[Congressional Record Volume 147, Number 21 (Wednesday, February 14, 2001)]
[Senate]
[Pages S1406-S1416]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. LUGAR (for himself, Mr. Roberts, Mr. McConnell, and Mr. 
        Burns):
  S. 333. A bill to provide tax and regulatory relief for farmers and 
to improve the competitiveness of American agricultural commodities and 
products in global markets; to the Committee on Finance.
  Mr. LUGAR. Mr. President, I rise today to introduce the Rural America 
Prosperity Act of 2001. I am pleased that Senator Roberts, Senator 
McConnell, and Senator Burns joined as cosponsors of this bill.
  A Republican controlled Congress in 1996 produced a sweeping reform 
of farm programs. Farmers were no longer told by the government what 
crops they had to plant. Farmers were no longer forced by the 
government to idle part of their land in exchange for program payments. 
That farm bill disentangled farmers from government controls and 
enabled them to make production decisions based on market signals.
  Freeing farmers from excessive, and often counterproductive, 
government controls is an important step, but we still need to do more 
to give farmers the tools they need to succeed. Specifically, we need 
to work to open foreign markets for our agricultural commodities and 
products, ease the tax and regulatory burden, and provide new risk 
management tools for farmers. The Rural America Prosperity Act of 2001, 
which we are introducing today, will help us meet these unfulfilled 
promises to rural America.
  There are three tax provisions in this legislation that I have long 
advocated as crucial to the financial health of farmers. First is the 
repeal of the estate tax. A repeal of this tax, which has prevented 
some farms from being passed from one generation to the next, is 
essential. We are proposing the same 10-year phase-out of the estate 
tax which Congress passed last year but President Clinton vetoed. 
Excluding capital gains from the sale of farmland would put production 
agriculture on the same footing as homeowners who benefit from a 
capital gains exclusion for their home. The deduction of health care 
insurance premiums is needed for farmers and others who are self-
employed.
  Last year Congress provided over $8 billion to improve the federal 
crop insurance program. While crop insurance is an important risk 
management tool, today we offer two other risk management tools for 
farmers--income averaging and FARRM accounts. Three years ago Congress 
made income averaging a permanent risk management tool for farmers when 
calculating taxes. Unfortunately, the interaction between income 
averaging and the alternative minimum tax has prevented many farmers 
from receiving the benefit of income averaging. This bill fixes that 
problem. Under this bill, farmers will be able to contribute up to 20 
percent of annual farm income into a FARRM account and deduct this 
amount from their taxes. This is an important tool for managing 
financial volatility associated with farming.
  We also address regulatory reform in our bill. We are seeking a 
review of existing and proposed regulations to determine the cost of 
compliance for farmers, ranchers and foresters. We want to determine if 
there are more cost-effective ways for farmers, ranchers and foresters 
to achieve the objectives of these regulations.
  Finally, we must do more to help develop new markets abroad for our 
farm commodities and agricultural products. Opportunity lies in 
developing countries where growing wealth allows for increased demand 
for meat and processed commodities. Authorizing fast-track authority 
for the President to negotiate international trade agreements may be 
the single most important thing we can do to facilitate exports.
  We also need to address sanctions. Sanctions that prohibit the export 
of U.S. agricultural products into the sanctioned country are often 
morally indefensible because they deny necessities to people, not the 
offending government. Such sanctions also deny markets for U.S. 
agricultural products which are then captured by our competitors. This 
legislation only affects commercial sales (excluding all Government 
subsidized trade programs) involving United States agricultural 
commodities, livestock, and value-added products.
  This legislation represents what I believe is necessary to further 
the historic reforms initiated in the farm bill almost five years ago. 
I urge my colleagues to cosponsor this bill. I will encourage my 
colleagues and the new Bush administration to work to enact these 
proposals.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.

[[Page S1407]]

  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 333

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

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Rural 
     America Prosperity Act of 2001''.
       (b) Table of Contents.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title; table of contents.

                    TITLE I--TAX RELIEF FOR FARMERS

                   Subtitle A--General Tax Provisions

Sec. 101. Deduction for 100 percent of health insurance costs of self-
              employed individuals.
Sec. 102. Exclusion of gain from sale of farmland.
Sec. 103. Income averaging for farmers not to increase alternative 
              minimum tax liability.
Sec. 104. Farm and ranch risk management accounts.

                 Subtitle B--Estate and Gift Tax Relief

Sec. 111. Repeal of estate, gift, and generation-skipping taxes.
Sec. 112. Termination of step up in basis at death.
Sec. 113. Carryover basis at death.
Sec. 114. Additional reductions of estate and gift tax rates.
Sec. 115. Unified credit against estate and gift taxes replaced with 
              unified exemption amount.
Sec. 116. Deemed allocation of GST exemption to lifetime transfers to 
              trusts; retroactive allocations.
Sec. 117. Severing of trusts.
Sec. 118. Modification of certain valuation rules.
Sec. 119. Relief provisions.
Sec. 120. Expansion of estate tax rule for conservation easements.

   TITLE II--STUDY OF COSTS OF REGULATIONS ON FARMERS, RANCHERS, AND 
                               FORESTERS

Sec. 201. Comptroller General study of regulations.
Sec. 202. Response of Secretary of Agriculture.

  TITLE III--EXTENSION OF TRADE AUTHORITIES PROCEDURES FOR RECIPROCAL 
                            TRADE AGREEMENTS

Sec. 301. Short title.
Sec. 302. Trade negotiating objectives.
Sec. 303. Trade agreements authority.
Sec. 304. Consultations.
Sec. 305. Implementation of trade agreements.
Sec. 306. Treatment of certain trade agreements.
Sec. 307. Conforming amendments.
Sec. 308. Definitions.

                  TITLE IV--AGRICULTURAL TRADE FREEDOM

Sec. 401. Short title.
Sec. 402. Definitions.
Sec. 403. Agricultural commodities, livestock, and products exempt from 
              unilateral agricultural sanctions.
Sec. 404. Sale or barter of food assistance.

                    TITLE I--TAX RELIEF FOR FARMERS

                   Subtitle A--General Tax Provisions

     SEC. 101. 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 (relating to special rules for 
     health insurance costs of self-employed individuals) is 
     amended to read as follows:
       ``(1) Allowance of deduction.--In the case of an individual 
     who is an employee within the meaning of section 401(c)(1), 
     there shall be allowed as a deduction under this section an 
     amount equal to 100 percent of the amount paid during the 
     taxable year for insurance which constitutes medical care for 
     the taxpayer, his spouse, and dependents.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 102. EXCLUSION OF GAIN FROM SALE OF FARMLAND.

       (a) In General.--Part III of subchapter B of chapter 1 of 
     the Internal Revenue Code of 1986 (relating to items 
     specifically excluded from gross income) is amended by 
     inserting after section 121 the following:

     ``SEC. 121A. EXCLUSION OF GAIN FROM SALE OF QUALIFIED FARM 
                   PROPERTY.

       ``(a) Exclusion.--In the case of a natural person, gross 
     income shall not include gain from the sale or exchange of 
     qualified farm property.
       ``(b) Limitation.--
       ``(1) In general.--The amount of gain excluded from gross 
     income under subsection (a) with respect to any taxable year 
     shall not exceed $500,000 ($250,000 in the case of a married 
     individual filing a separate return), reduced by the 
     aggregate amount of gain excluded under subsection (a) for 
     all preceding taxable years.
       ``(2) Special rule for joint returns.--The amount of the 
     exclusion under subsection (a) on a joint return for any 
     taxable year shall be allocated equally between the spouses 
     for purposes of applying the limitation under paragraph (1) 
     for any succeeding taxable year.
       ``(c) Qualified Farm Property.--For purposes of this 
     section--
       ``(1) In general.--The term `qualified farm property' means 
     real property located in the United States if, during periods 
     aggregating 3 years or more of the 5-year period ending on 
     the date of the sale or exchange of such real property--
       ``(A) such real property was used by the taxpayer or a 
     member of the family of the taxpayer as a farm for farming 
     purposes, and
       ``(B) there was material participation by the taxpayer (or 
     such a member) in the operation of the farm.
       ``(2) Other definitions.--The terms `member of the family', 
     `farm', and `farming purposes' have the respective meanings 
     given such terms by paragraphs (2), (4), and (5) of section 
     2032A(e).
       ``(3) Special rules.--Rules similar to the rules of 
     paragraphs (4) and (5) of section 2032A(b) and paragraphs (3) 
     and (6) of section 2032A(e) shall apply.
       ``(d) Other Rules.--For purposes of this section, rules 
     similar to the rules of subsection (e) and subsection (f) of 
     section 121 shall apply.''.
       (b) Conforming Amendment.--The table of sections for part 
     III of subchapter B of chapter 1 of the Internal Revenue Code 
     of 1986 is amended by inserting after the item relating to 
     section 121 the following:

``Sec. 121A. Exclusion of gain from sale of qualified farm property.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to any sale or exchange after the date of 
     enactment of this Act in taxable years ending after such 
     date.

     SEC. 103. INCOME AVERAGING FOR FARMERS NOT TO INCREASE 
                   ALTERNATIVE MINIMUM TAX LIABILITY.

       (a) In General.--Section 55(c) of the Internal Revenue Code 
     of 1986 (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.--
     Solely for purposes of this section, section 1301 (relating 
     to averaging of farm income) shall not apply in computing the 
     regular tax.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1997.

     SEC. 104. FARM AND RANCH RISK MANAGEMENT ACCOUNTS.

       (a) In General.--Subpart C of part II of subchapter E of 
     chapter 1 of the Internal Revenue Code of 1986 (relating to 
     taxable year for which deductions taken) is amended by 
     inserting after section 468B the following:

     ``SEC. 468C. FARM AND RANCH RISK MANAGEMENT ACCOUNTS.

       ``(a) Deduction Allowed.--In the case of an individual 
     engaged in an eligible farming business, there shall be 
     allowed as a deduction for any taxable year the amount paid 
     in cash by the taxpayer during the taxable year to a Farm and 
     Ranch Risk Management Account (hereinafter referred to as the 
     `FARRM Account').
       ``(b) Limitation.--The amount which a taxpayer may pay into 
     the FARRM Account for any taxable year shall not exceed 20 
     percent of so much of the taxable income of the taxpayer 
     (determined without regard to this section) which is 
     attributable (determined in the manner applicable under 
     section 1301) to any eligible farming business.
       ``(c) Eligible Farming Business.--For purposes of this 
     section, the term `eligible farming business' means any 
     farming business (as defined in section 263A(e)(4)) which is 
     not a passive activity (within the meaning of section 469(c)) 
     of the taxpayer.
       ``(d) FARRM Account.--For purposes of this section--
       ``(1) In general.--The term `FARRM Account' means a trust 
     created or organized in the United States for the exclusive 
     benefit of the taxpayer, but only if the written governing 
     instrument creating the trust meets the following 
     requirements:
       ``(A) No contribution will be accepted for any taxable year 
     in excess of the amount allowed as a deduction under 
     subsection (a) for such year.
       ``(B) The trustee is a bank (as defined in section 408(n)) 
     or another person who demonstrates to the satisfaction of the 
     Secretary that the manner in which such person will 
     administer the trust will be consistent with the requirements 
     of this section.
       ``(C) The assets of the trust consist entirely of cash or 
     of obligations which have adequate stated interest (as 
     defined in section 1274(c)(2)) and which pay such interest 
     not less often than annually.
       ``(D) All income of the trust is distributed currently to 
     the grantor.
       ``(E) The assets of the trust will not be commingled with 
     other property except in a common trust fund or common 
     investment fund.
       ``(2) Account taxed as grantor trust.--The grantor of a 
     FARRM Account shall be treated for purposes of this title as 
     the owner of such Account and shall be subject to tax thereon 
     in accordance with subpart E of part I of subchapter J of 
     this chapter (relating to grantors and others treated as 
     substantial owners).
       ``(e) Inclusion of Amounts Distributed.--
       ``(1) In general.--Except as provided in paragraph (2), 
     there shall be includible in the gross income of the taxpayer 
     for any taxable year--
       ``(A) any amount distributed from a FARRM Account of the 
     taxpayer during such taxable year, and
       ``(B) any deemed distribution under--
       ``(i) subsection (f)(1) (relating to deposits not 
     distributed within 5 years),

[[Page S1408]]

       ``(ii) subsection (f)(2) (relating to cessation in eligible 
     farming business), and
       ``(iii) subparagraph (A) or (B) of subsection (f)(3) 
     (relating to prohibited transactions and pledging account as 
     security).
       ``(2) Exceptions.--Paragraph (1)(A) shall not apply to--
       ``(A) any distribution to the extent attributable to income 
     of the Account, and
       ``(B) the distribution of any contribution paid during a 
     taxable year to a FARRM Account to the extent that such 
     contribution exceeds the limitation applicable under 
     subsection (b) if requirements similar to the requirements of 
     section 408(d)(4) are met.

     For purposes of subparagraph (A), distributions shall be 
     treated as first attributable to income and then to other 
     amounts.
       ``(f) Special Rules.--
       ``(1) Tax on deposits in account which are not distributed 
     within 5 years.--
       ``(A) In general.--If, at the close of any taxable year, 
     there is a nonqualified balance in any FARRM Account--
       ``(i) there shall be deemed distributed from such Account 
     during such taxable year an amount equal to such balance, and
       ``(ii) the taxpayer's tax imposed by this chapter for such 
     taxable year shall be increased by 10 percent of such deemed 
     distribution.

     The preceding sentence shall not apply if an amount equal to 
     such nonqualified balance is distributed from such Account to 
     the taxpayer before the due date (including extensions) for 
     filing the return of tax imposed by this chapter for such 
     year (or, if earlier, the date the taxpayer files such return 
     for such year).
       ``(B) Nonqualified balance.--For purposes of subparagraph 
     (A), the term `nonqualified balance' means any balance in the 
     Account on the last day of the taxable year which is 
     attributable to amounts deposited in such Account before the 
     4th preceding taxable year.
       ``(C) Ordering rule.--For purposes of this paragraph, 
     distributions from a FARRM Account (other than distributions 
     of current income) shall be treated as made from deposits in 
     the order in which such deposits were made, beginning with 
     the earliest deposits.
       ``(2) Cessation in eligible business.--At the close of the 
     first disqualification period after a period for which the 
     taxpayer was engaged in an eligible farming business, there 
     shall be deemed distributed from the FARRM Account of the 
     taxpayer an amount equal to the balance in such Account (if 
     any) at the close of such disqualification period. For 
     purposes of the preceding sentence, the term 
     `disqualification period' means any period of 2 consecutive 
     taxable years for which the taxpayer is not engaged in an 
     eligible farming business.
       ``(3) Certain rules to apply.--Rules similar to the 
     following rules shall apply for purposes of this section:
       ``(A) Section 220(f)(8) (relating to treatment on death).
       ``(B) Section 408(e)(2) (relating to loss of exemption of 
     account where individual engages in prohibited transaction).
       ``(C) Section 408(e)(4) (relating to effect of pledging 
     account as security).
       ``(D) Section 408(g) (relating to community property laws).
       ``(E) Section 408(h) (relating to custodial accounts).
       ``(4) Time when payments deemed made.--For purposes of this 
     section, a taxpayer shall be deemed to have made a payment to 
     a FARRM Account on the last day of a taxable year if such 
     payment is made on account of such taxable year and is made 
     on or before the due date (without regard to extensions) for 
     filing the return of tax for such taxable year.
       ``(5) Individual.--For purposes of this section, the term 
     `individual' shall not include an estate or trust.
       ``(6) Deduction not allowed for self-employment tax.--The 
     deduction allowable by reason of subsection (a) shall not be 
     taken into account in determining an individual's net 
     earnings from self-employment (within the meaning of section 
     1402(a)) for purposes of chapter 2.
       ``(g) Reports.--The trustee of a FARRM Account shall make 
     such reports regarding such Account to the Secretary and to 
     the person for whose benefit the Account is maintained with 
     respect to contributions, distributions, and such other 
     matters as the Secretary may require under regulations. The 
     reports required by this subsection shall be filed at such 
     time and in such manner and furnished to such persons at such 
     time and in such manner as may be required by such 
     regulations.''.
       (b) Tax on Excess Contributions.--
       (1) Subsection (a) of section 4973 of the Internal Revenue 
     Code of 1986 (relating to tax on excess contributions to 
     certain tax-favored accounts and annuities) is amended by 
     striking ``or'' at the end of paragraph (3), by redesignating 
     paragraph (4) as paragraph (5), and by inserting after 
     paragraph (3) the following:
       ``(4) a FARRM Account (within the meaning of section 
     468C(d)), or''.
       (2) Section 4973 of such Code, is amended by adding at the 
     end the following:
       ``(g) Excess Contributions to FARRM Accounts.--For purposes 
     of this section, in the case of a FARRM Account (within the 
     meaning of section 468C(d)), the term `excess contributions' 
     means the amount by which the amount contributed for the 
     taxable year to the Account exceeds the amount which may be 
     contributed to the Account under section 468C(b) for such 
     taxable year. For purposes of this subsection, any 
     contribution which is distributed out of the FARRM Account in 
     a distribution to which section 468C(e)(2)(B) applies shall 
     be treated as an amount not contributed.''.
       (3) The section heading for section 4973 of such Code is 
     amended to read as follows:

     ``SEC. 4973. EXCESS CONTRIBUTIONS TO CERTAIN ACCOUNTS, 
                   ANNUITIES, ETC.''.

       (4) The table of sections for chapter 43 of such Code is 
     amended by striking the item relating to section 4973 and 
     inserting the following:

``Sec. 4973. Excess contributions to certain accounts, annuities, 
              etc.''.
       (c) Tax on Prohibited Transactions.--
       (1) Subsection (c) of section 4975 of the Internal Revenue 
     Code of 1986 (relating to tax on prohibited transactions) is 
     amended by adding at the end the following:
       ``(6) Special rule for farrm accounts.--A person for whose 
     benefit a FARRM Account (within the meaning of section 
     468C(d)) is established 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 FARRM Account by reason of the application of 
     section 468C(f)(3)(A) to such account.''.
       (2) Paragraph (1) of section 4975(e) of such Code is 
     amended by redesignating subparagraphs (E) and (F) as 
     subparagraphs (F) and (G), respectively, and by inserting 
     after subparagraph (D) the following:
       ``(E) a FARRM Account described in section 468C(d),''.
       (d) Failure To Provide Reports on FARRM Accounts.--
     Paragraph (2) of section 6693(a) of the Internal Revenue Code 
     of 1986 (relating to failure to provide reports on certain 
     tax-favored accounts or annuities) is amended by 
     redesignating subparagraphs (C) and (D) as subparagraphs (D) 
     and (E), respectively, and by inserting after subparagraph 
     (B) the following:
       ``(C) section 468C(g) (relating to FARRM Accounts),''.
       (e) Clerical Amendment.--The table of sections for subpart 
     C of part II of subchapter E of chapter 1 of the Internal 
     Revenue Code of 1986 is amended by inserting after the item 
     relating to section 468B the following:

``Sec. 468C. Farm and Ranch Risk Management Accounts.''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

                 Subtitle B--Estate and Gift Tax Relief

     SEC. 111. REPEAL OF ESTATE, GIFT, AND GENERATION-SKIPPING 
                   TAXES.

       (a) In General.--Subtitle B of the Internal Revenue Code of 
     1986 is hereby repealed.
       (b) Effective Date.--The repeal made by subsection (a) 
     shall apply to the estates of decedents dying, and gifts and 
     generation-skipping transfers made, after December 31, 2010.

     SEC. 112. TERMINATION OF STEP UP IN BASIS AT DEATH.

       (a) Termination of Application of Section 1014.--Section 
     1014 of the Internal Revenue Code of 1986 (relating to basis 
     of property acquired from a decedent) is amended by adding at 
     the end the following:
       ``(f) Termination.--In the case of a decedent dying after 
     December 31, 2010, this section shall not apply to property 
     for which basis is provided by section 1022.''.
       (b) Conforming Amendment.--Subsection (a) of section 1016 
     of the Internal Revenue Code of 1986 (relating to adjustments 
     to basis) is amended by striking ``and'' at the end of 
     paragraph (26), by striking the period at the end of 
     paragraph (27) and inserting ``, and'', and by adding at the 
     end the following:
       ``(28) to the extent provided in section 1022 (relating to 
     basis for certain property acquired from a decedent dying 
     after December 31, 2010).''.

     SEC. 113. CARRYOVER BASIS AT DEATH.

       (a) General Rule.--Part II of subchapter O of chapter 1 of 
     the Internal Revenue Code of 1986 (relating to basis rules of 
     general application) is amended by inserting after section 
     1021 the following new section:

     ``SEC. 1022. CARRYOVER BASIS FOR CERTAIN PROPERTY ACQUIRED 
                   FROM A DECEDENT DYING AFTER DECEMBER 31, 2010.

       ``(a) Carryover Basis.--Except as otherwise provided in 
     this section, the basis of carryover basis property in the 
     hands of a person acquiring such property from a decedent 
     shall be determined under section 1015.
       ``(b) Carryover Basis Property Defined.--
       ``(1) In general.--For purposes of this section, the term 
     `carryover basis property' means any property--
       ``(A) which is acquired from or passed from a decedent who 
     died after December 31, 2010, and
       ``(B) which is not excluded pursuant to paragraph (2).

     The property taken into account under subparagraph (A) shall 
     be determined under section 1014(b) without regard to 
     subparagraph (A) of the last sentence of paragraph (9) 
     thereof.
       ``(2) Certain property not carryover basis property.--The 
     term `carryover basis property' does not include--
       ``(A) any item of gross income in respect of a decedent 
     described in section 691,

[[Page S1409]]

       ``(B) property of the decedent to the extent that the 
     aggregate adjusted fair market value of such property does 
     not exceed $1,300,000, and
       ``(C) property which was acquired from the decedent by the 
     surviving spouse of the decedent (and which would be 
     carryover basis property without regard to this subparagraph) 
     but only if the value of such property would have been 
     deductible from the value of the taxable estate of the 
     decedent under section 2056, as in effect on the day before 
     the date of enactment of the Rural America Prosperity Act of 
     2001.

     For purposes of this subsection, the term `adjusted fair 
     market value' means, with respect to any property, fair 
     market value reduced by any indebtedness secured by such 
     property.
       ``(3) Limitation on exception for property acquired by 
     surviving spouse.--The adjusted fair market value of property 
     which is not carryover basis property by reason of paragraph 
     (2)(C) shall not exceed $3,000,000.
       ``(4) Allocation of excepted amounts.--The executor shall 
     allocate the limitations under paragraphs (2)(B) and (3).
       ``(5) Inflation adjustment of excepted amounts.--In the 
     case of decedents dying in a calendar year after 2011, the 
     dollar amounts in paragraphs (2)(B) and (3) shall each be 
     increased by an amount equal to the product of--
       ``(A) such dollar amount, and
       ``(B) the cost-of-living adjustment determined under 
     section 1(f)(3) for such calendar year, determined by 
     substituting `2010' for `1992' in subparagraph (B) thereof.

     If any increase determined under the preceding sentence is 
     not a multiple of $10,000, such increase shall be rounded to 
     the nearest multiple of $10,000.
       ``(c) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to carry out the purposes of 
     this section.''.
       (b) Miscellaneous Amendments Related To Carryover Basis.--
       (1) Capital gain treatment for inherited art work or 
     similar property.--
       (A) In general.--Subparagraph (C) of section 1221(a)(3) of 
     the Internal Revenue Code of 1986 (defining capital asset) is 
     amended by inserting ``(other than by reason of section 
     1022)'' after ``is determined''.
       (B) Coordination with section 170.--Paragraph (1) of 
     section 170(e) of such Code (relating to certain 
     contributions of ordinary income and capital gain property) 
     is amended by adding at the end the following: ``For purposes 
     of this paragraph, the determination of whether property is a 
     capital asset shall be made without regard to the exception 
     contained in section 1221(a)(3)(C) for basis determined under 
     section 1022.''.
       (2) Definition of executor.--Section 7701(a) of such Code 
     (relating to definitions) is amended by adding at the end the 
     following:
       ``(47) Executor.--The term `executor' means the executor or 
     administrator of the decedent, or, if there is no executor or 
     administrator appointed, qualified, and acting within the 
     United States, then any person in actual or constructive 
     possession of any property of the decedent.''.
       (3) Clerical amendment.--The table of sections for part II 
     of subchapter O of chapter 1 of such Code is amended by 
     adding at the end the following new item:

``Sec. 1022. Carryover basis for certain property acquired from a 
              decedent dying after December 31, 2010.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to estates of decedents dying after December 31, 
     2010.

     SEC. 114. ADDITIONAL 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) 
     of the Internal Revenue Code of 1986 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 of such Code 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 2002, 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 of the Internal Revenue Code of 1986 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 of the Internal Revenue Code of 1986, 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 2003 and before 2011--
       ``(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:
      2004.........................................................1.0 
      2005.........................................................2.0 
      2006.........................................................3.0 
      2007.........................................................4.0 
      2008.........................................................5.5 
      2009.........................................................7.5 
      2010.........................................................9.5.
       ``(C) Coordination with income tax rates.--The reductions 
     under subparagraph (A)--
       ``(i) shall not reduce any rate under paragraph (1) below 
     the lowest rate in section 1(c), and
       ``(ii) shall not reduce the highest rate under paragraph 
     (1) below the highest rate in section 1(c).
       ``(D) Coordination with credit for state death taxes.--
     Rules similar to the rules of subparagraph (A) shall apply to 
     the table contained in section 2011(b) except that the 
     Secretary shall prescribe percentage point reductions which 
     maintain the proportionate relationship (as in effect before 
     any reduction under this paragraph) between the credit under 
     section 2011 and the tax rates under subsection (c).''.
       (d) Effective Dates.--
       (1) Subsections (a) and (b).--The amendments made by 
     subsections (a) and (b) shall apply to estates of decedents 
     dying, and gifts made, after December 31, 2001.
       (2) Subsection (c).--The amendment made by subsection (c) 
     shall apply to estates of decedents dying, and gifts made, 
     after December 31, 2003.

     SEC. 115. UNIFIED CREDIT AGAINST ESTATE AND GIFT TAXES 
                   REPLACED WITH UNIFIED EXEMPTION AMOUNT.

       (a) In General.--
       (1) Estate tax.--Subsection (b) of section 2001 of the 
     Internal Revenue Code of 1986 (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 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:

                                                       ``IThe exemption
                                                         caleamount is:
    2001......................................................$675,000 
    2002 and 2003.............................................$700,000 
    2003......................................................$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 of such Code 
     (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 of the Internal Revenue Code of 1986 
     (relating to unified credit against estate tax) is hereby 
     repealed.
       (2) Section 2505 of such Code (relating to unified credit 
     against gift tax) is hereby repealed.
       (c) Conforming Amendments.--
       (1)(A) Subsection (b) of section 2011 of the Internal 
     Revenue Code of 1986 is amended--
       (i) by striking ``adjusted'' in the table; and
       (ii) by striking the last sentence.
       (B) Subsection (f) of section 2011 of such Code is amended 
     by striking ``, reduced by the amount of the unified credit 
     provided by section 2010''.
       (2) Subsection (a) of section 2012 of such Code is amended 
     by striking ``and the unified credit provided by section 
     2010''.
       (3) Subparagraph (A) of section 2013(c)(1) of such Code is 
     amended by striking ``2010,''.

[[Page S1410]]

       (4) Paragraph (2) of section 2014(b) of such Code is 
     amended by striking ``2010, 2011,'' and inserting ``2011''.
       (5) Clause (ii) of section 2056A(b)(12)(C) of such Code 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 
     enactment of the Rural America Prosperity Act of 2001) 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 of such Code 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 of such Code 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) 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 enactment of the Rural America 
     Prosperity Act of 2001) 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 section 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 of such Code is amended by striking 
     subsection (c).
       (9)(A) Subsection (a) of section 2107 of such Code 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 of such Code 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) of such Code 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) of such Code 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 of such Code is amended by striking the item 
     relating to section 2010.
       (13) The table of sections for subchapter A of chapter 12 
     of such Code is amended by striking the item relating to 
     section 2505.
       (d) Effective Date.--The amendments made by this section--
       (1) insofar as they relate to the tax imposed by chapter 11 
     of the Internal Revenue Code of 1986, shall apply to estates 
     of decedents dying after December 31, 2001, and
       (2) insofar as they relate to the tax imposed by chapter 12 
     of such Code, shall apply to gifts made after December 31, 
     2001.

     SEC. 116. DEEMED ALLOCATION OF GST EXEMPTION TO LIFETIME 
                   TRANSFERS TO TRUSTS; RETROACTIVE ALLOCATIONS.

       (a) In General.--Section 2632 of the Internal Revenue Code 
     of 1986 (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 one 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--

[[Page S1411]]

       ``(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) 
     of the Internal Revenue Code of 1986 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, 2000, and 
     to estate tax inclusion periods ending after December 31, 
     2000.
       (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, 2000.

     SEC. 117. SEVERING OF TRUSTS.

       (a) In General.--Subsection (a) of section 2642 of the 
     Internal Revenue Code of 1986 (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, 2000.

     SEC. 118. MODIFICATION OF CERTAIN VALUATION RULES.

       (a) Gifts for Which Gift Tax Return Filed or Deemed 
     Allocation Made.--Paragraph (1) of section 2642(b) of the 
     Internal Revenue Code of 1986 (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) of the Internal Revenue Code of 1986 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, 2000.

     SEC. 119. RELIEF PROVISIONS.

       (a) In General.--Section 2642 of the Internal Revenue Code 
     of 1986 is amended by adding at the end the following new 
     subsection:
       ``(g) Relief Provisions.--
       ``(1) Relief from 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 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 from 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, 2000.
       (2) Substantial compliance.--Section 2642(g)(2) of such 
     Code (as so added) shall apply to transfers subject to 
     chapter 11 or 12 of the Internal Revenue Code of 1986 made 
     after December 31, 2000. No implication is intended with 
     respect to the availability of relief from late elections or 
     the application of a rule of substantial compliance on or 
     before such date.

     SEC. 120. EXPANSION OF ESTATE TAX RULE FOR CONSERVATION 
                   EASEMENTS.

       (a) Where Land Is Located.--
       (1) In general.--Clause (i) of section 2031(c)(8)(A) of the 
     Internal Revenue Code of 1986 (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, 
     2000.
       (b) Clarification of Date for Determining Value of Land and 
     Easement.--
       (1) In general.--Section 2031(c)(2) of the Internal Revenue 
     Code of 1986 (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).''.

[[Page S1412]]

       (2) Effective date.--The amendment made by this subsection 
     shall apply to estates of decedents dying after December 31, 
     1997.

   TITLE II--STUDY OF COSTS OF REGULATIONS ON FARMERS, RANCHERS, AND 
                               FORESTERS

     SEC. 201. COMPTROLLER GENERAL STUDY OF REGULATIONS.

       (a) Data Review and Collection.--The Comptroller General of 
     the United States shall--
       (1) conduct a review of existing Federal and non-Federal 
     studies and data regarding the cost to farmers, ranchers, and 
     foresters of complying with existing or proposed Federal 
     regulations directly affecting farmers, ranchers, and 
     foresters; and
       (2) as necessary, obtain and analyze new data concerning 
     the costs to farmers, ranchers, and foresters of complying 
     with Federal regulations proposed as of February 1, 2001, 
     directly affecting farmers, ranchers, and foresters.
       (b) Use of Data.--Using the studies and data reviewed and 
     collected under subsection (a), the Comptroller General 
     shall--
       (1) assess the overall costs to farmers, ranchers, and 
     foresters of complying with existing and proposed Federal 
     regulations directly affecting farmers, ranchers, and 
     foresters; and
       (2) identify and recommend reasonable alternatives to those 
     regulations that will achieve the objectives of the 
     regulations at less cost to farmers, ranchers, and foresters.
       (c) Submission of Results.--Not later than February 1, 
     2002, the Comptroller General shall submit to the Secretary 
     of Agriculture, the Committee on Agriculture, Nutrition, and 
     Forestry of the Senate, and the Committee on Agriculture of 
     the House of Representatives the results of the assessment 
     conducted under subsection (b)(1) and the recommendations 
     prepared under subsection (b)(2).

     SEC. 202. RESPONSE OF SECRETARY OF AGRICULTURE.

       Not later than April 1, 2002, the Secretary of Agriculture 
     shall submit to the Committee on Agriculture, Nutrition, and 
     Forestry of the Senate, and the Committee on Agriculture of 
     the House of Representatives a report responding to the 
     recommendations of the Comptroller General under section 202 
     regarding reasonable alternatives that could achieve the 
     objectives of Federal regulations at less cost to farmers, 
     ranchers, and foresters.

  TITLE III--EXTENSION OF TRADE AUTHORITIES PROCEDURES FOR RECIPROCAL 
                            TRADE AGREEMENTS

     SEC. 301. SHORT TITLE.

       This title may be cited as the ``Reciprocal Trade Agreement 
     Authorities Act of 2001''.

     SEC. 302. TRADE NEGOTIATING OBJECTIVES.

       (a) Overall Trade Negotiating Objectives.--The overall 
     trade negotiating objectives of the United States for 
     agreements subject to the provisions of section 303 are--
       (1) to obtain more open, equitable, and reciprocal market 
     access;
       (2) to obtain the reduction or elimination of barriers and 
     distortions that are directly related to trade and that 
     decrease market opportunities for United States exports or 
     otherwise distort United States trade;
       (3) to further strengthen the system of international 
     trading disciplines and procedures, including dispute 
     settlement; and
       (4) to foster economic growth, raise living standards, and 
     promote full employment in the United States and to enhance 
     the global economy.
       (b) Principal Trade Negotiating Objectives.--
       (1) Trade barriers and distortions.--The principal 
     negotiating objectives of the United States regarding trade 
     barriers and other trade distortions are--
       (A) to expand competitive market opportunities for United 
     States exports and to obtain fairer and more open conditions 
     of trade by reducing or eliminating tariff and nontariff 
     barriers and policies and practices of foreign governments 
     directly related to trade that decrease market opportunities 
     for United States exports or otherwise distort United States 
     trade; and
       (B) to obtain reciprocal tariff and nontariff barrier 
     elimination agreements, with particular attention to those 
     tariff categories covered in section 111(b) of the Uruguay 
     Round Agreements Act (19 U.S.C. 3521(b)).
       (2) Trade in services.--The principal negotiating objective 
     of the United States regarding trade in services is to reduce 
     or eliminate barriers to international trade in services, 
     including regulatory and other barriers that deny national 
     treatment or unreasonably restrict the establishment or 
     operations of service suppliers.
       (3) Foreign investment.--The principal negotiating 
     objective of the United States regarding foreign investment 
     is to reduce or eliminate artificial or trade-distorting 
     barriers to trade related foreign investment by--
       (A) reducing or eliminating exceptions to the principle of 
     national treatment;
       (B) freeing the transfer of funds relating to investments;
       (C) reducing or eliminating performance requirements and 
     other unreasonable barriers to the establishment and 
     operation of investments;
       (D) seeking to establish standards for expropriation and 
     compensation for expropriation, consistent with United States 
     legal principles and practice; and
       (E) providing meaningful procedures for resolving 
     investment disputes.
       (4) Intellectual property.--The principal negotiating 
     objectives of the United States regarding trade-related 
     intellectual property are--
       (A) to further promote adequate and effective protection of 
     intellectual property rights, including through--
       (i)(I) ensuring accelerated and full implementation of the 
     Agreement on Trade-Related Aspects of Intellectual Property 
     Rights referred to in section 101(d)(15) of the Uruguay Round 
     Agreements Act (19 U.S.C. 3511(d)(15)), particularly with 
     respect to United States industries whose products are 
     subject to the lengthiest transition periods for full 
     compliance by developing countries with that Agreement, and
       (II) ensuring that the provisions of any multilateral or 
     bilateral trade agreement entered into by the United States 
     provide protection at least as strong as the protection 
     afforded by chapter 17 of the North American Free Trade 
     Agreement and the annexes thereto;
       (ii) providing strong protection for new and emerging 
     technologies and new methods of transmitting and distributing 
     products embodying intellectual property;
       (iii) preventing or eliminating discrimination with respect 
     to matters affecting the availability, acquisition, scope, 
     maintenance, use, and enforcement of intellectual property 
     rights; and
       (iv) providing strong enforcement of intellectual property 
     rights, including through accessible, expeditious, and 
     effective civil, administrative, and criminal enforcement 
     mechanisms; and
       (B) to secure fair, equitable, and nondiscriminatory market 
     access opportunities for United States persons that rely upon 
     intellectual property protection.
       (5) Transparency.--The principal negotiating objective of 
     the United States with respect to transparency is to obtain 
     broader application of the principle of transparency 
     through--
       (A) increased and more timely public access to information 
     regarding trade issues and the activities of international 
     trade institutions; and
       (B) increased openness of dispute settlement proceedings, 
     including under the World Trade Organization.
       (6) Reciprocal trade in agriculture.--The principal 
     negotiating objective of the United States with respect to 
     agriculture is to obtain competitive opportunities for United 
     States exports in foreign markets substantially equivalent to 
     the competitive opportunities afforded foreign exports in 
     United States markets and to achieve fairer and more open 
     conditions of trade in bulk and value-added commodities by--
       (A) reducing or eliminating, by a date certain, tariffs or 
     other charges that decrease market opportunities for United 
     States exports--
       (i) giving priority to those products that are subject to 
     significantly higher tariffs or subsidy regimes of major 
     producing countries; and
       (ii) providing reasonable adjustment periods for United 
     States import-sensitive products, in close consultation with 
     the Congress on such products before initiating tariff 
     reduction negotiations;
       (B) reducing or eliminating subsidies that decrease market 
     opportunities for United States exports or unfairly distort 
     agriculture markets to the detriment of the United States;
       (C) developing, strengthening, and clarifying rules and 
     effective dispute settlement mechanisms to eliminate 
     practices that unfairly decrease United States market access 
     opportunities or distort agricultural markets to the 
     detriment of the United States, including--
       (i) unfair or trade-distorting activities of export state 
     trading enterprises and other administrative mechanisms, with 
     emphasis on requiring price transparency in the operation of 
     export state trading enterprises and such other mechanisms;
       (ii) unjustified trade restrictions or commercial 
     requirements affecting new technologies, including 
     biotechnology;
       (iii) unjustified sanitary or phytosanitary restrictions, 
     including those not based on scientific principles in 
     contravention of the Uruguay Round Agreements;
       (iv) other unjustified technical barriers to trade; and
       (v) restrictive rules in the administration of tariff-rate 
     quotas;
       (D) improving import relief mechanisms to recognize the 
     unique characteristics of perishable agriculture;
       (E) taking into account whether a party to the negotiations 
     has failed to adhere to the provisions of already existing 
     trade agreements with the United States or has circumvented 
     obligations under those agreements;
       (F) taking into account whether a product is subject to 
     market distortions by reason of a failure of a major 
     producing country to adhere to the provisions of already 
     existing trade agreements with the United States or by the 
     circumvention by that country of its obligations under those 
     agreements; and
       (G) otherwise ensuring that countries that accede to the 
     World Trade Organization have made meaningful market 
     liberalization commitments in agriculture.
       (7) Labor, environment, and other matters.--The principal 
     negotiating objective of the United States regarding labor, 
     environment, and other matters is to address the

[[Page S1413]]

     following aspects of foreign government policies and 
     practices regarding labor, environment, and other matters 
     that are directly related to trade:
       (A) To ensure that foreign labor, environmental, health, or 
     safety policies and practices do not arbitrarily or 
     unjustifiably discriminate or serve as disguised barriers to 
     trade.
       (B) To ensure that foreign governments do not derogate from 
     or waive existing domestic environmental, health, safety, or 
     labor measures, including measures that deter exploitative 
     child labor, as an encouragement to gain competitive 
     advantage in international trade or investment. Nothing in 
     this subparagraph is intended to address changes to a 
     country's laws that are consistent with sound macroeconomic 
     development.
       (8) WTO extended negotiations.--The principal negotiating 
     objectives of the United States regarding trade in financial 
     services are those set forth in section 135(a) of the Uruguay 
     Round Agreements Act (19 U.S.C. 3555(a)), regarding trade in 
     civil aircraft are those set forth in section 135(c) of that 
     Act, and regarding rules of origin are the conclusion of an 
     agreement described in section 132 of that Act (19 U.S.C. 
     3552).
       (c) International Economic Policy Objectives.--
       (1) In general.--The President should take into account the 
     relationship between trade agreements and other important 
     priorities of the United States and seek to ensure that the 
     trade agreements entered into by the United States complement 
     and reinforce other policy goals. The United States 
     priorities in this area include--
       (A) seeking to ensure that trade and environmental policies 
     are mutually supportive;
       (B) seeking to protect and preserve the environment and 
     enhance the international means for doing so, while 
     optimizing the use of the world's resources;
       (C) promoting respect for worker rights and the rights of 
     children and an understanding of the relationship between 
     trade and worker rights, particularly by working with the 
     International Labor Organization to encourage the observance 
     and enforcement of core labor standards, including the 
     prohibition on exploitative child labor; and
       (D) supplementing and strengthening standards for 
     protection of intellectual property under conventions 
     administered by international organizations other than the 
     World Trade Organization, expanding these conventions to 
     cover new and emerging technologies, and eliminating 
     discrimination and unreasonable exceptions or preconditions 
     to such protection.
       (2) Applicability of trade authorities procedures.--Nothing 
     in this subsection shall be construed to authorize the use of 
     the trade authorities procedures described in section 303 to 
     modify United States law.
       (d) Guidance for Negotiators.--
       (1) Domestic objectives.--In pursuing the negotiating 
     objectives described in subsection (b), the negotiators on 
     behalf of the United States shall take into account United 
     States domestic objectives, including the protection of 
     health and safety, essential security, environmental, 
     consumer, and employment opportunity interests, and the law 
     and regulations related thereto.
       (2) Consultations with congressional advisers and 
     enforcement of the trade laws.--In the course of negotiations 
     conducted under this title, the United States Trade 
     Representative shall--
       (A) consult closely and on a timely basis with, and keep 
     fully apprised of the negotiations, the congressional 
     advisers on trade policy and negotiations appointed under 
     section 161 of the Trade Act of 1974; and
       (B) preserve the ability of the United States to enforce 
     rigorously its trade laws, including the antidumping and 
     countervailing duty laws, and avoid agreements which lessen 
     the effectiveness of domestic and international disciplines 
     on unfair trade, especially dumping and subsidies, in order 
     to ensure that United States workers, agricultural producers, 
     and firms can compete fully on fair terms and enjoy the 
     benefits of reciprocal trade concessions.
       (e) Adherence to Obligations Under Uruguay Round 
     Agreements.--In determining whether to enter into 
     negotiations with a particular country, the President shall 
     take into account the extent to which that country has 
     implemented, or has accelerated the implementation of, its 
     obligations under the Uruguay Round Agreements.

     SEC. 303. TRADE AGREEMENTS AUTHORITY.

       (a) Agreements Regarding Tariff Barriers.--
       (1) In general.--Whenever the President determines that one 
     or more existing duties or other import restrictions of any 
     foreign country or the United States are unduly burdening and 
     restricting the foreign trade of the United States and that 
     the purposes, policies, and objectives of this title will be 
     promoted thereby, the President--
       (A) may enter into trade agreements with foreign countries 
     before--
       (i) October 1, 2003, or
       (ii) October 1, 2007, if trade authorities procedures are 
     extended under subsection (c), and
       (B) may, subject to paragraphs (2) and (3), proclaim--
       (i) such modification or continuance of any existing duty,
       (ii) such continuance of existing duty-free or excise 
     treatment, or
       (iii) such additional duties,

     as the President determines to be required or appropriate to 
     carry out any such trade agreement. The President shall 
     notify the Congress of the President's intention to enter 
     into an agreement under this subsection.
       (2) Limitations.--No proclamation may be made under 
     paragraph (1) that--
       (A) reduces any rate of duty (other than a rate of duty 
     that does not exceed 5 percent ad valorem on the date of 
     enactment of this Act) to a rate of duty that is less than 50 
     percent of the rate of the duty that applies on such date of 
     enactment;
       (B) reduces the rate of duty on an article to take effect 
     on a date that is more than 10 years after the first 
     reduction that is proclaimed to carry out a trade agreement 
     with respect to such article; or
       (C) increases any rate of duty above the rate that applied 
     on January 1, 2001.
       (3) Aggregate reduction; exemption from staging.--
       (A) Aggregate reduction.--Except as provided in 
     subparagraph (B), the aggregate reduction in the rate of duty 
     on any article which is in effect on any day pursuant to a 
     trade agreement entered into under paragraph (1) shall not 
     exceed the aggregate reduction which would have been in 
     effect on such day if--
       (i) a reduction of 3 percent ad valorem or a reduction of 
     one-tenth of the total reduction, whichever is greater, had 
     taken effect on the effective date of the first reduction 
     proclaimed under paragraph (1) to carry out such agreement 
     with respect to such article; and
       (ii) a reduction equal to the amount applicable under 
     clause (i) had taken effect at 1-year intervals after the 
     effective date of such first reduction.
       (B) Exemption from staging.--No staging is required under 
     subparagraph (A) with respect to a duty reduction that is 
     proclaimed under paragraph (1) for an article of a kind that 
     is not produced in the United States. The United States 
     International Trade Commission shall advise the President of 
     the identity of articles that may be exempted from staging 
     under this subparagraph.
       (4) Rounding.--If the President determines that such action 
     will simplify the computation of reductions under paragraph 
     (3), the President may round an annual reduction by an amount 
     equal to the lesser of--
       (A) the difference between the reduction without regard to 
     this paragraph and the next lower whole number; or
       (B) one-half of 1 percent ad valorem.
       (5) Other limitations.--A rate of duty reduction that may 
     not be proclaimed by reason of paragraph (2) may take effect 
     only if a provision authorizing such reduction is included 
     within an implementing bill provided for under section 305 
     and that bill is enacted into law.
       (6) Other tariff modifications.--Notwithstanding paragraphs 
     (1)(B) and (2) through (5), and subject to the consultation 
     and layover requirements of section 115 of the Uruguay Round 
     Agreements Act, the President may proclaim the modification 
     of any duty or staged rate reduction of any duty set forth in 
     Schedule XX, as defined in section 2(5) of that Act, if the 
     United States agrees to such modification or staged rate 
     reduction in a negotiation for the reciprocal elimination or 
     harmonization of duties under the auspices of the World Trade 
     Organization or as part of an interim agreement leading to 
     the formation of a regional free-trade area.
       (7) Authority under uruguay round agreements act not 
     affected.--Nothing in this subsection shall limit the 
     authority provided to the President under section 111(b) of 
     the Uruguay Round Agreements Act (19 U.S.C. 3521(b)).
       (b) Agreements Regarding Tariff and Nontariff Barriers.--
       (1) In general.--(A) Whenever the President determines 
     that--
       (i) one or more existing duties or any other import 
     restriction of any foreign country or the United States or 
     any other barrier to, or other distortion of, international 
     trade unduly burdens or restricts the foreign trade of the 
     United States or adversely affects the United States economy, 
     or
       (ii) the imposition of any such barrier or distortion is 
     likely to result in such a burden, restriction, or effect,

     and that the purposes, policies, and objectives of this title 
     will be promoted thereby, the President may enter into a 
     trade agreement described in subparagraph (B) during the 
     period described in subparagraph (C).
       (B) The President may enter into a trade agreement under 
     subparagraph (A) with foreign countries providing for--
       (i) the reduction or elimination of a duty, restriction, 
     barrier, or other distortion described in subparagraph (A), 
     or
       (ii) the prohibition of, or limitation on the imposition 
     of, such barrier or other distortion.
       (C) The President may enter into a trade agreement under 
     this paragraph before--
       (i) October 1, 2003, or
       (ii) October 1, 2007, if trade authorities procedures are 
     extended under subsection (c).
       (2) Conditions.--A trade agreement may be entered into 
     under this subsection only if such agreement makes progress 
     in meeting the applicable objectives described in section 302 
     and the President satisfies the conditions set forth in 
     section 304.
       (3) Bills qualifying for trade authorities procedures.--The 
     provisions of section 151 of the Trade Act of 1974 (in this 
     title referred to as ``trade authorities procedures'')

[[Page S1414]]

     apply to a bill of either House of Congress consisting only 
     of--
       (A) a provision approving a trade agreement entered into 
     under this subsection and approving the statement of 
     administrative action, if any, proposed to implement such 
     trade agreement,
       (B) provisions directly related to the principal trade 
     negotiating objectives set forth in section 302(b) achieved 
     in such trade agreement, if those provisions are necessary 
     for the operation or implementation of United States rights 
     or obligations under such trade agreement,
       (C) provisions that define and clarify, or provisions that 
     are related to, the operation or effect of the provisions of 
     the trade agreement,
       (D) provisions to provide adjustment assistance to workers 
     and firms adversely affected by trade, and
       (E) provisions necessary for purposes of complying with 
     section 252 of the Balanced Budget and Emergency Deficit 
     Control Act of 1985 in implementing the trade agreement,

     to the same extent as such section 151 applies to 
     implementing bills under that section. A bill to which this 
     subparagraph applies shall hereafter in this title be 
     referred to as an ``implementing bill''.
       (c) Extension Disapproval Process for Congressional Trade 
     Authorities Procedures.--
       (1) In general.--Except as provided in section 305(b)--
       (A) the trade authorities procedures apply to implementing 
     bills submitted with respect to trade agreements entered into 
     under subsection (b) before October 1, 2003; and
       (B) the trade authorities procedures shall be extended to 
     implementing bills submitted with respect to trade agreements 
     entered into under subsection (b) after September 30, 2003, 
     and before October 1, 2007, if (and only if)--
       (i) the President requests such extension under paragraph 
     (2); and
       (ii) neither House of the Congress adopts an extension 
     disapproval resolution under paragraph (5) before October 1, 
     2003.
       (2) Report to congress by the president.--If the President 
     is of the opinion that the trade authorities procedures 
     should be extended to implementing bills described in 
     paragraph (1)(B), the President shall submit to the Congress, 
     not later than July 1, 2003, a written report that contains a 
     request for such extension, together with--
       (A) a description of all trade agreements that have been 
     negotiated under subsection (b) and the anticipated schedule 
     for submitting such agreements to the Congress for approval;
       (B) a description of the progress that has been made in 
     negotiations to achieve the purposes, policies, and 
     objectives of this title, and a statement that such progress 
     justifies the continuation of negotiations; and
       (C) a statement of the reasons why the extension is needed 
     to complete the negotiations.
       (3) Report to congress by the advisory committee.--The 
     President shall promptly inform the Advisory Committee for 
     Trade Policy and Negotiations established under section 135 
     of the Trade Act of 1974 (19 U.S.C. 2155) of the President's 
     decision to submit a report to the Congress under paragraph 
     (2). The Advisory Committee shall submit to the Congress as 
     soon as practicable, but not later than August 1, 2003, a 
     written report that contains--
       (A) its views regarding the progress that has been made in 
     negotiations to achieve the purposes, policies, and 
     objectives of this title; and
       (B) a statement of its views, and the reasons therefor, 
     regarding whether the extension requested under paragraph (2) 
     should be approved or disapproved.
       (4) Reports may be classified.--The reports submitted to 
     the Congress under paragraphs (2) and (3), or any portion of 
     such reports, may be classified to the extent the President 
     determines appropriate.
       (5) Extension disapproval resolution.--(A) For purposes of 
     paragraph (1), the term ``extension disapproval resolution'' 
     means a resolution of either House of the Congress, the sole 
     matter after the resolving clause of which is as follows: 
     ``That the ____ disapproves the request of the President for 
     the extension, under section 303(c)(1)(B)(i) of the 
     Reciprocal Trade Agreement Authorities Act of 2001, of the 
     provisions of section 151 of the Trade Act of 1974 to any 
     implementing bill submitted with respect to any trade 
     agreement entered into under section 303(b) of the Reciprocal 
     Trade Agreement Authorities Act of 2001 after September 30, 
     2003.'', with the blank space being filled with the name of 
     the resolving House of the Congress.
       (B) An extension disapproval resolution--
       (i) may be introduced in either House of the Congress by 
     any member of such House; and
       (ii) shall be referred, in the House of Representatives, to 
     the Committee on Ways and Means and to the Committee on 
     Rules.
       (C) The provisions of sections 152(d) and (e) of the Trade 
     Act of 1974 (19 U.S.C. 2192(d) and (e)) (relating to the 
     floor consideration of certain resolutions in the House and 
     Senate) apply to an extension disapproval resolution.
       (D) It is not in order for--
       (i) the Senate to consider any extension disapproval 
     resolution not reported by the Committee on Finance;
       (ii) the House of Representatives to consider any extension 
     disapproval resolution not reported by the Committee on Ways 
     and Means and by the Committee on Rules; or
       (iii) either House of the Congress to consider an extension 
     disapproval resolution after September 30, 2003.

     SEC. 304. CONSULTATIONS.

       (a) Notice and Consultation Before Negotiation.--
       (1) In general.--The President, with respect to any 
     agreement that is subject to the provisions of section 
     303(b), shall--
       (A) provide, at least 90 calendar days before initiating 
     negotiations, written notice to the Congress of the 
     President's intention to enter into the negotiations and set 
     forth therein the date the President intends to initiate such 
     negotiations, the specific United States objectives for the 
     negotiations, and whether the President intends to seek an 
     agreement, or changes to an existing agreement; and
       (B) before and after submission of the notice, consult 
     regarding the negotiations with the Committee on Finance of 
     the Senate and the Committee on Ways and Means of the House 
     of Representatives and such other committees of the House and 
     Senate as the President deems appropriate.
       (2) Consultations regarding negotiations on certain 
     objectives.--
       (A) Consultation.--In addition to the requirements set 
     forth in paragraph (1), before initiating negotiations with 
     respect to a trade agreement subject to section 303(b) where 
     the subject matter of such negotiations is directly related 
     to the principal trade negotiating objectives set forth in 
     section 302(b)(1) or section 302(b)(7), the President shall 
     consult with the Committee on Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate 
     and with the appropriate advisory groups established under 
     section 135 of the Trade Act of 1974 with respect to such 
     negotiations.
       (B) Scope.--The consultations described in subparagraph (A) 
     shall concern the manner in which the negotiation will 
     address the objective of reducing or eliminating a specific 
     tariff or nontariff barrier or foreign government policy or 
     practice directly related to trade that decreases market 
     opportunities for United States exports or otherwise distorts 
     United States trade.
       (3) Negotiations regarding agriculture.--Before initiating 
     negotiations the subject matter of which is directly related 
     to the subject matter under section 302(b)(6)(A) with any 
     country, the President shall assess whether United States 
     tariffs on agriculture products that were bound under the 
     Uruguay Round Agreements are lower than the tariffs bound by 
     that country. In addition, the President shall consider 
     whether the tariff levels bound and applied throughout the 
     world with respect to imports from the United States are 
     higher than United States tariffs and whether the negotiation 
     provides an opportunity to address any such disparity. The 
     President shall consult with the Committee on Ways and Means 
     and the Committee on Agriculture of the House of 
     Representatives and the Committee on Finance and the 
     Committee on Agriculture, Nutrition, and Forestry of the 
     Senate concerning the results of the assessment, whether it 
     is appropriate for the United States to agree to further 
     tariff reductions based on the conclusions reached in the 
     assessment, and how all applicable negotiating objectives 
     will be met.
       (b) Consultation With Congress Before Agreements Entered 
     Into.--
       (1) Consultation.--Before entering into any trade agreement 
     under section 303(b), the President shall consult with--
       (A) the Committee on Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate; 
     and
       (B) each other committee of the House and the Senate, and 
     each joint committee of the Congress, which has jurisdiction 
     over legislation involving subject matters which would be 
     affected by the trade agreement.
       (2) Scope.--The consultation described in paragraph (1) 
     shall include consultation with respect to--
       (A) the nature of the agreement;
       (B) how and to what extent the agreement will achieve the 
     applicable purposes, policies, and objectives of this title; 
     and
       (C) the implementation of the agreement under section 305, 
     including the general effect of the agreement on existing 
     laws.
       (c) Advisory Committee Reports.--The report required under 
     section 135(e)(1) of the Trade Act of 1974 regarding any 
     trade agreement entered into under section 303(a) or (b) of 
     this Act shall be provided to the President, the Congress, 
     and the United States Trade Representative not later than 30 
     days after the date on which the President notifies the 
     Congress under section 303(a)(1) or 305(a)(1)(A) of the 
     President's intention to enter into the agreement.

     SEC. 305. IMPLEMENTATION OF TRADE AGREEMENTS.

       (a) In General.--
       (1) Notification and submission.--Any agreement entered 
     into under section 303(b) shall enter into force with respect 
     to the United States if (and only if)--
       (A) the President, at least 90 calendar days before the day 
     on which the President enters into the trade agreement, 
     notifies the House of Representatives and the Senate of the 
     President's intention to enter into the agreement, and 
     promptly thereafter publishes notice of such intention in the 
     Federal Register;
       (B) within 60 days after entering into the agreement, the 
     President submits to the Congress a description of those 
     changes to

[[Page S1415]]

     existing laws that the President considers would be required 
     in order to bring the United States into compliance with the 
     agreement;
       (C) after entering into the agreement, the President 
     submits a copy of the final legal text of the agreement, 
     together with--
       (i) a draft of an implementing bill described in section 
     303(b)(3);
       (ii) a statement of any administrative action proposed to 
     implement the trade agreement; and
       (iii) the supporting information described in paragraph 
     (2); and
       (D) the implementing bill is enacted into law.
       (2) Supporting information.--The supporting information 
     required under paragraph (1)(C)(iii) consists of--
       (A) an explanation as to how the implementing bill and 
     proposed administrative action will change or affect existing 
     law; and
       (B) a statement--
       (i) asserting that the agreement makes progress in 
     achieving the applicable purposes, policies, and objectives 
     of this title;
       (ii) setting forth the reasons of the President regarding--

       (I) how and to what extent the agreement makes progress in 
     achieving the applicable purposes, policies, and objectives 
     referred to in clause (i);
       (II) whether and how the agreement changes provisions of an 
     agreement previously negotiated;
       (III) how the agreement serves the interests of United 
     States commerce; and
       (IV) how the implementing bill meets the standards set 
     forth in section 303(b)(3).

       (3) Reciprocal benefits.--In order to ensure that a foreign 
     country that is not a party to a trade agreement entered into 
     under section 303(b) does not receive benefits under the 
     agreement unless the country is also subject to the 
     obligations under the agreement, the implementing bill 
     submitted with respect to the agreement shall provide that 
     the benefits and obligations under the agreement apply only 
     to the parties to the agreement, if such application is 
     consistent with the terms of the agreement. The implementing 
     bill may also provide that the benefits and obligations under 
     the agreement do not apply uniformly to all parties to the 
     agreement, if such application is consistent with the terms 
     of the agreement.
       (b) Limitations on Trade Authorities Procedures.--
       (1) For lack of consultations.--
       (A) In general.--The trade authorities procedures shall not 
     apply to any implementing bill submitted with respect to a 
     trade agreement entered into under section 303(b) if during 
     the 60-day period beginning on the date that one House of 
     Congress agrees to a procedural disapproval resolution for 
     lack of notice or consultations with respect to that trade 
     agreement, the other House separately agrees to a procedural 
     disapproval resolution with respect to that agreement.
       (B) Procedural disapproval resolution.--For purposes of 
     this paragraph, the term ``procedural disapproval 
     resolution'' means a resolution of either House of Congress, 
     the sole matter after the resolving clause of which is as 
     follows: ``That the President has failed or refused to notify 
     or consult (as the case may be) with Congress in accordance 
     with section 304 or 305 of the Reciprocal Trade Agreement 
     Authorities Act of 2001 on negotiations with respect to, or 
     entering into, a trade agreement to which section 303(b) of 
     that Act applies and, therefore, the provisions of section 
     151 of the Trade Act of 1974 shall not apply to any 
     implementing bill submitted with respect to that trade 
     agreement.''.
       (2) Procedures for considering resolution.--(A) A 
     procedural disapproval resolution--
       (i) in the House of Representatives--
       (I) shall be introduced by the chairman or ranking minority 
     member of the Committee on Ways and Means or the chairman or 
     ranking minority member of the Committee on Rules;
       (II) shall be referred to the Committee on Ways and Means 
     and to the Committee on Rules; and
       (III) may not be amended by either Committee; and
       (ii) in the Senate shall be an original resolution of the 
     Committee on Finance.
       (B) The provisions of section 152(d) and (e) of the Trade 
     Act of 1974 (19 U.S.C. 2192(d) and (e)) (relating to the 
     floor consideration of certain resolutions in the House and 
     Senate) apply to a procedural disapproval resolution.
       (C) It is not in order for the House of Representatives to 
     consider any procedural disapproval resolution not reported 
     by the Committee on Ways and Means and by the Committee on 
     Rules.
       (c) Rules of House of Representatives and Senate.--
     Subsection (b) of this section and section 303(c) are enacted 
     by the Congress--
       (1) as an exercise of the rulemaking power of the House of 
     Representatives and the Senate, respectively, and as such are 
     deemed a part of the rules of each House, respectively, and 
     such procedures supersede other rules only to the extent that 
     they are inconsistent with such other rules; and
       (2) with the full recognition of the constitutional right 
     of either House to change the rules (so far as relating to 
     the procedures of that House) at any time, in the same 
     manner, and to the same extent as any other rule of that 
     House.

     SEC. 306. TREATMENT OF CERTAIN TRADE AGREEMENTS.

       (a) Certain Agreements.--Notwithstanding section 303(b)(2), 
     if an agreement to which section 303(b) applies--
       (1) is entered into under the auspices of the World Trade 
     Organization regarding trade in information technology 
     products,
       (2) is entered into under the auspices of the World Trade 
     Organization regarding extended negotiations on financial 
     services as described in section 135(a) of the Uruguay Round 
     Agreements Act (19 U.S.C. 3555(a)),
       (3) is entered into under the auspices of the World Trade 
     Organization regarding the rules of origin work program 
     described in Article 9 of the Agreement on Rules of Origin 
     referred to in section 101(d)(10) of the Uruguay Round 
     Agreements Act (19 U.S.C. 3511(d)(10)), or
       (4) is entered into with Chile,

     and results from negotiations that were commenced before the 
     date of enactment of this Act, subsection (b) shall apply.
       (b) Treatment of Agreements.--In the case of any agreement 
     to which subsection (a) applies--
       (1) the applicability of the trade authorities procedures 
     to implementing bills shall be determined without regard to 
     the requirements of section 304(a), and any procedural 
     disapproval resolution under section 305(b)(1)(B) shall not 
     be in order on the basis of a failure or refusal to comply 
     with the provisions of section 304(a); and
       (2) the President shall consult regarding the negotiations 
     described in subsection (a) with the committees described in 
     section 304(a)(1)(B) as soon as feasible after the enactment 
     of this Act.

     SEC. 307. CONFORMING AMENDMENTS.

       (a) In General.--Title I of the Trade Act of 1974 (19 
     U.S.C. 2111 et seq.) is amended as follows:
       (1) Implementing bill.--
       (A) Section 151(b)(1) (19 U.S.C. 2191(b)(1)) is amended by 
     striking ``section 1103(a)(1) of the Omnibus Trade and 
     Competitiveness Act of 1988, or section 282 of the Uruguay 
     Round Agreements Act'' and inserting ``section 282 of the 
     Uruguay Round Agreements Act, or section 305(a)(1) of the 
     Reciprocal Trade Agreement Authorities Act of 2001''.
       (B) Section 151(c)(1) (19 U.S.C. 2191(c)(1)) is amended by 
     striking ``or section 282 of the Uruguay Round Agreements 
     Act'' and inserting ``, section 282 of the Uruguay Round 
     Agreements Act, or section 305(a)(1) of the Reciprocal Trade 
     Agreement Authorities Act of 2001''.
       (2) Advice from international trade commission.--Section 
     131 (19 U.S.C. 2151) is amended--
       (A) in subsection (a)--
       (i) in paragraph (1), by striking ``section 123 of this Act 
     or section 1102 (a) or (c) of the Omnibus Trade and 
     Competitiveness Act of 1988,'' and inserting ``section 123 of 
     this Act or section 303(a) or (b) of the Reciprocal Trade 
     Agreement Authorities Act of 2001,''; and
       (ii) in paragraph (2), by striking ``section 1102 (b) or 
     (c) of the Omnibus Trade and Competitiveness Act of 1988'' 
     and inserting ``section 303(b) of the Reciprocal Trade 
     Agreement Authorities Act of 2001'';
       (B) in subsection (b), by striking ``section 
     1102(a)(3)(A)'' and inserting ``section 303(a)(3)(A) of the 
     Reciprocal Trade Agreement Authorities Act of 2001'' before 
     the end period; and
       (C) in subsection (c), by striking ``section 1102 of the 
     Omnibus Trade and Competitiveness Act of 1988,'' and 
     inserting ``section 303 of the Reciprocal Trade Agreement 
     Authorities Act of 2001,''.
       (3) Hearings and advice.--Sections 132, 133(a), and 134(a) 
     (19 U.S.C. 2152, 2153(a), and 2154(a)) are each amended by 
     striking ``section 1102 of the Omnibus Trade and 
     Competitiveness Act of 1988,'' each place it appears and 
     inserting ``section 303 of the Reciprocal Trade Agreement 
     Authorities Act of 2001,''.
       (4) Prerequisites for offers.--Section 134(b) (19 U.S.C. 
     2154(b)) is amended by striking ``section 1102 of the Omnibus 
     Trade and Competitiveness Act of 1988'' and inserting 
     ``section 303 of the Reciprocal Trade Agreement Authorities 
     Act of 2001''.
       (5) Advice from private and public sectors.--Section 135 
     (19 U.S.C. 2155) is amended--
       (A) in subsection (a)(1)(A), by striking ``section 1102 of 
     the Omnibus Trade and Competitiveness Act of 1988'' and 
     inserting ``section 303 of the Reciprocal Trade Agreement 
     Authorities Act of 2001'';
       (B) in subsection (e)(1)--
       (i) by striking ``section 1102 of the Omnibus Trade and 
     Competitiveness Act of 1988'' each place it appears and 
     inserting ``section 303 of the Reciprocal Trade Agreement 
     Authorities Act of 2001''; and
       (ii) by striking ``section 1103(a)(1)(A) of such Act of 
     1988'' and inserting ``section 305(a)(1)(A) of the Reciprocal 
     Trade Agreement Authorities Act of 2001''; and
       (C) in subsection (e)(2), by striking ``section 1101 of the 
     Omnibus Trade and Competitiveness Act of 1988'' and inserting 
     ``section 302 of the Reciprocal Trade Agreement Authorities 
     Act of 2001''.
       (6) Transmission of agreements to congress.--Section 162(a) 
     (19 U.S.C. 2212(a)) is amended by striking ``or under section 
     1102 of the Omnibus Trade and Competitiveness Act of 1988'' 
     and inserting ``or under section 303 of the Reciprocal Trade 
     Agreement Authorities Act of 2001''.
       (b) Application of Certain Provisions.--For purposes of 
     applying sections 125, 126,

[[Page S1416]]

     and 127 of the Trade Act of 1974 (19 U.S.C. 2135, 2136(a), 
     and 2137)--
       (1) any trade agreement entered into under section 303 
     shall be treated as an agreement entered into under section 
     101 or 102, as appropriate, of the Trade Act of 1974 (19 
     U.S.C. 2111 or 2112); and
       (2) any proclamation or Executive order issued pursuant to 
     a trade agreement entered into under section 303 shall be 
     treated as a proclamation or Executive order issued pursuant 
     to a trade agreement entered into under section 102 of the 
     Trade Act of 1974.

     SEC. 308. DEFINITIONS.

       In this title:
       (1) United states person.--The term ``United States 
     person'' means--
       (A) a United States citizen;
       (B) a partnership, corporation, or other legal entity 
     organized under the laws of the United States; and
       (C) a partnership, corporation, or other legal entity that 
     is organized under the laws of a foreign country and is 
     controlled by entities described in subparagraph (B) or 
     United States citizens, or both.
       (2) Uruguay round agreements.--The term ``Uruguay Round 
     Agreements'' has the meaning given that term in section 2(7) 
     of the Uruguay Round Agreements Act (19 U.S.C. 3501(7)).
       (3) World trade organization.--The term ``World Trade 
     Organization'' means the organization established pursuant to 
     the WTO Agreement.
       (4) WTO agreement.--The term ``WTO Agreement'' means the 
     Agreement Establishing the World Trade Organization entered 
     into on April 15, 1994.

                  TITLE IV--AGRICULTURAL TRADE FREEDOM

     SEC. 401. SHORT TITLE.

       This title may be cited as the ``Agricultural Trade Freedom 
     Act''.

     SEC. 402. DEFINITIONS.

       In this title, the terms ``agricultural commodity'' and 
     ``United States agricultural commodity'' have the meanings 
     given the terms in section 102 of the Agricultural Trade Act 
     of 1978 (7 U.S.C. 5602).

     SEC. 403. AGRICULTURAL COMMODITIES, LIVESTOCK, AND PRODUCTS 
                   EXEMPT FROM UNILATERAL AGRICULTURAL SANCTIONS.

       Subtitle B of title IV of the Agricultural Trade Act of 
     1978 (7 U.S.C. 5661 et seq.) is amended by adding at the end 
     the following:

     ``SEC. 418. AGRICULTURAL COMMODITIES, LIVESTOCK, AND PRODUCTS 
                   EXEMPT FROM UNILATERAL AGRICULTURAL SANCTIONS.

       ``(a) Definitions.--In this section:
       ``(1) Current sanction.--The term `current sanction' means 
     a unilateral agricultural sanction that is in effect on the 
     date of enactment of the Agricultural Trade Freedom Act.
       ``(2) New sanction.--The term `new sanction' means a 
     unilateral agricultural sanction that becomes effective after 
     the date of enactment of that Act.
       ``(3) Unilateral agricultural sanction.--The term 
     `unilateral agricultural sanction' means any prohibition, 
     restriction, or condition that is imposed on the export of an 
     agricultural commodity to a foreign country or foreign entity 
     and that is imposed by the United States for reasons of the 
     national interest, except in a case in which the United 
     States imposes the measure pursuant to a multilateral regime 
     and the other members of that regime have agreed to impose 
     substantially equivalent measures.
       ``(b) Exemption.--
       ``(1) In general.--Subject to paragraphs (2) and (3) and 
     notwithstanding any other provision of law, agricultural 
     commodities made available as a result of commercial sales 
     shall be exempt from a unilateral agricultural sanction 
     imposed by the United States on another country.
       ``(2) Exclusions.--Paragraph (1) shall not apply to 
     agricultural commodities made available as a result of 
     programs carried out under--
       ``(A) the Agricultural Trade Development and Assistance Act 
     of 1954 (7 U.S.C. 1691 et seq.);
       ``(B) section 416 of the Agricultural Act of 1949 (7 U.S.C. 
     1431);
       ``(C) the Food for Progress Act of 1985 (7 U.S.C. 1736o);
       ``(D) the Agricultural Trade Act of 1978 (7 U.S.C. 5601 et 
     seq.); or
       ``(E) section 153 of the Food Security Act of 1985 (15 
     U.S.C. 713a-14).
       ``(3) Determination by president.--The President may 
     include agricultural commodities made available as a result 
     of the activities described in paragraph (1) in the 
     unilateral agricultural sanction imposed on a foreign country 
     or foreign entity if--
       ``(A) a declaration of war by Congress is in effect with 
     respect to the foreign country or foreign entity; or
       ``(B)(i) the President determines that inclusion of the 
     agricultural commodities is in the national interest;
       ``(ii) the President submits the report required under 
     subsection (d); and
       ``(iii) Congress has not approved a joint resolution 
     stating the disapproval of Congress of the report submitted 
     under subsection (d).
       ``(4) Effect on agricultural trade.--Nothing in this 
     subsection requires the imposition of a unilateral 
     agricultural sanction with respect to an agricultural 
     commodity, whether exported in connection with a commercial 
     sale or a program described in paragraph (2).
       ``(c) Current Sanctions.--
       ``(1) In general.--Subject to paragraph (2), the exemption 
     under subsection (b)(1) shall apply to a current sanction.
       ``(2) Presidential review.--Not later than 90 days after 
     the date of enactment of the Agricultural Trade Freedom Act, 
     the President shall review each current sanction to determine 
     whether the exemption under subsection (b)(1) should apply to 
     the current sanction.
       ``(3) Application.--The exemption under subsection (b)(1) 
     shall apply to a current sanction beginning on the date that 
     is 180 days after the date of enactment of the Agricultural 
     Trade Freedom Act unless the President determines that the 
     exemption should not apply to the current sanction for 
     reasons of the national interest.
       ``(d) Report.--
       ``(1) In general.--If the President determines under 
     subsection (b)(3)(B)(i) or (c)(3) that the exemption should 
     not apply to a unilateral agricultural sanction, the 
     President shall submit a report to Congress not later than 15 
     days after the date of the determination.
       ``(2) Contents of report.--The report shall contain--
       ``(A) an explanation of--
       ``(i) the economic activity that is proposed to be 
     prohibited, restricted, or conditioned by the unilateral 
     agricultural sanction; and
       ``(ii) the national interest for which the exemption should 
     not apply to the unilateral agricultural sanction; and
       ``(B) an assessment by the Secretary--
       ``(i) regarding export sales--

       ``(I) in the case of a current sanction, whether markets in 
     the sanctioned country or countries present a substantial 
     trade opportunity for export sales of a United States 
     agricultural commodity; or
       ``(II) in the case of a new sanction, the extent to which 
     any country or countries to be sanctioned or likely to be 
     sanctioned are markets that accounted for, during the 
     preceding calendar year, more than 3 percent of export sales 
     of a United States agricultural commodity;
       ``(ii) regarding the effect on United States agricultural 
     commodities--

       ``(I) in the case of a current sanction, the potential for 
     export sales of United States agricultural commodities in the 
     sanctioned country or countries; and
       ``(II) in the case of a new sanction, the likelihood that 
     exports of United States agricultural commodities will be 
     affected by the new sanction or by retaliation by any country 
     to be sanctioned or likely to be sanctioned, including a 
     description of specific United States agricultural 
     commodities that are most likely to be affected;

       ``(iii) regarding the income of agricultural producers--

       ``(I) in the case of a current sanction, the potential for 
     increasing the income of producers of the United States 
     agricultural commodities involved; and
       ``(II) in the case of a new sanction, the likely effect on 
     incomes of producers of the agricultural commodities 
     involved;

       ``(iv) regarding displacement of United States suppliers--

       ``(I) in the case of a current sanction, the potential for 
     increased competition for United States suppliers of the 
     agricultural commodity in countries that are not subject to 
     the current sanction because of uncertainty about the 
     reliability of the United States suppliers; and
       ``(II) in the case of a new sanction, the extent to which 
     the new sanction would permit foreign suppliers to replace 
     United States suppliers; and

       ``(v) regarding the reputation of United States 
     agricultural producers as reliable suppliers--

       ``(I) in the case of a current sanction, whether removing 
     the sanction would improve the reputation of United States 
     producers as reliable suppliers of agricultural commodities 
     in general, and of specific agricultural commodities 
     identified by the Secretary; and
       ``(II) in the case of a new sanction, the likely effect of 
     the proposed sanction on the reputation of United States 
     producers as reliable suppliers of agricultural commodities 
     in general, and of specific agricultural commodities 
     identified by the Secretary.

       ``(e) Congressional Priority Procedures.--
       ``(1) Joint resolution.--In this subsection, the term 
     `joint resolution' means only a joint resolution introduced 
     within 10 session days of Congress after the date on which 
     the report of the President under subsection (d) is received 
     by Congress, the matter after the resolving clause of which 
     is as follows: `That Congress disapproves the report of the 
     President pursuant to section 418(d) of the Agricultural 
     Trade Act of 1978, transmitted on ______________