of the trust shall be entitled
to recover from the distributee the amount of such tax
imposed on the other beneficiary.
``(F) Disposition.--If a trust ceases to be a qualified
trust at any time, a covered expatriate disposes of an
interest in a qualified trust, or a covered expatriate
holding an interest in a qualified trust dies, then, in lieu
of the tax imposed by subparagraph (A)(ii), there is hereby
imposed a tax equal to the lesser of--
``(i) the tax determined under paragraph (1) as if the day
before the expatriation date were the date of such cessation,
disposition, or death, whichever is applicable, or
``(ii) the balance in the tax deferred account immediately
before such date.
Such tax shall be imposed on the trust and each trustee shall
be personally liable for the amount of such tax and any other
beneficiary of the trust shall be entitled to recover from
the covered expatriate or the estate the amount of such tax
imposed on the other beneficiary.
``(G) Definitions and special rule.--For purposes of this
paragraph--
``(i) Qualified trust.--The term `qualified trust' means a
trust--
``(I) which is organized under, and governed by, the laws
of the United States or a State, and
``(II) with respect to which the trust instrument requires
that at least 1 trustee of the trust be an individual citizen
of the United States or a domestic corporation.
``(ii) Vested interest.--The term `vested interest' means
any interest which, as of the day before the expatriation
date, is vested in the beneficiary.
``(iii) Nonvested interest.--The term `nonvested interest'
means, with respect to any beneficiary, any interest in a
trust which is not a vested interest. Such interest shall be
determined by assuming the maximum exercise of discretion in
favor of the beneficiary and the occurrence of all
contingencies in favor of the beneficiary.
``(iv) Adjustments.--The Secretary may provide for such
adjustments to the bases of assets in a trust or a deferred
tax account, and the timing of such adjustments, in order to
ensure that gain is taxed only once.
``(3) Determination of beneficiaries' interest in trust.--
``(A) Determinations under paragraph (1).--For purposes of
paragraph (1), a beneficiary's interest in a trust shall be
based upon all relevant facts and circumstances, including
the terms of the trust instrument and any letter of wishes or
similar document, historical patterns of trust distributions,
and the existence of and functions performed by a trust
protector or any similar advisor.
``(B) Other determinations.--For purposes of this section--
``(i) Constructive ownership.--If a beneficiary of a trust
is a corporation, partnership, trust, or estate, the
shareholders, partners, or beneficiaries shall be deemed to
be the trust beneficiaries for purposes of this section.
``(ii) Taxpayer return position.--A taxpayer shall clearly
indicate on its income tax return--
``(I) the methodology used to determine that taxpayer's
trust interest under this section, and
``(II) if the taxpayer knows (or has reason to know) that
any other beneficiary of such trust is using a different
methodology to determine such beneficiary's trust interest
under this section.
``(g) Termination of Deferrals, Etc.--In the case of any
covered expatriate, notwithstanding any other provision of
this title--
``(1) any period during which recognition of income or gain
is deferred shall terminate on the day before the
expatriation date, and
[[Page H873]]
``(2) any extension of time for payment of tax shall cease
to apply on the day before the expatriation date and the
unpaid portion of such tax shall be due and payable at the
time and in the manner prescribed by the Secretary.
``(h) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this section.''
(b) Tax on Gifts and Bequests Received By United States
Citizens and Residents From Expatriates.--
(1) In general.--Subtitle B of the Internal Revenue Code of
1986 (relating to estate and gift taxes) is amended by
inserting after chapter 13 the following new chapter:
``CHAPTER 13A--GIFTS AND BEQUESTS FROM EXPATRIATES
``Sec. 2681. Imposition of tax.
``SEC. 2681. IMPOSITION OF TAX.
``(a) In General.--If, during any calendar year, any United
States citizen or resident receives any covered gift or
bequest, there is hereby imposed a tax equal to the product
of--
``(1) the highest rate of tax specified in the table
contained in section 2001(c) as in effect on the date of such
receipt, and
``(2) the value of such covered gift or bequest.
``(b) Tax To Be Paid by Recipient.--The tax imposed by
subsection (a) on any covered gift or bequest shall be paid
by the person receiving such gift or bequest.
``(c) Exception for Certain Gifts.--Subsection (a) shall
apply only to the extent that the covered gifts and bequests
received during the calendar year exceed $10,000.
``(d) Tax Reduced By Foreign Gift or Estate Tax.--The tax
imposed by subsection (a) on any covered gift or bequest
shall be reduced by the amount of any gift or estate tax paid
to a foreign country with respect to such covered gift or
bequest.
``(e) Covered Gift or Bequest.--
``(1) In general.--For purposes of this chapter, the term
`covered gift or bequest' means--
``(A) any property acquired by gift directly or indirectly
from an individual who, at the time of such acquisition, was
an expatriate, and
``(B) any property acquired by bequest, devise, or
inheritance directly or indirectly from an individual who, at
the time of death, was an expatriate.
``(2) Exceptions for transfers otherwise subject to estate
or gift tax.--Such term shall not include--
``(A) any property shown on a timely filed return of tax
imposed by chapter 12 which is a taxable gift by the
expatriate, and
``(B) any property shown on a timely filed return of tax
imposed by chapter 11 of the estate of the expatriate.
``(3) Transfers in trust.--Any covered gift or bequest
which is made in trust shall be treated as made to the
beneficiaries of such trust in proportion to their respective
interests in such trust (as determined under section
877A(f)(3)).
``(f) Expatriate.--For purposes of this section, the term
`expatriate' has the meaning given to such term by section
877A(e)(1).''.
(2) Clerical amendment.--The table of chapters for subtitle
B of such Code is amended by inserting after the item
relating to chapter 13 the following new item:
``Chapter 13A. Gifts and bequests from expatriates.''
(c) Definition of Termination of United States
Citizenship.--Section 7701(a) of such Code is amended by
adding at the end the following new paragraph:
``(47) Termination of united states citizenship.--
``(A) In general.--An individual shall not cease to be
treated as a United States citizen before the date on which
the individual's citizenship is treated as relinquished under
section 877A(e)(3).
``(B) Dual citizens.--Under regulations prescribed by the
Secretary, subparagraph (A) shall not apply to an individual
who became at birth a citizen of the United States and a
citizen of another country.''
(d) Conforming Amendment.--Paragraph (1) of section
6039G(d) of such Code is amended by inserting ``or 877A''
after ``section 877''.
(e) Clerical Amendment.--The table of sections for subpart
A of part II of subchapter N of chapter 1 of such Code is
amended by inserting after the item relating to section 877
the following new item:
``Sec. 877A. Tax responsibilities of expatriation.''.
(f) Effective Date.--
(1) In general.--Except as provided in this subsection, the
amendments made by this section shall apply to expatriates
(within the meaning of section 877A(e) of the Internal
Revenue Code of 1986, as added by this section) whose
expatriation date (as so defined) occurs on or after March 9,
2000.
(2) Gifts and bequests.--Chapter 13A of the Internal
Revenue Code of 1986 (as added by subsection (b)) shall apply
to covered gifts and bequests (as defined in section 2681 of
such Code, as so added) received on or after March 9, 2000.
PART II--DISALLOWANCE OF NONECONOMIC TAX ATTRIBUTES
Subpart A--Disallowance of Noneconomic Tax Attributes; Increase in
Penalty With Respect to Disallowed Noneconomic Tax Attributes
SEC. 266. DISALLOWANCE OF NONECONOMIC TAX ATTRIBUTES.
Section 7701 of the Internal Revenue Code of 1986 is
amended by redesignating subsection (m) as subsection (n) and
by inserting after subsection (l) the following new
subsection:
``(m) Disallowance of Noneconomic Tax Attributes.--
``(1) In general.--In determining liability for any tax
under subtitle A, noneconomic tax attributes shall not be
allowed.
``(2) Noneconomic tax attribute.--For purposes of this
subsection, a noneconomic tax attribute is any deduction,
loss, or credit claimed to result from any transaction
unless--
``(A) the transaction changes in a meaningful way (apart
from Federal income tax consequences) the taxpayer's economic
position, and
``(B)(i) the present value of the reasonably expected
potential income from the transaction (and the taxpayer's
risk of loss from the transaction) are substantial in
relationship to the present value of the tax benefits
claimed, or
``(ii) in the case of a transaction which is in substance
the borrowing of money or the acquisition of financial
capital, the deductions claimed with respect to the
transaction for any period are not significantly in excess of
the economic return for such period realized by the person
lending the money or providing the financial capital.
``(3) Presumption of noneconomic tax attributes.--For
purposes of paragraph (2), the following factors shall give
rise to a presumption that a transaction fails to meet the
requirements of paragraph (2):
``(A) The fact that the payments, liabilities, or assets
that purport to create a loss (or other benefit) for tax
purposes are not reflected to any meaningful extent on the
taxpayer's books and records for financial reporting
purposes.
``(B) The fact that the transaction results in an
allocation of income or gain to a tax-indifferent party which
is substantially in excess of such party's economic income or
gain from the transaction.
``(4) Treatment of built-in loss.--The determination of
whether a transaction results in the realization of a built-
in loss shall be made under subtitle A as if this subsection
had not been enacted. For purposes of the preceding sentence,
the term `built-in loss' means any loss or deduction to the
extent that such loss or deduction had economically been
incurred before such transaction is entered into and to the
extent that the loss or deduction was economically borne by
the taxpayer.
``(5) Definition and special rules.--For purposes of this
subsection--
``(A) Tax-indifferent party.--The term `tax-indifferent
party' means any person or entity exempt from tax under
subtitle A. A person shall be treated as a tax-indifferent
party with respect to a transaction if, by reason of such
person's method of accounting, the items taken into account
with respect to the transaction have no substantial impact on
such person's liability under subtitle A.
``(B) Series of related transaction.--A transaction which
is part of a series of related transactions shall be treated
as meeting the requirements of paragraph (2) only if--
``(i) such transaction meets such requirements without
regard to the other transactions, and
``(ii) such transactions, if treated as 1 transaction,
would meet such requirements.
A similar rule shall apply to a multiple step transaction
with each step being treated as a separate related
transaction.
``(C) Normal business transactions.--In the case of a
transaction which is an integral part of a taxpayer's trade
or business and which is entered into in the normal course of
such trade or business, the determination of the potential
income from such transaction shall be made by taking into
account its relationship to the overall trade or business of
the taxpayer.
``(D) Treatment of fees.--In determining whether there is
risk of loss from a transaction (and the amount thereof),
potential loss of fees and other transaction expenses shall
be disregarded.
``(E) Treatment of economic return enhancements.--The
following shall be treated as economic returns and not tax
benefits:
``(i) The credit under section 29 (relating to credit for
producing fuel from a nonconventional source).
``(ii) The credit under section 42 (relating to low-income
housing credit).
``(iii) The credit under section 45 (relating to
electricity produced from certain renewable resources).
``(iv) The credit under section 1397E (relating to credit
to holders of qualified zone academy bonds) or any similar
program hereafter enacted.
``(v) Any other tax benefit specified in regulations.
``(F) Exceptions for nonbusiness transactions.--
``(i) Individuals.--In the case of an individual, this
subsection shall only apply to transactions entered into in
connection with a trade or business or activity engaged in
for profit.
``(ii) Charitable transfers.--This subsection shall not
apply in determining the amount allowable as a deduction
under section 170, 545(b)(2), 556(b)(2), or 642(c).
``(6) Economic substance doctrine, etc., not affected.--The
provisions of this subsection shall not be construed as
altering or supplanting any rule of law referred to in
[[Page H874]]
section 6662(i)(2)(B) and the requirements of this subsection
shall be construed as being in addition to any such rule of
law.''
SEC. 267. INCREASE IN SUBSTANTIAL UNDERPAYMENT PENALTY WITH
RESPECT TO DISALLOWED NONECONOMIC TAX
ATTRIBUTES.
(a) In General.--Section 6662 of the Internal Revenue Code
of 1986 (relating to imposition of accuracy-related penalty)
is amended by adding at the end the following new subsection:
``(i) Increase in Penalty in Case of Disallowed Noneconomic
Tax Attributes.--
``(1) In general.--In the case of the portion of the
underpayment to which this subsection applies--
``(A) subsection (a) shall be applied with respect to such
portion by substituting `40 percent' for `20 percent', and
``(B) subsection (d)(2)(B) and section 6664(c) shall not
apply.
``(2) Underpayments to which subsection applies.--This
subsection shall apply to an underpayment to which this
section applies by reason of paragraph (1) or (2) of
subsection (b) but--
``(A) only to the extent that such underpayment is
attributable to--
``(i) the disallowance of any noneconomic tax attribute
(determined under section 7701(m)), or
``(ii) the disallowance of any other benefit--
``(I) because of a lack of economic substance or business
purpose for the transaction giving rise to the claimed
benefit,
``(II) because the form of the transaction did not reflect
its substance, or
``(III) because of any other similar rule of law, and
``(B) only if the underpayment so attributable exceeds
$1,000,000.
``(3) Increase in penalty not to apply if compliance with
disclosure requirements.--Paragraph (1)(A) shall not apply if
the taxpayer--
``(A) discloses to the Secretary within 30 days after the
closing of the transaction appropriate documents describing
the transaction, and
``(B) files with the taxpayer's return of tax imposed by
subtitle A--
``(i) a statement verifying that such disclosure has been
made,
``(ii) a detailed description of the facts, assumptions of
facts, and factual conclusions with respect to the business
or economic purposes or objectives of the transaction that
are relied upon to support the manner in which it is reported
on the return,
``(iii) a description of the due diligence performed to
ascertain the accuracy of such facts, assumptions, and
factual conclusions,
``(iv)(I) a statement (signed by the senior financial
officer of the corporation under penalty of perjury) that the
facts, assumptions, or factual conclusions relied upon in
reporting the transaction are true and correct as of the date
the return is filed, to the best of such officer's knowledge
and belief, and
``(II) if the actual facts varied materially from the
facts, assumptions, or factual conclusions relied upon, a
statement describing such variances,
``(v) copies of any written material provided in connection
with the offer of the transaction to the taxpayer by a third
party,
``(vi) a full description of any express or implied
agreement or arrangement with any advisor, or with any
offeror, that the fee payable to such person would be
contingent or subject to possible reimbursement, and
``(vii) a full description of any express or implied
warranty from any person with respect to the anticipated tax
results from the transaction.''
(b) Modifications to Penalty on Substantial Understatement
of Income Tax.--
(1) Modification of threshold.--Subparagraph (A) of section
6662(d)(2) of such Code is amended to read as follows:
``(A) In general.--For purposes of this section, there is a
substantial understatement of income tax for any taxable year
if the amount of the understatement for the taxable year
exceeds the lesser of--
``(i) $1,000,000, or
``(ii) the greater of 10 percent of the tax required to be
shown on the return for the taxable year or $5,000.''
(2) Reduction of penalty on account of disclosure not to
apply to tax shelters.--Subparagraph (C) of section
6662(d)(2) of such Code is amended by striking clause (ii),
by redesignating clause (iii) as clause (ii), and by striking
clause (i) and inserting the following new clause:
``(i) In general.--Subparagraph (B) shall not apply to any
item attributable to a tax shelter.''
(c) Treatment of Amended Returns.--Subsection (a) of
section 6664 of such Code is amended by adding at the end the
following new sentence: ``For purposes of this subsection, an
amended return shall be disregarded if such return is filed
on or after the date the taxpayer is first contacted by the
Secretary regarding the examination of the return.''
SEC. 268. PENALTY ON MARKETED TAX AVOIDANCE STRATEGIES WHICH
HAVE NO ECONOMIC SUBSTANCE, ETC.
(a) Penalty.--
(1) In general.--Section 6700 of the Internal Revenue Code
of 1986 (relating to promoting abusive tax shelters, etc.) is
amended by redesignating subsection (c) as subsection (d) and
by inserting after subsection (b) the following new
subsection:
``(c) Penalty on Substantial Promoters for Promoting Tax
Avoidance Strategies Which Have No Economic Substance, Etc.--
``(1) Imposition of penalty.--Any substantial promoter of a
tax avoidance strategy shall pay a penalty in the amount
determined under paragraph (2) with respect to such strategy
if any tax benefit attributable to such strategy (or any
similar strategy promoted by such promoter) is not allowable
by reason of any rule of law referred to in section
6662(i)(2)(A).
``(2) Amount of penalty.--The penalty under paragraph (1)
with respect to a promoter of a tax avoidance strategy is an
amount equal to 100 percent of the gross income derived (or
to be derived) by such promoter from such strategy.
``(3) Tax avoidance strategy.--For purposes of this
subsection, the term `tax avoidance strategy' means any
entity, plan, arrangement, or transaction a significant
purpose of the structure of which is the avoidance or evasion
of Federal income tax.
``(4) Substantial promoter.--For purposes of this
subsection --
``(A) In general.--The term `substantial promoter' means,
with respect to any tax avoidance strategy, any promoter if--
``(i) such promoter offers such strategy to more than 1
potential participant, and
``(ii) such promoter may receive fees in excess of
$1,000,000 in the aggregate with respect to such strategy.
``(B) Aggregation rules.--For purposes of this paragraph--
``(i) Related persons.--A promoter and all persons related
to such promoter shall be treated as 1 person.
``(ii) Similar strategies.--All similar tax avoidance
strategies of a promoter shall be treated as 1 tax avoidance
strategy.
``(C) Promoter.--The term `promoter' means any person who
participates in the promotion, offering, or sale of the tax
avoidance strategy.
``(D) Related person.--Persons are related if they bear a
relationship to each other which is described in section
267(b) or 707(b).
``(4) Coordination with subsection (a).--No penalty shall
be imposed by this subsection on any promoter with respect to
a tax avoidance strategy if a penalty is imposed under
subsection (a) on such promoter with respect to such
strategy.''
(2) Conforming amendment.--Subsection (d) of section 6700
of such Code is amended--
(A) by striking ``Penalty'' and inserting ``Penalties'',
and
(B) by striking ``penalty'' the first place it appears in
the text and inserting ``penalties''.
(b) Increase in Penalty on Promoting Abusive Tax
Shelters.--The first sentence of section 6700(a) of such Code
is amended by striking ``a penalty equal to'' and all that
follows and inserting ``a penalty equal to the greater of
$1,000 or 100 percent of the gross income derived (or to be
derived) by such person from such activity.''
SEC. 269. EFFECTIVE DATES.
(a) In General.--Except as provided in subsections (b) and
(c), the amendments made by this subpart shall apply to
transactions after the date of the enactment of this Act.
(b) Section 267.--The amendments made by subsections (b)
and (c) of section 267 shall apply to taxable years ending
after the date of the enactment of this Act.
(c) Section 268.--The amendments made by subsection (a) of
section 268 shall apply to any tax avoidance strategy (as
defined in section 6700(c) of the Internal Revenue Code of
1986, as amended by this title) interests in which are
offered to potential participants after the date of the
enactment of this Act.
Subpart B--Limitations on Importation or Transfer of Built-in Losses
SEC. 271. LIMITATION ON IMPORTATION OF BUILT-IN LOSSES.
(a) In General.--Section 362 of the Internal Revenue Code
of 1986 (relating to basis to corporations) is amended by
adding at the end the following new subsection:
``(e) Limitation on Importation of Built-in Losses.--
``(1) In general.--If in any transaction described in
subsection (a) or (b) there would (but for this subsection)
be an importation of a net built-in loss, the basis of each
property described in paragraph (2) which is acquired in such
transaction shall (notwithstanding subsections (a) and (b))
be its fair market value immediately after such transaction.
``(2) Property described.--For purposes of paragraph (1),
property is described in this paragraph if--
``(A) gain or loss with respect to such property is not
subject to tax under this subtitle in the hands of the
transferor immediately before the transfer, and
``(B) gain or loss with respect to such property is subject
to such tax in the hands of the transferee immediately after
such transfer.
In any case in which the transferor is a partnership, the
preceding sentence shall be applied by treating each partner
in such partnership as holding such partner's proportionate
share of the property of such partnership.
``(3) Importation of net built-in loss.--For purposes of
paragraph (1), there is an importation of a net built-in loss
in a transaction if the transferee's aggregate adjusted bases
of property described in paragraph (2) which is transferred
in such transaction would (but for this subsection) exceed
the fair market value of such property immediately after such
transaction.''
[[Page H875]]
(b) Comparable Treatment Where Liquidation.--Paragraph (1)
of section 334(b) of such Code (relating to liquidation of
subsidiary) is amended to read as follows:
``(1) In general.--If property is received by a corporate
distributee in a distribution in a complete liquidation to
which section 332 applies (or in a transfer described in
section 337(b)(1)), the basis of such property in the hands
of such distributee shall be the same as it would be in the
hands of the transferor; except that the basis of such
property in the hands of such distributee shall be the fair
market value of the property at the time of the
distribution--
``(A) in any case in which gain or loss is recognized by
the liquidating corporation with respect to such property, or
``(B) in any case in which the liquidating corporation is a
foreign corporation, the corporate distributee is a domestic
corporation, and the corporate distributee's aggregate
adjusted bases of property described in section 362(e)(2)
which is distributed in such liquidation would (but for this
subparagraph) exceed the fair market value of such property
immediately after such liquidation.''
(c) Effective Date.--The amendments made by this section
shall apply to transactions after the date of the enactment
of this Act.
SEC. 272. DISALLOWANCE OF PARTNERSHIP LOSS TRANSFERS.
(a) Treatment of Contributed Property With Built-in Loss.--
Paragraph (1) of section 704(c) of the Internal Revenue Code
of 1986 is amended by striking ``and'' at the end of
subparagraph (A), by striking the period at the end of
subparagraph (B) and inserting ``, and'', and by adding at
the end the following:
``(C) if any property so contributed has a built-in loss--
``(i) such built-in loss shall be taken into account only
in determining the amount of items allocated to the
contributing partner, and
``(ii) except as provided in regulations, in determining
the amount of items allocated to other partners, the basis of
the contributed property in the hands of the partnership
shall be treated as being equal to its fair market value
immediately after the contribution.
For purposes of subparagraph (C), the term `built-in loss'
means the excess of the adjusted basis of the property over
its fair market value immediately after the contribution.''
(b) Adjustment to Basis of Partnership Property on Transfer
of Partnership Interest If There is Substantial Built-in
Loss.--
(1) Adjustment required.--Subsection (a) of section 743 of
such Code (relating to optional adjustment to basis of
partnership property) is amended by inserting before the
period ``or unless the partnership has a substantial built-in
loss immediately after such transfer''.
(2) Adjustment.--Subsection (b) of section 743 of such Code
is amended by inserting ``or with respect to which there is a
substantial built-in loss immediately after such transfer''
after ``section 754 is in effect''.
(3) Substantial built-in loss.--Section 743 of such Code is
amended by adding at the end the following new subsection:
``(d) Substantial Built-in Loss.--For purposes of this
section, a partnership has a substantial built-in loss with
respect to a transfer of an interest in a partnership if the
transferee partner's proportionate share of the adjusted
basis of the partnership property exceeds 110 percent of the
basis of such partner's interest in the partnership.''
(4) Clerical amendments.--
(A) The section heading for section 743 of such Code is
amended to read as follows:
``SEC. 743. ADJUSTMENT TO BASIS OF PARTNERSHIP PROPERTY WHERE
SECTION 754 ELECTION OR SUBSTANTIAL BUILT-IN
LOSS.''
(B) The table of sections for subpart C of part II of
subchapter K of chapter 1 of such Code is amended by striking
the item relating to section 743 and inserting the following
new item:
``Sec. 743. Adjustment to basis of partnership property where section
754 election or substantial built-in loss.''
(c) Adjustment to Basis of Undistributed Partnership
Property If There is Substantial Basis Reduction.--
(1) Adjustment required.--Subsection (a) of section 734 of
such Code (relating to optional adjustment to basis of
undistributed partnership property) is amended by inserting
before the period ``or unless there is a substantial downward
adjustment''.
(2) Adjustment.--Subsection (b) of section 734 of such Code
is amended by inserting ``or unless there is a substantial
downward adjustment'' after ``section 754 is in effect''.
(3) Substantial downward adjustment.--Section 734 of such
Code is amended by adding at the end the following new
subsection:
``(d) Substantial Downward Adjustment.--For purposes of
this section, there is a substantial downward adjustment with
respect to a distribution if the sum of the amounts described
in subparagraphs (A) and (B) of subsection (b)(2) exceeds 10
percent of the aggregate adjusted basis of partnership
property immediately after the distribution.''
(4) Clerical amendments.--
(A) The section heading for section 734 of such Code is
amended to read as follows:
``SEC. 734. ADJUSTMENT TO BASIS OF UNDISTRIBUTED PARTNERSHIP
PROPERTY WHERE SECTION 754 ELECTION OR
SUBSTANTIAL BASIS REDUCTION.''
(B) The table of sections for subpart B of part II of
subchapter K of chapter 1 of such Code is amended by striking
the item relating to section 734 and inserting the following
new item:
``Sec. 734. Adjustment to basis of undistributed partnership property
where section 754 election or substantial basis
reduction.''
(d) Effective Dates.--
(1) Subsection (a).--The amendment made by subsection (a)
shall apply to contributions made after the date of the
enactment of this Act.
(2) Subsection (b).--The amendments made by subsection (a)
shall apply to transfers after the date of the enactment of
this Act.
(3) Subsection (c).--The amendments made by subsection (a)
shall apply to distributions after the date of the enactment
of this Act.
PART III--ESTATE AND GIFT TAX OFFSETS
SEC. 276. VALUATION RULES FOR TRANSFERS INVOLVING NONBUSINESS
ASSETS.
(a) In General.--Section 2031 of the Internal Revenue Code
of 1986 (relating to definition of gross estate) is amended
by redesignating subsection (d) as subsection (e) and by
inserting after subsection (c) the following new subsection:
``(d) Valuation Rules for Certain Transfers of Nonbusiness
Assets.--For purposes of this chapter and chapter 12--
``(1) In general.--In the case of the transfer of any
interest in an entity other than an interest which is
actively traded (within the meaning of section 1092), the
value of such interest shall be determined by taking into
account--
``(A) the value of such interest's proportionate share of
the nonbusiness assets of such entity (and no valuation
discount shall be allowed with respect to such nonbusiness
assets), plus
``(B) the value of such entity determined without regard to
the value taken into account under subparagraph (A).
``(2) Nonbusiness assets.--For purposes of this
subsection--
``(A) In general.--The term `nonbusiness asset' means any
asset which is not used in the active conduct of 1 or more
trades or businesses.
``(B) Exception for certain passive assets.--Except as
provided in subparagraph (C), a passive asset shall not be
treated for purposes of subparagraph (A) as used in the
active conduct of a trade or business unless--
``(i) the asset is property described in paragraph (1) or
(4) of section 1221(a) or is a hedge with respect to such
property, or
``(ii) the asset is real property used in the active
conduct of 1 or more real property trades or businesses
(within the meaning of section 469(c)(7)(C)) in which the
transferor materially participates and with respect to which
the transferor meets the requirements of section
469(c)(7)(B)(ii).
For purposes of clause (ii), material participation shall be
determined under the rules of section 469(h), except that
section 469(h)(3) shall be applied without regard to the
limitation to farming activity.
``(C) Exception for working capital.--Any asset (including
a passive asset) which is held as a part of the reasonably
required working capital needs of a trade or business shall
be treated as used in the active conduct of a trade or
business.
``(3) Passive asset.--For purposes of this subsection, the
term `passive asset' means any--
``(A) cash or cash equivalents,
``(B) except to the extent provided by the Secretary, stock
in a corporation or any other equity, profits, or capital
interest in any entity,
``(C) evidence of indebtedness, option, forward or futures
contract, notional principal contract, or derivative,
``(D) asset described in clause (iii), (iv), or (v) of
section 351(e)(1)(B),
``(E) annuity,
``(F) real property used in 1 or more real property trades
or businesses (as defined in section 469(c)(7)(C)),
``(G) asset (other than a patent, trademark, or copyright)
which produces royalty income,
``(H) commodity,
``(I) collectible (within the meaning of section 401(m)),
or
``(J) any other asset specified in regulations prescribed
by the Secretary.
``(4) Look-thru rules.--
``(A) In general.--If a nonbusiness asset of an entity
consists of a 10-percent interest in any other entity, this
subsection shall be applied by disregarding the 10-percent
interest and by treating the entity as holding directly its
ratable share of the assets of the other entity. This
subparagraph shall be applied successively to any 10-percent
interest of such other entity in any other entity.
``(B) 10-percent interest.--The term `10-percent interest'
means--
``(i) in the case of an interest in a corporation,
ownership of at least 10 percent (by vote or value) of the
stock in such corporation,
``(ii) in the case of an interest in a partnership,
ownership of at least 10 percent of the capital or profits
interest in the partnership, and
``(iii) in any other case, ownership of at least 10 percent
of the beneficial interests in the entity.
[[Page H876]]
``(5) Coordination with subsection (b).--Subsection (b)
shall apply after the application of this subsection.''
(b) Effective Date.--The amendments made by this section
shall apply to transfers after the date of the enactment of
this Act.
SEC. 277. CORRECTION OF TECHNICAL ERROR AFFECTING LARGEST
ESTATES.
(a) In General.--Paragraph (2) of section 2001(c) of the
Internal Revenue Code of 1986 is amended by striking
``$10,000,000'' and all that follows and inserting
``$10,000,000. The amount of the increase under the preceding
sentence shall not exceed the sum of the applicable credit
amount under section 2010(c) (as increased by section 2010A)
and $359,200.''
(b) Effective Date.--The amendment made by this section
shall apply to estates of decedents dying, and gifts made,
after December 31, 2000.
PART IV--OTHER OFFSETS
SEC. 281. CONSISTENT AMORTIZATION PERIODS FOR INTANGIBLES.
(a) Start-Up Expenditures.--
(1) Allowance of deduction.--Paragraph (1) of section
195(b) of the Internal Revenue Code of 1986 (relating to
start-up expenditures) is amended to read as follows:
``(1) Allowance of Deduction.--If a taxpayer elects the
application of this subsection with respect to any start-up
expenditures--
``(A) the taxpayer shall be allowed a deduction for the
taxable year in which the active trade or business begins in
an amount equal to the lesser of--
``(i) the amount of start-up expenditures with respect to
the active trade or business, or
``(ii) $5,000, reduced (but not below zero) by the amount
by which such start-up expenditures exceed $50,000, and
``(B) the remainder of such start-up expenditures shall be
allowed as a deduction ratably over the 180-month period
beginning with the month in which the active trade or
business begins.''
(2) Conforming amendment.--Subsection (b) of section 195 is
amended by striking ``Amortize'' and inserting ``Deduct'' in
the heading.
(b) Organizational Expenditures.--Subsection (a) of section
248 of such Code (relating to organizational expenditures) is
amended to read as follows:
``(a) Election to Deduct.--If a corporation elects the
application of this subsection (in accordance with
regulations prescribed by the Secretary) with respect to any
organizational expenditures--
``(1) the corporation shall be allowed a deduction for the
taxable year in which the corporation begins business in an
amount equal to the lesser of--
``(A) the amount of organizational expenditures with
respect to the taxpayer, or
``(B) $5,000, reduced (but not below zero) by the amount by
which such organizational expenditures exceed $50,000, and
``(2) the remainder of such organizational expenditures
shall be allowed as a deduction ratably over the 180-month
period beginning with the month in which the corporation
begins business.''
(c) Treatment of Organizational and Syndication Fees or
Partnerships.--Section 709(b) of such Code (relating to
amortization of organization fees) is amended by
redesignating paragraph (2) as paragraph (4) and by amending
paragraph (1) to read as follows:
``(1) Allowance of deduction.--If a taxpayer elects the
application of this subsection (in accordance with
regulations prescribed by the Secretary) with respect to any
organizational expenses--
``(A) the taxpayer shall be allowed a deduction for the
taxable year in which the partnership begins business in an
amount equal to the lesser of--
``(i) the amount of organizational expenses with respect to
the partnership, or
``(ii) $5,000, reduced (but not below zero) by the amount
by which such organizational expenses exceed $50,000, and
``(B) the remainder of such organizational expenses shall
be allowed as a deduction ratably over the 180-month period
beginning with the month in which the partnership begins
business.
``(2) Dispositions before close of amortization period.--In
any case in which a partnership is liquidated before the end
of the period to which paragraph (1)(B) applies, any deferred
expenses attributable to the partnership which were not
allowed as a deduction by reason of this section may be
deducted to the extent allowable under section 165.''
(d) Conforming Amendment.--Subsection (b) of section 709 of
such Code is amended by striking ``Amortization'' and
inserting ``Deduction'' in the heading.
(e) Effective Date.--The amendments made by this section
shall apply to amounts paid or incurred after the date of the
enactment of this Act.
SEC. 282. MODIFICATION OF FOREIGN TAX CREDIT CARRYOVER RULES.
(a) In General.--Section 904(c) of the Internal Revenue
Code of 1986 (relating to limitation on credit) is amended--
(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, 2000.
SEC. 283. RECOGNITION OF GAIN ON TRANSFERS TO SWAP FUNDS.
(a) Interests Similar to Preferred Stock Treated as
Stock.--Clause (vi) of section 351(e)(1)(B) of the Internal
Revenue Code of 1986 (relating to transfer of property to an
investment company) is amended to read as follows:
``(vi) except as otherwise provided in regulations
prescribed by the Secretary--
``(I) any interest in an entity if the return on such
interest is limited and preferred, and
``(II) interests (not described in subclause (I)) in any
entity if substantially all of the assets of such entity
consist (directly or indirectly) of any assets described in
subclause (I), any preceding clause, or clause (viii).''
(b) Certain Transfers Deemed To Be to Investment
Companies.--Subsection (e) of section 351 of such Code is
amended by adding at the end the following new paragraph:
``(3) Transfers of marketable securities to certain
corporations.--A transfer of property to a corporation if--
``(A) such property is marketable securities (as defined in
section 731(c)(2)), other than a diversified portfolio of
securities,
``(B) such corporation--
``(i) is registered under the Investment Company Act of
1940 as an investment company, or is exempt from registration
as a investment company under section 3(c)(7) of such Act
because interests in such corporation are offered to
qualified purchasers within the meaning of section 2(a)(51)
of such Act, or
``(ii) is formed or availed of for purposes of allowing
persons who have significant blocks of marketable securities
with unrealized appreciation to diversify those holdings
without recognition of gain, and
``(C) the transfer results, directly or indirectly, in
diversification of the transferor's interest.''
(c) Transfers to Partnerships.--Subsection (b) of section
721 of such Code is amended to read as follows:
``(b) Special Rule.--Subsection (a) shall not apply to gain
realized on a transfer of property to a partnership if, were
the partnership incorporated--
``(1) such partnership would be treated as an investment
company (within the meaning of section 351), or
``(2) section 351 would not apply to such transfer by
reason of section 351(e)(3).''
(d) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to transfers after March 8, 2000.
(2) Binding contracts.--The amendments made by this section
shall not apply to any transfer pursuant to a written binding
contract in effect on August 4, 1999, and at all times
thereafter before such transfer if such contract provides for
the transfer of a fixed amount of property.
Mr. RANGEL (during the reading). Mr. Speaker, I ask unanimous consent
that the motion to instruct be considered as read and printed in the
Record.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from New York?
There was no objection.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from New
York (Mr. Rangel) is recognized for 5 minutes in support of his motion
to recommit.
Mr. RANGEL. Mr. Speaker, if the Republicans want to have reform with
results, if the Republicans really want to give some aid and assistance
and comfort to the working poor, if the Republicans want to give a $1
increase in the minimum wage and at the same time give substantial
relief to the employers that will be required to do this, they would
support the motion to recommit.
Why? Because they would know that this motion to recommit would send
to the President a bill that would do these things, and it would be a
bill that would be signed by the President of the United States.
I know that many on the other side do not like the President. The
question is, do they care for the American people and the working poor?
He is still the President, and we have to work with him until the end
of the year. If we want any bills at all to pass, we should be
cooperating with Democrats and the President in order to get it done.
They just cannot pile $122 billion on a tax bill and forget the $5
trillion debt that we have and just move on, thinking that ultimately,
before the year's end, they would have accomplished in piecemeal what
they could not do last year with the $800 billion tax cut.
Mr. Speaker, I am suggesting that we do have an opportunity to vote
on the motion to recommit. It incorporates most of the things that the
Republicans would want done, some of the provisions we have worked with
in a bipartisan way, and just rejects out of hand the irresponsible tax
cuts, most of which go to the richest Americans that we have.
We still have an opportunity to deal with some of the serious
questions of Medicare, social security, giving assistance in
prescription drugs to our elderly, protecting a Patients' Bill of
[[Page H877]]
Rights. Democrats cannot do this alone, and we know in their hearts
these are the issues they would want to address, but they just cannot
do it by going into the Republican cloakroom and coming out with these
imaginary, creative ideas without consulting with the minority and the
President of the United States.
Is it not time we stop playing these political games? There is enough
politics to go around between now and the election. Let us not play
with the poorest of the poor, who are working every day to maintain
their self-esteem, to provide food and clothing, pay their rent, get
shelter for their kids. Let us not play around with social security and
Medicare.
Let us do the right thing by the American people and support the
motion to recommit. This could truly be a beginning, a beginning in
saying that now that we have the presidential primaries behind us, that
the candidates can stop going after each other on a personal basis and
decide how they are going to address these issues to the American
people on the question of issues and not personalities.
We in the House, where truly the people should govern, should set the
examples for our presidential candidates by dealing with the issues,
and not personality and not politics. We do not get this opportunity
often, but this is the beginning of a new era, we would believe. The
Members of the Committee on Ways and Means would like to be working
together in dealing with tax policy.
We resent the idea that tax bills are coming out from the Committee
on Rules and other standing committees without hearings, without
debate, to just bring things to the floor because it passed the
majority in the last year. What we should do is separate the question
of taxes and deal with the question of minimum wage.
That is why we are here in this body encouraging people not to go on
welfare but to work, work for their families, work for their
communities, work for their country, and we will give them a decent
wage with which to do it so they would not think about going on
welfare.
But we cannot have it both ways. We are talking about $6.15. Is there
anyone here that would like to send anybody in their family out to the
work market to earn $6.15? Give America a break, vote for the motion to
recommit.
The SPEAKER pro tempore. Is the gentleman from Arizona (Mr. Hayworth)
opposed to the motion to recommit?
Mr. HAYWORTH. I most certainly am, Mr. Speaker.
The SPEAKER pro tempore. The gentleman from Arizona (Mr. Hayworth) is
recognized for 5 minutes on the motion to recommit.
Mr. HAYWORTH. Mr. Speaker, I always listen with great interest to my
colleague, the gentleman from New York (Mr. Rangel), my close personal
friend.
He said just a few minutes ago, we cannot have it both ways. Indeed,
that is true. Sadly, this motion to recommit says to the American
people, Mr. Speaker, ``Wait, wait for tax relief. We believe it is
important, perhaps not as important as a bipartisan majority of this
House. We believe it is important, but you need to wait a while
longer.''
This legislation also, or this motion to recommit, offers tax relief
with one hand and takes it away with the other.
Mr. Speaker, the American people have spoken loudly and clearly about
the unfairness of the death tax. A recent issue of USA Today describes
it thusly, quoting now:
``Taxes aren't popular to begin with. But of all the ways Uncle Sam
takes a cut, none may be detested more than the tax levied on an estate
after someone dies.
``The idea of the government reaching into the grave and grabbing 37
to 60 percent of the wealth accumulated during a lifetime is, well,
ghoulish to many. It's the depressing confluence of the only two things
in this world that Benjamin Franklin noted were `certain.' ''
Mr. Speaker, we remember the statement of Dr. Franklin. He said, ``In
this life, two things are inevitable, death and taxes.'' But Mr.
Speaker, I think even Dr. Franklin, if he had the powers of prescience,
could not begin to fathom that the constitutional Republic he helped to
found would one day tax its citizens upon their death.
Mr. Speaker, a bipartisan majority of this House believes quite
clearly there should be no taxation without respiration. Yet, with the
motion to recommit, the minority in this House asks us to wait a bit
longer.
I said earlier, in somewhat hyperbolic fashion, that, quoting the old
movie line, sadly, our friends on the left say ``No tax relief, not for
nobody, nohow.'' That is the essence of their motion to recommit,
because it once again delays, delays tax relief for the American
people.
The record speaks quite clearly that this commonsense majority in
Congress has delivered tax relief in the past, even as we have paid
down the debt hanging over the heads of our children, even as we have
walled off 100 percent of the social security surplus for social
security.
Today we said to those businesses that are going to be affected, you
deserve tax relief; to the self-employed, you deserve 100 percent
deductibility of insurance; and no, you need not wait until there is
beachfront property in Yuma, Arizona. You need not wait for the
physically improbable to finally get tax relief, because, Mr. Speaker,
we understand what the American people are saying loudly and clearly:
Yes, save Medicare and social security; yes, improve education by
empowering parents and teachers and getting funds into the classroom;
yes, let us make sure we provide for our national security, so grossly
neglected by the current administration.
But Mr. Speaker, the American people also say to us, let us provide
financial security. Let us build on this prosperity by recognizing this
simple truth: that the money earned by Americans belongs not to the
Treasury of the United States and Washington bureaucrats, but to the
people who earn it.
The legislation supported by the majority will enact that tax relief
now. The alternative offered by the minority in this motion to recommit
says yet again, let us delay and delay and delay some more. Sadly, Mr.
Speaker, actions speak louder than words. The verbiage and the numbers,
when we strip them all away, show an antipathy toward the simple notion
that Americans should keep more of their hard-earned money.
Mr. Speaker, in conclusion, I would call on my colleagues to reject
this motion to recommit. Vote for real tax relief and real prosperity
for all Americans.
The SPEAKER pro tempore. Without objection, the previous question is
ordered on the motion to recommit.
There was no objection.
The SPEAKER pro tempore. The question is on the motion to recommit.
The question was taken; the Speaker pro tempore announced that the
noes appeared to have it.
Mr. RANGEL. Mr. Speaker, I object to the vote on the ground that a
quorum is not present and make the point of order that a quorum is not
present.
The SPEAKER pro tempore. Evidently a quorum is not present.
The Sergeant at Arms will notify absent Members.
Pursuant to clause 9 of rule XX, the Chair will reduce to 5 minutes
the minimum time for any electronic vote on the question of passage.
The vote was taken by electronic device, and there were--yeas 207,
nays 218, not voting 9, as follows:
[Roll No. 40]
YEAS--207
Abercrombie
Ackerman
Allen
Andrews
Baca
Baird
Baldacci
Baldwin
Barrett (WI)
Becerra
Bentsen
Berkley
Berman
Berry
Bishop
Blagojevich
Blumenauer
Bonior
Borski
Boswell
Boucher
Boyd
Brady (PA)
Brown (FL)
Brown (OH)
Capps
Capuano
Cardin
Carson
Clay
Clayton
Clement
Clyburn
Condit
Conyers
Costello
Coyne
Cramer
Crowley
Cummings
Danner
Davis (FL)
Davis (IL)
DeFazio
DeGette
Delahunt
DeLauro
Deutsch
Dicks
Dingell
Dixon
Doggett
Dooley
Doyle
Edwards
Engel
Eshoo
Etheridge
Evans
Farr
Fattah
Filner
Forbes
Ford
Frank (MA)
Frost
Gejdenson
Gephardt
Gonzalez
Gordon
Green (TX)
Gutierrez
Hall (OH)
Hall (TX)
Hastings (FL)
Hill (IN)
Hilliard
Hinchey
Hinojosa
Hoeffel
Holden
Holt
Hooley
Hoyer
Inslee
Jackson (IL)
Jackson-Lee (TX)
Jefferson
John
Jones (OH)
Kanjorski
Kaptur
Kennedy
Kildee
Kilpatrick
[[Page H878]]
Kind (WI)
Kleczka
Klink
Kucinich
LaFalce
Lampson
Lantos
Larson
Lee
Levin
Lewis (GA)
Lofgren
Lowey
Lucas (KY)
Luther
Maloney (CT)
Maloney (NY)
Markey
Mascara
Matsui
McCarthy (MO)
McCarthy (NY)
McDermott
McGovern
McIntyre
McKinney
McNulty
Meehan
Meek (FL)
Meeks (NY)
Menendez
Millender-McDonald
Miller, George
Minge
Mink
Moakley
Mollohan
Moore
Moran (VA)
Morella
Murtha
Nadler
Napolitano
Neal
Oberstar
Obey
Olver
Ortiz
Owens
Pallone
Pascrell
Pastor
Payne
Pelosi
Peterson (MN)
Phelps
Pickett
Pomeroy
Price (NC)
Rahall
Rangel
Reyes
Rivers
Rodriguez
Roemer
Rothman
Roybal-Allard
Rush
Sabo
Sanchez
Sanders
Sandlin
Sawyer
Schakowsky
Scott
Serrano
Sherman
Shows
Sisisky
Skelton
Slaughter
Smith (WA)
Snyder
Spratt
Stabenow
Stark
Stenholm
Strickland
Stupak
Tanner
Tauscher
Taylor (MS)
Thompson (CA)
Thompson (MS)
Thurman
Tierney
Towns
Turner
Udall (CO)
Udall (NM)
Velazquez
Visclosky
Waters
Watt (NC)
Waxman
Weiner
Wexler
Weygand
Wise
Woolsey
Wu
Wynn
NAYS--218
Aderholt
Archer
Armey
Bachus
Baker
Ballenger
Barcia
Barr
Barrett (NE)
Bartlett
Barton
Bass
Bateman
Bereuter
Biggert
Bilbray
Bilirakis
Bliley
Blunt
Boehlert
Boehner
Bonilla
Bono
Brady (TX)
Bryant
Burr
Burton
Buyer
Callahan
Calvert
Camp
Campbell
Canady
Cannon
Castle
Chabot
Chambliss
Chenoweth-Hage
Coble
Coburn
Collins
Combest
Cook
Cox
Crane
Cubin
Cunningham
Davis (VA)
Deal
DeLay
DeMint
Diaz-Balart
Dickey
Doolittle
Dreier
Duncan
Dunn
Ehlers
Ehrlich
Emerson
English
Everett
Ewing
Fletcher
Foley
Fossella
Fowler
Franks (NJ)
Frelinghuysen
Gallegly
Gekas
Gibbons
Gilchrest
Gillmor
Gilman
Goode
Goodlatte
Goodling
Goss
Graham
Green (WI)
Greenwood
Gutknecht
Hansen
Hastings (WA)
Hayes
Hayworth
Hefley
Herger
Hill (MT)
Hilleary
Hobson
Hoekstra
Horn
Hostettler
Houghton
Hulshof
Hunter
Hutchinson
Hyde
Isakson
Istook
Jenkins
Johnson (CT)
Johnson, Sam
Jones (NC)
Kasich
Kelly
King (NY)
Kingston
Knollenberg
Kolbe
Kuykendall
LaHood
Largent
Latham
LaTourette
Lazio
Leach
Lewis (CA)
Lewis (KY)
Linder
Lipinski
LoBiondo
Lucas (OK)
Manzullo
Martinez
McCrery
McHugh
McInnis
McIntosh
McKeon
Metcalf
Mica
Miller (FL)
Miller, Gary
Moran (KS)
Myrick
Nethercutt
Ney
Northup
Norwood
Nussle
Ose
Oxley
Packard
Paul
Pease
Peterson (PA)
Petri
Pickering
Pitts
Pombo
Porter
Portman
Pryce (OH)
Quinn
Radanovich
Ramstad
Regula
Reynolds
Riley
Rogan
Rogers
Rohrabacher
Ros-Lehtinen
Roukema
Royce
Ryan (WI)
Ryun (KS)
Salmon
Sanford
Saxton
Sensenbrenner
Sessions
Shadegg
Shaw
Shays
Sherwood
Shimkus
Shuster
Simpson
Skeen
Smith (MI)
Smith (NJ)
Smith (TX)
Souder
Stearns
Stump
Sununu
Sweeney
Talent
Tancredo
Tauzin
Taylor (NC)
Terry
Thomas
Thornberry
Thune
Tiahrt
Toomey
Traficant
Upton
Vitter
Walden
Walsh
Wamp
Watkins
Watts (OK)
Weldon (FL)
Weldon (PA)
Weller
Whitfield
Wicker
Wilson
Wolf
Young (AK)
Young (FL)
NOT VOTING--9
Cooksey
Ganske
Granger
Johnson, E. B.
McCollum
Scarborough
Schaffer
Spence
Vento
{time} 1820
Messrs. THOMAS, LAZIO, QUINN, BARTLETT of Maryland, FRANKS of New
Jersey, and YOUNG of Alaska changed their vote from ``yea'' to ``nay.''
Mr. DIXON and Mr. HALL of Texas changed their vote from ``nay'' to
``yea.''
So the motion to recommit was rejected.
The result of the vote was announced as above recorded.
The SPEAKER pro tempore (Mr. Pease). The question is on the passage
of the bill.
The question was taken; and the Speaker pro tempore announced that
the ayes appeared to have it.
Recorded Vote
Mr. ARCHER. Mr. Speaker, I demand a recorded vote.
A recorded vote was ordered.
The SPEAKER pro tempore. This is a 5-minute vote.
The vote was taken by electronic device, and there were--ayes 257,
noes 169, not voting 9, as follows:
[Roll No. 41]
AYES--257
Aderholt
Archer
Armey
Bachus
Baird
Baker
Ballenger
Barcia
Barr
Barrett (NE)
Bartlett
Barton
Bass
Bateman
Bereuter
Berkley
Biggert
Bilbray
Bilirakis
Bishop
Bliley
Blunt
Boehlert
Boehner
Bonilla
Bono
Boswell
Boucher
Brady (TX)
Bryant
Burr
Burton
Buyer
Callahan
Calvert
Camp
Campbell
Canady
Cannon
Capps
Castle
Chabot
Chambliss
Chenoweth-Hage
Coble
Coburn
Collins
Combest
Condit
Cook
Cox
Cramer
Crane
Cubin
Cunningham
Danner
Davis (VA)
Deal
DeLay
DeMint
Diaz-Balart
Dickey
Dooley
Doolittle
Dreier
Duncan
Dunn
Ehlers
Ehrlich
Emerson
English
Etheridge
Everett
Ewing
Fletcher
Foley
Forbes
Fossella
Fowler
Franks (NJ)
Frelinghuysen
Gallegly
Ganske
Gekas
Gibbons
Gilchrest
Gillmor
Gilman
Goode
Goodlatte
Goodling
Gordon
Goss
Graham
Green (WI)
Greenwood
Hall (OH)
Hall (TX)
Hansen
Hastert
Hastings (WA)
Hayes
Hayworth
Hefley
Herger
Hill (MT)
Hilleary
Hobson
Hoekstra
Holt
Hooley
Horn
Hostettler
Houghton
Hulshof
Hunter
Hutchinson
Hyde
Inslee
Isakson
Istook
Jefferson
Jenkins
John
Johnson (CT)
Johnson, Sam
Jones (NC)
Kasich
Kelly
King (NY)
Kingston
Knollenberg
Kolbe
Kuykendall
LaHood
Largent
Latham
LaTourette
Lazio
Leach
Lewis (CA)
Lewis (KY)
Linder
LoBiondo
Lucas (KY)
Lucas (OK)
Maloney (CT)
Manzullo
Martinez
McCarthy (NY)
McCrery
McHugh
McInnis
McIntosh
McIntyre
McKeon
Metcalf
Mica
Miller (FL)
Miller, Gary
Moore
Moran (KS)
Morella
Myrick
Nethercutt
Ney
Northup
Norwood
Nussle
Ose
Oxley
Packard
Paul
Pease
Peterson (MN)
Peterson (PA)
Petri
Pickering
Pickett
Pitts
Pombo
Porter
Portman
Price (NC)
Pryce (OH)
Quinn
Radanovich
Ramstad
Regula
Reynolds
Riley
Rivers
Roemer
Rogan
Rogers
Rohrabacher
Ros-Lehtinen
Roukema
Royce
Ryan (WI)
Ryun (KS)
Salmon
Sanchez
Sandlin
Sanford
Saxton
Sensenbrenner
Sessions
Shadegg
Shaw
Shays
Sherwood
Shimkus
Shows
Shuster
Simpson
Sisisky
Skeen
Smith (MI)
Smith (NJ)
Smith (TX)
Smith (WA)
Souder
Stearns
Stump
Sununu
Sweeney
Talent
Tancredo
Tauscher
Tauzin
Taylor (NC)
Terry
Thomas
Thompson (CA)
Thornberry
Thune
Tiahrt
Toomey
Traficant
Upton
Vitter
Walden
Walsh
Wamp
Watkins
Watts (OK)
Weldon (FL)
Weldon (PA)
Weller
Whitfield
Wicker
Wilson
Wolf
Wu
Young (AK)
Young (FL)
NOES--169
Abercrombie
Ackerman
Allen
Andrews
Baca
Baldacci
Baldwin
Barrett (WI)
Becerra
Bentsen
Berman
Berry
Blagojevich
Blumenauer
Bonior
Borski
Boyd
Brady (PA)
Brown (FL)
Brown (OH)
Capuano
Cardin
Carson
Clay
Clayton
Clement
Clyburn
Conyers
Costello
Coyne
Crowley
Cummings
Davis (FL)
Davis (IL)
DeFazio
DeGette
Delahunt
DeLauro
Deutsch
Dicks
Dingell
Dixon
Doggett
Doyle
Edwards
Engel
Eshoo
Evans
Farr
Fattah
Filner
Ford
Frank (MA)
Frost
Gejdenson
Gephardt
Gonzalez
Green (TX)
Gutierrez
Gutknecht
Hastings (FL)
Hill (IN)
Hilliard
Hinchey
Hinojosa
Hoeffel
Holden
Hoyer
Jackson (IL)
Jackson-Lee (TX)
Jones (OH)
Kanjorski
Kaptur
Kennedy
Kildee
Kilpatrick
Kind (WI)
Kleczka
Klink
Kucinich
LaFalce
Lampson
Lantos
Larson
Lee
Levin
Lewis (GA)
Lipinski
Lofgren
Lowey
Luther
Maloney (NY)
Markey
Mascara
Matsui
McCarthy (MO)
McDermott
McGovern
McKinney
McNulty
Meehan
Meek (FL)
Meeks (NY)
Menendez
Millender-McDonald
Miller, George
Minge
Mink
Moakley
Mollohan
Moran (VA)
Murtha
Nadler
Napolitano
Neal
Oberstar
Obey
Olver
Ortiz
Owens
Pallone
Pascrell
Pastor
Payne
Pelosi
Phelps
Pomeroy
Rahall
Rangel
Reyes
Rodriguez
Rothman
Roybal-Allard
Rush
Sabo
Sanders
Sawyer
Schakowsky
Scott
Serrano
Sherman
Skelton
Slaughter
Snyder
Spratt
Stabenow
Stark
Stenholm
[[Page H879]]
Stupak
Tanner
Taylor (MS)
Thompson (MS)
Thurman
Tierney
Towns
Turner
Udall (CO)
Udall (NM)
Velazquez
Visclosky
Waters
Watt (NC)
Waxman
Weiner
Wexler
Weygand
Wise
Woolsey
Wynn
NOT VOTING--9
Cooksey
Granger
Johnson, E. B.
McCollum
Scarborough
Schaffer
Spence
Strickland
Vento
{time} 1832
So the bill was passed.
The result of the vote was announced as above recorded.
A motion to reconsider was laid on the table.
____________________