[Congressional Record Volume 147, Number 68 (Thursday, May 17, 2001)]
[Senate]
[Pages S5129-S5181]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           TEXT OF AMENDMENTS

  SA 650. Mr. GRASSLEY (for himself and Mr. Baucus) proposed an 
amendment to the bill H.R. 1836, to provide for reconciliation pursuant 
to section 104 of the concurrent resolution on the budget for fiscal 
year 2002; as follows:

       Strike all after the enacting clause and insert the 
     following:

     SECTION 1. SHORT TITLE; ETC.

       (a) Short Title.--This Act may be cited as the ``Restoring 
     Earnings To Lift Individuals and Empower Families (RELIEF) 
     Act of 2001''.
       (b) Amendment of 1986 Code.--Except as otherwise expressly 
     provided, whenever in this Act an amendment or repeal is 
     expressed in terms of an amendment to, or repeal of, a 
     section or other provision, the reference shall be considered 
     to be made to a section or other provision of the Internal 
     Revenue Code of 1986.
       (c) Section 15 Not To Apply.--No amendment made by this Act 
     shall be treated as a change in a rate of tax for purposes of 
     section 15 of the Internal Revenue Code of 1986.
       (d) Table of Contents.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title; etc.

             TITLE I--INDIVIDUAL INCOME TAX RATE REDUCTIONS

                         Subtitle A--In General

Sec. 101. Reduction in income tax rates for individuals.
Sec. 102. Increase in amount of income required before phaseout of 
              itemized deductions begins.
Sec. 103. Repeal of phaseout of deduction for personal exemptions.

          Subtitle B--Compliance With Congressional Budget Act

Sec. 111. Sunset of provisions of title.
Sec. 112. Restoration of provisions of title.

                       TITLE II--CHILD TAX CREDIT

                         Subtitle A--In General

Sec. 201. Modifications to child tax credit.

          Subtitle B--Compliance With Congressional Budget Act

Sec. 211. Sunset of provisions of title.
Sec. 212. Restoration of provisions of title.

                   TITLE III--MARRIAGE PENALTY RELIEF

                         Subtitle A--In General

Sec. 301. Elimination of marriage penalty in standard deduction.
Sec. 302. Phaseout of marriage penalty in 15-percent bracket.
Sec. 303. Marriage penalty relief for earned income credit; earned 
              income to include only amounts includible in gross 
              income; simplification of earned income credit.

          Subtitle B--Compliance With Congressional Budget Act

Sec. 311. Sunset of provisions of title.
Sec. 312. Restoration of provisions of title.

               TITLE IV--AFFORDABLE EDUCATION PROVISIONS

                Subtitle A--Education Savings Incentives

Sec. 401. Modifications to education individual retirement accounts.
Sec. 402. Modifications to qualified tuition programs.

                   Subtitle B--Educational Assistance

Sec. 411. Permanent extension of exclusion for employer-provided 
              educational assistance.
Sec. 412. Elimination of 60-month limit and increase in income 
              limitation on student loan interest deduction.
Sec. 413. Exclusion of certain amounts received under the national 
              health service corps scholarship program and the F. 
              Edward Hebert Armed Forces Health Professions Scholarship 
              and Financial Assistance Program.

  Subtitle C--Liberalization of Tax-Exempt Financing Rules for Public 
                          School Construction

Sec. 421. Additional increase in arbitrage rebate exception for 
              governmental bonds used to finance educational 
              facilities.
Sec. 422. Treatment of qualified public educational facility bonds as 
              exempt facility bonds.

                      Subtitle D--Other Provisions

Sec. 431. Deduction for higher education expenses.
Sec. 432. Credit for interest on higher education loans.

          Subtitle E--Compliance With Congressional Budget Act

Sec. 441. Sunset of provisions of title.
Sec. 442. Restoration of provisions of title.

 TITLE V--ESTATE, GIFT, AND GENERATION-SKIPPING TRANSFER TAX PROVISIONS

  Subtitle A--Repeal of Estate and Generation-Skipping Transfer Taxes

Sec. 501. Repeal of estate and generation-skipping transfer taxes.

          Subtitle B--Reductions of Estate and Gift Tax Rates

Sec. 511. Additional reductions of estate and gift tax rates.

               Subtitle C--Increase in Exemption Amounts

Sec. 521. Increase in exemption equivalent of unified credit, lifetime 
              gifts exemption, and GST exemption amounts.

                Subtitle D--Credit for State Death Taxes

Sec. 531. Reduction of credit for State death taxes.
Sec. 532. Credit for State death taxes replaced with deduction for such 
              taxes.

Subtitle E--Carryover Basis at Death; Other Changes Taking Effect With 
                                 Repeal

Sec. 541. Termination of step-up in basis at death.
Sec. 542. Treatment of property acquired from a decedent dying after 
              December 31, 2010.

                   Subtitle F--Conservation Easements

Sec. 551. Expansion of estate tax rule for conservation easements.

     Subtitle G--Modifications of Generation-Skipping Transfer Tax

Sec. 561. Deemed allocation of GST exemption to lifetime transfers to 
              trusts; retroactive allocations.
Sec. 562. Severing of trusts.
Sec. 563. Modification of certain valuation rules.
Sec. 564. Relief provisions.

        Subtitle H--Extension of Time for Payment of Estate Tax

Sec. 571. Expansion of availability of installment payment for estates 
              with interests qualifying lending and finance businesses.
Sec. 572. Clarification of availability of installment payment.

          Subtitle I--Compliance With Congressional Budget Act

Sec. 581. Sunset of provisions of title.
Sec. 582. Restoration of provisions of title.

[[Page S5130]]

   TITLE VI--PENSION AND INDIVIDUAL RETIREMENT ARRANGEMENT PROVISIONS

               Subtitle A--Individual Retirement Accounts

Sec. 601. Modification of IRA contribution limits.
Sec. 602. Deemed IRAs under employer plans.
Sec. 603. Tax-free distributions from individual retirement accounts 
              for charitable purposes.

                     Subtitle B--Expanding Coverage

Sec. 611. Increase in benefit and contribution limits.
Sec. 612. Plan loans for subchapter S owners, partners, and sole 
              proprietors.
Sec. 613. Modification of top-heavy rules.
Sec. 614. Elective deferrals not taken into account for purposes of 
              deduction limits.
Sec. 615. Repeal of coordination requirements for deferred compensation 
              plans of State and local governments and tax-exempt 
              organizations.
Sec. 616. Deduction limits.
Sec. 617. Option to treat elective deferrals as after-tax Roth 
              contributions.
Sec. 618. Nonrefundable credit to certain individuals for elective 
              deferrals and IRA contributions.
Sec. 619. Credit for qualified pension plan contributions of small 
              employers.
Sec. 620. Credit for pension plan startup costs of small employers.
Sec. 621. Elimination of user fee for requests to IRS regarding new 
              pension plans.
Sec. 622. Treatment of nonresident aliens engaged in international 
              transportation services.

                Subtitle C--Enhancing Fairness for Women

Sec. 631. Catch-up contributions for individuals age 50 or over.
Sec. 632. Equitable treatment for contributions of employees to defined 
              contribution plans.
Sec. 633. Faster vesting of certain employer matching contributions.
Sec. 634. Modifications to minimum distribution rules.
Sec. 635. Clarification of tax treatment of division of section 457 
              plan benefits upon divorce.
Sec. 636. Provisions relating to hardship distributions.
Sec. 637. Waiver of tax on nondeductible contributions for domestic or 
              similar workers.

          Subtitle D--Increasing Portability for Participants

Sec. 641. Rollovers allowed among various types of plans.
Sec. 642. Rollovers of IRAs into workplace retirement plans.
Sec. 643. Rollovers of after-tax contributions.
Sec. 644. Hardship exception to 60-day rule.
Sec. 645. Treatment of forms of distribution.
Sec. 646. Rationalization of restrictions on distributions.
Sec. 647. Purchase of service credit in governmental defined benefit 
              plans.
Sec. 648. Employers may disregard rollovers for purposes of cash-out 
              amounts.
Sec. 649. Minimum distribution and inclusion requirements for section 
              457 plans.

       Subtitle E--Strengthening Pension Security and Enforcement

                       Part I--General Provisions

Sec. 651. Repeal of 160 percent of current liability funding limit.
Sec. 652. Maximum contribution deduction rules modified and applied to 
              all defined benefit plans.
Sec. 653. Excise tax relief for sound pension funding.
Sec. 654. Treatment of multiemployer plans under section 415.
Sec. 655. Protection of investment of employee contributions to 401(k) 
              plans.
Sec. 656. Prohibited allocations of stock in S corporation ESOP.
Sec. 657. Automatic rollovers of certain mandatory distributions.
Sec. 658. Clarification of treatment of contributions to multiemployer 
              plan.

 Part II--Treatment of Plan Amendments Reducing Future Benefit Accruals

Sec. 659. Notice required for pension plan amendments having the effect 
              of significantly reducing future benefit accruals.

                Subtitle F--Reducing Regulatory Burdens

Sec. 661. Modification of timing of plan valuations.
Sec. 662. ESOP dividends may be reinvested without loss of dividend 
              deduction.
Sec. 663. Repeal of transition rule relating to certain highly 
              compensated employees.
Sec. 664. Employees of tax-exempt entities.
Sec. 665. Clarification of treatment of employer-provided retirement 
              advice.
Sec. 666. Reporting simplification.
Sec. 667. Improvement of employee plans compliance resolution system.
Sec. 668. Repeal of the multiple use test.
Sec. 669. Flexibility in nondiscrimination, coverage, and line of 
              business rules.
Sec. 670. Extension to all governmental plans of moratorium on 
              application of certain nondiscrimination rules applicable 
              to State and local plans.

                   Subtitle G--Other ERISA Provisions

Sec. 681. Missing participants.
Sec. 682. Reduced PBGC premium for new plans of small employers.
Sec. 683. Reduction of additional PBGC premium for new and small plans.
Sec. 684. Authorization for PBGC to pay interest on premium overpayment 
              refunds.
Sec. 685. Substantial owner benefits in terminated plans.

                  Subtitle H--Miscellaneous Provisions

Sec. 691. Tax treatment and information requirements of Alaska Native 
              Settlement Trusts.

          Subtitle I--Compliance With Congressional Budget Act

Sec. 695. Sunset of provisions of title.
Sec. 696. Restoration of provisions of title.

                   TITLE VII--ALTERNATIVE MINIMUM TAX

                         Subtitle A--In General

Sec. 701. Increase in alternative minimum tax exemption.

          Subtitle B--Compliance With Congressional Budget Act

Sec. 711. Sunset of provisions of title.
Sec. 712. Restoration of provisions of title.

                      TITLE VIII--OTHER PROVISIONS

                         Subtitle A--In General

Sec. 801. Time for payment of corporate estimated taxes.
Sec. 802. Expansion of authority to postpone certain tax-related 
              deadlines by reason of presidentially declared disaster.

          Subtitle B--Compliance With Congressional Budget Act

Sec. 811. Sunset of provisions of title.
Sec. 812. Restoration of provisions of title.

             TITLE I--INDIVIDUAL INCOME TAX RATE REDUCTIONS

                         Subtitle A--In General

     SEC. 101. REDUCTION IN INCOME TAX RATES FOR INDIVIDUALS.

       (a) In General.--Section 1 is amended by adding at the end 
     the following new subsection:
       ``(i) Rate Reductions After 2000.--
       ``(1) 10-percent rate bracket.--
       ``(A) In general.--In the case of taxable years beginning 
     after December 31, 2000--
       ``(i) the rate of tax under subsections (a), (b), (c), and 
     (d) on taxable income not over the initial bracket amount 
     shall be 10 percent, and
       ``(ii) the 15 percent rate of tax shall apply only to 
     taxable income over the initial bracket amount but not over 
     the maximum dollar amount for the 15-percent rate bracket.
       ``(B) Initial bracket amount.--For purposes of this 
     subsection, the initial bracket amount is--
       ``(i) $12,000 in the case of subsection (a),
       ``(ii) $10,000 in the case of subsection (b), and
       ``(iii) \1/2\ the amount applicable under clause (i) (after 
     adjustment, if any, under subparagraph (C)) in the case of 
     subsections (c) and (d).
       ``(C) Inflation adjustment.--In prescribing the tables 
     under subsection (f) which apply with respect to taxable 
     years beginning in calendar years after 2001--
       ``(i) the Secretary shall make no adjustment to the initial 
     bracket amount for any taxable year beginning before January 
     1, 2007,
       ``(ii) the cost-of-living adjustment used in making 
     adjustments to the initial bracket amount for any taxable 
     year beginning after December 31, 2006, shall be determined 
     under subsection (f)(3) by substituting `2005' for `1992' in 
     subparagraph (B) thereof, and
       ``(iii) such adjustment shall not apply to the amount 
     referred to in subparagraph (B)(iii).
     If any amount after adjustment under the preceding sentence 
     is not a multiple of $50, such amount shall be rounded to the 
     next lowest multiple of $50.
       ``(2) Reductions in rates after 2001.--In the case of 
     taxable years beginning in a calendar year after 2001, the 
     corresponding percentage specified for such calendar year in 
     the following table shall be substituted for the otherwise 
     applicable tax rate in the tables under subsections (a), (b), 
     (c), (d), and (e).

------------------------------------------------------------------------
                                         The corresponding percentages
                                         shall be substituted for the
   ``In the case of taxable years           following percentages:
   beginning during calendar year:   -----------------------------------
                                        28%      31%      36%     39.6%
------------------------------------------------------------------------
2002, 2003, and 2004................    27%      30%      35%     38.6%
2005 and 2006.......................    26%      29%      34%     37.6%
2007 and thereafter.................    25%      28%      33%      36%
------------------------------------------------------------------------

       ``(3) Adjustment of tables.--The Secretary shall adjust the 
     tables prescribed under subsection (f) to carry out this 
     subsection.''.
       (b) Conforming Amendments.--
       (1) Subparagraph (B) of section 1(g)(7) is amended by 
     striking ``15 percent'' in clause (ii)(II) and inserting ``10 
     percent.''.
       (2) Section 1(h) is amended--
       (A) by striking ``28 percent'' both places it appears in 
     paragraphs (1)(A)(ii)(I) and (1)(B)(i) and inserting ``25 
     percent'', and
       (B) by striking paragraph (13).

[[Page S5131]]

       (3) Section 531 is amended by striking ``equal to'' and all 
     that follows and inserting ``equal to the product of the 
     highest rate of tax under section 1(c) and the accumulated 
     taxable income.''.
       (4) Section 541 is amended by striking ``equal to'' and all 
     that follows and inserting ``equal to the product of the 
     highest rate of tax under section 1(c) and the undistributed 
     personal holding company income.''.
       (5) Section 3402(p)(1)(B) is amended by striking ``7, 15, 
     28, or 31 percent'' and inserting ``7 percent, any percentage 
     applicable to any of the 3 lowest income brackets in the 
     table under section 1(c),''.
       (6) Section 3402(p)(2) is amended by striking ``15 
     percent'' and inserting ``10 percent''.
       (7) Section 3402(q)(1) is amended by striking ``equal to 28 
     percent of such payment'' and inserting ``equal to the 
     product of the third lowest rate of tax under section 1(c) 
     and such payment''.
       (8) Section 3402(r)(3) is amended by striking ``31 
     percent'' and inserting ``the fourth lowest rate of tax under 
     section 1(c)''.
       (9) Section 3406(a)(1) is amended by striking ``equal to 31 
     percent of such payment'' and inserting ``equal to the 
     product of the fourth lowest rate of tax under section 1(c) 
     and such payment''.
       (10) Section 13273 of the Revenue Reconciliation Act of 
     1993 is amended by striking ``28 percent'' and inserting 
     ``the third lowest rate of tax under section 1(c) of the 
     Internal Revenue Code of 1986''.
       (c) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to taxable years 
     beginning after December 31, 2000.
       (2) Amendments to withholding provisions.--The amendments 
     made by paragraphs (6), (7), (8), (9), (10), and (11) of 
     subsection (b) shall apply to amounts paid after the 60th day 
     after the date of the enactment of this Act.

     SEC. 102. INCREASE IN AMOUNT OF INCOME REQUIRED BEFORE 
                   PHASEOUT OF ITEMIZED DEDUCTIONS BEGINS.

       (a) In General.--Section 68(b)(1) (defining applicable 
     amount) is amended--
       (1) by striking ``$100,000'' and inserting ``$150,000'', 
     and
       (2) by striking ``$50,000'' and inserting ``$75,000''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2008.

     SEC. 103. REPEAL OF PHASEOUT OF DEDUCTION FOR PERSONAL 
                   EXEMPTIONS.

       (a) In General.--Subsection (d) of section 151 (relating to 
     exemption amount) is amended by striking paragraph (3).
       (b) Technical Amendments.--
       (1) Paragraph (6) of section 1(f) is amended--
       (A) by striking ``section 151(d)(4)'' in subparagraph (A) 
     and inserting ``section 151(d)(3)'', and
       (B) by striking ``section 151(d)(4)(A)'' in subparagraph 
     (B) and inserting ``section 151(d)(3)''.
       (2) Paragraph (4) of section 151(d) is amended to read as 
     follows:
       ``(3) Inflation adjustment.--In the case of any taxable 
     year beginning in a calendar year after 1989, the dollar 
     amount contained in paragraph (1) shall be increased by an 
     amount equal to--
       ``(A) such dollar amount, multiplied by
       ``(B) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, by substituting `calendar year 1988' for 
     `calendar year 1992' in subparagraph (B) thereof.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2008.

          Subtitle B--Compliance With Congressional Budget Act

     SEC. 111. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.

                       TITLE II--CHILD TAX CREDIT

                         Subtitle A--In General

     SEC. 201. MODIFICATIONS TO CHILD TAX CREDIT.

       (a) Increase in Per Child Amount.--Subsection (a) of 
     section 24 (relating to child tax credit) is amended to read 
     as follows:
       ``(a) Allowance of Credit.--
       ``(1) In general.--There shall be allowed as a credit 
     against the tax imposed by this chapter for the taxable year 
     with respect to each qualifying child of the taxpayer an 
     amount equal to the per child amount.
       ``(2) Per child amount.--For purposes of paragraph (1), the 
     per child amount shall be determined as follows:

The per child amount is--ble year beginning in--
  2001, 2002, or 2003.............................................$600 
  2004, 2005, or 2006..............................................700 
  2007, 2008, or 2009..............................................800 
  2010.............................................................900 
  2011 or thereafter..........................................1,000.''.
       (b) Credit Allowed Against Alternative Minimum Tax.--
       (1) In general.--Subsection (b) of section 24 (relating to 
     child tax credit) is amended by adding at the end the 
     following new paragraph:
       ``(3) Limitation based on amount of tax.--The credit 
     allowed under subsection (a) for any taxable year shall not 
     exceed the excess of--
       ``(A) the sum of the regular tax liability (as defined in 
     section 26(b)) plus the tax imposed by section 55, over
       ``(B) the sum of the credits allowable under this subpart 
     (other than this section) and section 27 for the taxable 
     year.''.
       (2) Conforming amendments.--
       (A) The heading for section 24(b) is amended to read as 
     follows: ``Limitations.--''.
       (B) The heading for section 24(b)(1) is amended to read as 
     follows: ``Limitation based on adjusted gross income.--''.
       (C) Section 24(d) is amended--
       (i) by striking ``section 26(a)'' each place it appears and 
     inserting ``subsection (b)(3)'', and
       (ii) in paragraph (1)(B) by striking ``aggregate amount of 
     credits allowed by this subpart'' and inserting ``amount of 
     credit allowed by this section''.
       (D) Paragraph (1) of section 26(a) is amended by inserting 
     ``(other than section 24)'' after ``this subpart''.
       (E) Subsection (c) of section 23 is amended by striking 
     ``and section 1400C'' and inserting ``and sections 24 and 
     1400C''.
       (F) Subparagraph (C) of section 25(e)(1) is amended by 
     inserting ``, 24,'' after ``sections 23''.
       (G) Section 904(h) is amended by inserting ``(other than 
     section 24)'' after ``chapter''.
       (H) Subsection (d) of section 1400C is amended by inserting 
     ``and section 24'' after ``this section''.
       (c) Refundable Child Credit.--
       (1) In general.--So much of section 24(d) (relating to 
     additional credit for families with 3 or more children) as 
     precedes paragraph (2) is amended to read as follows:
       ``(d) Portion of Credit Refundable.--
       ``(1) In general.--The aggregate credits allowed to a 
     taxpayer under subpart C shall be increased by the lesser 
     of--
       ``(A) the credit which would be allowed under this section 
     without regard to this subsection and the limitation under 
     subsection (b)(3), or
       ``(B) the amount by which the amount of credit allowed by 
     this section (determined without regard to this subsection) 
     would increase if the limitation imposed by subsection (b)(3) 
     were increased by the greater of--
       ``(i) 15 percent of so much of the taxpayer's earned income 
     (within the meaning of section 32) for the taxable year as 
     exceeds $10,000, or
       ``(ii) in the case of a taxpayer with 3 or more qualifying 
     children, the excess (if any) of--

       ``(I) the taxpayer's social security taxes for the taxable 
     year, over
       ``(II) the credit allowed under section 32 for the taxable 
     year.

     The amount of the credit allowed under this subsection shall 
     not be treated as a credit allowed under this subpart and 
     shall reduce the amount of credit otherwise allowable under 
     subsection (a) without regard to subsection (b)(3).''.
       (2) Conforming amendment.--Section 32 is amended by 
     striking subsection (n).
       (d) Elimination of Reduction of Credit to Taxpayer Subject 
     to Alternative Minimum Tax Provision.--Section 24(d) is 
     amended--
       (1) by striking paragraph (2), and
       (2) by redesignating paragraph (3) as paragraph (2).
       (e) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to taxable years 
     beginning after December 31, 2000.
       (2) Subsection (b).--The amendments made by subsection (b) 
     shall apply to taxable years beginning after December 31, 
     2001.

          Subtitle B--Compliance With Congressional Budget Act

     SEC. 211. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.

     SEC. 212. RESTORATION OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     were terminated under section 211 shall begin to apply again 
     as of October 1, 2011, as provided in each such provision or 
     amendment.

                   TITLE III--MARRIAGE PENALTY RELIEF

                         Subtitle A--In General

     SEC. 301. ELIMINATION OF MARRIAGE PENALTY IN STANDARD 
                   DEDUCTION.

       (a) In General.--Paragraph (2) of section 63(c) (relating 
     to standard deduction) is amended--
       (1) by striking ``$5,000'' in subparagraph (A) and 
     inserting ``the applicable percentage of the dollar amount in 
     effect under subparagraph (C) for the taxable year'';
       (2) by adding ``or'' at the end of subparagraph (B);
       (3) by striking ``in the case of'' and all that follows in 
     subparagraph (C) and inserting ``in any other case.''; and
       (4) by striking subparagraph (D).
       (b) Applicable Percentage.--Section 63(c) (relating to 
     standard deduction) is amended by adding at the end the 
     following new paragraph:
       ``(7) Applicable percentage.--For purposes of paragraph 
     (2), the applicable percentage shall be determined in 
     accordance with the following table:

``For taxable years
  beginning                                              The applicable
  in calendar year--                                    percentage is--
  2005.............................................................174 
  2006.............................................................180 
  2007.............................................................187 
  2008.............................................................193 
  2009 and thereafter............................................200.''

[[Page S5132]]

       (c) Technical Amendments.--
       (1) Subparagraph (B) of section 1(f)(6), as amended by 
     section 103(b), is amended by striking ``(other than with'' 
     and all that follows through ``shall be applied'' and 
     inserting ``(other than with respect to sections 63(c)(4) and 
     151(d)(3)(A)) shall be applied''.
       (2) Paragraph (4) of section 63(c) is amended by adding at 
     the end the following flush sentence:
     ``The preceding sentence shall not apply to the amount 
     referred to in paragraph (2)(A).''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2004.

     SEC. 302. PHASEOUT OF MARRIAGE PENALTY IN 15-PERCENT BRACKET.

       (a) In General.--Section 1(f) (relating to adjustments in 
     tax tables so that inflation will not result in tax 
     increases) is amended by adding at the end the following new 
     paragraph:
       ``(8) Phaseout of marriage penalty in 15-percent bracket.--
       ``(A) In general.--With respect to taxable years beginning 
     after December 31, 2005, in prescribing the tables under 
     paragraph (1)--
       ``(i) the maximum taxable income in the 15-percent rate 
     bracket in the table contained in subsection (a) (and the 
     minimum taxable income in the next higher taxable income 
     bracket in such table) shall be the applicable percentage of 
     the maximum taxable income in the 15-percent rate bracket in 
     the table contained in subsection (c) (after any other 
     adjustment under this subsection), and
       ``(ii) the comparable taxable income amounts in the table 
     contained in subsection (d) shall be \1/2\ of the amounts 
     determined under clause (i).
       ``(B) Applicable percentage.--For purposes of subparagraph 
     (A), the applicable percentage shall be determined in 
     accordance with the following table:

    ``For taxable years
      beginning                                          The applicable
      in calendar year--                                percentage is--
  2005.............................................................180 
  2006.............................................................187 
  2007.............................................................193 
  2008 and thereafter.............................................200. 
       ``(C) Rounding.--If any amount determined under 
     subparagraph (A)(i) is not a multiple of $50, such amount 
     shall be rounded to the next lowest multiple of $50.''.
       (b) Technical Amendments.--
       (1) Subparagraph (A) of section 1(f)(2) is amended by 
     inserting ``except as provided in paragraph (8),'' before 
     ``by increasing''.
       (2) The heading for subsection (f) of section 1 is amended 
     by inserting ``Phaseout of Marriage Penalty in 15-Percent 
     Bracket;'' before ``Adjustments''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2004.

     SEC. 303. MARRIAGE PENALTY RELIEF FOR EARNED INCOME CREDIT; 
                   EARNED INCOME TO INCLUDE ONLY AMOUNTS 
                   INCLUDIBLE IN GROSS INCOME; SIMPLIFICATION OF 
                   EARNED INCOME CREDIT.

       (a) Increased Phaseout Amount.--
       (1) In general.--Section 32(b)(2) (relating to amounts) is 
     amended--
       (A) by striking ``Amounts.--The earned'' and inserting 
     ``Amounts.--
       ``(A) In general.--Subject to subparagraph (B), the 
     earned'', and
       (B) by adding at the end the following new subparagraph:
       ``(B) Joint returns.--In the case of a joint return filed 
     by an eligible individual and such individual's spouse, the 
     phaseout amount determined under subparagraph (A) shall be 
     increased by $3,000.''.
       (2) Inflation adjustment.--Paragraph (1)(B) of section 
     32(j) (relating to inflation adjustments) is amended to read 
     as follows:
       ``(B) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, determined--
       ``(i) in the case of amounts in subsections (b)(2)(A) and 
     (i)(1), by substituting `calendar year 1995' for `calendar 
     year 1992' in subparagraph (B) thereof, and
       ``(ii) in the case of the $3,000 amount in subsection 
     (b)(2)(B), by substituting `calendar year 2001' for `calendar 
     year 1992' in subparagraph (B) of such section 1.''.
       (3) Rounding.--Section 32(j)(2)(A) (relating to rounding) 
     is amended by striking ``subsection (b)(2)'' and inserting 
     ``subsection (b)(2)(A) (after being increased under 
     subparagraph (B) thereof)''.
       (b) Earned Income To Include Only Amounts Includible in 
     Gross Income.--Clause (i) of section 32(c)(2)(A) (defining 
     earned income) is amended by inserting ``, but only if such 
     amounts are includible in gross income for the taxable year'' 
     after ``other employee compensation''.
       (c) Repeal of Reduction of Credit to Taxpayers Subject to 
     Alternative Minimum Tax.--Section 32(h) is repealed.
       (d) Replacement of Modified Adjusted Gross Income With 
     Adjusted Gross Income.--
       (1) In general.--Section 32(a)(2)(B) is amended by striking 
     ``modified''.
       (2) Conforming amendments.--
       (A) Section 32(c) is amended by striking paragraph (5).
       (B) Section 32(f)(2)(B) is amended by striking ``modified'' 
     each place it appears.
       (e) Relationship Test.--
       (1) In general.--Clause (i) of section 32(c)(3)(B) 
     (relating to relationship test) is amended to read as 
     follows:
       ``(i) In general.--An individual bears a relationship to 
     the taxpayer described in this subparagraph if such 
     individual is--

       ``(I) a son, daughter, stepson, or stepdaughter, or a 
     descendant of any such individual,
       ``(II) a brother, sister, stepbrother, or stepsister, or a 
     descendant of any such individual, who the taxpayer cares for 
     as the taxpayer's own child, or
       ``(III) an eligible foster child of the taxpayer.''.

       (2) Eligible foster child.--
       (A) In general.--Clause (iii) of section 32(c)(3)(B) is 
     amended to read as follows:
       ``(iii) Eligible foster child.--For purposes of clause (i), 
     the term `eligible foster child' means an individual not 
     described in subclause (I) or (II) of clause (i) who--

       ``(I) is placed with the taxpayer by an authorized 
     placement agency, and
       ``(II) the taxpayer cares for as the taxpayer's own 
     child.''.

       (B) Conforming amendment.--Section 32(c)(3)(A)(ii) is 
     amended by striking ``except as provided in subparagraph 
     (B)(iii),''.
       (f) 2 or More Claiming Qualifying Child.--Section 
     32(c)(1)(C) is amended to read as follows:
       ``(C) 2 or more claiming qualifying child.--
       ``(i) In general.--Except as provided in clause (ii), if 
     (but for this paragraph) an individual may be claimed, and is 
     claimed, as a qualifying child by 2 or more taxpayers for a 
     taxable year beginning in the same calendar year, such 
     individual shall be treated as the qualifying child of the 
     taxpayer who is--

       ``(I) a parent of the individual, or
       ``(II) if subclause (I) does not apply, the taxpayer with 
     the highest adjusted gross income for such taxable year.

       ``(ii) More than 1 claiming credit.--If the parents 
     claiming the credit with respect to any qualifying child do 
     not file a joint return together, such child shall be treated 
     as the qualifying child of--

       ``(I) the parent with whom the child resided for the 
     longest period of time during the taxable year, or
       ``(II) if the child resides with both parents for the same 
     amount of time during such taxable year, the parent with the 
     highest adjusted gross income.''.

       (g) Expansion of Mathematical Error Authority.--Paragraph 
     (2) of section 6213(g) is amended by striking ``and'' at the 
     end of subparagraph (K), by striking the period at the end of 
     subparagraph (L) and inserting ``, and'', and by inserting 
     after subparagraph (L) the following new subparagraph:
       ``(M) the entry on the return claiming the credit under 
     section 32 with respect to a child if, according to the 
     Federal Case Registry of Child Support Orders established 
     under section 453(h) of the Social Security Act, the taxpayer 
     is a noncustodial parent of such child.''
       (h) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to taxable years beginning after December 31, 2001.
       (2) Subsection (g).--The amendment made by subsection (g) 
     shall take effect on January 1, 2004.

          Subtitle B--Compliance With Congressional Budget Act

     SEC. 311. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.

               TITLE IV--AFFORDABLE EDUCATION PROVISIONS

                Subtitle A--Education Savings Incentives

     SEC. 401. MODIFICATIONS TO EDUCATION INDIVIDUAL RETIREMENT 
                   ACCOUNTS.

       (a) Maximum Annual Contributions.--
       (1) In general.--Section 530(b)(1)(A)(iii) (defining 
     education individual retirement account) is amended by 
     striking ``$500'' and inserting ``$2,000''.
       (2) Conforming amendment.--Section 4973(e)(1)(A) is amended 
     by striking ``$500'' and inserting ``$2,000''.
       (b) Modification of AGI Limits To Remove Marriage 
     Penalty.--Section 530(c)(1) (relating to reduction in 
     permitted contributions based on adjusted gross income) is 
     amended--
       (1) by striking ``$150,000'' in subparagraph (A)(ii) and 
     inserting ``$190,000'', and
       (2) by striking ``$10,000'' in subparagraph (B) and 
     inserting ``$30,000''.
       (c) Tax-Free Expenditures for Elementary and Secondary 
     School Expenses.--
       (1) In general.--Section 530(b)(2) (defining qualified 
     higher education expenses) is amended to read as follows:
       ``(2) Qualified education expenses.--
       ``(A) In general.--The term `qualified education expenses' 
     means--
       ``(i) qualified higher education expenses (as defined in 
     section 529(e)(3)), and
       ``(ii) qualified elementary and secondary education 
     expenses (as defined in paragraph (4)).
       ``(B) Qualified state tuition programs.--Such term shall 
     include any contribution to a qualified State tuition program 
     (as defined in section 529(b)) on behalf of the designated 
     beneficiary (as defined in section 529(e)(1)); but there 
     shall be no increase in the investment in the contract for 
     purposes of applying section 72 by reason of any portion of 
     such contribution which is not includible in gross income by 
     reason of subsection (d)(2).''.
       (2) Qualified elementary and secondary education 
     expenses.--Section 530(b) (relating to definitions and 
     special rules) is amended by adding at the end the following 
     new paragraph:
       ``(4) Qualified elementary and secondary education 
     expenses.--

[[Page S5133]]

       ``(A) In general.--The term `qualified elementary and 
     secondary education expenses' means--
       ``(i) expenses for tuition, fees, academic tutoring, 
     special needs services, books, supplies, computer equipment 
     (including related software and services), and other 
     equipment which are incurred in connection with the 
     enrollment or attendance of the designated beneficiary of the 
     trust as an elementary or secondary school student at a 
     public, private, or religious school, and
       ``(ii) expenses for room and board, uniforms, 
     transportation, and supplementary items and services 
     (including extended day programs) which are required or 
     provided by a public, private, or religious school in 
     connection with such enrollment or attendance.
       ``(B) School.--The term `school' means any school which 
     provides elementary education or secondary education 
     (kindergarten through grade 12), as determined under State 
     law.''.
       (3) Conforming amendments.--Section 530 is amended--
       (A) by striking ``higher'' each place it appears in 
     subsections (b)(1) and (d)(2), and
       (B) by striking ``higher'' in the heading for subsection 
     (d)(2).
       (d) Waiver of Age Limitations for Children With Special 
     Needs.--Section 530(b)(1) (defining education individual 
     retirement account) is amended by adding at the end the 
     following flush sentence:
     ``The age limitations in subparagraphs (A)(ii) and (E), and 
     paragraphs (5) and (6) of subsection (d), shall not apply to 
     any designated beneficiary with special needs (as determined 
     under regulations prescribed by the Secretary).''.
       (e) Entities Permitted To Contribute to Accounts.--Section 
     530(c)(1) (relating to reduction in permitted contributions 
     based on adjusted gross income) is amended by striking ``The 
     maximum amount which a contributor'' and inserting ``In the 
     case of a contributor who is an individual, the maximum 
     amount the contributor''.
       (f) Time When Contributions Deemed Made.--
       (1) In general.--Section 530(b) (relating to definitions 
     and special rules), as amended by subsection (c)(2), is 
     amended by adding at the end the following new paragraph:
       ``(5) Time when contributions deemed made.--An individual 
     shall be deemed to have made a contribution to an education 
     individual retirement account on the last day of the 
     preceding taxable year if the contribution is made on account 
     of such taxable year and is made not later than the time 
     prescribed by law for filing the return for such taxable year 
     (not including extensions thereof).''.
       (2) Extension of time to return excess contributions.--
     Subparagraph (C) of section 530(d)(4) (relating to additional 
     tax for distributions not used for educational expenses) is 
     amended--
       (A) by striking clause (i) and inserting the following new 
     clause:
       ``(i) such distribution is made before the first day of the 
     sixth month of the taxable year following the taxable year, 
     and'', and
       (B) by striking ``due date of return'' in the heading and 
     inserting ``certain date''.
       (g) Coordination With Hope and Lifetime Learning Credits 
     and Qualified Tuition Programs.--
       (1) In general.--Section 530(d)(2)(C) is amended to read as 
     follows:
       ``(C) Coordination with hope and lifetime learning credits 
     and qualified tuition programs.--For purposes of subparagraph 
     (A)--
       ``(i) Credit coordination.--The total amount of qualified 
     higher education expenses with respect to an individual for 
     the taxable year shall be reduced--

       ``(I) as provided in section 25A(g)(2), and
       ``(II) by the amount of such expenses which were taken into 
     account in determining the credit allowed to the taxpayer or 
     any other person under section 25A.

       ``(ii) Coordination with qualified tuition programs.--If, 
     with respect to an individual for any taxable year--

       ``(I) the aggregate distributions during such year to which 
     subparagraph (A) and section 529(c)(3)(B) apply, exceed
       ``(II) the total amount of qualified education expenses 
     (after the application of clause (i)) for such year,

     the taxpayer shall allocate such expenses among such 
     distributions for purposes of determining the amount of the 
     exclusion under subparagraph (A) and section 529(c)(3)(B).''.
       (2) Conforming amendments.--
       (A) Subsection (e) of section 25A is amended to read as 
     follows:
       ``(e) Election Not To Have Section Apply.--A taxpayer may 
     elect not to have this section apply with respect to the 
     qualified tuition and related expenses of an individual for 
     any taxable year.''.
       (B) Section 135(d)(2)(A) is amended by striking 
     ``allowable'' and inserting ``allowed''.
       (C) Section 530(d)(2)(D) is amended--
       (i) by striking ``or credit'', and
       (ii) by striking ``credit or'' in the heading.
       (D) Section 4973(e)(1) is amended by adding ``and'' at the 
     end of subparagraph (A), by striking subparagraph (B), and by 
     redesignating subparagraph (C) as subparagraph (B).
       (h) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 402. MODIFICATIONS TO QUALIFIED TUITION PROGRAMS.

       (a) Eligible Educational Institutions Permitted To Maintain 
     Qualified Tuition Programs.--
       (1) In general.--Section 529(b)(1) (defining qualified 
     State tuition program) is amended--
       (A) by inserting ``or by 1 or more eligible educational 
     institutions'' after ``maintained by a State or agency or 
     instrumentality thereof '' in the matter preceding 
     subparagraph (A), and
       (B) by adding at the end the following new flush sentence:
     ``Except to the extent provided in regulations, a program 
     established and maintained by 1 or more eligible educational 
     institutions shall not be treated as a qualified tuition 
     program unless such program has received a ruling or 
     determination that such program meets the applicable 
     requirements for a qualified tuition program.''.
       (2) Private qualified tuition programs limited to benefit 
     plans.--Clause (ii) of section 529(b)(1)(A) is amended by 
     inserting ``in the case of a program established and 
     maintained by a State or agency or instrumentality thereof,'' 
     before ``may make''.
       (3) Conforming amendments.--
       (A) Sections 72(e)(9), 135(c)(2)(C), 135(d)(1)(D), 529, 
     530(b)(2)(B), 4973(e), and 6693(a)(2)(C) are amended by 
     striking ``qualified State tuition'' each place it appears 
     and inserting ``qualified tuition''.
       (B) The headings for sections 72(e)(9) and 135(c)(2)(C) are 
     amended by striking ``qualified state tuition'' each place it 
     appears and inserting ``qualified tuition''.
       (C) The headings for sections 529(b) and 530(b)(2)(B) are 
     amended by striking ``Qualified state tuition'' each place it 
     appears and inserting ``Qualified tuition''.
       (D) The heading for section 529 is amended by striking 
     ``STATE''.
       (E) The item relating to section 529 in the table of 
     sections for part VIII of subchapter F of chapter 1 is 
     amended by striking ``State''.
       (b) Exclusion From Gross Income of Education Distributions 
     From Qualified Tuition Programs.--
       (1) In general.--Section 529(c)(3)(B) (relating to 
     distributions) is amended to read as follows:
       ``(B) Distributions for qualified higher education 
     expenses.--For purposes of this paragraph--
       ``(i) In-kind distributions.--No amount shall be includible 
     in gross income under subparagraph (A) by reason of a 
     distribution which consists of providing a benefit to the 
     distributee which, if paid for by the distributee, would 
     constitute payment of a qualified higher education expense.
       ``(ii) Cash distributions.--In the case of distributions 
     not described in clause (i), if--

       ``(I) such distributions do not exceed the qualified higher 
     education expenses (reduced by expenses described in clause 
     (i)), no amount shall be includible in gross income, and
       ``(II) in any other case, the amount otherwise includible 
     in gross income shall be reduced by an amount which bears the 
     same ratio to such amount as such expenses bear to such 
     distributions.

       ``(iii) Exception for institutional programs.--In the case 
     of any taxable year beginning before January 1, 2004, clauses 
     (i) and (ii) shall not apply with respect to any distribution 
     during such taxable year under a qualified tuition program 
     established and maintained by 1 or more eligible educational 
     institutions.
       ``(iv) Treatment as distributions.--Any benefit furnished 
     to a designated beneficiary under a qualified tuition program 
     shall be treated as a distribution to the beneficiary for 
     purposes of this paragraph.
       ``(v) Coordination with hope and lifetime learning 
     credits.--The total amount of qualified higher education 
     expenses with respect to an individual for the taxable year 
     shall be reduced--

       ``(I) as provided in section 25A(g)(2), and
       ``(II) by the amount of such expenses which were taken into 
     account in determining the credit allowed to the taxpayer or 
     any other person under section 25A.

       ``(vi) Coordination with education individual retirement 
     accounts.--If, with respect to an individual for any taxable 
     year--

       ``(I) the aggregate distributions to which clauses (i) and 
     (ii) and section 530(d)(2)(A) apply, exceed
       ``(II) the total amount of qualified higher education 
     expenses otherwise taken into account under clauses (i) and 
     (ii) (after the application of clause (v)) for such year,

     the taxpayer shall allocate such expenses among such 
     distributions for purposes of determining the amount of the 
     exclusion under clauses (i) and (ii) and section 
     530(d)(2)(A).''.
       (2) Conforming amendments.--
       (A) Section 135(d)(2)(B) is amended by striking ``the 
     exclusion under section 530(d)(2)'' and inserting ``the 
     exclusions under sections 529(c)(3)(B) and 530(d)(2)''.
       (B) Section 221(e)(2)(A) is amended by inserting ``529,'' 
     after ``135,''.
       (c) Rollover to Different Program for Benefit of Same 
     Designated Beneficiary.--Section 529(c)(3)(C) (relating to 
     change in beneficiaries) is amended--
       (1) by striking ``transferred to the credit'' in clause (i) 
     and inserting ``transferred--

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

       (2) by adding at the end the following new clause:
       ``(iii) Limitation on certain rollovers.--Clause (i)(I) 
     shall only apply to the first 3

[[Page S5134]]

     transfers with respect to a designated beneficiary.'', and
       (3) by inserting ``or programs'' after ``beneficiaries'' in 
     the heading.
       (d) Member of Family Includes First Cousin.--Section 
     529(e)(2) (defining member of family) is amended by striking 
     ``and'' at the end of subparagraph (B), by striking the 
     period at the end of subparagraph (C) and by inserting ``; 
     and'', and by adding at the end the following new 
     subparagraph:
       ``(D) any first cousin of such beneficiary.''.
       (e) Adjustment of Limitation on Room and Board 
     Distributions.--Section 529(e)(3)(B)(ii) is amended to read 
     as follows:
       ``(ii) Limitation.--The amount treated as qualified higher 
     education expenses by reason of clause (i) shall not exceed--

       ``(I) the allowance (applicable to the student) for room 
     and board included in the cost of attendance (as defined in 
     section 472 of the Higher Education Act of 1965 (20 U.S.C. 
     1087ll), as in effect on the date of the enactment of the 
     Restoring Earnings To Lift Individuals and Empower Families 
     (RELIEF) Act of 2001) as determined by the eligible 
     educational institution for such period, or
       ``(II) if greater, the actual invoice amount the student 
     residing in housing owned or operated by the eligible 
     educational institution is charged by such institution for 
     room and board costs for such period.''.

       (f) Technical Amendments.--Section 529(c)(3)(D) is 
     amended--
       (1) by inserting ``except to the extent provided by the 
     Secretary,'' before ``all distributions'' in clause (ii), and
       (2) by inserting ``except to the extent provided by the 
     Secretary,'' before ``the value'' in clause (iii).
       (g) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

                   Subtitle B--Educational Assistance

     SEC. 411. PERMANENT EXTENSION OF EXCLUSION FOR EMPLOYER-
                   PROVIDED EDUCATIONAL ASSISTANCE.

       (a) In General.--Section 127 (relating to exclusion for 
     educational assistance programs) is amended by striking 
     subsection (d) and by redesignating subsection (e) as 
     subsection (d).
       (b) Repeal of Limitation on Graduate Education.--The last 
     sentence of section 127(c)(1) is amended by striking ``, and 
     such term also does not include any payment for, or the 
     provision of any benefits with respect to, any graduate level 
     course of a kind normally taken by an individual pursuing a 
     program leading to a law, business, medical, or other 
     advanced academic or professional degree''.
       (c) Conforming Amendment.--Section 51A(b)(5)(B)(iii) is 
     amended by striking ``or would be so excludable but for 
     section 127(d)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply with respect to expenses relating to courses 
     beginning after December 31, 2001.

     SEC. 412. ELIMINATION OF 60-MONTH LIMIT AND INCREASE IN 
                   INCOME LIMITATION ON STUDENT LOAN INTEREST 
                   DEDUCTION.

       (a) Elimination of 60-Month Limit.--
       (1) In general.--Section 221 (relating to interest on 
     education loans), as amended by section 402(b)(2)(B), is 
     amended by striking subsection (d) and by redesignating 
     subsections (e), (f), and (g) as subsections (d), (e), and 
     (f), respectively.
       (2) Conforming amendment.--Section 6050S(e) is amended by 
     striking ``section 221(e)(1)'' and inserting ``section 
     221(d)(1)''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply with respect to any loan interest paid after 
     December 31, 2001, in taxable years ending after such date.
       (b) Increase in Income Limitation.--
       (1) In general.--Section 221(b)(2)(B) (relating to amount 
     of reduction) is amended by striking clauses (i) and (ii) and 
     inserting the following:
       ``(i) the excess of--

       ``(I) the taxpayer's modified adjusted gross income for 
     such taxable year, over
       ``(II) $50,000 ($100,000 in the case of a joint return), 
     bears to

       ``(ii) $15,000 ($30,000 in the case of a joint return).''.
       (2) Conforming amendment.--Section 221(g)(1) is amended by 
     striking ``$40,000 and $60,000 amounts'' and inserting 
     ``$50,000 and $100,000 amounts''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to taxable years ending after December 31, 2001.

     SEC. 413. EXCLUSION OF CERTAIN AMOUNTS RECEIVED UNDER THE 
                   NATIONAL HEALTH SERVICE CORPS SCHOLARSHIP 
                   PROGRAM AND THE F. EDWARD HEBERT ARMED FORCES 
                   HEALTH PROFESSIONS SCHOLARSHIP AND FINANCIAL 
                   ASSISTANCE PROGRAM.

       (a) In General.--Section 117(c) (relating to the exclusion 
     from gross income amounts received as a qualified 
     scholarship) is amended--
       (1) by striking ``Subsections (a)'' and inserting the 
     following:
       ``(1) In general.--Except as provided in paragraph (2), 
     subsections (a)'', and
       (2) by adding at the end the following new paragraph:
       ``(2) Exceptions.--Paragraph (1) shall not apply to any 
     amount received by an individual under--
       ``(A) the National Health Service Corps Scholarship Program 
     under section 338A(g)(1)(A) of the Public Health Service Act, 
     or
       ``(B) the Armed Forces Health Professions Scholarship and 
     Financial Assistance program under subchapter I of chapter 
     105 of title 10, United States Code.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to amounts received in taxable years beginning 
     after December 31, 2001.

  Subtitle C--Liberalization of Tax-Exempt Financing Rules for Public 
                          School Construction

     SEC. 421. ADDITIONAL INCREASE IN ARBITRAGE REBATE EXCEPTION 
                   FOR GOVERNMENTAL BONDS USED TO FINANCE 
                   EDUCATIONAL FACILITIES.

       (a) In General.--Section 148(f)(4)(D)(vii) (relating to 
     increase in exception for bonds financing public school 
     capital expenditures) is amended by striking ``$5,000,000'' 
     the second place it appears and inserting ``$10,000,000''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to obligations issued in calendar years beginning 
     after December 31, 2001.

     SEC. 422. TREATMENT OF QUALIFIED PUBLIC EDUCATIONAL FACILITY 
                   BONDS AS EXEMPT FACILITY BONDS.

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

[[Page S5135]]

     and qualified 501(c)(3) bonds) is amended by adding at the 
     end the following new paragraph:
       ``(3) Exempt facility bonds for qualified public-private 
     schools.--Subsection (c) shall not apply to any exempt 
     facility bond issued as part of an issue described in section 
     142(a)(13) (relating to qualified public educational 
     facilities).''.
       (e) Conforming Amendment.--The heading for section 147(h) 
     is amended by striking ``Mortgage Revenue Bonds, Qualified 
     Student Loan Bonds, and Qualified 501(c)(3) Bonds'' and 
     inserting ``Certain Bonds''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to bonds issued after December 31, 2001.

                      Subtitle D--Other Provisions

     SEC. 431. DEDUCTION FOR HIGHER EDUCATION EXPENSES.

       (a) Deduction Allowed.--Part VII of subchapter B of chapter 
     1 (relating to additional itemized deductions for 
     individuals) is amended by redesignating section 222 as 
     section 223 and by inserting after section 221 the following:

     ``SEC. 222. QUALIFIED TUITION AND RELATED EXPENSES.

       ``(a) Allowance of Deduction.--In the case of an 
     individual, there shall be allowed as a deduction an amount 
     equal to the qualified tuition and related expenses paid by 
     the taxpayer during the taxable year.
       ``(b) Dollar limitations.--
       ``(1) In general.--The amount allowed as a deduction under 
     subsection (a) with respect to the taxpayer for any taxable 
     year shall not exceed the applicable dollar limit.
       ``(2) Applicable dollar limit.--
       ``(A) 2002 and 2003.--In the case of a taxable year 
     beginning in 2002 or 2003, the applicable dollar limit shall 
     be equal to--
       ``(i) in the case of a taxpayer whose adjusted gross income 
     for the taxable year does not exceed $65,000 ($130,000 in the 
     case of a joint return), $3,000, and--
       ``(ii) in the case of any other taxpayer, zero.
       ``(B) 2004 and 2005.--In the case of a taxable year 
     beginning in 2004 or 2005, the applicable dollar amount shall 
     be equal to--
       ``(i) in the case of a taxpayer whose adjusted gross income 
     for the taxable year does not exceed $65,000 ($130,000 in the 
     case of a joint return), $5,000,
       ``(ii) in the case of a taxpayer not described in clause 
     (i) whose adjusted gross income for the taxable year does not 
     exceed $80,000 ($160,000 in the case of a joint return), 
     $2,000, and
       ``(iii) in the case of any other taxpayer, zero.
       ``(C) Adjusted gross income.--For purposes of this 
     paragraph, adjusted gross income shall be determined--
       ``(i) without regard to this section and sections 911, 931, 
     and 933, and
       ``(ii) after application of sections 86, 135, 137, 219, 
     221, and 469.
       ``(c) No Double Benefit.--
       ``(1) In general.--No deduction shall be allowed under 
     subsection (a) for any expense for which a deduction is 
     allowed to the taxpayer under any other provision of this 
     chapter.
       ``(2) Coordination with other education incentives.--
       ``(A) Denial of deduction if credit elected.--No deduction 
     shall be allowed under subsection (a) for a taxable year with 
     respect to the qualified tuition and related expenses with 
     respect to an individual if the taxpayer or any other person 
     elects to have section 25A apply with respect to such 
     individual for such year.
       ``(B) Coordination with exclusions.--The total amount of 
     qualified tuition and related expenses shall be reduced by 
     the amount of such expenses taken into account in determining 
     any amount excluded under section 135, 529(c)(1), or 
     530(d)(2).
       ``(3) Dependents.--No deduction shall be allowed under 
     subsection (a) to any individual with respect to whom a 
     deduction under section 151 is allowable to another taxpayer 
     for a taxable year beginning in the calendar year in which 
     such individual's taxable year begins.
       ``(d) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Qualified tuition and related expenses.--The term 
     `qualified tuition and related expenses' has the meaning 
     given such term by section 25A(f). Such expenses shall be 
     reduced in the same manner as under section 25A(g)(2).
       ``(2) Identification requirement.--No deduction shall be 
     allowed under subsection (a) to a taxpayer with respect to 
     the qualified tuition and related expenses of an individual 
     unless the taxpayer includes the name and taxpayer 
     identification number of the individual on the return of tax 
     for the taxable year.
       ``(3) Limitation on taxable year of deduction.--
       ``(A) In general.--A deduction shall be allowed under 
     subsection (a) for qualified tuition and related expenses for 
     any taxable year only to the extent such expenses are in 
     connection with enrollment at an institution of higher 
     education during the taxable year.
       ``(B) Certain prepayments allowed.--Subparagraph (A) shall 
     not apply to qualified tuition and related expenses paid 
     during a taxable year if such expenses are in connection with 
     an academic term beginning during such taxable year or during 
     the first 3 months of the next taxable year.
       ``(4) No deduction for married individuals filing separate 
     returns.--If the taxpayer is a married individual (within the 
     meaning of section 7703), this section shall apply only if 
     the taxpayer and the taxpayer's spouse file a joint return 
     for the taxable year.
       ``(5) Nonresident aliens.--If the taxpayer is a nonresident 
     alien individual for any portion of the taxable year, this 
     section shall apply only if such individual is treated as a 
     resident alien of the United States for purposes of this 
     chapter by reason of an election under subsection (g) or (h) 
     of section 6013.
       ``(6) Regulations.--The Secretary may prescribe such 
     regulations as may be necessary or appropriate to carry out 
     this section, including regulations requiring recordkeeping 
     and information reporting.
       ``(e) Termination.--This section shall not apply to taxable 
     years beginning after December 31, 2005.''.
       (b) Deduction Allowed in Computing Adjusted Gross Income.--
     Section 62(a) is amended by inserting after paragraph (17) 
     the following:
       ``(18) Higher education expenses.--The deduction allowed by 
     section 222.''.
       (c) Conforming Amendments.--
       (1) Sections 86(b)(2), 135(c)(4), 137(b)(3), and 219(g)(3) 
     are each amended by inserting ``222,'' after ``221,''.
       (2) Section 221(b)(2)(C) is amended by inserting ``222,'' 
     before ``911''.
       (3) Section 469(i)(3)(E) is amended by striking ``and 221'' 
     and inserting ``, 221, and 222''.
       (4) The table of sections for part VII of subchapter B of 
     chapter 1 is amended by striking the item relating to section 
     222 and inserting the following:

``Sec. 222. Qualified tuition and related expenses.
``Sec. 223. Cross reference.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to payments made in taxable years beginning after 
     December 31, 2001.

     SEC. 432. CREDIT FOR INTEREST ON HIGHER EDUCATION LOANS.

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

     ``SEC. 25B. INTEREST ON HIGHER EDUCATION LOANS.

       ``(a) Allowance of Credit.--In the case of an individual, 
     there shall be allowed as a credit against the tax imposed by 
     this chapter for the taxable year an amount equal to the 
     interest paid by the taxpayer during the taxable year on any 
     qualified education loan.
       ``(b) Maximum Credit.--
       ``(1) In general.--Except as provided in paragraph (2), the 
     credit allowed by subsection (a) for the taxable year shall 
     not exceed $500.
       ``(2) Limitation based on modified adjusted gross income.--
       ``(A) In general.--If the modified adjusted gross income of 
     the taxpayer for the taxable year exceeds $35,000 ($70,000 in 
     the case of a joint return), the amount which would (but for 
     this paragraph) be allowable as a credit under this section 
     shall be reduced (but not below zero) by the amount which 
     bears the same ratio to the amount which would be so 
     allowable as such excess bears to $10,000 ($20,000 in the 
     case of a joint return).
       ``(B) Modified adjusted gross income.--The term `modified 
     adjusted gross income' means adjusted gross income determined 
     without regard to sections 911, 931, and 933.
       ``(C) Inflation adjustment.--In the case of any taxable 
     year beginning after 2009, the $35,000 and $70,000 amounts 
     referred to in subparagraph (A) shall be increased by an 
     amount equal to--
       ``(i) such dollar amount, multiplied by
       ``(ii) the cost-of-living adjustment determined under 
     section (1)(f)(3) for the calendar year in which the taxable 
     year begins, by substituting `2008' for `1992'.
       ``(D) Rounding.--If any amount as adjusted under 
     subparagraph (C) is not a multiple of $50, such amount shall 
     be rounded to the nearest multiple of $50.
       ``(c) Dependents Not Eligible for Credit.--No credit shall 
     be allowed by this section to an individual for the taxable 
     year if a deduction under section 151 with respect to such 
     individual is allowed to another taxpayer for the taxable 
     year beginning in the calendar year in which such 
     individual's taxable year begins.
       ``(d) Limit on Period Credit Allowed.--A credit shall be 
     allowed under this section only with respect to interest paid 
     on any qualified education loan during the first 60 months 
     (whether or not consecutive) in which interest payments are 
     required. For purposes of this subsection, any loan and all 
     refinancings of such loan shall be treated as 1 loan. Such 60 
     months shall be determined in the manner prescribed by the 
     Secretary in the case of multiple loans which are refinanced 
     by, or serviced as, a single loan and in the case of loans 
     incurred before January 1, 2009.
       ``(e) Definitions.--For purposes of this section--
       ``(1) Qualified education loan.--The term `qualified 
     education loan' has the meaning given such term by section 
     221(e)(1).
       ``(2) Dependent.--The term `dependent' has the meaning 
     given such term by section 152.
       ``(f) Special Rules.--
       ``(1) Denial of double benefit.--No credit shall be allowed 
     under this section if any amount of interest on a qualified 
     education loan is taken into account for any deduction under 
     any other provision of this chapter for the taxable year.

[[Page S5136]]

       ``(2) Married couples must file joint return.--If the 
     taxpayer is married at the close of the taxable year, the 
     credit shall be allowed under subsection (a) only if the 
     taxpayer and the taxpayer's spouse file a joint return for 
     the taxable year.
       ``(3) Marital status.--Marital status shall be determined 
     in accordance with section 7703.''.
       (b) Conforming Amendment.--The table of sections for 
     subpart A of part IV of subchapter A of chapter 1 is amended 
     by inserting after the item relating to section 25A the 
     following new item:

``Sec. 25B. Interest on higher education loans.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to any qualified education loan (as defined in 
     section 25B(e)(1) of the Internal Revenue Code of 1986, as 
     added by this section) incurred on, before, or after December 
     31, 2008, but only with respect to any loan interest payment 
     due in taxable years beginning after December 31, 2008.

          Subtitle E--Compliance With Congressional Budget Act

     SEC. 441. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.

 TITLE V--ESTATE, GIFT, AND GENERATION-SKIPPING TRANSFER TAX PROVISIONS

  Subtitle A--Repeal of Estate and Generation-Skipping Transfer Taxes

     SEC. 501. REPEAL OF ESTATE AND GENERATION-SKIPPING TRANSFER 
                   TAXES.

       (a) Estate Tax Repeal.--Subchapter C of chapter 11 of 
     subtitle B (relating to miscellaneous) is amended by adding 
     at the end the following new section:

     ``SEC. 2210. TERMINATION.

       ``(a) In General.--Except as provided in subsection (b), 
     this chapter shall not apply to the estates of decedents 
     dying after December 31, 2010.
       ``(b) Certain Distributions From Qualified Domestic 
     Trusts.--In applying section 2056A with respect to the 
     surviving spouse of a decedent dying before January 1, 2011--
       ``(1) section 2056A(b)(1)(A) shall not apply to 
     distributions made after December 31, 2021, and
       ``(2) section 2056A(b)(1)(B) shall not apply after December 
     31, 2010.''.
       (b) Generation-Skipping Transfer Tax Repeal.--Subchapter G 
     of chapter 13 of subtitle B (relating to administration) is 
     amended by adding at the end the following new section:

     ``SEC. 2664. TERMINATION.

       ``This chapter shall not apply to generation-skipping 
     transfers made after December 31, 2010.''.
       (c) Conforming Amendments.--
       (1) The table of sections for subchapter C of chapter 11 is 
     amended by adding at the end the following new item:

``Sec. 2210. Termination.''.

       (2) The table of sections for subchapter G of chapter 13 is 
     amended by adding at the end the following new item:

``Sec. 2664. Termination.''.

       (d) Effective Date.--The amendments made by this section 
     shall apply to the estates of decedents dying, and 
     generation-skipping transfers made, after December 31, 2010.

          Subtitle B--Reductions of Estate and Gift Tax Rates

     SEC. 511. ADDITIONAL REDUCTIONS OF ESTATE AND GIFT TAX RATES.

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

$1,025,800, plus 50% of the excess over $2,500,000.''..................
       (b) Repeal of Phaseout of Graduated Rates.--Subsection (c) 
     of section 2001 is amended by striking paragraph (2).
       (c) Additional Reductions of Maximum Rate of Tax.--
     Subsection (c) of section 2001, as amended by subsection (b), 
     is amended by adding at the end the following new paragraph:
       ``(2) Phasedown of maximum rate of tax.--
       ``(A) In general.--In the case of estates of decedents 
     dying, and gifts made, in calendar years after 2002 and 
     before 2011, 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) the maximum rate of tax for any calendar year shall 
     be determined in the table under subparagraph (B), and
       ``(ii) the brackets and the amounts setting forth the tax 
     shall be adjusted to the extent necessary to reflect the 
     adjustments under subparagraph (A).
       ``(B) Maximum rate.--

                                                                Maximum
``Calendar year:                                                  Rate:
2003.........................................................49 percent
2004.........................................................48 percent
2005.........................................................47 percent
2006.........................................................46 percent
2007.........................................................45 percent
2008.........................................................45 percent
2009.........................................................45 percent
2010.........................................................45 percent
       (d) Maximum Gift Tax Rate Reduced to 40 Percent After 
     2010.--Subsection (a) of section 2502 (relating to rate 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 an amount equal to the excess of--
       ``(A) a tentative tax, computed under paragraph (2), on the 
     aggregate sum of the taxable gifts for such calendar year and 
     for each of the preceding calendar periods, over
       ``(B) a tentative tax, computed under paragraph (2), on the 
     aggregate sum of the taxable gifts for each of the preceding 
     calendar periods.
       ``(2) Rate schedule.--

``If the amount with respect to which the tentative tax to be computed 
The tentative tax is:
18% of such amount.....................................................
$1,800, plus 20% of the excess over $10,000............................
$3,800, plus 22% of the excess over $20,000............................
$8,200, plus 24% of the excess over $40,000............................
$13,000, plus 26% of the excess over $60,000...........................
$18,200, plus 28% of the excess over $80,000...........................
$23,800, plus 30% of the excess over $100,000..........................
$38,800, plus 32% of the excess over $150,000..........................
$70,800, plus 34% of the excess over $250,000..........................
$155,800, plus 37% of the excess over $500,000.........................
$248,300, plus 39% of the excess over $750,000.........................
$345,800, plus 40% of the excess over $1,000,000.''....................
       (e) Treatment of Certain Transfers in Trust.--Section 2511 
     (relating to transfers in general) is amended by adding at 
     the end the following new subsection:
       ``(c) Treatment of Certain Transfers in Trust.--
     Notwithstanding any other provision of this section and 
     except as provided in regulations, a transfer in trust shall 
     be treated as a taxable gift under section 2503, unless the 
     trust is treated as wholly owned by the donor or the donor's 
     spouse under subpart E of part I of subchapter J of chapter 
     1.''.
       (f) 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, 2002.
       (3) Subsections (d) and (e).--The amendments made by 
     subsections (d) and (e) shall apply to gifts made after 
     December 31, 2010.

               Subtitle C--Increase in Exemption Amounts

     SEC. 521. INCREASE IN EXEMPTION EQUIVALENT OF UNIFIED CREDIT, 
                   LIFETIME GIFTS EXEMPTION, AND GST EXEMPTION 
                   AMOUNTS.

       (a) In General.--Subsection (c) of section 2010 (relating 
     to applicable credit amount) is amended by striking the table 
     and inserting the following new table:

``In the case of estates of decedentThe applicable exclusion amount is:
      2002 and 2003.........................................$1,000,000 
      2004..................................................$2,000,000 
      2005, 2006, 2007, and 2008............................$3,000,000 
      2009..................................................$3,500,000 
      2010...............................................$4,000,000.''.
       (b) Lifetime Gift Exemption Increased to $1,000,000.--
       (1) For periods before estate tax repeal.--Paragraph (1) of 
     section 2505(a) (relating to unified credit against gift tax) 
     is amended by inserting ``(determined as if the applicable 
     exclusion amount were $1,000,000)'' after ``calendar year''.
       (2) For periods after estate tax repeal.--Paragraph (1) of 
     section 2505(a) (relating to unified credit against gift 
     tax), as amended by paragraph (1), is amended to read as 
     follows:
       ``(1) the amount of the tentative tax which would be 
     determined under the rate schedule set forth in section 
     2502(a)(2) if the amount with respect to which such tentative 
     tax is to be computed were $1,000,000, reduced by''.
       (c) GST Exemption.--
       (1) In general.--Subsection (a) of 2631 (relating to GST 
     exemption) is amended by striking ``of $1,000,000'' and 
     inserting ``amount''.
       (2) Exemption amount.--Subsection (c) of section 2631 is 
     amended to read as follows:
       ``(c) GST Exemption Amount.--For purposes of subsection 
     (a), the GST exemption amount for any calendar year shall be 
     equal to the applicable exclusion amount under section 
     2010(c) for such calendar year.''.
       (d) Repeal of Special Benefit for Family-Owned Business 
     Interests.--
       (1) In general.--Section 2057 is hereby repealed.
       (2) Conforming amendments.--
       (A) Paragraph (10) of section 2031(c) is amended by 
     inserting ``(as in effect on the day before the date of the 
     enactment of this parenthetical)'' before the period.
       (B) The table of sections for part IV of subchapter A of 
     chapter 11 is amended by striking the item relating to 
     section 2057.
       (e) Effective Dates.--
       (1) In general.--Except as provided in paragraphs (2) and 
     (3), the amendments made by this section shall apply to 
     estates of decedents dying, and gifts made, after December 
     31, 2001.
       (2) Subsection (b)(2).--The amendments made by subsection 
     (b)(2) shall apply to gifts made after December 31, 2010.

[[Page S5137]]

       (3) Subsections (c) and (d).--The amendments made by 
     subsections (c) and (d) shall apply to estates of decedents 
     dying, and generation-skipping transfers made, after December 
     31, 2003.

                Subtitle D--Credit for State Death Taxes

     SEC. 531. REDUCTION OF CREDIT FOR STATE DEATH TAXES.

       (a) Maximum Credit Reduced to 8 Percent.--
       (1) In general.--The table contained in section 2011(b) is 
     amended by striking the ten highest brackets and inserting 
     the following:

$106,800, plus 8% of the excess over $2,040,000.''.....................
       (2) Effective date.--The amendment made by this subsection 
     shall apply to estates of decedents dying after December 31, 
     2001.
       (b) Maximum Credit Reduced to 7.2 Percent.--
       (1) In general.--The table contained in section 2011(b), as 
     amended by subsection (a), is amended by striking the two 
     highest brackets and inserting the following:

$70,800, plus 7.2% of the excess over $1,540,000.''....................
       (2) Effective date.--The amendment made by this subsection 
     shall apply to estates of decedents dying after December 31, 
     2002.
       (c) Maximum Credit Reduced to 7.04 Percent.--
       (1) In general.--The table contained in section 2011(b), as 
     amended by subsections (a) and (b), is amended by striking 
     the highest bracket and inserting the following:

$70,800, plus 7.04% of the excess over $1,540,000.''...................
       (2) Effective date.--The amendment made by this subsection 
     shall apply to estates of decedents dying after December 31, 
     2003.

     SEC. 522. CREDIT FOR STATE DEATH TAXES REPLACED WITH 
                   DEDUCTION FOR SUCH TAXES.

       (a) Repeal of Credit.--Section 2011 (relating to credit for 
     State death taxes) is repealed.
       (b) Deduction for State Death Taxes.--Part IV of subchapter 
     A of chapter 11 is amended by adding at the end the following 
     new section:

     ``SEC. 2058. STATE DEATH TAXES.

       ``(a) Allowance of Deduction.--For purposes of the tax 
     imposed by section 2001, the value of the taxable estate 
     shall be determined by deducting from the value of the gross 
     estate the amount of any estate, inheritance, legacy, or 
     succession taxes actually paid to any State or the District 
     of Columbia, in respect of any property included in the gross 
     estate (not including any such taxes paid with respect to the 
     estate of a person other than the decedent).
       ``(b) Period of Limitations.--The deduction allowed by this 
     section shall include only such taxes as were actually paid 
     and deduction therefor claimed before the later of--
       ``(1) 4 years after the filing of the return required by 
     section 6018, or
       ``(2) if--
       ``(A) a petition for redetermination of a deficiency has 
     been filed with the Tax Court within the time prescribed in 
     section 6213(a), the expiration of 60 days after the decision 
     of the Tax Court becomes final,
       ``(B) an extension of time has been granted under section 
     6161 or 6166 for payment of the tax shown on the return, or 
     of a deficiency, the date of the expiration of the period of 
     the extension, or
       ``(C) a claim for refund or credit of an overpayment of tax 
     imposed by this chapter has been filed within the time 
     prescribed in section 6511, the latest of the expiration of--
       ``(i) 60 days from the date of mailing by certified mail or 
     registered mail by the Secretary to the taxpayer of a notice 
     of the disallowance of any part of such claim,
       ``(ii) 60 days after a decision by any court of competent 
     jurisdiction becomes final with respect to a timely suit 
     instituted upon such claim, or
       ``(iii) 2 years after a notice of the waiver of 
     disallowance is filed under section 6532(a)(3).

     Notwithstanding sections 6511 and 6512, refund based on the 
     deduction may be made if the claim for refund is filed within 
     the period provided in the preceding sentence. Any such 
     refund shall be made without interest.''.
       (c) Conforming Amendments.--
       (1) Subsection (a) of section 2012 is amended by striking 
     ``the credit for State death taxes provided by section 2011 
     and''.
       (2) Subparagraph (A) of section 2013(c)(1) is amended by 
     striking ``2011,''.
       (3) Paragraph (2) of section 2014(b) is amended by striking 
     ``, 2011,''.
       (4) Sections 2015 and 2016 are each amended by striking 
     ``2011 or''.
       (5) Subsection (d) of section 2053 is amended to read as 
     follows:
       ``(d) Certain Foreign Death Taxes.--
       ``(1) In general.--Notwithstanding the provisions of 
     subsection (c)(1)(B), for purposes of the tax imposed by 
     section 2001, the value of the taxable estate may be 
     determined, if the executor so elects before the expiration 
     of the period of limitation for assessment provided in 
     section 6501, by deducting from the value of the gross estate 
     the amount (as determined in accordance with regulations 
     prescribed by the Secretary) of any estate, succession, 
     legacy, or inheritance tax imposed by and actually paid to 
     any foreign country, in respect of any property situated 
     within such foreign country and included in the gross estate 
     of a citizen or resident of the United States, upon a 
     transfer by the decedent for public, charitable, or religious 
     uses described in section 2055. The determination under this 
     paragraph of the country within which property is situated 
     shall be made in accordance with the rules applicable under 
     subchapter B (sec. 2101 and following) in determining whether 
     property is situated within or without the United States. Any 
     election under this paragraph shall be exercised in 
     accordance with regulations prescribed by the Secretary.
       ``(2) Condition for allowance of deduction.--No deduction 
     shall be allowed under paragraph (1) for a foreign death tax 
     specified therein unless the decrease in the tax imposed by 
     section 2001 which results from the deduction provided in 
     paragraph (1) will inure solely for the benefit of the 
     public, charitable, or religious transferees described in 
     section 2055 or section 2106(a)(2). In any case where the tax 
     imposed by section 2001 is equitably apportioned among all 
     the transferees of property included in the gross estate, 
     including those described in sections 2055 and 2106(a)(2) 
     (taking into account any exemptions, credits, or deductions 
     allowed by this chapter), in determining such decrease, there 
     shall be disregarded any decrease in the Federal estate tax 
     which any transferees other than those described in sections 
     2055 and 2106(a)(2) are required to pay.
       ``(3) Effect on credit for foreign death taxes of deduction 
     under this subsection.--
       ``(A) Election.--An election under this subsection shall be 
     deemed a waiver of the right to claim a credit, against the 
     Federal estate tax, under a death tax convention with any 
     foreign country for any tax or portion thereof in respect of 
     which a deduction is taken under this subsection.
       ``(B) Cross reference.--

  ``See section 2014(f) for the effect of a deduction taken under this 
paragraph on the credit for foreign death taxes.''.
       (6) Subparagraph (A) of section 2056A(b)(10) is amended--
       (A) by striking ``2011,'', and
       (B) by inserting ``2058,'' after ``2056,''.
       (7)(A) Subsection (a) of section 2102 is amended to read as 
     follows:
       ``(a) In General.--The tax imposed by section 2101 shall be 
     credited with the amounts determined in accordance with 
     sections 2012 and 2013 (relating to gift tax and tax on prior 
     transfers).''.
       (B) Section 2102 is amended by striking subsection (b) and 
     by redesignating subsection (c) as subsection (b).
       (C) Section 2102(b)(5) (as redesignated by subparagraph 
     (B)) and section 2107(c)(3) are each amended by striking 
     ``2011 to 2013, inclusive,'' and inserting ``2012 and 2013''.
       (8) Subsection (a) of section 2106 is amended by adding at 
     the end the following new paragraph:
       ``(4) State death taxes.--The amount which bears the same 
     ratio to the State death taxes as the value of the property, 
     as determined for purposes of this chapter, upon which State 
     death taxes were paid and which is included in the gross 
     estate under section 2103 bears to the value of the total 
     gross estate under section 2103. For purposes of this 
     paragraph, the term `State death taxes' means the taxes 
     described in section 2011(a).''.
       (9) Section 2201 is amended--
       (A) by striking ``as defined in section 2011(d)'', and
       (B) by adding at the end the following new flush sentence:

     ``For purposes of this section, the additional estate tax is 
     the difference between the tax imposed by section 2001 or 
     2101 and the amount equal to 125 percent of the maximum 
     credit provided by section 2011(b), as in effect before its 
     repeal by the Restoring Earnings To Lift Individuals and 
     Empower Families (RELIEF) Act of 2001.''.
       (10) Section 2604 is repealed.
       (11) Paragraph (2) of section 6511(i) is amended by 
     striking ``2011(c), 2014(b),'' and inserting ``2014(b)''.
       (12) Subsection (c) of section 6612 is amended by striking 
     ``section 2011(c) (relating to refunds due to credit for 
     State taxes),''.
       (13) The table of sections for part II of subchapter A of 
     chapter 11 is amended by striking the item relating to 
     section 2011.
       (14) The table of sections for part IV of subchapter A of 
     chapter 11 is amended by adding at the end the following new 
     item:

``Sec. 2058. State death taxes.''.
       (15) The table of sections for subchapter A of chapter 13 
     is amended by striking the item relating to section 2604.
       (d) Effective Date.--The amendments made by this section 
     shall apply to estates of decedents dying after December 31, 
     2004.

Subtitle E--Carryover Basis at Death; Other Changes Taking Effect With 
                                 Repeal

     SEC. 541. TERMINATION OF STEP-UP IN BASIS AT DEATH.

       Section 1014 (relating to basis of property acquired from a 
     decedent) is amended by adding at the end the following new 
     subsection:
       ``(f) Termination.--This section shall not apply with 
     respect to decedents dying after December 31, 2010.''.

     SEC. 542. TREATMENT OF PROPERTY ACQUIRED FROM A DECEDENT 
                   DYING AFTER DECEMBER 31, 2010.

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

[[Page S5138]]

     ``SEC. 1022. TREATMENT OF PROPERTY ACQUIRED FROM A DECEDENT 
                   DYING AFTER DECEMBER 31, 2010.

       ``(a) In General.--Except as otherwise provided in this 
     section--
       ``(1) property acquired from a decedent dying after 
     December 31, 2010, shall be treated for purposes of this 
     subtitle as transferred by gift, and
       ``(2) the basis of the person acquiring property from such 
     a decedent shall be the lesser of--
       ``(A) the adjusted basis of the decedent, or
       ``(B) the fair market value of the property at the date of 
     the decedent's death.
       ``(b) Basis Increase for Certain Property.--
       ``(1) In general.--In the case of property to which this 
     subsection applies, the basis of such property under 
     subsection (a) shall be increased by its basis increase under 
     this subsection.
       ``(2) Basis increase.--For purposes of this subsection--
       ``(A) In general.--The basis increase under this subsection 
     for any property is the portion of the aggregate basis 
     increase which is allocated to the property pursuant to this 
     section.
       ``(B) Aggregate basis increase.--In the case of any estate, 
     the aggregate basis increase under this subsection is 
     $1,300,000.
       ``(C) Limit increased by unused built-in losses and loss 
     carryovers.--The limitation under subparagraph (B) shall be 
     increased by--
       ``(i) the sum of the amount of any capital loss carryover 
     under section 1212(b), and the amount of any net operating 
     loss carryover under section 172, which would (but for the 
     decedent's death) be carried from the decedent's last taxable 
     year to a later taxable year of the decedent, plus
       ``(ii) the sum of the amount of any losses that would have 
     been allowable under section 165 if the property acquired 
     from the decedent had been sold at fair market value 
     immediately before the decedent's death.
       ``(3) Decedent nonresidents who are not citizens of the 
     united states.--In the case of a decedent nonresident not a 
     citizen of the United States--
       ``(A) paragraph (2)(B) shall be applied by substituting 
     `$60,000' for `$1,300,000', and
       ``(B) paragraph (2)(C) shall not apply.
       ``(c) Additional Basis Increase for Property Acquired by 
     Surviving Spouse.--
       ``(1) In general.--In the case of property to which this 
     subsection applies and which is qualified spousal property, 
     the basis of such property under subsection (a) (as increased 
     under subsection (b)) shall be increased by its spousal 
     property basis increase.
       ``(2) Spousal property basis increase.--For purposes of 
     this subsection--
       ``(A) In general.--The spousal property basis increase for 
     property referred to in paragraph (1) is the portion of the 
     aggregate spousal property basis increase which is allocated 
     to the property pursuant to this section.
       ``(B) Aggregate spousal property basis increase.--In the 
     case of any estate, the aggregate spousal property basis 
     increase is $3,000,000.
       ``(3) Qualified spousal property.--For purposes of this 
     subsection, the term `qualified spousal property' means--
       ``(A) outright transfer property, and
       ``(B) qualified terminable interest property.
       ``(4) Outright transfer property.--For purposes of this 
     subsection--
       ``(A) In general.--The term `outright transfer property' 
     means any interest in property acquired from the decedent by 
     the decedent's surviving spouse.
       ``(B) Exception.--Subparagraph (A) shall not apply where, 
     on the lapse of time, on the occurrence of an event or 
     contingency, or on the failure of an event or contingency to 
     occur, an interest passing to the surviving spouse will 
     terminate or fail--
       ``(i)(I) if an interest in such property passes or has 
     passed (for less than an adequate and full consideration in 
     money or money's worth) from the decedent to any person other 
     than such surviving spouse (or the estate of such spouse), 
     and
       ``(II) if by reason of such passing such person (or his 
     heirs or assigns) may possess or enjoy any part of such 
     property after such termination or failure of the interest so 
     passing to the surviving spouse, or
       ``(ii) if such interest is to be acquired for the surviving 
     spouse, pursuant to directions of the decedent, by his 
     executor or by the trustee of a trust.

     For purposes of this subparagraph, an interest shall not be 
     considered as an interest which will terminate or fail merely 
     because it is the ownership of a bond, note, or similar 
     contractual obligation, the discharge of which would not have 
     the effect of an annuity for life or for a term.
       ``(C) Interest of spouse conditional on survival for 
     limited period.--For purposes of this paragraph, an interest 
     passing to the surviving spouse shall not be considered as an 
     interest which will terminate or fail on the death of such 
     spouse if--
       ``(i) such death will cause a termination or failure of 
     such interest only if it occurs within a period not exceeding 
     6 months after the decedent's death, or only if it occurs as 
     a result of a common disaster resulting in the death of the 
     decedent and the surviving spouse, or only if it occurs in 
     the case of either such event, and
       ``(ii) such termination or failure does not in fact occur.
       ``(5) Qualified terminable interest property.--For purposes 
     of this subsection--
       ``(A) In general.--The term `qualified terminable interest 
     property' means property--
       ``(i) which passes from the decedent, and
       ``(ii) in which the surviving spouse has a qualifying 
     income interest for life.
       ``(B) Qualifying income interest for life.--The surviving 
     spouse has a qualifying income interest for life if--
       ``(i) the surviving spouse is entitled to all the income 
     from the property, payable annually or at more frequent 
     intervals, or has a usufruct interest for life in the 
     property, and
       ``(ii) no person has a power to appoint any part of the 
     property to any person other than the surviving spouse.

     Clause (ii) shall not apply to a power exercisable only at or 
     after the death of the surviving spouse. To the extent 
     provided in regulations, an annuity shall be treated in a 
     manner similar to an income interest in property (regardless 
     of whether the property from which the annuity is payable can 
     be separately identified).
       ``(C) Property includes interest therein.--The term 
     `property' includes an interest in property.
       ``(D) Specific portion treated as separate property.--A 
     specific portion of property shall be treated as separate 
     property. For purposes of the preceding sentence, the term 
     `specific portion' only includes a portion determined on a 
     fractional or percentage basis.
       ``(d) Definitions and Special Rules for Application of 
     Subsections (b) and (c).--
       ``(1) Property to which subsections (b) and (c) apply.--
       ``(A) In general.--The basis of property acquired from a 
     decedent may be increased under subsection (b) or (c) only if 
     the property was owned by the decedent at the time of death.
       ``(B) Rules relating to ownership.--
       ``(i) Jointly held property.--In the case of property which 
     was owned by the decedent and another person as joint tenants 
     with right of survivorship or tenants by the entirety--

       ``(I) if the only such other person is the surviving 
     spouse, the decedent shall be treated as the owner of only 50 
     percent of the property,
       ``(II) in any case (to which subclause (I) does not apply) 
     in which the decedent furnished consideration for the 
     acquisition of the property, the decedent shall be treated as 
     the owner to the extent of the portion of the property which 
     is proportionate to such consideration, and
       ``(III) in any case (to which subclause (I) does not apply) 
     in which the property has been acquired by gift, bequest, 
     devise, or inheritance by the decedent and any other person 
     as joint tenants with right of survivorship and their 
     interests are not otherwise specified or fixed by law, the 
     decedent shall be treated as the owner to the extent of the 
     value of a fractional part to be determined by dividing the 
     value of the property by the number of joint tenants with 
     right of survivorship.

       ``(ii) Revocable trusts.--The decedent shall be treated as 
     owning property transferred by the decedent during life to a 
     qualified revocable trust (as defined in section 645(b)(1)).
       ``(iii) Powers of appointment.--The decedent shall not be 
     treated as owning any property by reason of holding a power 
     of appointment with respect to such property.
       ``(iv) Community property.--Property which represents the 
     surviving spouse's one-half share of community property held 
     by the decedent and the surviving spouse under the community 
     property laws of any State or possession of the United States 
     or any foreign country shall be treated for purposes of this 
     section as owned by, and acquired from, the decedent if at 
     least one-half of the whole of the community interest in such 
     property is treated as owned by, and acquired from, the 
     decedent without regard to this clause.
       ``(C) Property acquired by decedent by gift within 3 years 
     of death.--
       ``(i) In general.--Subsections (b) and (c) shall not apply 
     to property acquired by the decedent by gift or by inter 
     vivos transfer for less than adequate and full consideration 
     in money or money's worth during the 3-year period ending on 
     the date of the decedent's death.
       ``(ii) Exception for certain gifts from spouse.--Clause (i) 
     shall not apply to property acquired by the decedent from the 
     decedent's spouse unless, during such 3-year period, such 
     spouse acquired the property in whole or in part by gift or 
     by inter vivos transfer for less than adequate and full 
     consideration in money or money's worth.
       ``(D) Stock of certain entities.--Subsections (b) and (c) 
     shall not apply to--
       ``(i) stock or securities a foreign personal holding 
     company,
       ``(ii) stock of a DISC or former DISC,
       ``(iii) stock of a foreign investment company, or
       ``(iv) stock of a passive foreign investment company unless 
     such company is a qualified electing fund (as defined in 
     section 1295) with respect to the decedent.
       ``(2) Fair market value limitation.--The adjustments under 
     subsections (b) and (c) shall not increase the basis of any 
     interest in property acquired from the decedent above its 
     fair market value in the hands of the decedent as of the date 
     of the decedent's death.
       ``(3) Allocation rules.--

[[Page S5139]]

       ``(A) In general.--The executor shall allocate the 
     adjustments under subsections (b) and (c) on the return 
     required by section 6018.
       ``(B) Changes in allocation.--Any allocation made pursuant 
     to subparagraph (A) may be changed only as provided by the 
     Secretary.
       ``(4) Inflation adjustment of basis adjustment amounts.--
       ``(A) In general.--In the case of decedents dying in a 
     calendar year after 2011, the $1,300,000, $60,000, and 
     $3,000,000 dollar amounts in subsections (b) and (c)(2)(B) 
     shall each be increased by an amount equal to the product 
     of--
       ``(i) such dollar amount, and
       ``(ii) 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.
       ``(B) Rounding.--If any increase determined under 
     subparagraph (A) is not a multiple of--
       ``(i) $100,000 in the case of the $1,300,000 amount,
       ``(ii) $5,000 in the case of the $60,000 amount, and
       ``(iii) $250,000 in the case of the $3,000,000 amount,

     such increase shall be rounded to the next lowest multiple 
     thereof.
       ``(e) Property Acquired From the Decedent.--For purposes of 
     this section, the following property shall be considered to 
     have been acquired from the decedent:
       ``(1) Property acquired by bequest, devise, or inheritance, 
     or by the decedent's estate from the decedent.
       ``(2) Property transferred by the decedent during his 
     lifetime--
       ``(A) to a qualified revocable trust (as defined in section 
     645(b)(1)), or
       ``(B) to any other trust with respect to which the decedent 
     reserved the right to make any change in the enjoyment 
     thereof through the exercise of a power to alter, amend, or 
     terminate the trust.
       ``(3) Any other property passing from the decedent by 
     reason of death to the extent that such property passed 
     without consideration.
       ``(f) Coordination With Section 691.--This section shall 
     not apply to property which constitutes a right to receive an 
     item of income in respect of a decedent under section 691.
       ``(g) Certain Liabilities Disregarded.--
       ``(1) In general.--In determining whether gain is 
     recognized on the acquisition of property--
       ``(A) from a decedent by a decedent's estate or any 
     beneficiary other than a tax-exempt beneficiary, and
       ``(B) from the decedent's estate by any beneficiary other 
     than a tax-exempt beneficiary,
     and in determining the adjusted basis of such property, 
     liabilities in excess of basis shall be disregarded.
       ``(2) Tax-exempt beneficiary.--For purposes of paragraph 
     (1)(B)--
       ``(A) In general.--The term `tax-exempt beneficiary' 
     means--
       ``(i) the United States, any State or political subdivision 
     thereof, any possession of the United States, any Indian 
     tribal government (within the meaning of section 7871), or 
     any agency or instrumentality of any of the foregoing,
       ``(ii) an organization (other than a cooperative described 
     in section 521) which is exempt from tax imposed by chapter 
     1, and
       ``(iii) any foreign person or entity (within the meaning of 
     section 168(h)(2)).
       ``(h) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to carry out the purposes of 
     this section.''.
       (b) Information Returns, Etc.--
       (1) Large transfers at death.--So much of subpart C of part 
     II of subchapter A of chapter 61 as precedes section 6019 is 
     amended to read as follows:

   ``Subpart C--Returns Relating to Transfers During Life or at Death

``Sec. 6018. Returns relating to large transfers at death.
``Sec. 6019. Gift tax returns.

     ``SEC. 6018. RETURNS RELATING TO LARGE TRANSFERS AT DEATH.

       ``(a) In General.--If this section applies to property 
     acquired from a decedent, the executor of the estate of such 
     decedent shall make a return containing the information 
     specified in subsection (c) with respect to such property.
       ``(b) Property to Which Section Applies.--
       ``(1) Large transfers.--This section shall apply to all 
     property (other than cash) acquired from a decedent if the 
     fair market value of such property acquired from the decedent 
     exceeds the dollar amount applicable under section 
     1022(b)(2)(B) (without regard to section 1022(b)(2)(C)).
       ``(2) Transfers of certain gifts received by decedent 
     within 3 years of death.--This section shall apply to any 
     appreciated property acquired from the decedent if--
       ``(A) subsections (b) and (c) of section 1022 do not apply 
     to such property by reason of section 1022(d)(1)(C), and
       ``(B) such property was required to be included on a return 
     required to be filed under section 6019.
       ``(3) Nonresidents not citizens of the united states.--In 
     the case of a decedent who is a nonresident not a citizen of 
     the United States, paragraphs (1) and (2) shall be applied--
       ``(A) by taking into account only--
       ``(i) tangible property situated in the United States, and
       ``(ii) other property acquired from the decedent by a 
     United States person, and
       ``(B) by substituting the dollar amount applicable under 
     section 1022(b)(3) for the dollar amount referred to in 
     paragraph (1).
       ``(4) Returns by trustees or beneficiaries.--If the 
     executor is unable to make a complete return as to any 
     property acquired from or passing from the decedent, the 
     executor shall include in the return a description of such 
     property and the name of every person holding a legal or 
     beneficial interest therein. Upon notice from the Secretary, 
     such person shall in like manner make a return as to such 
     property.
       ``(c) Information Required To Be Furnished.--The 
     information specified in this subsection with respect to any 
     property acquired from the decedent is--
       ``(1) the name and TIN of the recipient of such property,
       ``(2) an accurate description of such property,
       ``(3) the adjusted basis of such property in the hands of 
     the decedent and its fair market value at the time of death,
       ``(4) the decedent's holding period for such property,
       ``(5) sufficient information to determine whether any gain 
     on the sale of the property would be treated as ordinary 
     income,
       ``(6) the amount of basis increase allocated to the 
     property under subsection (b) or (c) of section 1022, and
       ``(7) such other information as the Secretary may by 
     regulations prescribe.
       ``(d) Property Acquired From Decedent.--For purposes of 
     this section, section 1022 shall apply for purposes of 
     determining the property acquired from a decedent.
       ``(e) Statements To Be Furnished to Certain Persons.--Every 
     person required to make a return under subsection (a) shall 
     furnish to each person whose name is required to be set forth 
     in such return (other than the person required to make such 
     return) a written statement showing--
       ``(1) the name, address, and phone number of the person 
     required to make such return, and
       ``(2) the information specified in subsection (c) with 
     respect to property acquired from, or passing from, the 
     decedent to the person required to receive such statement.

     The written statement required under the preceding sentence 
     shall be furnished not later than 30 days after the date that 
     the return required by subsection (a) is filed.''.
       (2) Gifts.--Section 6019 (relating to gift tax returns) is 
     amended--
       (A) by striking ``Any individual'' and inserting ``(a) In 
     General.--Any individual'', and
       (B) by adding at the end the following new subsection:
       ``(b) Statements To Be Furnished to Certain Persons.--Every 
     person required to make a return under subsection (a) shall 
     furnish to each person whose name is required to be set forth 
     in such return (other than the person required to make such 
     return) a written statement showing--
       ``(1) the name, address, and phone number of the person 
     required to make such return, and
       ``(2) the information specified in such return with respect 
     to property received by the person required to receive such 
     statement.
     The written statement required under the preceding sentence 
     shall be furnished not later than 30 days after the date that 
     the return required by subsection (a) is filed.''.
       (3) Time for filing section 6018 returns.--
       (A) Returns relating to large transfers at death.--
     Subsection (a) of section 6075 is amended to read as follows:
       ``(a) Returns Relating to Large Transfers at Death.--The 
     return required by section 6018 with respect to a decedent 
     shall be filed with the return of the tax imposed by chapter 
     1 for the decedent's last taxable year or such later date 
     specified in regulations prescribed by the Secretary.''.
       (B) Conforming amendments.--Paragraph (3) of section 
     6075(b) is amended--

       (I) by striking ``estate tax return'' in the heading and 
     inserting ``section 6018 return'', and
       (II) by striking ``(relating to estate tax returns)'' and 
     inserting ``(relating to returns relating to large transfers 
     at death)''.

       (4) Penalties.--Part I of subchapter B of chapter 68 
     (relating to assessable penalties) is amended by adding at 
     the end the following new section:

     ``SEC. 6716. FAILURE TO FILE INFORMATION WITH RESPECT TO 
                   CERTAIN TRANSFERS AT DEATH AND GIFTS.

       ``(a) Information Required To Be Furnished to the 
     Secretary.--Any person required to furnish any information 
     under section 6018 who fails to furnish such information on 
     the date prescribed therefor (determined with regard to any 
     extension of time for filing) shall pay a penalty of $10,000 
     ($500 in the case of information required to be furnished 
     under section 6018(b)(2)) for each such failure.
       ``(b) Information Required To Be Furnished to 
     Beneficiaries.--Any person required to furnish in writing to 
     each person described in section 6018(e) or 6019(b) the 
     information required under such section who fails to furnish 
     such information shall pay a penalty of $50 for each such 
     failure.
       ``(c) Reasonable Cause Exception.--No penalty shall be 
     imposed under subsection (a) or (b) with respect to any 
     failure if it is shown that such failure is due to reasonable 
     cause.

[[Page S5140]]

       ``(d) Intentional Disregard.--If any failure under 
     subsection (a) or (b) is due to intentional disregard of the 
     requirements under sections 6018 and 6019(b), the penalty 
     under such subsection shall be 5 percent of the fair market 
     value (as of the date of death or, in the case of section 
     6019(b), the date of the gift) of the property with respect 
     to which the information is required.
       ``(e) Deficiency Procedures Not To Apply.--Subchapter B of 
     chapter 63 (relating to deficiency procedures for income, 
     estate, gift, and certain excise taxes) shall not apply in 
     respect of the assessment or collection of any penalty 
     imposed by this section.''.
       (5) Clerical amendments.--
       (A) The table of sections for part I of subchapter B of 
     chapter 68 is amended by adding at the end the following new 
     item:

``Sec. 6716. Failure to file information with respect to certain 
              transfers at death and gifts.''.
       (B) The item relating to subpart C in the table of subparts 
     for part II of subchapter A of chapter 61 is amended to read 
     as follows:

``Subpart C. Returns relating to transfers during life or at death.''.

       (c) Exclusion of Gain on Sale of Principal Residence Made 
     Available to Heir of Decedent in Certain Cases.--Subsection 
     (d) of section 121 (relating to exclusion of gain from sale 
     of principal residence) is amended by adding at the end the 
     following new paragraph:
       ``(9) Property acquired from a decedent.--The exclusion 
     under this section shall apply to property sold by--
       ``(A) the estate of a decedent, and
       ``(B) any individual who acquired such property from the 
     decedent (within the meaning of section 1022),
     determined by taking into account the ownership and use by 
     the decedent.''.
       (d) Transfers of Appreciated Carryover Basis Property To 
     Satisfy Pecuniary Bequest.--
       (1) In general.--Section 1040 (relating to transfer of 
     certain farm, etc., real property) is amended to read as 
     follows:

     ``SEC. 1040. USE OF APPRECIATED CARRYOVER BASIS PROPERTY TO 
                   SATISFY PECUNIARY BEQUEST.

       ``(a) In General.--If the executor of the estate of any 
     decedent satisfies the right of any person to receive a 
     pecuniary bequest with appreciated property, then gain on 
     such exchange shall be recognized to the estate only to the 
     extent that, on the date of such exchange, the fair market 
     value of such property exceeds such value on the date of 
     death.
       ``(b) Similar Rule for Certain Trusts.--To the extent 
     provided in regulations prescribed by the Secretary, a rule 
     similar to the rule provided in subsection (a) shall apply 
     where--
       ``(1) by reason of the death of the decedent, a person has 
     a right to receive from a trust a specific dollar amount 
     which is the equivalent of a pecuniary bequest, and
       ``(2) the trustee of a trust satisfies such right with 
     property.
       ``(c) Basis of Property Acquired in Exchange Described in 
     Subsection (a) or (b).--The basis of property acquired in an 
     exchange with respect to which gain realized is not 
     recognized by reason of subsection (a) or (b) shall be the 
     basis of such property immediately before the exchange 
     increased by the amount of the gain recognized to the estate 
     or trust on the exchange.''.
       (2) The item relating to section 1040 in the table of 
     sections for part III of subchapter O of chapter 1 is amended 
     to read as follows:

``Sec. 1040. Use of appreciated carryover basis property to satisfy 
              pecuniary bequest.''.

       (e) Miscellaneous Amendments Related to Carryover Basis.--
       (1) Recognition of gain on transfers to nonresidents.--
       (A) Subsection (a) of section 684 is amended by inserting 
     ``or to a nonresident alien'' after ``or trust''.
       (B) Subsection (b) of section 684 is amended by striking 
     ``any person'' and inserting ``any United States person''.
       (C) The section heading for section 684 is amended by 
     inserting ``and nonresident aliens'' after ``estates''.
       (D) The item relating to section 684 in the table of 
     sections for subpart F of part I of subchapter J of chapter 1 
     is amended by inserting ``and nonresident aliens'' after 
     ``estates''.
       (2) Capital gain treatment for inherited art work or 
     similar property.--
       (A) In general.--Subparagraph (C) of section 1221(a)(3) 
     (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) (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.''.
       (3) Definition of executor.--Section 7701(a) (relating to 
     definitions) is amended by adding at the end the following:
       ``(47) Executor.--The term `executor' means the executor or 
     administrator of the decedent, or, if there is no executor or 
     administrator appointed, qualified, and acting within the 
     United States, then any person in actual or constructive 
     possession of any property of the decedent.''.
       (4) Certain trusts.--Subparagraph (A) of section 4947(a)(2) 
     is amended by inserting ``642(c),'' after ``170(f)(2)(B),''.
       (5) Other amendments.--
       (A) Section 1246 is amended by striking subsection (e).
       (B) Subsection (e) of section 1291 is amended--
       (i) by striking ``(e),''; and
       (ii) by striking ``; except that'' and all that follows and 
     inserting a period.
       (C) Section 1296 is amended by striking subsection (i).
       (6) Clerical amendment.--The table of sections for part II 
     of subchapter O of chapter 1 is amended by inserting after 
     the item relating to section 1021 the following new item:

``Sec. 1022. Treatment of property acquired from a decedent dying after 
              December 31, 2010.''.

       (f) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to estates of 
     decedents dying after December 31, 2010.
       (2) Transfers to nonresidents.--The amendments made by 
     subsection (e)(1) shall apply to transfers after December 31, 
     2010.
       (3) Section 4947.--The amendment made by subsection (e)(4) 
     shall apply to deductions for taxable years beginning after 
     December 31, 2010.

                   Subtitle F--Conservation Easements

     SEC. 551. EXPANSION OF ESTATE TAX RULE FOR CONSERVATION 
                   EASEMENTS.

       (a) Repeal of Certain Restrictions on Where Land Is 
     Located.--Clause (i) of section 2031(c)(8)(A) (defining land 
     subject to a qualified conservation easement) is amended to 
     read as follows:
       ``(i) which is located in the United States or any 
     possession of the United States,''.
       (b) Clarification of Date for Determining Value of Land and 
     Easement.--Section 2031(c)(2) (defining applicable 
     percentage) is amended by adding at the end the following new 
     sentence: ``The values taken into account under the preceding 
     sentence shall be such values as of the date of the 
     contribution referred to in paragraph (8)(B).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to estates of decedents dying after December 31, 
     2000.

     Subtitle G--Modifications of Generation-Skipping Transfer Tax

     SEC. 561. DEEMED ALLOCATION OF GST EXEMPTION TO LIFETIME 
                   TRANSFERS TO TRUSTS; RETROACTIVE ALLOCATIONS.

       (a) In General.--Section 2632 (relating to special rules 
     for allocation of GST exemption) is amended by redesignating 
     subsection (c) as subsection (e) and by inserting after 
     subsection (b) the following new subsections:
       ``(c) Deemed Allocation to Certain Lifetime Transfers to 
     GST Trusts.--
       ``(1) In general.--If any individual makes an indirect skip 
     during such individual's lifetime, any unused portion of such 
     individual's GST exemption shall be allocated to the property 
     transferred to the extent necessary to make the inclusion 
     ratio for such property zero. If the amount of the indirect 
     skip exceeds such unused portion, the entire unused portion 
     shall be allocated to the property transferred.
       ``(2) Unused portion.--For purposes of paragraph (1), the 
     unused portion of an individual's GST exemption is that 
     portion of such exemption which has not previously been--
       ``(A) allocated by such individual,
       ``(B) treated as allocated under subsection (b) with 
     respect to a direct skip occurring during or before the 
     calendar year in which the indirect skip is made, or
       ``(C) treated as allocated under paragraph (1) with respect 
     to a prior indirect skip.
       ``(3) Definitions.--
       ``(A) Indirect skip.--For purposes of this subsection, the 
     term `indirect skip' means any transfer of property (other 
     than a direct skip) subject to the tax imposed by chapter 12 
     made to a GST trust.
       ``(B) GST trust.--The term `GST trust' means a trust that 
     could have a generation-skipping transfer with respect to the 
     transferor unless--
       ``(i) the trust instrument provides that more than 25 
     percent of the trust corpus must be distributed to or may be 
     withdrawn by 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

[[Page S5141]]

     general power of appointment exercisable by one or more of 
     such individuals,
       ``(iv) the trust is a trust any portion of which would be 
     included in the gross estate of a non-skip person (other than 
     the transferor) if such person died immediately after the 
     transfer,
       ``(v) the trust is a charitable lead annuity trust (within 
     the meaning of section 2642(e)(3)(A)) or a charitable 
     remainder annuity trust or a charitable remainder unitrust 
     (within the meaning of section 664(d)), or
       ``(vi) the trust is a trust with respect to which a 
     deduction was allowed under section 2522 for the amount of an 
     interest in the form of the right to receive annual payments 
     of a fixed percentage of the net fair market value of the 
     trust property (determined yearly) and which is required to 
     pay principal to a non-skip person if such person is alive 
     when the yearly payments for which the deduction was allowed 
     terminate.
     For purposes of this subparagraph, the value of transferred 
     property shall not be considered to be includible in the 
     gross estate of a non-skip person or subject to a right of 
     withdrawal by reason of such person holding a right to 
     withdraw so much of such property as does not exceed the 
     amount referred to in section 2503(b) with respect to any 
     transferor, and it shall be assumed that powers of 
     appointment held by non-skip persons will not be exercised.
       ``(4) Automatic allocations to certain gst trusts.--For 
     purposes of this subsection, an indirect skip to which 
     section 2642(f) applies shall be deemed to have been made 
     only at the close of the estate tax inclusion period. The 
     fair market value of such transfer shall be the fair market 
     value of the trust property at the close of the estate tax 
     inclusion period.
       ``(5) Applicability and effect.--
       ``(A) In general.--An individual--
       ``(i) may elect to have this subsection not apply to--

       ``(I) an indirect skip, or
       ``(II) any or all transfers made by such individual to a 
     particular trust, and

       ``(ii) may elect to treat any trust as a GST trust for 
     purposes of this subsection with respect to any or all 
     transfers made by such individual to such trust.
       ``(B) Elections.--
       ``(i) Elections with respect to indirect skips.--An 
     election under subparagraph (A)(i)(I) shall be deemed to be 
     timely if filed on a timely filed gift tax return for the 
     calendar year in which the transfer was made or deemed to 
     have been made pursuant to paragraph (4) or on such later 
     date or dates as may be prescribed by the Secretary.
       ``(ii) Other elections.--An election under clause (i)(II) 
     or (ii) of subparagraph (A) may be made on a timely filed 
     gift tax return for the calendar year for which the election 
     is to become effective.
       ``(d) Retroactive Allocations.--
       ``(1) In general.--If--
       ``(A) a non-skip person has an interest or a future 
     interest in a trust to which any transfer has been made,
       ``(B) such person--
       ``(i) is a lineal descendant of a grandparent of the 
     transferor or of a grandparent of the transferor's spouse or 
     former spouse, and
       ``(ii) is assigned to a generation below the generation 
     assignment of the transferor, and
       ``(C) such person predeceases the transferor,
     then the transferor may make an allocation of any of such 
     transferor's unused GST exemption to any previous transfer or 
     transfers to the trust on a chronological basis.
       ``(2) Special rules.--If the allocation under paragraph (1) 
     by the transferor is made on a gift tax return filed on or 
     before the date prescribed by section 6075(b) for gifts made 
     within the calendar year within which the non-skip person's 
     death occurred--
       ``(A) the value of such transfer or transfers for purposes 
     of section 2642(a) shall be determined as if such allocation 
     had been made on a timely filed gift tax return for each 
     calendar year within which each transfer was made,
       ``(B) such allocation shall be effective immediately before 
     such death, and
       ``(C) the amount of the transferor's unused GST exemption 
     available to be allocated shall be determined immediately 
     before such death.
       ``(3) Future interest.--For purposes of this subsection, a 
     person has a future interest in a trust if the trust may 
     permit income or corpus to be paid to such person on a date 
     or dates in the future.''.
       (b) Conforming Amendment.--Paragraph (2) of section 2632(b) 
     is amended by striking ``with respect to a prior 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. 562. SEVERING OF TRUSTS.

       (a) In General.--Subsection (a) of section 2642 (relating 
     to inclusion ratio) is amended by adding at the end the 
     following new paragraph:
       ``(3) Severing of trusts.--
       ``(A) In general.--If a trust is severed in a qualified 
     severance, the trusts resulting from such severance shall be 
     treated as separate trusts thereafter for purposes of this 
     chapter.
       ``(B) Qualified severance.--For purposes of subparagraph 
     (A)--
       ``(i) In general.--The term `qualified severance' means the 
     division of a single trust and the creation (by any means 
     available under the governing instrument or under local law) 
     of two or more trusts if--

       ``(I) the single trust was divided on a fractional basis, 
     and
       ``(II) the terms of the new trusts, in the aggregate, 
     provide for the same succession of interests of beneficiaries 
     as are provided in the original trust.

       ``(ii) Trusts with inclusion ratio greater than zero.--If a 
     trust has an inclusion ratio of greater than zero and less 
     than 1, a severance is a qualified severance only if the 
     single trust is divided into two trusts, one of which 
     receives a fractional share of the total value of all trust 
     assets equal to the applicable fraction of the single trust 
     immediately before the severance. In such case, the trust 
     receiving such fractional share shall have an inclusion ratio 
     of zero and the other trust shall have an inclusion ratio of 
     1.
       ``(iii) Regulations.--The term `qualified severance' 
     includes any other severance permitted under regulations 
     prescribed by the Secretary.
       ``(C) Timing and manner of severances.--A severance 
     pursuant to this paragraph may be made at any time. The 
     Secretary shall prescribe by forms or regulations the manner 
     in which the qualified severance shall be reported to the 
     Secretary.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to severances after December 31, 2000.

     SEC. 563. MODIFICATION OF CERTAIN VALUATION RULES.

       (a) Gifts for Which Gift Tax Return Filed or Deemed 
     Allocation Made.--Paragraph (1) of section 2642(b) (relating 
     to valuation rules, etc.) is amended to read as follows:
       ``(1) Gifts for which gift tax return filed or deemed 
     allocation made.--If the allocation of the GST exemption to 
     any transfers of property is made on a gift tax return filed 
     on or before the date prescribed by section 6075(b) for such 
     transfer or is deemed to be made under section 2632 (b)(1) or 
     (c)(1)--
       ``(A) the value of such property for purposes of subsection 
     (a) shall be its value as finally determined for purposes of 
     chapter 12 (within the meaning of section 2001(f)(2)), or, in 
     the case of an allocation deemed to have been made at the 
     close of an estate tax inclusion period, its value at the 
     time of the close of the estate tax inclusion period, and
       ``(B) such allocation shall be effective on and after the 
     date of such transfer, or, in the case of an allocation 
     deemed to have been made at the close of an estate tax 
     inclusion period, on and after the close of such estate tax 
     inclusion period.''.
       (b) Transfers at Death.--Subparagraph (A) of section 
     2642(b)(2) is amended to read as follows:
       ``(A) Transfers at death.--If property is transferred as a 
     result of the death of the transferor, the value of such 
     property for purposes of subsection (a) shall be its value as 
     finally determined for purposes of chapter 11; except that, 
     if the requirements prescribed by the Secretary respecting 
     allocation of post-death changes in value are not met, the 
     value of such property shall be determined as of the time of 
     the distribution concerned.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to transfers subject to chapter 11 or 12 of the 
     Internal Revenue Code of 1986 made after December 31, 2000.

     SEC. 564. RELIEF PROVISIONS.

       (a) In General.--Section 2642 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 the enactment of this paragraph.
       ``(B) Basis for determinations.--In determining whether to 
     grant relief under this paragraph, the Secretary shall take 
     into account all relevant circumstances, including evidence 
     of intent contained in the trust instrument or instrument of 
     transfer and such other factors as the Secretary deems 
     relevant. For purposes of determining whether to grant relief 
     under this paragraph, the time for making the allocation (or 
     election) shall be treated as if not expressly prescribed by 
     statute.
       ``(2) Substantial compliance.--An allocation of GST 
     exemption under section 2632 that demonstrates an intent to 
     have the lowest possible inclusion ratio with respect to a 
     transfer or a trust shall be deemed to be an allocation of so 
     much of the transferor's unused GST exemption as produces the 
     lowest possible inclusion ratio. In determining whether there 
     has been substantial compliance, all relevant circumstances 
     shall be

[[Page S5142]]

     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.

        Subtitle H--Extension of Time for Payment of Estate Tax

     SEC. 571. EXPANSION OF AVAILABILITY OF INSTALLMENT PAYMENT 
                   FOR ESTATES WITH INTERESTS QUALIFYING LENDING 
                   AND FINANCE BUSINESSES.

       (a) In General.--Section 6166(b) (relating to definitions 
     and special rules) is amended by adding at the end the 
     following new paragraph:
       ``(10) Stock in qualifying lending and finance business 
     treated as stock in an active trade or business company.--
       ``(A) In general.--If the executor elects the benefits of 
     this paragraph, then--
       ``(i) Stock in qualifying lending and finance business 
     treated as stock in an active trade or business company.--For 
     purposes of this section, any asset used in a qualifying 
     lending and finance business shall be treated as an asset 
     which is used in carrying on a trade or business.
       ``(ii) 5-year deferral for principal not to apply.--The 
     executor shall be treated as having selected under subsection 
     (a)(3) the date prescribed by section 6151(a).
       ``(iii) 5 equal installments allowed.--For purposes of 
     applying subsection (a)(1), `5' shall be substituted for 
     `10'.
       ``(B) Definitions.--For purposes of this paragraph--
       ``(i) Qualifying lending and finance business.--The term 
     `qualifying lending and finance business' means a lending and 
     finance business, if--

       ``(I) based on all the facts and circumstances immediately 
     before the date of the decedent's death, there was 
     substantial activity with respect to the lending and finance 
     business, or
       ``(II) during at least 3 of the 5 taxable years ending 
     before the date of the decedent's death, such business had at 
     least 1 full-time employee substantially all of the services 
     of whom were in the active management of such business, 10 
     full-time, nonowner employees substantially all of the 
     services of whom were directly related to such business, and 
     $5,000,000 in gross receipts from activities described in 
     clause (ii).

       ``(ii) Lending and finance business.--The term `lending and 
     finance business' means a trade or business of--

       ``(I) making loans,
       ``(II) purchasing or discounting accounts receivable, 
     notes, or installment obligations,
       ``(III) engaging in rental and leasing of real and tangible 
     personal property, including entering into leases and 
     purchasing, servicing, and disposing of leases and leased 
     assets,
       ``(IV) rendering services or making facilities available in 
     the ordinary course of a lending or finance business, and
       ``(V) rendering services or making facilities available in 
     connection with activities described in subclauses (I) 
     through (IV) carried on by the corporation rendering services 
     or making facilities available, or another corporation which 
     is a member of the same affiliated group (as defined in 
     section 1504 without regard to section 1504(b)(3)).

       ``(iii) Limitation.--The term `qualifying lending and 
     finance business' shall not include any interest in an 
     entity, if the stock or debt of such entity or a controlled 
     group (as defined in section 267(f)(1)) of which such entity 
     was a member was readily tradable on an established 
     securities market or secondary market (as defined by the 
     Secretary) at any time within 3 years before the date of the 
     decedent's death.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to estates of decedents dying after December 31, 
     2001.

     SEC. 572. CLARIFICATION OF AVAILABILITY OF INSTALLMENT 
                   PAYMENT.

       (a) In General.--Subparagraph (B) of section 6166(b)(8) 
     (relating to all stock must be non-readily-tradable stock) is 
     amended to read as follows:
       ``(B) All stock must be non-readily-tradable stock.--
       ``(i) In general.--No stock shall be taken into account for 
     purposes of applying this paragraph unless it is non-readily-
     tradable stock (within the meaning of paragraph (7)(B)).
       ``(ii) Special application where only holding company stock 
     is non-readily-tradable stock.--If the requirements of clause 
     (i) are not met, but all of the stock of any holding company 
     taken into account is non-readily-tradable, then this 
     paragraph shall apply, but subsection (a)(1) shall be applied 
     by substituting `5' for `10'.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to estates of decedents dying after December 31, 
     2001.

          Subtitle I--Compliance With Congressional Budget Act

     SEC. 581. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.

   TITLE VI--PENSION AND INDIVIDUAL RETIREMENT ARRANGEMENT PROVISIONS

               Subtitle A--Individual Retirement Accounts

     SEC. 601. MODIFICATION OF IRA CONTRIBUTION LIMITS.

       (a) Increase in Contribution Limit.--
       (1) In general.--Paragraph (1)(A) of section 219(b) 
     (relating to maximum amount of deduction) is amended by 
     striking ``$2,000'' and inserting ``the deductible amount''.
       (2) Deductible amount.--Section 219(b) is amended by adding 
     at the end the following new paragraph:
       ``(5) Deductible amount.--For purposes of paragraph 
     (1)(A)--
       ``(A) In general.--The deductible amount shall be 
     determined in accordance with the following table:

    ``For taxable years                                  The deductible
      beginning in:                                        amount is:  
      2002 through 2005.....................................$2,500 .

      2006 and 2007.........................................$3,000 .

      2008 and 2009.........................................$3,500 .

      2010..................................................$4,000 .

      2011 and thereafter...................................$5,000..

       ``(B) Catch-up contributions for individuals 50 or older.--
       ``(i) In general.--In the case of an individual who has 
     attained the age of 50 before the close of the taxable year, 
     the deductible amount for such taxable year shall be 
     increased by the applicable amount.
       ``(ii) Applicable amount.--For purposes of clause (i), the 
     applicable amount shall be the amount determined in 
     accordance with the following table:

    ``For taxable years                                  The applicable
      beginning in:                                        amount is:  
      2002 through 2005.......................................$500 .

      2006 through 2009.....................................$1,000 .

      2010..................................................$1,500 .

      2011 and thereafter...................................$2,000..

       ``(C) Cost-of-living adjustment.--
       ``(i) In general.--In the case of any taxable year 
     beginning in a calendar year after 2011, the $5,000 amount 
     under subparagraph (A) shall be increased by an amount equal 
     to--

       ``(I) such dollar amount, multiplied by
       ``(II) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, determined by substituting `calendar year 2010' 
     for `calendar year 1992' in subparagraph (B) thereof.

       ``(ii) Rounding rules.--If any amount after adjustment 
     under clause (i) is not a multiple of $500, such amount shall 
     be rounded to the next lower multiple of $500.''.
       (b) Conforming Amendments.--
       (1) Section 408(a)(1) is amended by striking ``in excess of 
     $2,000 on behalf of any individual'' and inserting ``on 
     behalf of any individual in excess of the amount in effect 
     for such taxable year under section 219(b)(1)(A)''.
       (2) Section 408(b)(2)(B) is amended by striking ``$2,000'' 
     and inserting ``the dollar amount in effect under section 
     219(b)(1)(A)''.
       (3) Section 408(b) is amended by striking ``$2,000'' in the 
     matter following paragraph (4) and inserting ``the dollar 
     amount in effect under section 219(b)(1)(A)''.
       (4) Section 408(j) is amended by striking ``$2,000''.
       (5) Section 408(p)(8) is amended by striking ``$2,000'' and 
     inserting ``the dollar amount in effect under section 
     219(b)(1)(A)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 602. DEEMED IRAS UNDER EMPLOYER PLANS.

       (a) In General.--Section 408 (relating to individual 
     retirement accounts) is amended by redesignating subsection 
     (q) as subsection (r) and by inserting after subsection (p) 
     the following new subsection:
       ``(q) Deemed IRAs Under Qualified Employer Plans.--
       ``(1) General rule.--If--
       ``(A) a qualified employer plan elects to allow employees 
     to make voluntary employee contributions to a separate 
     account or annuity established under the plan, and
       ``(B) under the terms of the qualified employer plan, such 
     account or annuity meets the applicable requirements of this 
     section or section 408A for an individual retirement account 
     or annuity,
     then such account or annuity shall be treated for purposes of 
     this title in the same manner as an individual retirement 
     plan and not as a qualified employer plan (and contributions 
     to such account or annuity as contributions to an individual 
     retirement plan and not to the qualified employer plan). For 
     purposes of subparagraph (B), the requirements of subsection 
     (a)(5) shall not apply.
       ``(2) Special rules for qualified employer plans.--For 
     purposes of this title, a qualified employer plan shall not 
     fail to meet any requirement of this title solely by reason 
     of establishing and maintaining a program described in 
     paragraph (1).
       ``(3) Definitions.--For purposes of this subsection--
       ``(A) Qualified employer plan.--The term `qualified 
     employer plan' has the meaning given such term by section 
     72(p)(4); except such term shall only include an eligible 
     deferred compensation plan (as defined in section 457(b)) 
     which is maintained by an eligible employer described in 
     section 457(e)(1)(A).
       ``(B) Voluntary employee contribution.--The term `voluntary 
     employee contribution'

[[Page S5143]]

     means any contribution (other than a mandatory contribution 
     within the meaning of section 411(c)(2)(C))--
       ``(i) which is made by an individual as an employee under a 
     qualified employer plan which allows employees to elect to 
     make contributions described in paragraph (1), and
       ``(ii) with respect to which the individual has designated 
     the contribution as a contribution to which this subsection 
     applies.''.
       (b) Amendment of ERISA.--
       (1) In general.--Section 4 of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1003) is amended by 
     adding at the end the following new subsection:
       ``(c) If a pension plan allows an employee to elect to make 
     voluntary employee contributions to accounts and annuities as 
     provided in section 408(q) of the Internal Revenue Code of 
     1986, such accounts and annuities (and contributions thereto) 
     shall not be treated as part of such plan (or as a separate 
     pension plan) for purposes of any provision of this title 
     other than section 403(c), 404, or 405 (relating to exclusive 
     benefit, and fiduciary and co-fiduciary responsibilities).''.
       (2) Conforming amendment.--Section 4(a) of such Act (29 
     U.S.C. 1003(a)) is amended by inserting ``or (c)'' after 
     ``subsection (b)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after December 31, 2002.

     SEC. 603. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT 
                   ACCOUNTS FOR CHARITABLE PURPOSES.

       (a) In General.--Subsection (d) of section 408 (relating to 
     individual retirement accounts) is amended by adding at the 
     end the following new paragraph:
       ``(8) Distributions for charitable purposes.--
       ``(A) In general.--In the case of a qualified charitable 
     distribution from an individual retirement account to an 
     organization described in section 170(c), no amount shall be 
     includible in the gross income of the account holder or 
     beneficiary.
       ``(B) Special rules relating to charitable remainder 
     trusts, pooled income funds, and charitable gift annuities.--
       ``(i) In general.--In the case of a qualified charitable 
     distribution from an individual retirement account--

       ``(I) to a charitable remainder annuity trust or a 
     charitable remainder unitrust (as such terms are defined in 
     section 664(d)),
       ``(II) to a pooled income fund (as defined in section 
     642(c)(5)), or
       ``(III) for the issuance of a charitable gift annuity (as 
     defined in section 501(m)(5)),

     no amount shall be includible in gross income of the account 
     holder or beneficiary. The preceding sentence shall apply 
     only if no person holds any interest in the amounts in the 
     trust, fund, or annuity attributable to such distribution 
     other than one or more of the following: the individual for 
     whose benefit such account is maintained, the spouse of such 
     individual, or any organization described in section 170(c).
       ``(ii) Determination of inclusion of amounts distributed.--
     In determining the amount includible in the gross income of 
     the distributee of a distribution from a trust described in 
     clause (i)(I) or an annuity described in clause (i)(III), the 
     portion of any qualified charitable distribution to such 
     trust or for such annuity which would (but for this 
     subparagraph) have been includible in gross income--

       ``(I) in the case of any such trust, shall be treated as 
     income described in section 664(b)(1), or
       ``(II) in the case of any such annuity, shall not be 
     treated as an investment in the contract.

       ``(iii) No inclusion for distribution to pooled income 
     fund.--No amount shall be includible in the gross income of a 
     pooled income fund (as so defined) by reason of a qualified 
     charitable distribution to such fund.
       ``(C) Qualified charitable distribution.--For purposes of 
     this paragraph, the term `qualified charitable distribution' 
     means any distribution from an individual retirement 
     account--
       ``(i) which is made on or after the date that the 
     individual for whose benefit the account is maintained has 
     attained age 70\1/2\, and
       ``(ii) which is a charitable contribution (as defined in 
     section 170(c)) made directly from the account to--

       ``(I) an organization described in section 170(c), or
       ``(II) a trust, fund, or annuity described in subparagraph 
     (B).

       ``(D) Denial of deduction.--The amount allowable as a 
     deduction to the taxpayer for the taxable year under section 
     170 (before the application of section 170(b)) for qualified 
     charitable distributions shall be reduced (but not below 
     zero) by the sum of the amounts of the qualified charitable 
     distributions during such year which (but for this paragraph) 
     would have been includible in the gross income of the 
     taxpayer for such year.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2009.

                     Subtitle B--Expanding Coverage

     SEC. 611. INCREASE IN BENEFIT AND CONTRIBUTION LIMITS.

       (a) Defined Benefit Plans.--
       (1) Dollar limit.--
       (A) Subparagraph (A) of section 415(b)(1) (relating to 
     limitation for defined benefit plans) is amended by striking 
     ``$90,000'' and inserting ``the applicable limit''.
       (B) Section 415(b) is amended by adding at the end the 
     following new paragraph:
       ``(12) Applicable limit.--For purposes of paragraph (1)(A), 
     the applicable limit shall be determined in accordance with 
     the following table:

    ``For taxable years                                  The applicable
      beginning in:                                         limit is:  
      2002, 2003, and 2004.................................$150,000.

      2005 and thereafter $160,000.''...............................
       (C) Subparagraphs (C) and (D) of section 415(b)(2) are each 
     amended--
       (i) in the headings, by striking ``$90,000'' and inserting 
     ``applicable'',
       (ii) by striking ``$90,000 limitation'' each place it 
     appears and inserting ``limitation'', and
       (iii) by striking ``a $90,000 annual benefit'' each place 
     it appears and inserting ``an annual benefit equal to the 
     applicable limit''.
       (D) Paragraph (7) of section 415(b) (relating to benefits 
     under certain collectively bargained plans) is amended by 
     striking ``the greater of $68,212 or one-half the amount 
     otherwise applicable for such year under paragraph (1)(A) for 
     `$90,000' '' and inserting ``one-half the amount otherwise 
     applicable for such year under paragraph (1)(A) for `the 
     applicable limit' ''.
       (2) Limit reduced when benefit begins before age 62.--
     Subparagraph (C) of section 415(b)(2) is amended by striking 
     ``the social security retirement age'' each place it appears 
     in the heading and text and inserting ``age 62'' and by 
     striking the second sentence.
       (3) Limit increased when benefit begins after age 65.--
     Subparagraph (D) of section 415(b)(2) is amended by striking 
     ``the social security retirement age'' each place it appears 
     in the heading and text and inserting ``age 65''.
       (4) Cost-of-living adjustments.--Subsection (d) of section 
     415 (related to cost-of-living adjustments) is amended--
       (A) by striking ``$90,000'' in paragraph (1)(A) and 
     inserting ``applicable limit''; and
       (B) in paragraph (3)(A)--
       (i) by striking ``$90,000'' in the heading and inserting 
     ``applicable limit''; and
       (ii) by striking ``October 1, 1986'' and inserting ``July 
     1, 2004''.
       (5) Conforming amendments.--
       (A) Section 415(b)(2) is amended by striking subparagraph 
     (F).
       (B) Section 415(b)(9) is amended to read as follows:
       ``(9) Special rule for commercial airline pilots.--In the 
     case of any participant who is a commercial airline pilot, 
     if, as of the time of the participant's retirement, 
     regulations prescribed by the Federal Aviation Administration 
     require an individual to separate from service as a 
     commercial airline pilot after attaining any age occurring on 
     or after age 60 and before age 62, paragraph (2)(C) shall be 
     applied by substituting such age for age 62.''.
       (C) Section 415(b)(10)(C)(i) is amended by striking 
     ``applied without regard to paragraph (2)(F)''.
       (b) Qualified Trusts.--
       (1) Compensation limit.--
       (A) Section 401(a)(17) is amended--
       (i) in subparagraph (A), by striking ``$150,000'' and 
     inserting ``the applicable dollar amount'',
       (ii) in subparagraph (B), by striking ``$150,000'' and 
     inserting ``the applicable dollar'', and
       (iii) by adding at the end the following:
       ``(C) Applicable dollar amount.--For purposes of this 
     paragraph, the applicable dollar amount shall be determined 
     in accordance with the following table:

    ``For taxable years                                  The applicable
      beginning in                                       dollar amount:
      calendar year:
      2002....................................................$180,000 
      2003....................................................$190,000 
      2004 or thereafter...................................$200,000.''.

       (B) Section 404(l) is amended--
       (i) by striking the second sentence,
       (ii) by striking ``$150,000'' and inserting ``the 
     applicable dollar amount in effect under section 
     401(a)(17)(A)'', and
       (iii) by striking ``the preceding sentence'' and inserting 
     ``section 401(a)(17)(B)''.
       (C) Section 408(k) is amended--
       (i) in each of paragraphs (3)(C) and (6)(D)(ii), by 
     striking ``$150,000'' each place it appears and inserting 
     ``amount of compensation equal to the applicable dollar 
     amount in effect under section 401(a)(17)(A)'', and
       (ii) in paragraph (8), by striking ``and shall adjust'' and 
     all that follows through ``section 401(a)(17)(B)''.
       (D) Section 505(b)(7) is amended--
       (i) by striking ``$150,000'' and inserting ``the applicable 
     dollar amount in effect under section 401(a)(17)(A)'', and
       (ii) by striking the second sentence.
       (2) Base period and rounding of cost-of-living 
     adjustment.--Subparagraph (B) of section 401(a)(17) is 
     amended--
       (A) by striking ``The Secretary'' and inserting ``In 
     calendar years beginning after 2005, the Secretary'',
       (B) by striking ``October 1, 1993'' and inserting ``July 1, 
     2005''; and
       (C) by striking ``$10,000'' both places it appears and 
     inserting ``$5,000''.
       (c) Elective Deferrals.--
       (1) In general.--Paragraph (1) of section 402(g) (relating 
     to limitation on exclusion for elective deferrals) is amended 
     to read as follows:
       ``(1) In general.--
       ``(A) Limitation.--Notwithstanding subsections (e)(3) and 
     (h)(1)(B), the elective deferrals of any individual for any 
     taxable year shall be included in such individual's gross

[[Page S5144]]

     income to the extent the amount of such deferrals for the 
     taxable year exceeds the applicable dollar amount.
       ``(B) Applicable dollar amount.--For purposes of 
     subparagraph (A), the applicable dollar amount shall be the 
     amount determined in accordance with the following table:

    ``For taxable years                                  The applicable
      beginning in                                       dollar amount:
      calendar year:
      2002.....................................................$11,000 
      2003.....................................................$11,500 
      2004.....................................................$12,000 
      2005.....................................................$12,500 
      2006.....................................................$13,000 
      2007.....................................................$13,500 
      2008.....................................................$14,000 
      2009.....................................................$14,500 
      2010 or thereafter....................................$15,000.''.

       (2) Cost-of-living adjustment.--Paragraph (5) of section 
     402(g) is amended to read as follows:
       ``(5) Cost-of-living adjustment.--In the case of taxable 
     years beginning after December 31, 2010, the Secretary shall 
     adjust the $15,000 amount under paragraph (1)(B) at the same 
     time and in the same manner as under section 415(d), except 
     that the base period shall be the calendar quarter beginning 
     July 1, 2009, and any increase under this paragraph which is 
     not a multiple of $500 shall be rounded to the next lowest 
     multiple of $500.''.
       (3) Conforming amendments.--
       (A) Section 402(g) (relating to limitation on exclusion for 
     elective deferrals), as amended by paragraphs (1) and (2), is 
     further amended by striking paragraph (4) and redesignating 
     paragraphs (5), (6), (7), (8), and (9) as paragraphs (4), 
     (5), (6), (7), and (8), respectively.
       (B) Paragraph (2) of section 457(c) is amended by striking 
     ``402(g)(8)(A)(iii)'' and inserting ``402(g)(7)(A)(iii)''.
       (C) Clause (iii) of section 501(c)(18)(D) is amended by 
     striking ``(other than paragraph (4) thereof)''.
       (d) Deferred Compensation Plans of State and Local 
     Governments and Tax-Exempt Organizations.--
       (1) In general.--Section 457 (relating to deferred 
     compensation plans of State and local governments and tax-
     exempt organizations) is amended--
       (A) in subsections (b)(2)(A) and (c)(1) by striking 
     ``$7,500'' each place it appears and inserting ``the 
     applicable dollar amount''; and
       (B) in subsection (b)(3)(A) by striking ``$15,000'' and 
     inserting ``twice the dollar amount in effect under 
     subsection (b)(2)(A)''.
       (2) Applicable dollar amount; cost-of-living adjustment.--
     Paragraph (15) of section 457(e) is amended to read as 
     follows:
       ``(15) Applicable dollar amount.--
       ``(A) In general.--The applicable dollar amount shall be 
     the amount determined in accordance with the following table:

    ``For taxable years                                  The applicable
      beginning in                                       dollar amount:
      calendar year:
      2002......................................................$9,000 
      2003......................................................$9,500 
      2004.....................................................$10,000 
      2005.....................................................$10,500 
      2006.....................................................$11,000 
      2007.....................................................$12,000 
      2008.....................................................$13,000 
      2009.....................................................$14,000 
      2010 or thereafter.......................................$15,000.

       ``(B) Cost-of-living adjustments.--In the case of taxable 
     years beginning after December 31, 2010, the Secretary shall 
     adjust the $15,000 amount under subparagraph (A) at the same 
     time and in the same manner as under section 415(d), except 
     that the base period shall be the calendar quarter beginning 
     July 1, 2009, and any increase under this paragraph which is 
     not a multiple of $500 shall be rounded to the next lowest 
     multiple of $500.''.
       (e) Simple Retirement Accounts.--
       (1) Limitation.--Clause (ii) of section 408(p)(2)(A) 
     (relating to general rule for qualified salary reduction 
     arrangement) is amended by striking ``$6,000'' and inserting 
     ``the applicable dollar amount''.
       (2) Applicable dollar amount.--Subparagraph (E) of 
     408(p)(2) is amended to read as follows:
       ``(E) Applicable dollar amount; cost-of-living 
     adjustment.--
       ``(i) In general.--For purposes of subparagraph (A)(ii), 
     the applicable dollar amount shall be the amount determined 
     in accordance with the following table:

    ``For taxable years                                  The applicable
      beginning in                                       dollar amount:
      calendar year:
        2002 and 2003...........................................$7,000 
        2004 and 2005...........................................$8,000 
        2006 and 2007...........................................$9,000 
        2008 or thereafter.....................................$10,000.

       ``(ii) Cost-of-living adjustment.--In the case of a year 
     beginning after December 31, 2008, the Secretary shall adjust 
     the $10,000 amount under clause (i) at the same time and in 
     the same manner as under section 415(d), except that the base 
     period taken into account shall be the calendar quarter 
     beginning July 1, 2007, and any increase under this 
     subparagraph which is not a multiple of $500 shall be rounded 
     to the next lower multiple of $500.''.
       (3) Conforming amendments.--
       (A) Subclause (I) of section 401(k)(11)(B)(i) is amended by 
     striking ``$6,000'' and inserting ``the amount in effect 
     under section 408(p)(2)(A)(ii)''.
       (B) Section 401(k)(11) is amended by striking subparagraph 
     (E).
       (f) Rounding Rule Relating to Defined Benefit Plans and 
     Defined Contribution Plans.--Paragraph (4) of section 415(d) 
     is amended to read as follows:
       ``(4) Rounding.--
       ``(A) Applicable limit amount.--Any increase under 
     subparagraph (A) of paragraph (1) which is not a multiple of 
     $5,000 shall be rounded to the next lowest multiple of 
     $5,000.
       ``(B) $30,000 amount.--Any increase under subparagraph (C) 
     of paragraph (1) which is not a multiple of $1,000 shall be 
     rounded to the next lowest multiple of $1,000.''.
       (g) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2001.

     SEC. 612. PLAN LOANS FOR SUBCHAPTER S OWNERS, PARTNERS, AND 
                   SOLE PROPRIETORS.

       (a) In General.--Subparagraph (B) of section 4975(f)(6) 
     (relating to exemptions not to apply to certain transactions) 
     is amended by adding at the end the following new clause:
       ``(iii) Loan exception.--For purposes of subparagraph 
     (A)(i), the term `owner-employee' shall only include a person 
     described in subclause (II) or (III) of clause (i).''.
       (b) Amendment of ERISA.--Section 408(d)(2) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1108(d)(2)) 
     is amended by adding at the end the following new 
     subparagraph:
       ``(C) For purposes of paragraph (1)(A), the term `owner-
     employee' shall only include a person described in clause 
     (ii) or (iii) of subparagraph (A).''.
       (c) Effective Date.--The amendment made by this section 
     shall apply to years beginning after December 31, 2001.

     SEC. 613. MODIFICATION OF TOP-HEAVY RULES.

       (a) Simplification of Definition of Key Employee.--
       (1) In general.--Section 416(i)(1)(A) (defining key 
     employee) is amended--
       (A) by striking ``or any of the 4 preceding plan years'' in 
     the matter preceding clause (i);
       (B) by striking clause (i) and inserting the following:
       ``(i) an officer of the employer having an annual 
     compensation greater than the amount in effect under section 
     414(q)(1)(B)(i) for such plan year,'';
       (C) by striking clause (ii) and redesignating clauses (iii) 
     and (iv) as clauses (ii) and (iii), respectively;
       (D) by striking the second sentence in the matter following 
     clause (iii), as redesignated by subparagraph (C); and
       (E) by adding at the end the following: ``For purposes of 
     this subparagraph, in the case of an employee who is not 
     employed during the preceding plan year or is employed for a 
     portion of such year, such employee shall be treated as a key 
     employee if it can be reasonably anticipated that such 
     employee will be described in 1 of the preceding clauses for 
     the current plan year.''.
       (2) Conforming amendment.--Section 416(i)(1)(B)(iii) is 
     amended by striking ``and subparagraph (A)(ii)''.
       (b) Matching Contributions Taken Into Account for Minimum 
     Contribution Requirements.--Section 416(c)(2)(A) (relating to 
     defined contribution plans) is amended by adding at the end 
     the following: ``Employer matching contributions (as defined 
     in section 401(m)(4)(A)) shall be taken into account for 
     purposes of this subparagraph.''.
       (c) Distributions During Last Year Before Determination 
     Date Taken Into Account.--
       (1) In general.--Paragraph (3) of section 416(g) is amended 
     to read as follows:
       ``(3) Distributions during last year before determination 
     date taken into account.--
       ``(A) In general.--For purposes of determining--
       ``(i) the present value of the cumulative accrued benefit 
     for any employee, or
       ``(ii) the amount of the account of any employee,
     such present value or amount shall be increased by the 
     aggregate distributions made with respect to such employee 
     under the plan during the 1-year period ending on the 
     determination date. The preceding sentence shall also apply 
     to distributions under a terminated plan which if it had not 
     been terminated would have been required to be included in an 
     aggregation group.
       ``(B) 5-year period in case of in-service distribution.--In 
     the case of any distribution made for a reason other than 
     separation from service, death, or disability, subparagraph 
     (A) shall be applied by substituting `5-year period' for `1-
     year period'.''.
       (2) Benefits not taken into account.--Subparagraph (E) of 
     section 416(g)(4) is amended--
       (A) by striking ``last 5 years'' in the heading and 
     inserting ``last year before determination date''; and
       (B) by striking ``5-year period'' and inserting ``1-year 
     period''.
       (d) Frozen Plan Exempt From Minimum Benefit Requirement.--
     Subparagraph (C) of section 416(c)(1) (relating to defined 
     benefit plans) is amended--
       (A) by striking ``clause (ii)'' in clause (i) and inserting 
     ``clause (ii) or (iii)''; and
       (B) by adding at the end the following:
       ``(iii) Exception for frozen plan.--For purposes of 
     determining an employee's years of service with the employer, 
     any service with the employer shall be disregarded to the 
     extent that such service occurs during a plan year when the 
     plan benefits (within the

[[Page S5145]]

     meaning of section 410(b)) no key employee or former key 
     employee.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2001.

     SEC. 614. ELECTIVE DEFERRALS NOT TAKEN INTO ACCOUNT FOR 
                   PURPOSES OF DEDUCTION LIMITS.

       (a) In General.--Section 404 (relating to deduction for 
     contributions of an employer to an employees' trust or 
     annuity plan and compensation under a deferred payment plan) 
     is amended by adding at the end the following new subsection:
       ``(n) Elective Deferrals Not Taken Into Account for 
     Purposes of Deduction Limits.--
       ``(1) In general.--The applicable percentage of the amount 
     of any elective deferrals (as defined in section 402(g)(3)) 
     shall not be subject to any limitation contained in paragraph 
     (3), (7), or (9) of subsection (a), and such elective 
     deferrals shall not be taken into account in applying any 
     such limitation to any other contributions.
       ``(2) Applicable percentage.--For purposes of paragraph 
     (1), the applicable percentage shall be determined in 
     accordance with the following table:

    ``For taxable years                                  The applicable
      beginning in:                                    percentage is:  
      2002 through 2010.................................25 percent .

      2011 and thereafter..............................100 percent .

       (b) Effective Date.--The amendment made by this section 
     shall apply to years beginning after December 31, 2001.

     SEC. 615. REPEAL OF COORDINATION REQUIREMENTS FOR DEFERRED 
                   COMPENSATION PLANS OF STATE AND LOCAL 
                   GOVERNMENTS AND TAX-EXEMPT ORGANIZATIONS.

       (a) In General.--Subsection (c) of section 457 (relating to 
     deferred compensation plans of State and local governments 
     and tax-exempt organizations), as amended by section 611, is 
     amended to read as follows:
       ``(c) Limitation.--The maximum amount of the compensation 
     of any one individual which may be deferred under subsection 
     (a) during any taxable year shall not exceed the amount in 
     effect under subsection (b)(2)(A) (as modified by any 
     adjustment provided under subsection (b)(3)).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to years beginning after December 31, 2001.

     SEC. 616. DEDUCTION LIMITS.

       (a) Modification of Limits.--
       (1) Stock bonus and profit sharing trusts.--
       (A) In general.--Subclause (I) of section 404(a)(3)(A)(i) 
     (relating to stock bonus and profit sharing trusts) is 
     amended by striking ``15 percent'' and inserting ``25 
     percent''.
       (B) Conforming amendment.--Subparagraph (C) of section 
     404(h)(1) is amended by striking ``15 percent'' each place it 
     appears and inserting ``25 percent''.
       (2) Defined contribution plans.--
       (A) In general.--Clause (v) of section 404(a)(3)(A) 
     (relating to stock bonus and profit sharing trusts) is 
     amended to read as follows:
       ``(v) Defined contribution plans subject to the funding 
     standards.--Except as provided by the Secretary, a defined 
     contribution plan which is subject to the funding standards 
     of section 412 shall be treated in the same manner as a stock 
     bonus or profit-sharing plan for purposes of this 
     subparagraph.''
       (B) Conforming amendments.--
       (i) Section 404(a)(1)(A) is amended by inserting ``(other 
     than a trust to which paragraph (3) applies)'' after 
     ``pension trust''.
       (ii) Section 404(h)(2) is amended by striking ``stock bonus 
     or profit-sharing trust'' and inserting ``trust subject to 
     subsection (a)(3)(A)''.
       (iii) The heading of section 404(h)(2) is amended by 
     striking ``stock bonus and profit-sharing trust'' and 
     inserting ``certain trusts''.
       (b) Compensation.--
       (1) In general.--Section 404(a) (relating to general rule) 
     is amended by adding at the end the following:
       ``(12) Definition of compensation.--For purposes of 
     paragraphs (3), (7), (8), and (9), the term `compensation' 
     shall include amounts treated as `participant's compensation' 
     under subparagraph (C) or (D) of section 415(c)(3).''.
       (2) Conforming amendments.--
       (A) Subparagraph (B) of section 404(a)(3) is amended by 
     striking the last sentence thereof.
       (B) Clause (i) of section 4972(c)(6)(B) is amended by 
     striking ``(within the meaning of section 404(a))'' and 
     inserting ``(within the meaning of section 404(a) and as 
     adjusted under section 404(a)(12))''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2001.

     SEC. 617. OPTION TO TREAT ELECTIVE DEFERRALS AS AFTER-TAX 
                   ROTH CONTRIBUTIONS.

       (a) In General.--Subpart A of part I of subchapter D of 
     chapter 1 (relating to deferred compensation, etc.) is 
     amended by inserting after section 402 the following new 
     section:

     ``SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFERRALS AS ROTH 
                   CONTRIBUTIONS.

       ``(a) General Rule.--If an applicable retirement plan 
     includes a qualified Roth contribution program--
       ``(1) any designated Roth contribution made by an employee 
     pursuant to the program shall be treated as an elective 
     deferral for purposes of this chapter, except that such 
     contribution shall not be excludable from gross income, and
       ``(2) such plan (and any arrangement which is part of such 
     plan) shall not be treated as failing to meet any requirement 
     of this chapter solely by reason of including such program.
       ``(b) Qualified Roth Contribution Program.--For purposes of 
     this section--
       ``(1) In general.--The term `qualified Roth contribution 
     program' means a program under which an employee may elect to 
     make designated Roth contributions in lieu of all or a 
     portion of elective deferrals the employee is otherwise 
     eligible to make under the applicable retirement plan.
       ``(2) Separate accounting required.--A program shall not be 
     treated as a qualified Roth contribution program unless the 
     applicable retirement plan--
       ``(A) establishes separate accounts (`designated Roth 
     accounts') for the designated Roth contributions of each 
     employee and any earnings properly allocable to the 
     contributions, and
       ``(B) maintains separate recordkeeping with respect to each 
     account.
       ``(c) Definitions and Rules Relating to Designated Roth 
     Contributions.--For purposes of this section--
       ``(1) Designated roth contribution.--The term `designated 
     Roth contribution' means any elective deferral which--
       ``(A) is excludable from gross income of an employee 
     without regard to this section, and
       ``(B) the employee designates (at such time and in such 
     manner as the Secretary may prescribe) as not being so 
     excludable.
       ``(2) Designation limits.--The amount of elective deferrals 
     which an employee may designate under paragraph (1) shall not 
     exceed the excess (if any) of--
       ``(A) the maximum amount of elective deferrals excludable 
     from gross income of the employee for the taxable year 
     (without regard to this section), over
       ``(B) the aggregate amount of elective deferrals of the 
     employee for the taxable year which the employee does not 
     designate under paragraph (1).
       ``(3) Rollover contributions.--
       ``(A) In general.--A rollover contribution of any payment 
     or distribution from a designated Roth account which is 
     otherwise allowable under this chapter may be made only if 
     the contribution is to--
       ``(i) another designated Roth account of the individual 
     from whose account the payment or distribution was made, or
       ``(ii) a Roth IRA of such individual.
       ``(B) Coordination with limit.--Any rollover contribution 
     to a designated Roth account under subparagraph (A) shall not 
     be taken into account for purposes of paragraph (1).
       ``(d) Distribution Rules.--For purposes of this title--
       ``(1) Exclusion.--Any qualified distribution from a 
     designated Roth account shall not be includible in gross 
     income.
       ``(2) Qualified distribution.--For purposes of this 
     subsection--
       ``(A) In general.--The term `qualified distribution' has 
     the meaning given such term by section 408A(d)(2)(A) (without 
     regard to clause (iv) thereof).
       ``(B) Distributions within nonexclusion period.--A payment 
     or distribution from a designated Roth account shall not be 
     treated as a qualified distribution if such payment or 
     distribution is made within the 5-taxable-year period 
     beginning with the earlier of--
       ``(i) the first taxable year for which the individual made 
     a designated Roth contribution to any designated Roth account 
     established for such individual under the same applicable 
     retirement plan, or
       ``(ii) if a rollover contribution was made to such 
     designated Roth account from a designated Roth account 
     previously established for such individual under another 
     applicable retirement plan, the first taxable year for which 
     the individual made a designated Roth contribution to such 
     previously established account.
       ``(C) Distributions of excess deferrals and contributions 
     and earnings thereon.--The term `qualified distribution' 
     shall not include any distribution of any excess deferral 
     under section 402(g)(2) or any excess contribution under 
     section 401(k)(8), and any income on the excess deferral or 
     contribution.
       ``(3) Treatment of distributions of certain excess 
     deferrals.--Notwithstanding section 72, if any excess 
     deferral under section 402(g)(2) attributable to a designated 
     Roth contribution is not distributed on or before the 1st 
     April 15 following the close of the taxable year in which 
     such excess deferral is made, the amount of such excess 
     deferral shall--
       ``(A) not be treated as investment in the contract, and
       ``(B) be included in gross income for the taxable year in 
     which such excess is distributed.
       ``(4) Aggregation rules.--Section 72 shall be applied 
     separately with respect to distributions and payments from a 
     designated Roth account and other distributions and payments 
     from the plan.
       ``(e) Other Definitions.--For purposes of this section--
       ``(1) Applicable retirement plan.--The term `applicable 
     retirement plan' means--
       ``(A) an employees' trust described in section 401(a) which 
     is exempt from tax under section 501(a), and

[[Page S5146]]

       ``(B) a plan under which amounts are contributed by an 
     individual's employer for an annuity contract described in 
     section 403(b).
       ``(2) Elective deferral.--The term `elective deferral' 
     means any elective deferral described in subparagraph (A) or 
     (C) of section 402(g)(3).''.
       (b) Excess Deferrals.--Section 402(g) (relating to 
     limitation on exclusion for elective deferrals) is amended--
       (1) by adding at the end of paragraph (1)(A) (as added by 
     section 201(c)(1)) the following new sentence: ``The 
     preceding sentence shall not apply the portion of such excess 
     as does not exceed the designated Roth contributions of the 
     individual for the taxable year.''; and
       (2) by inserting ``(or would be included but for the last 
     sentence thereof)'' after ``paragraph (1)'' in paragraph 
     (2)(A).
       (c) Rollovers.--Subparagraph (B) of section 402(c)(8) is 
     amended by adding at the end the following:
     ``If any portion of an eligible rollover distribution is 
     attributable to payments or distributions from a designated 
     Roth account (as defined in section 402A), an eligible 
     retirement plan with respect to such portion shall include 
     only another designated Roth account and a Roth IRA.''.
       (d) Reporting Requirements.--
       (1) W-2 information.--Section 6051(a)(8) is amended by 
     inserting ``, including the amount of designated Roth 
     contributions (as defined in section 402A)'' before the comma 
     at the end.
       (2) Information.--Section 6047 is amended by redesignating 
     subsection (f) as subsection (g) and by inserting after 
     subsection (e) the following new subsection:
       ``(f) Designated Roth Contributions.--The Secretary shall 
     require the plan administrator of each applicable retirement 
     plan (as defined in section 402A) to make such returns and 
     reports regarding designated Roth contributions (as defined 
     in section 402A) to the Secretary, participants and 
     beneficiaries of the plan, and such other persons as the 
     Secretary may prescribe.''.
       (e) Conforming Amendments.--
       (1) Section 408A(e) is amended by adding after the first 
     sentence the following new sentence: ``Such term includes a 
     rollover contribution described in section 402A(c)(3)(A).''.
       (2) The table of sections for subpart A of part I of 
     subchapter D of chapter 1 is amended by inserting after the 
     item relating to section 402 the following new item:

``Sec. 402A. Optional treatment of elective deferrals as Roth 
              contributions.''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2003.

     SEC. 618. NONREFUNDABLE CREDIT TO CERTAIN INDIVIDUALS FOR 
                   ELECTIVE DEFERRALS AND IRA CONTRIBUTIONS.

       (a) In General.--Subpart A of part IV of subchapter A of 
     chapter 1 (relating to nonrefundable personal credits), as 
     amended by section 432, is amended by inserting after section 
     25B the following new section:

     ``SEC. 25C. ELECTIVE DEFERRALS AND IRA CONTRIBUTIONS BY 
                   CERTAIN INDIVIDUALS.

       ``(a) Allowance of Credit.--In the case of an eligible 
     individual, there shall be allowed as a credit against the 
     tax imposed by this subtitle for the taxable year an amount 
     equal to the applicable percentage of so much of the 
     qualified retirement savings contributions of the eligible 
     individual for the taxable year as do not exceed $2,000.
       ``(b) Applicable Percentage.--For purposes of this section, 
     the applicable percentage is the percentage determined in 
     accordance with the following table:


----------------------------------------------------------------------------------------------------------------
                                     Adjusted Gross Income
------------------------------------------------------------------------------------------------
          Joint return                 Head of a household               All other cases            Applicable
------------------------------------------------------------------------------------------------    percentage
      Over          Not over          Over          Not over          Over          Not over
----------------------------------------------------------------------------------------------------------------
          $0          $30,000              $0         $22,500              $0         $15,000              50
      30,000           32,500          22,500          24,375          15,000          16,250              20
      32,500           50,000          24,375          37,500          16,250          25,000              10
      50,000     ..............        37,500    ..............        25,000    ..............             0
----------------------------------------------------------------------------------------------------------------


       ``(c) Eligible Individual.--For purposes of this section--
       ``(1) In general.--The term `eligible individual' means any 
     individual if such individual has attained the age of 18 as 
     of the close of the taxable year.
       ``(2) Dependents and full-time students not eligible.--The 
     term `eligible individual' shall not include--
       ``(A) any individual with respect to whom a deduction under 
     section 151 is allowed to another taxpayer for a taxable year 
     beginning in the calendar year in which such individual's 
     taxable year begins, and
       ``(B) any individual who is a student (as defined in 
     section 151(c)(4)).
       ``(d) Qualified Retirement Savings Contributions.--For 
     purposes of this section--
       ``(1) In general.--The term `qualified retirement savings 
     contributions' means, with respect to any taxable year, the 
     sum of--
       ``(A) the amount of the qualified retirement contributions 
     (as defined in section 219(e)) made by the eligible 
     individual,
       ``(B) the amount of--
       ``(i) any elective deferrals (as defined in section 
     402(g)(3)) of such individual, and
       ``(ii) any elective deferral of compensation by such 
     individual under an eligible deferred compensation plan (as 
     defined in section 457(b)) of an eligible employer described 
     in section 457(e)(1)(A), and
       ``(C) the amount of voluntary employee contributions by 
     such individual to any qualified retirement plan (as defined 
     in section 4974(c)).
       ``(2) Reduction for certain distributions.--
       ``(A) In general.--The qualified retirement savings 
     contributions determined under paragraph (1) shall be reduced 
     (but not below zero) by the sum of--
       ``(i) any distribution from a qualified retirement plan (as 
     defined in section 4974(c)), or from an eligible deferred 
     compensation plan (as defined in section 457(b)), received by 
     the individual during the testing period which is includible 
     in gross income, and
       ``(ii) any distribution from a Roth IRA received by the 
     individual during the testing period which is not a qualified 
     rollover contribution (as defined in section 408A(e)) to a 
     Roth IRA.
       ``(B) Testing period.--For purposes of subparagraph (A), 
     the testing period, with respect to a taxable year, is the 
     period which includes--
       ``(i) such taxable year,
       ``(ii) the 2 preceding taxable years, and
       ``(iii) the period after such taxable year and before the 
     due date (including extensions) for filing the return of tax 
     for such taxable year.
       ``(C) Excepted distributions.--There shall not be taken 
     into account under subparagraph (A)--
       ``(i) any distribution referred to in section 72(p), 
     401(k)(8), 401(m)(6), 402(g)(2), 404(k), or 408(d)(4), and
       ``(ii) any distribution to which section 408A(d)(3) 
     applies.
       ``(D) Treatment of distributions received by spouse of 
     individual.--For purposes of determining distributions 
     received by an individual under subparagraph (A) for any 
     taxable year, any distribution received by the spouse of such 
     individual shall be treated as received by such individual if 
     such individual and spouse file a joint return for such 
     taxable year and for the taxable year during which the spouse 
     receives the distribution.
       ``(e) Adjusted Gross Income.--For purposes of this section, 
     adjusted gross income shall be determined without regard to 
     sections 911, 931, and 933.
       ``(f) Investment in the Contract.--Notwithstanding any 
     other provision of law, a qualified retirement savings 
     contribution shall not fail to be included in determining the 
     investment in the contract for purposes of section 72 by 
     reason of the credit under this section.
       ``(g) Termination.--This section shall not apply to taxable 
     years beginning after December 31, 2006.''.
       (b) Credit Allowed Against Regular Tax and Alternative 
     Minimum Tax.--
       (1) In general.--Section 25C, as added by subsection (a), 
     is amended by inserting after subsection (f) the following 
     new subsection:
       ``(g) Limitation Based on Amount of Tax.--The aggregate 
     credit allowed by this section for the taxable year shall not 
     exceed the sum of--
       ``(1) the taxpayer's regular tax liability for the taxable 
     year reduced by the sum of the credits allowed by sections 
     21, 22, 23, 24, 25, 25A, and 25B plus
       ``(2) the tax imposed by section 55 for such taxable 
     year.''
       (2) Conforming amendments.--
       (A) Section 26(a)(1), as amended by section 201, is amended 
     by inserting ``or section 25C'' after ``section 24''.
       (B) Section 23(c), as amended by section 201, is amended by 
     striking ``sections 24'' and inserting ``sections 24, 25C,''.
       (C) Section 25(e)(1)(C), as amended by section 201, is 
     amended by inserting ``25C,'' after ``24,''.
       (D) Section 904(h), as amended by section 201, is amended 
     by inserting ``or 25C'' after ``section 24''.
       (E) Section 1400C(d), as amended by section 201, is amended 
     by inserting ``and section 25C'' after ``section 24''.
       (c) Conforming Amendment.--The table of sections for 
     subpart A of part IV of subchapter A of chapter 1, as amended 
     by section 432, is amended by inserting after the item 
     relating to section 25B the following new item:

``Sec. 25C. Elective deferrals and IRA contributions by certain 
              individuals.''


[[Page S5147]]


       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 619. CREDIT FOR QUALIFIED PENSION PLAN CONTRIBUTIONS OF 
                   SMALL EMPLOYERS.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits) is amended 
     by adding at the end the following new section:

     ``SEC. 45E. SMALL EMPLOYER PENSION PLAN CONTRIBUTIONS.

       ``(a) General Rule.--For purposes of section 38, in the 
     case of an eligible employer, the small employer pension plan 
     contribution credit determined under this section for any 
     taxable year is an amount equal to 50 percent of the amount 
     which would (but for subsection (f)(1)) be allowed as a 
     deduction under section 404 for such taxable year for 
     qualified employer contributions made to any qualified 
     retirement plan on behalf of any employee who is not a highly 
     compensated employee.
       ``(b) Credit Limited to 3 Years.--The credit allowable by 
     this section shall be allowed only with respect to the period 
     of 3 taxable years beginning with the first taxable year for 
     which a credit is allowable with respect to a plan under this 
     section.
       ``(c) Qualified Employer Contribution.--For purposes of 
     this section--
       ``(1) Defined contribution plans.--In the case of a defined 
     contribution plan, the term `qualified employer contribution' 
     means the amount of nonelective and matching contributions to 
     the plan made by the employer on behalf of any employee who 
     is not a highly compensated employee to the extent such 
     amount does not exceed 3 percent of such employee's 
     compensation from the employer for the year.
       ``(2) Defined benefit plans.--In the case of a defined 
     benefit plan, the term `qualified employer contribution' 
     means the amount of employer contributions to the plan made 
     on behalf of any employee who is not a highly compensated 
     employee to the extent that the accrued benefit of such 
     employee derived from employer contributions for the year 
     does not exceed the equivalent (as determined under 
     regulations prescribed by the Secretary and without regard to 
     contributions and benefits under the Social Security Act) of 
     3 percent of such employee's compensation from the employer 
     for the year.
       ``(d) Qualified Retirement Plan.--
       ``(1) In general.--The term `qualified retirement plan' 
     means any plan described in section 401(a) which includes a 
     trust exempt from tax under section 501(a) if the plan 
     meets--
       ``(A) the contribution requirements of paragraph (2),
       ``(B) the vesting requirements of paragraph (3), and
       ``(C) the distribution requirements of paragraph (4).
       ``(2) Contribution requirements.--
       ``(A) In general.--The requirements of this paragraph are 
     met if, under the plan--
       ``(i) the employer is required to make nonelective 
     contributions of at least 1 percent of compensation (or the 
     equivalent thereof in the case of a defined benefit plan) for 
     each employee who is not a highly compensated employee who is 
     eligible to participate in the plan, and
       ``(ii) allocations of nonelective employer contributions, 
     in the case of a defined contribution plan, are either in 
     equal dollar amounts for all employees covered by the plan or 
     bear a uniform relationship to the total compensation, or the 
     basic or regular rate of compensation, of the employees 
     covered by the plan (and an equivalent requirement is met 
     with respect to a defined benefit plan).
       ``(B) Compensation limitation.--The compensation taken into 
     account under subparagraph (A) for any year shall not exceed 
     the limitation in effect for such year under section 
     401(a)(17).
       ``(3) Vesting requirements.--The requirements of this 
     paragraph are met if the plan satisfies the requirements of 
     either of the following subparagraphs:
       ``(A) 3-year vesting.--A plan satisfies the requirements of 
     this subparagraph if an employee who has completed at least 3 
     years of service has a nonforfeitable right to 100 percent of 
     the employee's accrued benefit derived from employer 
     contributions.
       ``(B) 5-year graded vesting.--A plan satisfies the 
     requirements of this subparagraph if an employee has a 
     nonforfeitable right to a percentage of the employee's 
     accrued benefit derived from employer contributions 
     determined under the following table:

                                                     The nonforfeitable
``Years of service:                                      percentage is:
  1.............................................................20 ....

  2.............................................................40 ....

  3.............................................................60 ....

  4.............................................................80 ....

  5............................................................100.....

       ``(4) Distribution requirements.--In the case of a profit-
     sharing or stock bonus plan, the requirements of this 
     paragraph are met if, under the plan, qualified employer 
     contributions are distributable only as provided in section 
     401(k)(2)(B).
       ``(e) Other Definitions.--For purposes of this section--
       ``(1) Eligible employer.--
       ``(A) In general.--The term `eligible employer' means, with 
     respect to any year, an employer which has no more than 20 
     employees who received at least $5,000 of compensation from 
     the employer for the preceding year.
       ``(B) Requirement for new qualified employer plans.--Such 
     term shall not include an employer if, during the 3-taxable 
     year period immediately preceding the 1st taxable year for 
     which the credit under this section is otherwise allowable 
     for a qualified employer plan of the employer, the employer 
     or any member of any controlled group including the employer 
     (or any predecessor of either) established or maintained a 
     qualified employer plan with respect to which contributions 
     were made, or benefits were accrued, for substantially the 
     same employees as are in the qualified employer plan.
       ``(2) Highly compensated employee.--The term `highly 
     compensated employee' has the meaning given such term by 
     section 414(q) (determined without regard to section 
     414(q)(1)(B)(ii)).
       ``(f) Special Rules.--
       ``(1) Disallowance of deduction.--No deduction shall be 
     allowed for that portion of the qualified employer 
     contributions paid or incurred for the taxable year which is 
     equal to the credit determined under subsection (a).
       ``(2) Election not to claim credit.--This section shall not 
     apply to a taxpayer for any taxable year if such taxpayer 
     elects to have this section not apply for such taxable year.
       ``(3) Aggregation rules.--All persons treated as a single 
     employer under subsection (a) or (b) of section 52, or 
     subsection (n) or (o) of section 414, shall be treated as one 
     person. All eligible employer plans shall be treated as 1 
     eligible employer plan.
       ``(g) Recapture of Credit on Forfeited Contributions.--
       ``(1) In general.--Except as provided in paragraph (2), if 
     any accrued benefit which is forfeitable by reason of 
     subsection (d)(3) is forfeited, the employer's tax imposed by 
     this chapter for the taxable year in which the forfeiture 
     occurs shall be increased by 35 percent of the employer 
     contributions from which such benefit is derived to the 
     extent such contributions were taken into account in 
     determining the credit under this section.
       ``(2) Reallocated contributions.--Paragraph (1) shall not 
     apply to any contribution which is reallocated by the 
     employer under the plan to employees who are not highly 
     compensated employees.''.
       (b) Credit Allowed as Part of General Business Credit.--
     Section 38(b) (defining current year business credit) is 
     amended by striking ``plus'' at the end of paragraph (12), by 
     striking the period at the end of paragraph (13) and 
     inserting ``, plus'', and by adding at the end the following 
     new paragraph:
       ``(14) in the case of an eligible employer (as defined in 
     section 45E(e)), the small employer pension plan contribution 
     credit determined under section 45E(a).''
       (c) Conforming Amendments.--
       (1) Section 39(d) is amended by adding at the end the 
     following new paragraph:
       ``(10) No carryback of small employer pension plan 
     contribution credit before january 1, 2003.--No portion of 
     the unused business credit for any taxable year which is 
     attributable to the small employer pension plan contribution 
     credit determined under section 45E may be carried back to a 
     taxable year beginning before January 1, 2003.''
       (2) Subsection (c) of section 196 is amended by striking 
     ``and'' at the end of paragraph (8), by striking the period 
     at the end of paragraph (9) and inserting ``, and'', and by 
     adding at the end the following new paragraph:
       ``(10) the small employer pension plan contribution credit 
     determined under section 45E(a).''
       (3) The table of sections for subpart D of part IV of 
     subchapter A of chapter 1 is amended by adding at the end the 
     following new item:

``Sec. 45E. Small employer pension plan contributions.''
       (d) Effective Date.--The amendments made by this section 
     shall apply to contributions paid or incurred in taxable 
     years beginning after December 31, 2002.

     SEC. 620. CREDIT FOR PENSION PLAN STARTUP COSTS OF SMALL 
                   EMPLOYERS.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits), as amended 
     by section 619, is amended by adding at the end the following 
     new section:

     ``SEC. 45F. SMALL EMPLOYER PENSION PLAN STARTUP COSTS.

       ``(a) General Rule.--For purposes of section 38, in the 
     case of an eligible employer, the small employer pension plan 
     startup cost credit determined under this section for any 
     taxable year is an amount equal to 50 percent of the 
     qualified startup costs paid or incurred by the taxpayer 
     during the taxable year.
       ``(b) Dollar Limitation.--The amount of the credit 
     determined under this section for any taxable year shall not 
     exceed--
       ``(1) $500 for the first credit year and each of the 2 
     taxable years immediately following the first credit year, 
     and
       ``(2) zero for any other taxable year.
       ``(c) Eligible Employer.--For purposes of this section--
       ``(1) In general.--The term `eligible employer' has the 
     meaning given such term by section 408(p)(2)(C)(i).
       ``(2) Requirement for new qualified employer plans.--Such 
     term shall not include an employer if, during the 3-taxable 
     year period immediately preceding the 1st taxable year for 
     which the credit under this section is otherwise allowable 
     for a qualified employer plan of the employer, the employer 
     or any member of any controlled group including the employer 
     (or any predecessor of either) established or maintained a 
     qualified

[[Page S5148]]

     employer plan with respect to which contributions were made, 
     or benefits were accrued, for substantially the same 
     employees as are in the qualified employer plan.
       ``(d) Other Definitions.--For purposes of this section--
       ``(1) Qualified startup costs.--
       ``(A) In general.--The term `qualified startup costs' means 
     any ordinary and necessary expenses of an eligible employer 
     which are paid or incurred in connection with--
       ``(i) the establishment or administration of an eligible 
     employer plan, or
       ``(ii) the retirement-related education of employees with 
     respect to such plan.
       ``(B) Plan must have at least 1 participant.--Such term 
     shall not include any expense in connection with a plan that 
     does not have at least 1 employee eligible to participate who 
     is not a highly compensated employee.
       ``(2) Eligible employer plan.--The term `eligible employer 
     plan' means a qualified employer plan within the meaning of 
     section 4972(d).
       ``(3) First credit year.--The term `first credit year' 
     means--
       ``(A) the taxable year which includes the date that the 
     eligible employer plan to which such costs relate becomes 
     effective, or
       ``(B) at the election of the eligible employer, the taxable 
     year preceding the taxable year referred to in subparagraph 
     (A).
       ``(e) Special Rules.--For purposes of this section--
       ``(1) Aggregation rules.--All persons treated as a single 
     employer under subsection (a) or (b) of section 52, or 
     subsection (n) or (o) of section 414, shall be treated as one 
     person. All eligible employer plans shall be treated as 1 
     eligible employer plan.
       ``(2) Disallowance of deduction.--No deduction shall be 
     allowed for that portion of the qualified startup costs paid 
     or incurred for the taxable year which is equal to the credit 
     determined under subsection (a).
       ``(3) Election not to claim credit.--This section shall not 
     apply to a taxpayer for any taxable year if such taxpayer 
     elects to have this section not apply for such taxable 
     year.''
       (b) Credit Allowed as Part of General Business Credit.--
     Section 38(b) (defining current year business credit), as 
     amended by section 619, is amended by striking ``plus'' at 
     the end of paragraph (13), by striking the period at the end 
     of paragraph (14) and inserting ``, plus'', and by adding at 
     the end the following new paragraph:
       ``(15) in the case of an eligible employer (as defined in 
     section 45F(c)), the small employer pension plan startup cost 
     credit determined under section 45F(a).''
       (c) Conforming Amendments.--
       (1) Section 39(d), as amended by section 619(c), is amended 
     by adding at the end the following new paragraph:
       ``(11) No carryback of small employer pension plan startup 
     cost credit before january 1, 2002.--No portion of the unused 
     business credit for any taxable year which is attributable to 
     the small employer pension plan startup cost credit 
     determined under section 45F may be carried back to a taxable 
     year beginning before January 1, 2002.''
       (2) Subsection (c) of section 196, as amended by section 
     619(c), is amended by striking ``and'' at the end of 
     paragraph (9), by striking the period at the end of paragraph 
     (10) and inserting ``, and'', and by adding at the end the 
     following new paragraph:
       ``(11) the small employer pension plan startup cost credit 
     determined under section 45F(a).''
       (3) The table of sections for subpart D of part IV of 
     subchapter A of chapter 1, as amended by section 619(c), is 
     amended by adding at the end the following new item:

``Sec. 45F. Small employer pension plan startup costs.''
       (d) Effective Date.--The amendments made by this section 
     shall apply to costs paid or incurred in taxable years 
     beginning after December 31, 2001, with respect to qualified 
     employer plans established after such date.

     SEC. 621. ELIMINATION OF USER FEE FOR REQUESTS TO IRS 
                   REGARDING NEW PENSION PLANS.

       (a) Elimination of Certain User Fees.--The Secretary of the 
     Treasury or the Secretary's delegate shall not require 
     payment of user fees under the program established under 
     section 10511 of the Revenue Act of 1987 for requests to the 
     Internal Revenue Service for ruling letters, opinion letters, 
     and determination letters or similar requests with respect to 
     the qualified status of a new pension benefit plan or any 
     trust which is part of the plan.
       (b) New Pension Benefit Plan.--For purposes of this 
     section--
       (1) In general.--The term ``new pension benefit plan'' 
     means a pension, profit-sharing, stock bonus, annuity, or 
     employee stock ownership plan which is maintained by one or 
     more eligible employers if such employer (or any predecessor 
     employer) has not made a prior request described in 
     subsection (a) for such plan (or any predecessor plan).
       (2) Eligible employer.--
       (A) In general.--The term ``eligible employer'' means an 
     employer which has--
       (i) no more than 100 employees for the preceding year, and
       (ii) at least one employee who is not a highly compensated 
     employee (as defined in section 414(q)) and is participating 
     in the plan.
       (B) New plan requirement.--The term ``eligible employer'' 
     shall not include an employer if, during the 3-taxable year 
     period immediately preceding the taxable year in which the 
     request is made, the employer or any member of any controlled 
     group including the employer (or any predecessor of either) 
     established or maintained a qualified employer plan with 
     respect to which contributions were made, or benefits were 
     accrued for service, for substantially the same employees as 
     are in the qualified employer plan.
       (c) Determination of Average Fees Charged.--For purposes of 
     any determination of average fees charged, any request to 
     which subsection (a) applies shall not be taken into account.
       (d) Effective Date.--The provisions of this section shall 
     apply with respect to requests made after December 31, 2001.

     SEC. 622. TREATMENT OF NONRESIDENT ALIENS ENGAGED IN 
                   INTERNATIONAL TRANSPORTATION SERVICES.

       (a) Exclusion From Income Sourcing Rules.--The second 
     sentence of section 861(a)(3) (relating to gross income from 
     sources within the United States) is amended by striking 
     ``except for purposes of sections 79 and 105 and subchapter 
     D,''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to remuneration for services performed in plan 
     years beginning after December 31, 2001.

                Subtitle C--Enhancing Fairness for Women

     SEC. 631. CATCH-UP CONTRIBUTIONS FOR INDIVIDUALS AGE 50 OR 
                   OVER.

       (a) In General.--Section 414 (relating to definitions and 
     special rules) is amended by adding at the end the following 
     new subsection:
       ``(v) Catch-up Contributions for Individuals Age 50 or 
     Over.--
       ``(1) In general.--An applicable employer plan shall not be 
     treated as failing to meet any requirement of this title 
     solely because the plan permits an eligible participant to 
     make additional elective deferrals in any plan year.
       ``(2) Limitation on amount of additional deferrals.--
       ``(A) In general.--A plan shall not permit additional 
     elective deferrals under paragraph (1) for any year in an 
     amount greater than the lesser of--
       ``(i) the applicable dollar amount, or
       ``(ii) the excess (if any) of--

       ``(I) the participant's compensation (as defined in section 
     415(c)(3)) for the year, over
       ``(II) any other elective deferrals of the participant for 
     such year which are made without regard to this subsection.

       ``(B) Applicable dollar amount.--For purposes of this 
     paragraph, the applicable dollar amount shall be determined 
     in accordance with the following table:

``For taxable years beginning in:      The applicable dollar amount is:
  2002, 2003, and 2004........................................$500 ....

  2005 and 2006.............................................$1,000 ....

  2007......................................................$2,000 ....

  2008......................................................$3,000 ....

  2009......................................................$4,000 ....

  2010 and thereafter.......................................$7,500.....

       ``(3) Treatment of contributions.--In the case of any 
     contribution to a plan under paragraph (1)--
       ``(A) such contribution shall not, with respect to the year 
     in which the contribution is made--
       ``(i) be subject to any otherwise applicable limitation 
     contained in section 402(g), 402(h), 403(b), 404(a), 404(h), 
     408(k), 408(p), 415, or 457, or
       ``(ii) be taken into account in applying such limitations 
     to other contributions or benefits under such plan or any 
     other such plan, and
       ``(B) such plan shall not be treated as failing to meet the 
     requirements of section 401(a)(4), 401(a)(26), 401(k)(3), 
     401(k)(11), 401(k)(12), 401(m), 403(b)(12), 408(k), 408(p), 
     408B, 410(b), or 416 by reason of the making of (or the right 
     to make) such contribution.
       ``(4) Eligible participant.--For purposes of this 
     subsection, the term `eligible participant' means, with 
     respect to any plan year, a participant in a plan--
       ``(A) who has attained the age of 50 before the close of 
     the plan year, and
       ``(B) with respect to whom no other elective deferrals may 
     (without regard to this subsection) be made to the plan for 
     the plan year by reason of the application of any limitation 
     or other restriction described in paragraph (3) or comparable 
     limitation or restriction contained in the terms of the plan.
       ``(5) Other definitions and rules.--For purposes of this 
     subsection--
       ``(A) Applicable employer plan.--The term `applicable 
     employer plan' means--
       ``(i) an employees' trust described in section 401(a) which 
     is exempt from tax under section 501(a),
       ``(ii) a plan under which amounts are contributed by an 
     individual's employer for an annuity contract described in 
     section 403(b),
       ``(iii) an eligible deferred compensation plan under 
     section 457 of an eligible employer described in section 
     457(e)(1)(A), and
       ``(iv) an arrangement meeting the requirements of section 
     408 (k) or (p).
       ``(B) Elective deferral.--The term `elective deferral' has 
     the meaning given such term by subsection (u)(2)(C).
       ``(C) Exception for section 457 plans.--This subsection 
     shall not apply to an applicable employer plan described in 
     subparagraph (A)(iii) for any year to which section 457(b)(3) 
     applies.''.

[[Page S5149]]

       (b) Effective Date.--The amendment made by this section 
     shall apply to contributions in taxable years beginning after 
     December 31, 2001.

     SEC. 632. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF EMPLOYEES 
                   TO DEFINED CONTRIBUTION PLANS.

       (a) Equitable Treatment.--
       (1) In general.--Subparagraph (B) of section 415(c)(1) 
     (relating to limitation for defined contribution plans) is 
     amended by striking ``25 percent'' and inserting ``the 
     applicable percentage''.
       (2) Applicable percentage.--Section 415(c) is amended by 
     adding at the end the following new paragraph:
       ``(8) Applicable percentage.--For purposes of paragraph 
     (1)(B), the applicable percentage shall be determined in 
     accordance with the following table:

``For years                                              The applicable
beginning in:                                            percentage is:
  2002 through 2010..............................................50....

  2011 and thereafter...........................................100....

       (3) Application to section 403(b).--Section 403(b) is 
     amended--
       (A) by striking ``the exclusion allowance for such taxable 
     year'' in paragraph (1) and inserting ``the applicable limit 
     under section 415'',
       (B) by striking paragraph (2), and
       (C) by inserting ``or any amount received by a former 
     employee after the fifth taxable year following the taxable 
     year in which such employee was terminated'' before the 
     period at the end of the second sentence of paragraph (3).
       (4) Conforming amendments.--
       (A) Subsection (f) of section 72 is amended by striking 
     ``section 403(b)(2)(D)(iii))'' and inserting ``section 
     403(b)(2)(D)(iii), as in effect before the enactment of the 
     Restoring Earnings to Lift Individuals and Empower Families 
     Act of 2001)''.
       (B) Section 404(a)(10)(B) is amended by striking ``, the 
     exclusion allowance under section 403(b)(2),''.
       (C) Section 415(a)(2) is amended by striking ``, and the 
     amount of the contribution for such portion shall reduce the 
     exclusion allowance as provided in section 403(b)(2)''.
       (D) Section 415(c)(3) is amended by adding at the end the 
     following new subparagraph:
       ``(E) Annuity contracts.--In the case of an annuity 
     contract described in section 403(b), the term `participant's 
     compensation' means the participant's includible compensation 
     determined under section 403(b)(3).''.
       (E) Section 415(c) is amended by striking paragraph (4).
       (F) Section 415(c)(7) is amended to read as follows:
       ``(7) Certain contributions by church plans not treated as 
     exceeding limit.--
       ``(A) In general.--Notwithstanding any other provision of 
     this subsection, at the election of a participant who is an 
     employee of a church or a convention or association of 
     churches, including an organization described in section 
     414(e)(3)(B)(ii), contributions and other additions for an 
     annuity contract or retirement income account described in 
     section 403(b) with respect to such participant, when 
     expressed as an annual addition to such participant's 
     account, shall be treated as not exceeding the limitation of 
     paragraph (1) if such annual addition is not in excess of 
     $10,000.
       ``(B) $40,000 aggregate limitation.--The total amount of 
     additions with respect to any participant which may be taken 
     into account for purposes of this subparagraph for all years 
     may not exceed $40,000.
       ``(C) Annual addition.--For purposes of this paragraph, the 
     term `annual addition' has the meaning given such term by 
     paragraph (2).''.
       (G) Subparagraph (B) of section 402(g)(7) (as redesignated 
     by section 611(c)(3)) is amended by inserting before the 
     period at the end the following: ``(as in effect before the 
     enactment of the Restoring Earnings to Lift Individuals and 
     Empower Families Act of 2001)''.
       (H) Section 664(g) is amended--
       (i) in paragraph (3)(E) by striking ``limitations under 
     section 415(c)'' and inserting ``applicable limitation under 
     paragraph (7)'', and
       (ii) by adding at the end the following new paragraph:
       ``(7) Applicable limitation.--
       ``(A) In general.--For purposes of paragraph (3)(E), the 
     applicable limitation under this paragraph with respect to a 
     participant is an amount equal to the lesser of--
       ``(i) $30,000, or
       ``(ii) 25 percent of the participant's compensation (as 
     defined in section 415(c)(3)).
       ``(B) Cost-of-living adjustment.--The Secretary shall 
     adjust annually the $30,000 amount under subparagraph (A)(i) 
     at the same time and in the same manner as under section 
     415(d), except that the base period shall be the calendar 
     quarter beginning October 1, 1993, and any increase under 
     this subparagraph which is not a multiple of $5,000 shall be 
     rounded to the next lowest multiple of $5,000.''.
       (5) Effective date.--
       (A) Except as provided in subparagraph (B), the amendments 
     made by this subsection shall apply to years beginning after 
     December 31, 2001.
       (B) The amendments made by paragraphs (3) and (4) shall 
     apply to years beginning after December 31, 2010.
       (b) Special Rules for Sections 403(b) and 408.--
       (1) In general.--Subsection (k) of section 415 is amended 
     by adding at the end the following new paragraph:
       ``(4) Special rules for sections 403(b) and 408.--For 
     purposes of this section, any annuity contract described in 
     section 403(b) for the benefit of a participant shall be 
     treated as a defined contribution plan maintained by each 
     employer with respect to which the participant has the 
     control required under subsection (b) or (c) of section 414 
     (as modified by subsection (h)). For purposes of this 
     section, any contribution by an employer to a simplified 
     employee pension plan for an individual for a taxable year 
     shall be treated as an employer contribution to a defined 
     contribution plan for such individual for such year.''.
       (2) Effective date.--
       (A) In general.--The amendment made by paragraph (1) shall 
     apply to limitation years beginning after December 31, 2000.
       (B) Exclusion allowance.--Effective for limitation years 
     beginning in 2001, in the case of any annuity contract 
     described in section 403(b) of the Internal Revenue Code of 
     1986, the amount of the contribution disqualified by reason 
     of section 415(g) of such Code shall reduce the exclusion 
     allowance as provided in section 403(b)(2) of such Code.
       (3) Modification of 403(b) exclusion allowance to conform 
     to 415 modification.--The Secretary of the Treasury shall 
     modify the regulations regarding the exclusion allowance 
     under section 403(b)(2) of the Internal Revenue Code of 1986 
     to render void the requirement that contributions to a 
     defined benefit pension plan be treated as previously 
     excluded amounts for purposes of the exclusion allowance. For 
     taxable years beginning after December 31, 2000, such 
     regulations shall be applied as if such requirement were 
     void.
       (c) Deferred Compensation Plans of State and Local 
     Governments and Tax-Exempt Organizations.--
       (1) In general.--Subparagraph (B) of section 457(b)(2) 
     (relating to salary limitation on eligible deferred 
     compensation plans) is amended by striking ``33\1/3\ 
     percent'' and inserting ``the applicable percentage''.
       (2) Applicable percentage.--Section 457 is amended by 
     adding at the end the following new subsection:
       ``(h) Applicable Percentage.--For purposes of subsection 
     (b)(2)(A), the applicable percentage shall be determined in 
     accordance with the following table:

``For years                                              The applicable
beginning in:                                            percentage is:
  2002 through 2010..............................................50....

  2011 and thereafter...........................................100....

       (3) Effective date.--The amendments made by this subsection 
     shall apply to years beginning after December 31, 2001.

     SEC. 633. FASTER VESTING OF CERTAIN EMPLOYER MATCHING 
                   CONTRIBUTIONS.

       (a) In General.--Section 411(a) (relating to minimum 
     vesting standards) is amended--
       (1) in paragraph (2), by striking ``A plan'' and inserting 
     ``Except as provided in paragraph (12), a plan''; and
       (2) by adding at the end the following:
       ``(12) Faster vesting for matching contributions.--In the 
     case of matching contributions (as defined in section 
     401(m)(4)(A)), paragraph (2) shall be applied--
       ``(A) by substituting `3 years' for `5 years' in 
     subparagraph (A), and
       ``(B) by substituting the following table for the table 
     contained in subparagraph (B):

                                                     The nonforfeitable
``Years of service:                                      percentage is:
      2.............................................................20 
      3.............................................................40 
      4.............................................................60 
      5.............................................................80 
      6.........................................................100.''.
       (b) Amendment of ERISA.--Section 203(a) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1053(a)) is 
     amended--
       (1) in paragraph (2), by striking ``A plan'' and inserting 
     ``Except as provided in paragraph (4), a plan'', and
       (2) by adding at the end the following:
       ``(4) In the case of matching contributions (as defined in 
     section 401(m)(4)(A) of the Internal Revenue Code of 1986), 
     paragraph (2) shall be applied--
       ``(A) by substituting `3 years' for `5 years' in 
     subparagraph (A), and
       ``(B) by substituting the following table for the table 
     contained in subparagraph (B):

                                                     The nonforfeitable
``Years of service:                                      percentage is:
  2.............................................................20 ....

  3.............................................................40 ....

  4.............................................................60 ....

  5.............................................................80 ....

  6.........................................................100.''.....

       (c) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to contributions 
     for plan years beginning after December 31, 2001.
       (2) Collective bargaining agreements.--In the case of a 
     plan maintained pursuant to one or more collective bargaining 
     agreements between employee representatives and one or more 
     employers ratified by the date of the enactment of this Act, 
     the amendments made by this section shall not apply to 
     contributions on behalf of employees covered by any such 
     agreement for plan years beginning before the earlier of--

[[Page S5150]]

       (A) the later of--
       (i) the date on which the last of such collective 
     bargaining agreements terminates (determined without regard 
     to any extension thereof on or after such date of the 
     enactment); or
       (ii) January 1, 2002; or
       (B) January 1, 2006.
       (3) Service required.--With respect to any plan, the 
     amendments made by this section shall not apply to any 
     employee before the date that such employee has 1 hour of 
     service under such plan in any plan year to which the 
     amendments made by this section apply.

     SEC. 634. MODIFICATIONS TO MINIMUM DISTRIBUTION RULES.

       (a) Life Expectancy Tables.--The Secretary of the Treasury 
     shall modify the life expectancy tables under the regulations 
     relating to minimum distribution requirements under sections 
     401(a)(9), 408(a)(6) and (b)(3), 403(b)(10), and 457(d)(2) of 
     the Internal Revenue Code to reflect current life expectancy.
       (b) Repeal of Rule Where Distributions Had Begun Before 
     Death Occurs.--
       (1) In general.--Subparagraph (B) of section 401(a)(9) is 
     amended by striking clause (i) and redesignating clauses 
     (ii), (iii), and (iv) as clauses (i), (ii), and (iii), 
     respectively.
       (2) Conforming changes.--
       (A) Clause (i) of section 401(a)(9)(B) (as so redesignated) 
     is amended--
       (i) by striking ``for other cases'' in the heading; and
       (ii) by striking ``the distribution of the employee's 
     interest has begun in accordance with subparagraph (A)(ii)'' 
     and inserting ``his entire interest has been distributed to 
     him''.
       (B) Clause (ii) of section 401(a)(9)(B) (as so 
     redesignated) is amended by striking ``clause (ii)'' and 
     inserting ``clause (i)''.
       (C) Clause (iii) of section 401(a)(9)(B) (as so 
     redesignated) is amended--
       (i) by striking ``clause (iii)(I)'' and inserting ``clause 
     (ii)(I)'';
       (ii) by striking ``clause (iii)(III)'' in subclause (I) and 
     inserting ``clause (ii)(III)'';
       (iii) by striking ``the date on which the employee would 
     have attained age 70\1/2\,'' in subclause (I) and inserting 
     ``April 1 of the calendar year following the calendar year in 
     which the spouse attains 70\1/2\,''; and
       (iv) by striking ``the distributions to such spouse 
     begin,'' in subclause (II) and inserting ``his entire 
     interest has been distributed to him,''.
       (3) Effective date.--
       (A) In general.--Except as provided in subparagraph (B), 
     the amendments made by this subsection shall apply to years 
     beginning after December 31, 2001.
       (B) Distributions to surviving spouse.--
       (i) In general.--In the case of an employee described in 
     clause (ii), distributions to the surviving spouse of the 
     employee shall not be required to commence prior to the date 
     on which such distributions would have been required to begin 
     under section 401(a)(9)(B) of the Internal Revenue Code of 
     1986 (as in effect on the day before the date of the 
     enactment of this Act).
       (ii) Certain employees.--An employee is described in this 
     clause if such employee dies before--

       (I) the date of the enactment of this Act, and
       (II) the required beginning date (within the meaning of 
     section 401(a)(9)(C) of the Internal Revenue Code of 1986) of 
     the employee.

     SEC. 635. CLARIFICATION OF TAX TREATMENT OF DIVISION OF 
                   SECTION 457 PLAN BENEFITS UPON DIVORCE.

       (a) In General.--Section 414(p)(11) (relating to 
     application of rules to governmental and church plans) is 
     amended--
       (1) by inserting ``or an eligible deferred compensation 
     plan (within the meaning of section 457(b))'' after 
     ``subsection (e))''; and
       (2) in the heading, by striking ``governmental and church 
     plans'' and inserting ``certain other plans''.
       (b) Waiver of Certain Distribution Requirements.--Paragraph 
     (10) of section 414(p) is amended by striking ``and section 
     409(d)'' and inserting ``section 409(d), and section 
     457(d)''.
       (c) Tax Treatment of Payments From a Section 457 Plan.--
     Subsection (p) of section 414 is amended by redesignating 
     paragraph (12) as paragraph (13) and inserting after 
     paragraph (11) the following new paragraph:
       ``(12) Tax treatment of payments from a section 457 plan.--
     If a distribution or payment from an eligible deferred 
     compensation plan described in section 457(b) is made 
     pursuant to a qualified domestic relations order, rules 
     similar to the rules of section 402(e)(1)(A) shall apply to 
     such distribution or payment.''.
       (d) Effective Date.--
       (1) In general.--The amendment made by subsection (c) shall 
     apply to transfers, distributions, and payments made after 
     December 31, 2001.
       (2) Amendments relating to assignments in divorce, etc., 
     proceedings.--The amendments made by subsections (a) and (b) 
     shall take effect on January 1, 2002, except that in the case 
     of a domestic relations order entered before such date, the 
     plan administrator--
       (A) shall treat such order as a qualified domestic 
     relations order if such administrator is paying benefits 
     pursuant to such order on such date, and
       (B) may treat any other such order entered before such date 
     as a qualified domestic relations order even if such order 
     does not meet the requirements of such amendments.

     SEC. 636. PROVISIONS RELATING TO HARDSHIP DISTRIBUTIONS.

       (a) Safe Harbor Relief.--
       (1) In general.--The Secretary of the Treasury shall revise 
     the regulations relating to hardship distributions under 
     section 401(k)(2)(B)(i)(IV) of the Internal Revenue Code of 
     1986 to provide that the period an employee is prohibited 
     from making elective and employee contributions in order for 
     a distribution to be deemed necessary to satisfy financial 
     need shall be equal to 6 months.
       (2) Effective date.--The revised regulations under this 
     subsection shall apply to years beginning after December 31, 
     2001.
       (b) Hardship Distributions Not Treated as Eligible Rollover 
     Distributions.--
       (1) Modification of definition of eligible rollover.--
     Subparagraph (C) of section 402(c)(4) (relating to eligible 
     rollover distribution) is amended to read as follows:
       ``(C) any distribution which is made upon hardship of the 
     employee.''.
       (2) Effective date.--The amendment made by this subsection 
     shall apply to distributions made after December 31, 2001.

     SEC. 637. WAIVER OF TAX ON NONDEDUCTIBLE CONTRIBUTIONS FOR 
                   DOMESTIC OR SIMILAR WORKERS.

       (a) In General.--Section 4972(c)(6) (relating to exceptions 
     to nondeductible contributions), as amended by section 502, 
     is amended by striking ``or'' at the end of subparagraph (A), 
     by striking the period and inserting ``, or'' at the end of 
     subparagraph (B), and by inserting after subparagraph (B) the 
     following new subparagraph:
       ``(C) so much of the contributions to a simple retirement 
     account (within the meaning of section 408(p)) or a simple 
     plan (within the meaning of section 401(k)(11)) which are not 
     deductible when contributed solely because such contributions 
     are not made in connection with a trade or business of the 
     employer.''
       (b) Exclusion of Certain Contributions.--Section 
     4972(c)(6), as amended by subsection (a), is amended by 
     adding at the end the following new sentence: ``Subparagraph 
     (C) shall not apply to contributions made on behalf of the 
     employer or a member of the employer's family (as defined in 
     section 447(e)(1)).''.
       (c) No Inference.--Nothing in the amendments made by this 
     section shall be construed to infer the proper treatment of 
     nondeductible contributions under the laws in effect before 
     such amendments.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

          Subtitle D--Increasing Portability for Participants

     SEC. 641. ROLLOVERS ALLOWED AMONG VARIOUS TYPES OF PLANS.

       (a) Rollovers From and to Section 457 Plans.--
       (1) Rollovers from section 457 plans.--
       (A) In general.--Section 457(e) (relating to other 
     definitions and special rules) is amended by adding at the 
     end the following:
       ``(16) Rollover amounts.--
       ``(A) General rule.--In the case of an eligible deferred 
     compensation plan established and maintained by an employer 
     described in subsection (e)(1)(A), if--
       ``(i) any portion of the balance to the credit of an 
     employee in such plan is paid to such employee in an eligible 
     rollover distribution (within the meaning of section 
     402(c)(4) without regard to subparagraph (C) thereof),
       ``(ii) the employee transfers any portion of the property 
     such employee receives in such distribution to an eligible 
     retirement plan described in section 402(c)(8)(B), and
       ``(iii) in the case of a distribution of property other 
     than money, the amount so transferred consists of the 
     property distributed,
     then such distribution (to the extent so transferred) shall 
     not be includible in gross income for the taxable year in 
     which paid.
       ``(B) Certain rules made applicable.--The rules of 
     paragraphs (2) through (7) and (9) of section 402(c) and 
     section 402(f) shall apply for purposes of subparagraph (A).
       ``(C) Reporting.--Rollovers under this paragraph shall be 
     reported to the Secretary in the same manner as rollovers 
     from qualified retirement plans (as defined in section 
     4974(c)).''.
       (B) Deferral limit determined without regard to rollover 
     amounts.--Section 457(b)(2) (defining eligible deferred 
     compensation plan) is amended by inserting ``(other than 
     rollover amounts)'' after ``taxable year''.
       (C) Direct rollover.--Paragraph (1) of section 457(d) is 
     amended by striking ``and'' at the end of subparagraph (A), 
     by striking the period at the end of subparagraph (B) and 
     inserting ``, and'', and by inserting after subparagraph (B) 
     the following:
       ``(C) in the case of a plan maintained by an employer 
     described in subsection (e)(1)(A), the plan meets 
     requirements similar to the requirements of section 
     401(a)(31).

     Any amount transferred in a direct trustee-to-trustee 
     transfer in accordance with section 401(a)(31) shall not be 
     includible in gross income for the taxable year of 
     transfer.''.
       (D) Withholding.--
       (i) Paragraph (12) of section 3401(a) is amended by adding 
     at the end the following:
       ``(E) under or to an eligible deferred compensation plan 
     which, at the time of such payment, is a plan described in 
     section 457(b) which is maintained by an eligible employer 
     described in section 457(e)(1)(A), or''.
       (ii) Paragraph (3) of section 3405(c) is amended to read as 
     follows:

[[Page S5151]]

       ``(3) Eligible rollover distribution.--For purposes of this 
     subsection, the term `eligible rollover distribution' has the 
     meaning given such term by section 402(f)(2)(A).''.
       (iii) Liability for withholding.--Subparagraph (B) of 
     section 3405(d)(2) is amended by striking ``or'' at the end 
     of clause (ii), by striking the period at the end of clause 
     (iii) and inserting ``, or'', and by adding at the end the 
     following:
       ``(iv) section 457(b) and which is maintained by an 
     eligible employer described in section 457(e)(1)(A).''.
       (2) Rollovers to section 457 plans.--
       (A) In general.--Section 402(c)(8)(B) (defining eligible 
     retirement plan) is amended by striking ``and'' at the end of 
     clause (iii), by striking the period at the end of clause 
     (iv) and inserting ``, and'', and by inserting after clause 
     (iv) the following new clause:
       ``(v) an eligible deferred compensation plan described in 
     section 457(b) which is maintained by an eligible employer 
     described in section 457(e)(1)(A).''.
       (B) Separate accounting.--Section 402(c) is amended by 
     adding at the end the following new paragraph:
       ``(11) Separate accounting.--Unless a plan described in 
     clause (v) of paragraph (8)(B) agrees to separately account 
     for amounts rolled into such plan from eligible retirement 
     plans not described in such clause, the plan described in 
     such clause may not accept transfers or rollovers from such 
     retirement plans.''.
       (C) 10 percent additional tax.--Subsection (t) of section 
     72 (relating to 10-percent additional tax on early 
     distributions from qualified retirement plans) is amended by 
     adding at the end the following new paragraph:
       ``(9) Special rule for rollovers to section 457 plans.--For 
     purposes of this subsection, a distribution from an eligible 
     deferred compensation plan (as defined in section 457(b)) of 
     an eligible employer described in section 457(e)(1)(A) shall 
     be treated as a distribution from a qualified retirement plan 
     described in 4974(c)(1) to the extent that such distribution 
     is attributable to an amount transferred to an eligible 
     deferred compensation plan from a qualified retirement plan 
     (as defined in section 4974(c)).''.
       (b) Allowance of Rollovers From and to 403(b) Plans.--
       (1) Rollovers from section 403(b) plans.--Section 
     403(b)(8)(A)(ii) (relating to rollover amounts) is amended by 
     striking ``such distribution'' and all that follows and 
     inserting ``such distribution to an eligible retirement plan 
     described in section 402(c)(8)(B), and''.
       (2) Rollovers to section 403(b) plans.--Section 
     402(c)(8)(B) (defining eligible retirement plan), as amended 
     by subsection (a), is amended by striking ``and'' at the end 
     of clause (iv), by striking the period at the end of clause 
     (v) and inserting ``, and'', and by inserting after clause 
     (v) the following new clause:
       ``(vi) an annuity contract described in section 403(b).''.
       (c) Expanded Explanation to Recipients of Rollover 
     Distributions.--Paragraph (1) of section 402(f) (relating to 
     written explanation to recipients of distributions eligible 
     for rollover treatment) is amended by striking ``and'' at the 
     end of subparagraph (C), by striking the period at the end of 
     subparagraph (D) and inserting ``, and'', and by adding at 
     the end the following new subparagraph:
       ``(E) of the provisions under which distributions from the 
     eligible retirement plan receiving the distribution may be 
     subject to restrictions and tax consequences which are 
     different from those applicable to distributions from the 
     plan making such distribution.''.
       (d) Spousal Rollovers.--Section 402(c)(9) (relating to 
     rollover where spouse receives distribution after death of 
     employee) is amended by striking ``; except that'' and all 
     that follows up to the end period.
       (e) Conforming Amendments.--
       (1) Section 72(o)(4) is amended by striking ``and 
     408(d)(3)'' and inserting ``403(b)(8), 408(d)(3), and 
     457(e)(16)''.
       (2) Section 219(d)(2) is amended by striking ``or 
     408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
       (3) Section 401(a)(31)(B) is amended by striking ``and 
     403(a)(4)'' and inserting ``, 403(a)(4), 403(b)(8), and 
     457(e)(16)''.
       (4) Subparagraph (A) of section 402(f)(2) is amended by 
     striking ``or paragraph (4) of section 403(a)'' and inserting 
     ``, paragraph (4) of section 403(a), subparagraph (A) of 
     section 403(b)(8), or subparagraph (A) of section 
     457(e)(16)''.
       (5) Paragraph (1) of section 402(f) is amended by striking 
     ``from an eligible retirement plan''.
       (6) Subparagraphs (A) and (B) of section 402(f)(1) are 
     amended by striking ``another eligible retirement plan'' and 
     inserting ``an eligible retirement plan''.
       (7) Subparagraph (B) of section 403(b)(8) is amended to 
     read as follows:
       ``(B) Certain rules made applicable.--The rules of 
     paragraphs (2) through (7) and (9) of section 402(c) and 
     section 402(f) shall apply for purposes of subparagraph (A), 
     except that section 402(f) shall be applied to the payor in 
     lieu of the plan administrator.''.
       (8) Section 408(a)(1) is amended by striking ``or 
     403(b)(8),'' and inserting ``403(b)(8), or 457(e)(16)''.
       (9) Subparagraphs (A) and (B) of section 415(b)(2) are each 
     amended by striking ``and 408(d)(3)'' and inserting 
     ``403(b)(8), 408(d)(3), and 457(e)(16)''.
       (10) Section 415(c)(2) is amended by striking ``and 
     408(d)(3)'' and inserting ``408(d)(3), and 457(e)(16)''.
       (11) Section 4973(b)(1)(A) is amended by striking ``or 
     408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
       (f) Effective Date; Special Rule.--
       (1) Effective date.--The amendments made by this section 
     shall apply to distributions after December 31, 2001.
       (2) Special rule.--Notwithstanding any other provision of 
     law, subsections (h)(3) and (h)(5) of section 1122 of the Tax 
     Reform Act of 1986 shall not apply to any distribution from 
     an eligible retirement plan (as defined in clause (iii) or 
     (iv) of section 402(c)(8)(B) of the Internal Revenue Code of 
     1986) on behalf of an individual if there was a rollover to 
     such plan on behalf of such individual which is permitted 
     solely by reason of any amendment made by this section.

     SEC. 642. ROLLOVERS OF IRAS INTO WORKPLACE RETIREMENT PLANS.

       (a) In General.--Subparagraph (A) of section 408(d)(3) 
     (relating to rollover amounts) is amended by adding ``or'' at 
     the end of clause (i), by striking clauses (ii) and (iii), 
     and by adding at the end the following:
       ``(ii) the entire amount received (including money and any 
     other property) is paid into an eligible retirement plan for 
     the benefit of such individual not later than the 60th day 
     after the date on which the payment or distribution is 
     received, except that the maximum amount which may be paid 
     into such plan may not exceed the portion of the amount 
     received which is includible in gross income (determined 
     without regard to this paragraph).

     For purposes of clause (ii), the term `eligible retirement 
     plan' means an eligible retirement plan described in clause 
     (iii), (iv), (v), or (vi) of section 402(c)(8)(B).''.
       (b) Conforming Amendments.--
       (1) Paragraph (1) of section 403(b) is amended by striking 
     ``section 408(d)(3)(A)(iii)'' and inserting ``section 
     408(d)(3)(A)(ii)''.
       (2) Clause (i) of section 408(d)(3)(D) is amended by 
     striking ``(i), (ii), or (iii)'' and inserting ``(i) or 
     (ii)''.
       (3) Subparagraph (G) of section 408(d)(3) is amended to 
     read as follows:
       ``(G) Simple retirement accounts.--In the case of any 
     payment or distribution out of a simple retirement account 
     (as defined in subsection (p)) to which section 72(t)(6) 
     applies, this paragraph shall not apply unless such payment 
     or distribution is paid into another simple retirement 
     account.''.
       (c) Effective Date; Special Rule.--
       (1) Effective date.--The amendments made by this section 
     shall apply to distributions after December 31, 2001.
       (2) Special rule.--Notwithstanding any other provision of 
     law, subsections (h)(3) and (h)(5) of section 1122 of the Tax 
     Reform Act of 1986 shall not apply to any distribution from 
     an eligible retirement plan (as defined in clause (iii) or 
     (iv) of section 402(c)(8)(B) of the Internal Revenue Code of 
     1986) on behalf of an individual if there was a rollover to 
     such plan on behalf of such individual which is permitted 
     solely by reason of the amendments made by this section.

     SEC. 643. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.

       (a) Rollovers From Exempt Trusts.--Paragraph (2) of section 
     402(c) (relating to maximum amount which may be rolled over) 
     is amended by adding at the end the following: ``The 
     preceding sentence shall not apply to such distribution to 
     the extent--
       ``(A) such portion is transferred in a direct trustee-to-
     trustee transfer to a qualified trust which is part of a plan 
     which is a defined contribution plan and which agrees to 
     separately account for amounts so transferred, including 
     separately accounting for the portion of such distribution 
     which is includible in gross income and the portion of such 
     distribution which is not so includible, or
       ``(B) such portion is transferred to an eligible retirement 
     plan described in clause (i) or (ii) of paragraph (8)(B).''.
       (b) Optional Direct Transfer of Eligible Rollover 
     Distributions.--Subparagraph (B) of section 401(a)(31) 
     (relating to limitation) is amended by adding at the end the 
     following: ``The preceding sentence shall not apply to such 
     distribution if the plan to which such distribution is 
     transferred--
       ``(i) agrees to separately account for amounts so 
     transferred, including separately accounting for the portion 
     of such distribution which is includible in gross income and 
     the portion of such distribution which is not so includible, 
     or
       ``(ii) is an eligible retirement plan described in clause 
     (i) or (ii) of section 402(c)(8)(B).''.
       (c) Rules for Applying Section 72 to IRAs.--Paragraph (3) 
     of section 408(d) (relating to special rules for applying 
     section 72) is amended by inserting at the end the following:
       ``(H) Application of section 72.--
       ``(i) In general.--If--

       ``(I) a distribution is made from an individual retirement 
     plan, and
       ``(II) a rollover contribution is made to an eligible 
     retirement plan described in section 402(c)(8)(B)(iii), (iv), 
     (v), or (vi) with respect to all or part of such 
     distribution,

     then, notwithstanding paragraph (2), the rules of clause (ii) 
     shall apply for purposes of applying section 72.
       ``(ii) Applicable rules.--In the case of a distribution 
     described in clause (i)--

       ``(I) section 72 shall be applied separately to such 
     distribution,

[[Page S5152]]

       ``(II) notwithstanding the pro rata allocation of income 
     on, and investment in, the contract to distributions under 
     section 72, the portion of such distribution rolled over to 
     an eligible retirement plan described in clause (i) shall be 
     treated as from income on the contract (to the extent of the 
     aggregate income on the contract from all individual 
     retirement plans of the distributee), and
       ``(III) appropriate adjustments shall be made in applying 
     section 72 to other distributions in such taxable year and 
     subsequent taxable years.''.

       (d) Effective Date.--The amendments made by this section 
     shall apply to distributions made after December 31, 2001.

     SEC. 644. HARDSHIP EXCEPTION TO 60-DAY RULE.

       (a) Exempt Trusts.--Paragraph (3) of section 402(c) 
     (relating to transfer must be made within 60 days of receipt) 
     is amended to read as follows:
       ``(3) Transfer must be made within 60 days of receipt.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     paragraph (1) shall not apply to any transfer of a 
     distribution made after the 60th day following the day on 
     which the distributee received the property distributed.
       ``(B) Hardship exception.--The Secretary may waive the 60-
     day requirement under subparagraph (A) where the failure to 
     waive such requirement would be against equity or good 
     conscience, including casualty, disaster, or other events 
     beyond the reasonable control of the individual subject to 
     such requirement.''.
       (b) IRAs.--Paragraph (3) of section 408(d) (relating to 
     rollover contributions), as amended by section 643, is 
     amended by adding after subparagraph (H) the following new 
     subparagraph:
       ``(I) Waiver of 60-day requirement.--The Secretary may 
     waive the 60-day requirement under subparagraphs (A) and (D) 
     where the failure to waive such requirement would be against 
     equity or good conscience, including casualty, disaster, or 
     other events beyond the reasonable control of the individual 
     subject to such requirement.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to distributions after December 31, 2001.

     SEC. 645. TREATMENT OF FORMS OF DISTRIBUTION.

       (a) Plan Transfers.--
       (1) Amendment of internal revenue code.--Paragraph (6) of 
     section 411(d) (relating to accrued benefit not to be 
     decreased by amendment) is amended by adding at the end the 
     following:
       ``(D) Plan transfers.--
       ``(i) In general.--A defined contribution plan (in this 
     subparagraph referred to as the `transferee plan') shall not 
     be treated as failing to meet the requirements of this 
     subsection merely because the transferee plan does not 
     provide some or all of the forms of distribution previously 
     available under another defined contribution plan (in this 
     subparagraph referred to as the `transferor plan') to the 
     extent that--

       ``(I) the forms of distribution previously available under 
     the transferor plan applied to the account of a participant 
     or beneficiary under the transferor plan that was transferred 
     from the transferor plan to the transferee plan pursuant to a 
     direct transfer rather than pursuant to a distribution from 
     the transferor plan,
       ``(II) the terms of both the transferor plan and the 
     transferee plan authorize the transfer described in subclause 
     (I),
       ``(III) the transfer described in subclause (I) was made 
     pursuant to a voluntary election by the participant or 
     beneficiary whose account was transferred to the transferee 
     plan,
       ``(IV) the election described in subclause (III) was made 
     after the participant or beneficiary received a notice 
     describing the consequences of making the election, and
       ``(V) the transferee plan allows the participant or 
     beneficiary described in subclause (III) to receive any 
     distribution to which the participant or beneficiary is 
     entitled under the transferee plan in the form of a single 
     sum distribution.

       ``(ii) Special rule for mergers, etc.--Clause (i) shall 
     apply to plan mergers and other transactions having the 
     effect of a direct transfer, including consolidations of 
     benefits attributable to different employers within a 
     multiple employer plan.''.
       (2) Amendment of erisa.--Section 204(g) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1054(g)) is 
     amended by adding at the end the following:
       ``(4)(A) A defined contribution plan (in this subparagraph 
     referred to as the `transferee plan') shall not be treated as 
     failing to meet the requirements of this subsection merely 
     because the transferee plan does not provide some or all of 
     the forms of distribution previously available under another 
     defined contribution plan (in this subparagraph referred to 
     as the `transferor plan') to the extent that--
       ``(i) the forms of distribution previously available under 
     the transferor plan applied to the account of a participant 
     or beneficiary under the transferor plan that was transferred 
     from the transferor plan to the transferee plan pursuant to a 
     direct transfer rather than pursuant to a distribution from 
     the transferor plan;
       ``(ii) the terms of both the transferor plan and the 
     transferee plan authorize the transfer described in clause 
     (i);
       ``(iii) the transfer described in clause (i) was made 
     pursuant to a voluntary election by the participant or 
     beneficiary whose account was transferred to the transferee 
     plan;
       ``(iv) the election described in clause (iii) was made 
     after the participant or beneficiary received a notice 
     describing the consequences of making the election; and
       ``(v) the transferee plan allows the participant or 
     beneficiary described in clause (iii) to receive any 
     distribution to which the participant or beneficiary is 
     entitled under the transferee plan in the form of a single 
     sum distribution.
       ``(B) Subparagraph (A) shall apply to plan mergers and 
     other transactions having the effect of a direct transfer, 
     including consolidations of benefits attributable to 
     different employers within a multiple employer plan.''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to years beginning after December 31, 2001.
       (b) Regulations.--
       (1) Amendment of internal revenue code.--The last sentence 
     of paragraph (6)(B) of section 411(d) (relating to accrued 
     benefit not to be decreased by amendment) is amended to read 
     as follows: ``The Secretary shall by regulations provide that 
     this subparagraph shall not apply to any plan amendment which 
     reduces or eliminates benefits or subsidies which create 
     significant burdens or complexities for the plan and plan 
     participants, unless such amendment adversely affects the 
     rights of any participant in a more than de minimis 
     manner.''.
       (2) Amendment of erisa.--The last sentence of section 
     204(g)(2) of the Employee Retirement Income Security Act of 
     1974 (29 U.S.C. 1054(g)(2)) is amended to read as follows: 
     ``The Secretary of the Treasury shall by regulations provide 
     that this paragraph shall not apply to any plan amendment 
     which reduces or eliminates benefits or subsidies which 
     create significant burdens or complexities for the plan and 
     plan participants, unless such amendment adversely affects 
     the rights of any participant in a more than de minimis 
     manner.''.
       (3) Secretary directed.--Not later than December 31, 2002, 
     the Secretary of the Treasury is directed to issue 
     regulations under section 411(d)(6) of the Internal Revenue 
     Code of 1986 and section 204(g) of the Employee Retirement 
     Income Security Act of 1974, including the regulations 
     required by the amendment made by this subsection. Such 
     regulations shall apply to plan years beginning after 
     December 31, 2002, or such earlier date as is specified by 
     the Secretary of the Treasury.

     SEC. 646. RATIONALIZATION OF RESTRICTIONS ON DISTRIBUTIONS.

       (a) Modification of Same Desk Exception.--
       (1) Section 401(k).--
       (A) Section 401(k)(2)(B)(i)(I) (relating to qualified cash 
     or deferred arrangements) is amended by striking ``separation 
     from service'' and inserting ``severance from employment''.
       (B) Subparagraph (A) of section 401(k)(10) (relating to 
     distributions upon termination of plan or disposition of 
     assets or subsidiary) is amended to read as follows:
       ``(A) In general.--An event described in this subparagraph 
     is the termination of the plan without establishment or 
     maintenance of another defined contribution plan (other than 
     an employee stock ownership plan as defined in section 
     4975(e)(7)).''.
       (C) Section 401(k)(10) is amended--
       (i) in subparagraph (B)--

       (I) by striking ``An event'' in clause (i) and inserting 
     ``A termination''; and
       (II) by striking ``the event'' in clause (i) and inserting 
     ``the termination'';

       (ii) by striking subparagraph (C); and
       (iii) by striking ``or disposition of assets or 
     subsidiary'' in the heading.
       (2) Section 403(b).--
       (A) Paragraphs (7)(A)(ii) and (11)(A) of section 403(b) are 
     each amended by striking ``separates from service'' and 
     inserting ``has a severance from employment''.
       (B) The heading for paragraph (11) of section 403(b) is 
     amended by striking ``separation from service'' and inserting 
     ``severance from employment''.
       (3) Section 457.--Clause (ii) of section 457(d)(1)(A) is 
     amended by striking ``is separated from service'' and 
     inserting ``has a severance from employment''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to distributions after December 31, 2001.

     SEC. 647. PURCHASE OF SERVICE CREDIT IN GOVERNMENTAL DEFINED 
                   BENEFIT PLANS.

       (a) 403(b) Plans.--Subsection (b) of section 403 is amended 
     by adding at the end the following new paragraph:
       ``(13) Trustee-to-trustee transfers to purchase permissive 
     service credit.--No amount shall be includible in gross 
     income by reason of a direct trustee-to-trustee transfer to a 
     defined benefit governmental plan (as defined in section 
     414(d)) if such transfer is--
       ``(A) for the purchase of permissive service credit (as 
     defined in section 415(n)(3)(A)) under such plan, or
       ``(B) a repayment to which section 415 does not apply by 
     reason of subsection (k)(3) thereof.''.
       (b) 457 Plans.--Subsection (e) of section 457, as amended 
     by section 401, is amended by adding after paragraph (16) the 
     following new paragraph:
       ``(17) Trustee-to-trustee transfers to purchase permissive 
     service credit.--No amount shall be includible in gross 
     income by reason of a direct trustee-to-trustee transfer 
     to a defined benefit governmental

[[Page S5153]]

     plan (as defined in section 414(d)) if such transfer is--
       ``(A) for the purchase of permissive service credit (as 
     defined in section 415(n)(3)(A)) under such plan, or
       ``(B) a repayment to which section 415 does not apply by 
     reason of subsection (k)(3) thereof.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to trustee-to-trustee transfers after December 
     31, 2001.

     SEC. 648. EMPLOYERS MAY DISREGARD ROLLOVERS FOR PURPOSES OF 
                   CASH-OUT AMOUNTS.

       (a) Qualified Plans.--
       (1) Amendment of internal revenue code.--Section 411(a)(11) 
     (relating to restrictions on certain mandatory distributions) 
     is amended by adding at the end the following:
       ``(D) Special rule for rollover contributions.--A plan 
     shall not fail to meet the requirements of this paragraph if, 
     under the terms of the plan, the present value of the 
     nonforfeitable accrued benefit is determined without regard 
     to that portion of such benefit which is attributable to 
     rollover contributions (and earnings allocable thereto). For 
     purposes of this subparagraph, the term `rollover 
     contributions' means any rollover contribution under sections 
     402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and 
     457(e)(16).''.
       (2) Amendment of erisa.--Section 203(e) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1053(c)) is 
     amended by adding at the end the following:
       ``(4) A plan shall not fail to meet the requirements of 
     this subsection if, under the terms of the plan, the present 
     value of the nonforfeitable accrued benefit is determined 
     without regard to that portion of such benefit which is 
     attributable to rollover contributions (and earnings 
     allocable thereto). For purposes of this subparagraph, the 
     term `rollover contributions' means any rollover contribution 
     under sections 402(c), 403(a)(4), 403(b)(8), 
     408(d)(3)(A)(ii), and 457(e)(16) of the Internal Revenue Code 
     of 1986.''.
       (b) Eligible Deferred Compensation Plans.--Clause (i) of 
     section 457(e)(9)(A) is amended by striking ``such amount'' 
     and inserting ``the portion of such amount which is not 
     attributable to rollover contributions (as defined in section 
     411(a)(11)(D))''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to distributions after December 31, 2001.

     SEC. 649. MINIMUM DISTRIBUTION AND INCLUSION REQUIREMENTS FOR 
                   SECTION 457 PLANS.

       (a) Minimum Distribution Requirements.--Paragraph (2) of 
     section 457(d) (relating to distribution requirements) is 
     amended to read as follows:
       ``(2) Minimum distribution requirements.--A plan meets the 
     minimum distribution requirements of this paragraph if such 
     plan meets the requirements of section 401(a)(9).''.
       (b) Inclusion in Gross Income.--
       (1) Year of inclusion.--Subsection (a) of section 457 
     (relating to year of inclusion in gross income) is amended to 
     read as follows:
       ``(a) Year of Inclusion in Gross Income.--
       ``(1) In general.--Any amount of compensation deferred 
     under an eligible deferred compensation plan, and any income 
     attributable to the amounts so deferred, shall be includible 
     in gross income only for the taxable year in which such 
     compensation or other income--
       ``(A) is paid to the participant or other beneficiary, in 
     the case of a plan of an eligible employer described in 
     subsection (e)(1)(A), and
       ``(B) is paid or otherwise made available to the 
     participant or other beneficiary, in the case of a plan of an 
     eligible employer described in subsection (e)(1)(B).
       ``(2) Special rule for rollover amounts.--To the extent 
     provided in section 72(t)(9), section 72(t) shall apply to 
     any amount includible in gross income under this 
     subsection.''.
       (2) Conforming amendments.--
       (A) So much of paragraph (9) of section 457(e) as precedes 
     subparagraph (A) is amended to read as follows:
       ``(9) Benefits of tax exempt organization plans not treated 
     as made available by reason of certain elections, etc.--In 
     the case of an eligible deferred compensation plan of an 
     employer described in subsection (e)(1)(B)--''.
       (B) Section 457(d) is amended by adding at the end the 
     following new paragraph:
       ``(3) Special rule for government plan.--An eligible 
     deferred compensation plan of an employer described in 
     subsection (e)(1)(A) shall not be treated as failing to meet 
     the requirements of this subsection solely by reason of 
     making a distribution described in subsection 
     (e)(9)(A).''.
       (c) Modification of Transition Rules for Existing 457 
     Plans.--
       (1) In general.--Section 1107(c)(3)(B) of the Tax Reform 
     Act of 1986 is amended by striking ``or'' at the end of 
     clause (i), by striking the period at the end of clause (ii) 
     and inserting ``, or'' and by inserting after clause (ii) the 
     following new clause:
       ``(iii) are deferred pursuant to an agreement with an 
     individual covered by an agreement described in clause (ii), 
     to the extent the annual amount under such agreement with the 
     individual does not exceed--

       ``(I) the amount described in clause (ii)(II), multiplied 
     by
       ``(II) the cumulative increase in the Consumer Price Index 
     (as published by the Bureau of Labor Statistics of the 
     Department of Labor).''.

       (2) Conforming amendment.--The fourth sentence of section 
     1107(c)(3)(B) of the Tax Reform Act of 1986 is amended by 
     striking ``This subparagraph'' and inserting ``Clauses (i) 
     and (ii) of this subparagraph''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to taxable years ending after the date of the 
     enactment of this Act with respect to increases in the 
     Consumer Price Index after September 30, 1993.
       (d) Effective Date.--The amendments made by subsections (a) 
     and (b) shall apply to distributions after December 31, 2001.

       Subtitle E--Strengthening Pension Security and Enforcement

                       PART I--GENERAL PROVISIONS

     SEC. 651. REPEAL OF 160 PERCENT OF CURRENT LIABILITY FUNDING 
                   LIMIT.

       (a) Amendments to Internal Revenue Code.--Section 412(c)(7) 
     (relating to full-funding limitation) is amended--
       (1) by striking ``the applicable percentage'' in 
     subparagraph (A)(i)(I) and inserting ``in the case of plan 
     years beginning before January 1, 2005, the applicable 
     percentage''; and
       (2) by amending subparagraph (F) to read as follows:
       ``(F) Applicable percentage.--For purposes of subparagraph 
     (A)(i)(I), the applicable percentage shall be determined in 
     accordance with the following table:

    ``In the case of any plan                            The applicable
      year beginning in--                               percentage is--
      2002........................................................160  
      2003........................................................165  
      2004......................................................170.''.
       (b) Amendment of ERISA.--Section 302(c)(7) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1082(c)(7)) 
     is amended--
       (1) by striking ``the applicable percentage'' in 
     subparagraph (A)(i)(I) and inserting ``in the case of plan 
     years beginning before January 1, 2005, the applicable 
     percentage'', and
       (2) by amending subparagraph (F) to read as follows:
       ``(F) Applicable percentage.--For purposes of subparagraph 
     (A)(i)(I), the applicable percentage shall be determined in 
     accordance with the following table:

    ``In the case of any plan                            The applicable
      year beginning in--                               percentage is--
      2002.........................................................160 
      2003.........................................................165 
      2004......................................................170.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after December 31, 2001.

     SEC. 652. MAXIMUM CONTRIBUTION DEDUCTION RULES MODIFIED AND 
                   APPLIED TO ALL DEFINED BENEFIT PLANS.

       (a) In General.--Subparagraph (D) of section 404(a)(1) 
     (relating to special rule in case of certain plans) is 
     amended to read as follows:
       ``(D) Special rule in case of certain plans.--
       ``(i) In general.--In the case of any defined benefit plan, 
     except as provided in regulations, the maximum amount 
     deductible under the limitations of this paragraph shall not 
     be less than the unfunded termination liability (determined 
     as if the proposed termination date referred to in section 
     4041(b)(2)(A)(i)(II) of the Employee Retirement Income 
     Security Act of 1974 were the last day of the plan year).
       ``(ii) Plans with less than 100 participants.--For purposes 
     of this subparagraph, in the case of a plan which has less 
     than 100 participants for the plan year, termination 
     liability shall not include the liability attributable to 
     benefit increases for highly compensated employees (as 
     defined in section 414(q)) resulting from a plan amendment 
     which is made or becomes effective, whichever is later, 
     within the last 2 years before the termination date.
       ``(iii) Rule for determining number of participants.--For 
     purposes of determining whether a plan has more than 100 
     participants, all defined benefit plans maintained by the 
     same employer (or any member of such employer's controlled 
     group (within the meaning of section 412(l)(8)(C))) shall be 
     treated as one plan, but only employees of such member or 
     employer shall be taken into account.
       ``(iv) Plans maintained by professional service 
     employers.--Clause (i) shall not apply to a plan described in 
     section 4021(b)(13) of the Employee Retirement Income 
     Security Act of 1974.''.
       (b) Conforming Amendment.--Paragraph (6) of section 4972(c) 
     is amended to read as follows:
       ``(6) Exceptions.--In determining the amount of 
     nondeductible contributions for any taxable year, there shall 
     not be taken into account so much of the contributions to one 
     or more defined contribution plans which are not deductible 
     when contributed solely because of section 404(a)(7) as 
     does not exceed the greater of--
       ``(A) the amount of contributions not in excess of 6 
     percent of compensation (within the meaning of section 
     404(a)) paid or accrued (during the taxable year for which 
     the contributions were made) to beneficiaries under the 
     plans, or
       ``(B) the sum of--
       ``(i) the amount of contributions described in section 
     401(m)(4)(A), plus
       ``(ii) the amount of contributions described in section 
     402(g)(3)(A).

     For purposes of this paragraph, the deductible limits under 
     section 404(a)(7) shall first be applied to amounts 
     contributed to a defined benefit plan and then to amounts 
     described in subparagraph (B).''.

[[Page S5154]]

       (c) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after December 31, 2001.

     SEC. 653. EXCISE TAX RELIEF FOR SOUND PENSION FUNDING.

       (a) In General.--Subsection (c) of section 4972 (relating 
     to nondeductible contributions) is amended by adding at the 
     end the following new paragraph:
       ``(7) Defined benefit plan exception.--In determining the 
     amount of nondeductible contributions for any taxable year, 
     an employer may elect for such year not to take into account 
     any contributions to a defined benefit plan except to the 
     extent that such contributions exceed the full-funding 
     limitation (as defined in section 412(c)(7), determined 
     without regard to subparagraph (A)(i)(I) thereof). For 
     purposes of this paragraph, the deductible limits under 
     section 404(a)(7) shall first be applied to amounts 
     contributed to defined contribution plans and then to amounts 
     described in this paragraph. If an employer makes an election 
     under this paragraph for a taxable year, paragraph (6) shall 
     not apply to such employer for such taxable year.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to years beginning after December 31, 2001.

     SEC. 654. TREATMENT OF MULTIEMPLOYER PLANS UNDER SECTION 415.

       (a) Compensation Limit.--
       (1) In general.--Paragraph (11) of section 415(b) (relating 
     to limitation for defined benefit plans) is amended to read 
     as follows:
       ``(11) Special limitation rule for governmental and 
     multiemployer plans.--In the case of a governmental plan (as 
     defined in section 414(d)) or a multiemployer plan (as 
     defined in section 414(f)), subparagraph (B) of paragraph (1) 
     shall not apply.''.
       (2) Conforming amendment.--Section 415(b)(7) (relating to 
     benefits under certain collectively bargained plans) is 
     amended by inserting ``(other than a multiemployer plan)'' 
     after ``defined benefit plan'' in the matter preceding 
     subparagraph (A).
       (b) Combining and Aggregation of Plans.--
       (1) Combining of plans.--Subsection (f) of section 415 
     (relating to combining of plans) is amended by adding at the 
     end the following:
       ``(3) Exception for multiemployer plans.--Notwithstanding 
     paragraph (1) and subsection (g), a multiemployer plan (as 
     defined in section 414(f)) shall not be combined or 
     aggregated with any other plan maintained by an employer for 
     purposes of applying subsection (b)(1)(B) to such plan or any 
     other such plan.''.
       (2) Conforming amendment for aggregation of plans.--
     Subsection (g) of section 415 (relating to aggregation of 
     plans) is amended by striking ``The Secretary'' and inserting 
     ``Except as provided in subsection (f)(3), the Secretary''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2001.

     SEC. 655. PROTECTION OF INVESTMENT OF EMPLOYEE CONTRIBUTIONS 
                   TO 401(K) PLANS.

       (a) In General.--Section 1524(b) of the Taxpayer Relief Act 
     of 1997 is amended to read as follows:
       ``(b) Effective Date.--
       ``(1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to elective 
     deferrals for plan years beginning after December 31, 1998.
       ``(2) Nonapplication to previously acquired property.--The 
     amendments made by this section shall not apply to any 
     elective deferral which is invested in assets consisting of 
     qualifying employer securities, qualifying employer real 
     property, or both, if such assets were acquired before 
     January 1, 1999.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply as if included in the provision of the Taxpayer 
     Relief Act of 1997 to which it relates.

     SEC. 656. PROHIBITED ALLOCATIONS OF STOCK IN S CORPORATION 
                   ESOP.

       (a) In General.--Section 409 (relating to qualifications 
     for tax credit employee stock ownership plans) is amended by 
     redesignating subsection (p) as subsection (q) and by 
     inserting after subsection (o) the following new subsection:
       ``(p) Prohibited Allocations of Securities in an S 
     Corporation.--
       ``(1) In general.--An employee stock ownership plan holding 
     employer securities consisting of stock in an S corporation 
     shall provide that no portion of the assets of the plan 
     attributable to (or allocable in lieu of) such employer 
     securities may, during a nonallocation year, accrue (or be 
     allocated directly or indirectly under any plan of the 
     employer meeting the requirements of section 401(a)) for the 
     benefit of any disqualified person.
       ``(2) Failure to meet requirements.--
       ``(A) In general.--If a plan fails to meet the requirements 
     of paragraph (1), the plan shall be treated as having 
     distributed to any disqualified person the amount allocated 
     to the account of such person in violation of paragraph (1) 
     at the time of such allocation.
       ``(B) Cross reference.--

  ``For excise tax relating to violations of paragraph (1) and 
ownership of synthetic equity, see section 4979A.

       ``(3) Nonallocation year.--For purposes of this 
     subsection--
       ``(A) In general.--The term `nonallocation year' means any 
     plan year of an employee stock ownership plan if, at any time 
     during such plan year--
       ``(i) such plan holds employer securities consisting of 
     stock in an S corporation, and
       ``(ii) disqualified persons own at least 50 percent of the 
     number of shares of stock in the S corporation.
       ``(B) Attribution rules.--For purposes of subparagraph 
     (A)--
       ``(i) In general.--The rules of section 318(a) shall apply 
     for purposes of determining ownership, except that--

       ``(I) in applying paragraph (1) thereof, the members of an 
     individual's family shall include members of the family 
     described in paragraph (4)(D), and
       ``(II) paragraph (4) thereof shall not apply.

       ``(ii) Deemed-owned shares.--Notwithstanding the employee 
     trust exception in section 318(a)(2)(B)(i), an individual 
     shall be treated as owning deemed-owned shares of the 
     individual.
     Solely for purposes of applying paragraph (5), this 
     subparagraph shall be applied after the attribution rules of 
     paragraph (5) have been applied.
       ``(4) Disqualified person.--For purposes of this 
     subsection--
       ``(A) In general.--The term `disqualified person' means any 
     person if--
       ``(i) the aggregate number of deemed-owned shares of such 
     person and the members of such person's family is at least 20 
     percent of the number of deemed-owned shares of stock in the 
     S corporation, or
       ``(ii) in the case of a person not described in clause (i), 
     the number of deemed-owned shares of such person is at least 
     10 percent of the number of deemed-owned shares of stock in 
     such corporation.
       ``(B) Treatment of family members.--In the case of a 
     disqualified person described in subparagraph (A)(i), any 
     member of such person's family with deemed-owned shares shall 
     be treated as a disqualified person if not otherwise treated 
     as a disqualified person under subparagraph (A).
       ``(C) Deemed-owned shares.--
       ``(i) In general.--The term `deemed-owned shares' means, 
     with respect to any person--

       ``(I) the stock in the S corporation constituting employer 
     securities of an employee stock ownership plan which is 
     allocated to such person under the plan, and
       ``(II) such person's share of the stock in such corporation 
     which is held by such plan but which is not allocated under 
     the plan to participants.

       ``(ii) Person's share of unallocated stock.--For purposes 
     of clause (i)(II), a person's share of unallocated S 
     corporation stock held by such plan is the amount of the 
     unallocated stock which would be allocated to such person if 
     the unallocated stock were allocated to all participants in 
     the same proportions as the most recent stock allocation 
     under the plan.
       ``(D) Member of family.--For purposes of this paragraph, 
     the term `member of the family' means, with respect to any 
     individual--
       ``(i) the spouse of the individual,
       ``(ii) an ancestor or lineal descendant of the individual 
     or the individual's spouse,
       ``(iii) a brother or sister of the individual or the 
     individual's spouse and any lineal descendant of the brother 
     or sister, and
       ``(iv) the spouse of any individual described in clause 
     (ii) or (iii).

     A spouse of an individual who is legally separated from such 
     individual under a decree of divorce or separate maintenance 
     shall not be treated as such individual's spouse for purposes 
     of this subparagraph.
       ``(5) Treatment of synthetic equity.--For purposes of 
     paragraphs (3) and (4), in the case of a person who owns 
     synthetic equity in the S corporation, except to the extent 
     provided in regulations, the shares of stock in such 
     corporation on which such synthetic equity is based shall be 
     treated as outstanding stock in such corporation and deemed-
     owned shares of such person if such treatment of synthetic 
     equity of 1 or more such persons results in--
       ``(A) the treatment of any person as a disqualified person, 
     or
       ``(B) the treatment of any year as a nonallocation year.

     For purposes of this paragraph, synthetic equity shall be 
     treated as owned by a person in the same manner as stock is 
     treated as owned by a person under the rules of paragraphs 
     (2) and (3) of section 318(a). If, without regard to this 
     paragraph, a person is treated as a disqualified person or a 
     year is treated as a nonallocation year, this paragraph shall 
     not be construed to result in the person or year not being so 
     treated.
       ``(6) Definitions.--For purposes of this subsection--
       ``(A) Employee stock ownership plan.--The term `employee 
     stock ownership plan' has the meaning given such term by 
     section 4975(e)(7).
       ``(B) Employer securities.--The term `employer security' 
     has the meaning given such term by section 409(l).
       ``(C) Synthetic equity.--The term `synthetic equity' means 
     any stock option, warrant, restricted stock, deferred 
     issuance stock right, or similar interest or right that gives 
     the holder the right to acquire or receive stock of the S 
     corporation in the future. Except to the extent provided in 
     regulations, synthetic equity also includes a stock 
     appreciation right, phantom stock unit, or similar right to a 
     future cash payment based on the value of such stock or 
     appreciation in such value.

[[Page S5155]]

       ``(7) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to carry out the purposes of 
     this subsection.''.
       (b) Coordination With Section 4975(e)(7).--The last 
     sentence of section 4975(e)(7) (defining employee stock 
     ownership plan) is amended by inserting ``, section 409(p),'' 
     after ``409(n)''.
       (c) Excise Tax.--
       (1) Application of tax.--Subsection (a) of section 4979A 
     (relating to tax on certain prohibited allocations of 
     employer securities) is amended--
       (A) by striking ``or'' at the end of paragraph (1), and
       (B) by striking all that follows paragraph (2) and 
     inserting the following:
       ``(3) there is any allocation of employer securities which 
     violates the provisions of section 409(p), or a nonallocation 
     year described in subsection (e)(2)(C) with respect to an 
     employee stock ownership plan, or
       ``(4) any synthetic equity is owned by a disqualified 
     person in any nonallocation year,
     there is hereby imposed a tax on such allocation or ownership 
     equal to 50 percent of the amount involved.''.
       (2) Liability.--Section 4979A(c) (defining liability for 
     tax) is amended to read as follows:
       ``(c) Liability for Tax.--The tax imposed by this section 
     shall be paid--
       ``(1) in the case of an allocation referred to in paragraph 
     (1) or (2) of subsection (a), by--
       ``(A) the employer sponsoring such plan, or
       ``(B) the eligible worker-owned cooperative,
     which made the written statement described in section 
     664(g)(1)(E) or in section 1042(b)(3)(B) (as the case may 
     be), and
       ``(2) in the case of an allocation or ownership referred to 
     in paragraph (3) or (4) of subsection (a), by the S 
     corporation the stock in which was so allocated or owned.''.
       (3) Definitions.--Section 4979A(e) (relating to 
     definitions) is amended to read as follows:
       ``(e) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Definitions.--Except as provided in paragraph (2), 
     terms used in this section have the same respective meanings 
     as when used in sections 409 and 4978.
       ``(2) Special rules relating to tax imposed by reason of 
     paragraph (3) or (4) of subsection (a).--
       ``(A) Prohibited allocations.--The amount involved with 
     respect to any tax imposed by reason of subsection (a)(3) is 
     the amount allocated to the account of any person in 
     violation of section 409(p)(1).
       ``(B) Synthetic equity.--The amount involved with respect 
     to any tax imposed by reason of subsection (a)(4) is the 
     value of the shares on which the synthetic equity is based.
       ``(C) Special rule during first nonallocation year.--For 
     purposes of subparagraph (A), the amount involved for the 
     first nonallocation year of any employee stock ownership plan 
     shall be determined by taking into account the total value of 
     all the deemed-owned shares of all disqualified persons with 
     respect to such plan.
       ``(D) Statute of limitations.--The statutory period for the 
     assessment of any tax imposed by this section by reason of 
     paragraph (3) or (4) of subsection (a) shall not expire 
     before the date which is 3 years from the later of--
       ``(i) the allocation or ownership referred to in such 
     paragraph giving rise to such tax, or
       ``(ii) the date on which the Secretary is notified of such 
     allocation or ownership.''.
       (d) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to plan years beginning after December 31, 2002.
       (2) Exception for certain plans.--In the case of any--
       (A) employee stock ownership plan established after July 
     11, 2000, or
       (B) employee stock ownership plan established on or before 
     such date if employer securities held by the plan consist of 
     stock in a corporation with respect to which an election 
     under section 1362(a) of the Internal Revenue Code of 1986 is 
     not in effect on such date,
     the amendments made by this section shall apply to plan years 
     ending after July 11, 2000.

     SEC. 657. AUTOMATIC ROLLOVERS OF CERTAIN MANDATORY 
                   DISTRIBUTIONS.

       (a) Direct Transfers of Mandatory Distributions.--
       (1) In general.--Section 401(a)(31) (relating to optional 
     direct transfer of eligible rollover distributions), as 
     amended by section 643, is amended by redesignating 
     subparagraphs (B), (C), and (D) as subparagraphs (C), (D), 
     and (E), respectively, and by inserting after subparagraph 
     (A) the following new subparagraph:
       ``(B) Certain mandatory distributions.--
       ``(i) In general.--In case of a trust which is part of an 
     eligible plan, such trust shall not constitute a qualified 
     trust under this section unless the plan of which such trust 
     is a part provides that if--

       ``(I) a distribution described in clause (ii) in excess of 
     $1,000 is made, and
       ``(II) the distributee does not make an election under 
     subparagraph (A) and does not elect to receive the 
     distribution directly,

     the plan administrator shall make such transfer to an 
     individual retirement account or annuity of a designated 
     trustee or issuer and shall notify the distributee in writing 
     (either separately or as part of the notice under section 
     402(f)) that the distribution may be transferred without cost 
     or penalty to another individual account or annuity.
       ``(ii) Eligible plan.--For purposes of clause (i), the term 
     `eligible plan' means a plan which provides that any 
     nonforfeitable accrued benefit for which the present value 
     (as determined under section 411(a)(11)) does not exceed 
     $5,000 shall be immediately distributed to the 
     participant.''.
       (2) Conforming amendments.--
       (A) The heading of section 401(a)(31) is amended by 
     striking ``Optional direct'' and inserting ``Direct''.
       (B) Section 401(a)(31)(C), as redesignated by paragraph 
     (1), is amended by striking ``Subparagraph (A)'' and 
     inserting ``Subparagraphs (A) and (B)''.
       (b) Notice Requirement.--Section 402(f)(1) (relating to 
     written explanation to recipients of distributions eligible 
     for rollover treatment) is amended by striking ``and'' at the 
     end of subparagraph (C), by striking the period at the end of 
     subparagraph (D), and by adding at the end the following new 
     subparagraph:
       ``(E) if applicable, of the provision requiring a direct 
     trustee-to-trustee transfer of a distribution under section 
     401(a)(31)(B) unless the recipient elects otherwise.''.
       (c) Fiduciary Rules.--
       (1) In general.--Section 404(c) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1104(c)) is amended by 
     adding at the end the following new paragraph:
       ``(3) In the case of a pension plan which makes a transfer 
     to an individual retirement account or annuity of a 
     designated trustee or issuer under section 401(a)(31)(B) of 
     the Internal Revenue Code of 1986, the participant or 
     beneficiary shall, for purposes of paragraph (1), be treated 
     as exercising control over the assets in the account or 
     annuity upon the earlier of--
       ``(A) a rollover of all or a portion of the amount to 
     another individual retirement account or annuity; or
       ``(B) one year after the transfer is made.''.
       (2) Regulations.--
       (A) Automatic rollover safe harbor.--The Secretary of Labor 
     shall promulgate regulations to provide guidance regarding 
     meeting the fiduciary requirements of section 404(a) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1104(a)) in the case of a pension plan which makes a transfer 
     under section 401(a)(31)(B) of the Internal Revenue Code of 
     1986.
       (B) Use of low-cost individual retirement plans.--The 
     Secretary of the Treasury and the Secretary of Labor shall 
     promulgate such regulations as necessary to encourage the use 
     of low-cost individual retirement plans for purposes of 
     transfers under section 401(a)(31)(B) of the Internal Revenue 
     Code of 1986 and for other uses as appropriate to promote the 
     preservation of assets for retirement income purposes.
       (d) Effective Date.--The amendments made by this section 
     shall apply to distributions made after final regulations 
     implementing subsection (c) are prescribed.

     SEC. 658. CLARIFICATION OF TREATMENT OF CONTRIBUTIONS TO 
                   MULTIEMPLOYER PLAN.

       (a) Not Considered Method of Accounting.--For purposes of 
     section 446 of the Internal Revenue Code of 1986, a 
     determination under section 404(a)(6) of such Code regarding 
     the taxable year with respect to which a contribution to a 
     multiemployer pension plan is deemed made shall not be 
     treated as a method of accounting of the taxpayer. No 
     deduction shall be allowed for any taxable year for any 
     contribution to a multiemployer pension plan with respect to 
     which a deduction was previously allowed.
       (b) Regulations.--The Secretary of the Treasury shall 
     promulgate such regulations as necessary to clarify that a 
     taxpayer shall not be allowed, with respect to any taxable 
     year, an aggregate amount of deductions for contributions to 
     a multiemployer pension plan which exceeds the amount of such 
     contributions made or deemed made under section 404(a)(6) of 
     the Internal Revenue Code of 1986 to such plan.
       (c) Effective Date.--Subsection (a), and any regulations 
     promulgated under subsection (b), shall be effective for 
     years ending after the date of the enactment of this Act.

 PART II--TREATMENT OF PLAN AMENDMENTS REDUCING FUTURE BENEFIT ACCRUALS

     SEC. 659. NOTICE REQUIRED FOR PENSION PLAN AMENDMENTS HAVING 
                   THE EFFECT OF SIGNIFICANTLY REDUCING FUTURE 
                   BENEFIT ACCRUALS.

       (a) Excise Tax.--
       (1) In general.--Chapter 43 (relating to qualified pension, 
     etc., plans) is amended by adding at the end the following 
     new section:

     ``SEC. 4980F. FAILURE TO PROVIDE NOTICE OF PENSION PLAN 
                   AMENDMENTS REDUCING BENEFIT ACCRUALS.

       ``(a) Imposition of Tax.--There is hereby imposed a tax on 
     the failure of an applicable pension plan to meet the 
     requirements of subsection (e) with respect to any applicable 
     individual.
       ``(b) Amount of Tax.--
       ``(1) In general.--The amount of the tax imposed by 
     subsection (a) on any failure with respect to any applicable 
     individual shall be $100 for each day in the noncompliance 
     period with respect to such failure.
       ``(2) Noncompliance period.--For purposes of this section, 
     the term `noncompliance period' means, with respect to any 
     failure, the period beginning on the date the failure first 
     occurs and ending on the date the notice to which the failure 
     relates is provided or the failure is otherwise corrected.

[[Page S5156]]

       ``(c) Limitations on Amount of Tax.--
       ``(1) Tax not to apply where failure not discovered and 
     reasonable diligence exercised.--No tax shall be imposed by 
     subsection (a) on any failure during any period for which it 
     is established to the satisfaction of the Secretary that any 
     person subject to liability for the tax under subsection (d) 
     did not know that the failure existed and exercised 
     reasonable diligence to meet the requirements of subsection 
     (e).
       ``(2) Tax not to apply to failures corrected within 30 
     days.--No tax shall be imposed by subsection (a) on any 
     failure if--
       ``(A) any person subject to liability for the tax under 
     subsection (d) exercised reasonable diligence to meet the 
     requirements of subsection (e), and
       ``(B) such person provides the notice described in 
     subsection (e) during the 30-day period beginning on the 
     first date such person knew, or exercising reasonable 
     diligence would have known, that such failure existed.
       ``(3) Overall limitation for unintentional failures.--
       ``(A) In general.--If the person subject to liability for 
     tax under subsection (d) exercised reasonable diligence to 
     meet the requirements of subsection (e), the tax imposed by 
     subsection (a) for failures during the taxable year of the 
     employer (or, in the case of a multiemployer plan, the 
     taxable year of the trust forming part of the plan) shall not 
     exceed $500,000. For purposes of the preceding sentence, all 
     multiemployer plans of which the same trust forms a part 
     shall be treated as 1 plan.
       ``(B) Taxable years in the case of certain controlled 
     groups.--For purposes of this paragraph, if all persons who 
     are treated as a single employer for purposes of this section 
     do not have the same taxable year, the taxable years taken 
     into account shall be determined under principles similar to 
     the principles of section 1561.
       ``(4) Waiver by secretary.--In the case of a failure which 
     is due to reasonable cause and not to willful neglect, the 
     Secretary may waive part or all of the tax imposed by 
     subsection (a) to the extent that the payment of such tax 
     would be excessive or otherwise inequitable relative to the 
     failure involved.
       ``(d) Liability for Tax.--The following shall be liable for 
     the tax imposed by subsection (a):
       ``(1) In the case of a plan other than a multiemployer 
     plan, the employer.
       ``(2) In the case of a multiemployer plan, the plan.
       ``(e) Notice Requirements for Plan Amendments Significantly 
     Reducing Benefit Accruals.--
       ``(1) In general.--If the sponsor of an applicable pension 
     plan adopts an amendment which has the effect of 
     significantly reducing the rate of future benefit accrual of 
     1 or more participants, the plan administrator shall, not 
     later than the 45th day before the effective date of the 
     amendment, provide written notice to each applicable 
     individual (and to each employee organization representing 
     applicable individuals) which--
       ``(A) sets forth a summary of the plan amendment and the 
     effective date of the amendment,
       ``(B) includes a statement that the plan amendment is 
     expected to significantly reduce the rate of future benefit 
     accrual,
       ``(C) includes a description of the classes of employees 
     reasonably expected to be affected by the reduction in the 
     rate of future benefit accrual,
       ``(D) sets forth examples illustrating how the plan will 
     change benefits for such classes of employees,
       ``(E) if paragraph (2) applies to the plan amendment, 
     includes a notice that the plan administrator will provide a 
     benefit estimation tool kit described in paragraph (2)(B) to 
     each applicable individual no later than the date required 
     under paragraph (2)(A), and
       ``(F) includes a notice of each applicable individual's 
     right under Federal law to receive, and of the procedures for 
     requesting, an annual benefit statement.
       ``(2) Requirement to provide benefit estimation tool kit.--
       ``(A) In general.--If a plan amendment results in the 
     significant restructuring of the plan benefit formula (as 
     determined under regulations prescribed by the Secretary), 
     the plan administrator shall, not later than the 15th day 
     before the effective date of the amendment, provide a benefit 
     estimation tool kit described in subparagraph (B) to each 
     applicable individual. If such plan amendment occurs within 
     12 months of an event described in section 410(b)(6)(C), the 
     plan administrator shall in no event be required to provide 
     the benefit estimation tool kit to applicable individuals 
     affected by the event before the date which is 12 months 
     after the date on which notice under paragraph (1) is given 
     to such applicable individuals.
       ``(B) Benefit estimation tool kit.--The benefit estimation 
     tool kit described in this subparagraph shall include the 
     following information:
       ``(i) Sufficient information to enable an applicable 
     individual to estimate the individual's projected benefits 
     under the terms of the plan in effect both before and after 
     the adoption of the amendment.
       ``(ii) The formulas and actuarial assumptions necessary to 
     estimate under both such plan terms a single life annuity at 
     appropriate ages, and, when available, a lump sum 
     distribution.
       ``(iii) The interest rate used to compute a lump sum 
     distribution and information as to whether the value of any 
     early retirement benefit or retirement-type subsidy (within 
     the meaning of section 411(d)(6)(B)(i)) is included in the 
     lump sum distribution.
       ``(3) Notice to designee.--Any notice under paragraph (1) 
     or (2) may be provided to a person designated, in writing, by 
     the person to which it would otherwise be provided.
       ``(4) Form of explanation.--The information required to be 
     provided under this subsection shall be provided in a manner 
     calculated to be reasonably understood by the average plan 
     participant.
       ``(f) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Applicable individual.--
       ``(A) In general.--The term `applicable individual' means, 
     with respect to any plan amendment--
       ``(i) each participant in the plan, and
       ``(ii) any beneficiary who is an alternate payee (within 
     the meaning of section 414(p)(8)) under an applicable 
     qualified domestic relations order (within the meaning of 
     section 414(p)(1)(A)),
     whose rate of future benefit accrual under the plan may 
     reasonably be expected to be significantly reduced by such 
     plan amendment.
       ``(B) Exception for participants with less than 1 year of 
     participation.--Such term shall not include a participant who 
     has less than 1 year of participation (within the meaning of 
     section 411(b)(4)) under the plan as of the effective date of 
     the plan amendment.
       ``(2) Applicable pension plan.--The term `applicable 
     pension plan' means--
       ``(A) a defined benefit plan, or
       ``(B) an individual account plan which is subject to the 
     funding standards of section 412.
     Such term shall not include a governmental plan (within the 
     meaning of section 414(d)), a church plan (within the 
     meaning of section 414(e)) with respect to which an 
     election under section 410(d) has not been made, or any 
     other plan to which section 204(h) of the Employee 
     Retirement Income Security Act of 1974 does not apply.
       ``(3) Early retirement.--A plan amendment which eliminates 
     or significantly reduces any early retirement benefit or 
     retirement-type subsidy (within the meaning of section 
     411(d)(6)(B)(i)) shall be treated as having the effect of 
     significantly reducing the rate of future benefit accrual.
       ``(g) Regulations.--The Secretary shall, not later than 1 
     year after the date of the enactment of this section, issue--
       ``(1) the regulations described in subsection (e)(2)(A) and 
     section 204(h)(2)(A) of the Employee Retirement Income 
     Security Act of 1974, and
       ``(2) guidance for both of the examples described in 
     subsection (e)(1)(D) and section 204(h)(1)(D) of the Employee 
     Retirement Income Security Act of 1974 and the benefit 
     estimation tool kit described in subsection (e)(2)(B) and 
     section 204(h)(2)(B) of the Employee Retirement Income 
     Security Act of 1974.
       ``(h) New Technologies.--The Secretary may by regulation 
     allow any notice under paragraph (1) or (2) of subsection (e) 
     to be provided by using new technologies. Such regulations 
     shall ensure that at least one option for providing such 
     notice is not dependent on new technologies.''
       (2) Conforming amendment.--The table of sections for 
     chapter 43 is amended by adding at the end the following new 
     item:

``Sec. 4980F. Failure to provide notice of pension plan amendments 
              reducing benefit accruals.''

       (b) Amendment of ERISA.--Section 204(h) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1054(h)) is 
     amended to read as follows:
       ``(h)(1) If an applicable pension plan is amended so as to 
     provide a significant reduction in the rate of future benefit 
     accrual of 1 or more participants, the plan administrator 
     shall, not later than the 45th day before the effective date 
     of the amendment, provide written notice to each applicable 
     individual (and to each employee organization representing 
     applicable individuals) which--
       ``(A) sets forth a summary of the plan amendment and the 
     effective date of the amendment,
       ``(B) includes a statement that the plan amendment is 
     expected to significantly reduce the rate of future benefit 
     accrual,
       ``(C) includes a description of the classes of employees 
     reasonably expected to be affected by the reduction in the 
     rate of future benefit accrual,
       ``(D) sets forth examples illustrating how the plan will 
     change benefits for such classes of employees,
       ``(E) if paragraph (2) applies to the plan amendment, 
     includes a notice that the plan administrator will provide a 
     benefit estimation tool kit described in paragraph (2)(B) to 
     each applicable individual no later than the date required 
     under paragraph (2)(A), and
       ``(F) includes a notice of each applicable individual's 
     right under Federal law to receive, and of the procedures for 
     requesting, an annual benefit statement.
       ``(2)(A) If a plan amendment results in the significant 
     restructuring of the plan benefit formula (as determined 
     under regulations prescribed by the Secretary of the 
     Treasury), the plan administrator shall, not later than the 
     15th day before the effective date of the amendment, provide 
     a benefit estimation tool kit described in subparagraph (B) 
     to each applicable individual. If such plan amendment occurs 
     within 12 months of an event described in section 
     410(b)(6)(C) of the

[[Page S5157]]

     Internal Revenue Code of 1986, the plan administrator shall 
     in no event be required to provide the benefit estimation 
     tool kit to applicable individuals affected by the event 
     before the date which is 12 months after the date on which 
     notice under paragraph (1) is given to such applicable 
     individuals.
       ``(B) The benefit estimation tool kit described in this 
     subparagraph shall include the following information:
       ``(i) Sufficient information to enable an applicable 
     individual to estimate the individual's projected benefits 
     under the terms of the plan in effect both before and after 
     the adoption of the amendment.
       ``(ii) The formulas and actuarial assumptions necessary to 
     estimate under both such plan terms a single life annuity at 
     appropriate ages, and, when available, a lump sum 
     distribution.
       ``(iii) The interest rate used to compute a lump sum 
     distribution and information as to whether the value of any 
     early retirement benefit or retirement-type subsidy (within 
     the meaning of subsection (g)(2)(A)) is included in the lump 
     sum distribution.
       ``(3) Any notice under paragraph (1) or (2) may be provided 
     to a person designated, in writing, by the person to which it 
     would otherwise be provided.
       ``(4) The information required to be provided under this 
     subsection shall be provided in a manner calculated to be 
     reasonably understood by the average participant.
       ``(5)(A) In the case of any failure to exercise due 
     diligence in meeting any requirement of this subsection with 
     respect to any plan amendment, the provisions of the 
     applicable pension plan shall be applied as if such plan 
     amendment entitled all applicable individuals to the greater 
     of--
       ``(i) the benefits to which they would have been entitled 
     without regard to such amendment, or
       ``(ii) the benefits under the plan with regard to such 
     amendment.
       ``(B) For purposes of subparagraph (A), there is a failure 
     to exercise due diligence in meeting the requirements of this 
     subsection if such failure is within the control of the plan 
     sponsor and is--
       ``(i) an intentional failure (including any failure to 
     promptly provide the required notice or information after the 
     plan administrator discovers an unintentional failure to meet 
     the requirements of this subsection),
       ``(ii) a failure to provide most of the individuals with 
     most of the information they are entitled to receive under 
     this subsection, or
       ``(iii) a failure to exercise due diligence which is 
     determined under regulations prescribed by the Secretary of 
     the Treasury.
       ``(C) For excise tax on failure to meet requirements, see 
     section 4980F of the Internal Revenue Code of 1986.
       ``(5)(A) For purposes of this subsection, the term 
     `applicable individual' means, with respect to any plan 
     amendment--
       ``(i) each participant in the plan, and
       ``(ii) any beneficiary who is an alternate payee (within 
     the meaning of section 206(d)(3)(K)) under an applicable 
     qualified domestic relations order (within the meaning of 
     section 206(d)(3)(B)),
     whose rate of future benefit accrual under the plan may 
     reasonably be expected to be significantly reduced by such 
     plan amendment.
       ``(B) Such term shall not include a participant who has 
     less than 1 year of participation (within the meaning of 
     subsection (b)(4)) under the plan as of the effective date of 
     the plan amendment.
       ``(6) For purposes of this subsection, the term `applicable 
     pension plan' means--
       ``(A) a defined benefit plan, or
       ``(B) an individual account plan which is subject to the 
     funding standards of section 302.
       ``(7) For purposes of this subsection, a plan amendment 
     which eliminates or significantly reduces any early 
     retirement benefit or retirement-type subsidy (within the 
     meaning of section 204(g)(2)(A)) shall be treated as having 
     the effect of significantly reducing the rate of future 
     benefit accrual.
       ``(8) The Secretary of the Treasury may by regulation allow 
     any notice under this subsection to be provided by using new 
     technologies. Such regulation shall ensure that at least one 
     option for providing such notice is not dependent on new 
     technologies.''
       (c) Regulations Relating to Early Retirement Subsidies.--
     The Secretary of the Treasury or the Secretary's delegate 
     shall, not later than 1 year after the date of the enactment 
     of this Act, issue regulations relating to early retirement 
     benefits or retirement-type subsidies described in section 
     411(d)(6)(B)(i) of the Internal Revenue Code of 1986 and 
     section 204(g)(2)(A) of the Employee Retirement Income 
     Security Act of 1974.
       (d) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to plan amendments taking effect on or after the date 
     of the enactment of this Act.
       (2) Transition.--Until such time as the Secretary of the 
     Treasury issues regulations under section 4980F(e)(2) of the 
     Internal Revenue Code of 1986 and section 204(h)(2) of the 
     Employee Retirement Income Security Act of 1974 (as added by 
     the amendments made by this section), a plan shall be treated 
     as meeting the requirements of such sections if it makes a 
     good faith effort to comply with such requirements.
       (3) Special notice rules.--The period for providing any 
     notice required by the amendments made by this section shall 
     not end before the date which is 3 months after the date of 
     the enactment of this Act.
       (d) Study.--The Secretary of the Treasury shall prepare a 
     report on the effects of significant restructurings of plan 
     benefit formulas of traditional defined benefit plans. Such 
     study shall examine the effects of such restructurings on 
     longer service participants, including the incidence and 
     effects of ``wear away'' provisions under which participants 
     earn no additional benefits for a period of time after 
     restructuring. As soon as practicable, but not later than one 
     year after the date of enactment of this Act, the Secretary 
     shall submit such report, together with recommendations 
     thereon, to the Committee on Ways and Means and the Committee 
     on Education and the Workforce of the House of 
     Representatives and the Committee on Finance and the 
     Committee on Health, Education, Labor, and Pensions of the 
     Senate.

                Subtitle F--Reducing Regulatory Burdens

     SEC. 661. MODIFICATION OF TIMING OF PLAN VALUATIONS.

       (a) In General.--Paragraph (9) of section 412(c) (relating 
     to annual valuation) is amended to read as follows:
       ``(9) Annual valuation.--
       ``(A) In general.--For purposes of this section, a 
     determination of experience gains and losses and a valuation 
     of the plan's liability shall be made not less frequently 
     than once every year, except that such determination shall be 
     made more frequently to the extent required in particular 
     cases under regulations prescribed by the Secretary.
       ``(B) Valuation date.--
       ``(i) Current year.--Except as provided in clause (ii), the 
     valuation referred to in subparagraph (A) shall be made as of 
     a date within the plan year to which the valuation refers or 
     within one month prior to the beginning of such year.
       ``(ii) Election to use prior year valuation.--The valuation 
     referred to in subparagraph (A) may be made as of a date 
     within the plan year prior to the year to which the valuation 
     refers if--

       ``(I) an election is in effect under this clause with 
     respect to the plan, and
       ``(II) as of such date, the value of the assets of the plan 
     are not less than 125 percent of the plan's current liability 
     (as defined in paragraph (7)(B)).

       ``(iii) Adjustments.--Information under clause (ii) shall, 
     in accordance with regulations, be actuarially adjusted to 
     reflect significant differences in participants.
       ``(iv) Election.--An election under clause (ii), once made, 
     shall be irrevocable without the consent of the Secretary.''.
       (b) Amendment of ERISA.--Paragraph (9) of section 302(c) of 
     the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1053(c)) is amended--
       (1) by inserting ``(A)'' after ``(9)'', and
       (2) by adding at the end the following:
       ``(B)(i) Except as provided in clause (ii), the valuation 
     referred to in subparagraph (A) shall be made as of a date 
     within the plan year to which the valuation refers or within 
     one month prior to the beginning of such year.
       ``(ii) The valuation referred to in subparagraph (A) may be 
     made as of a date within the plan year prior to the year to 
     which the valuation refers if--
       ``(I) an election is in effect under this clause with 
     respect to the plan, and
       ``(II) as of such date, the value of the assets of the plan 
     are not less than 125 percent of the plan's current liability 
     (as defined in paragraph (7)(B)).
       ``(iii) Information under clause (ii) shall, in accordance 
     with regulations, be actuarially adjusted to reflect 
     significant differences in participants.
       ``(iv) An election under clause (ii), once made, shall be 
     irrevocable without the consent of the Secretary of the 
     Treasury.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after December 31, 2001.

     SEC. 662. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT LOSS OF 
                   DIVIDEND DEDUCTION.

       (a) In General.--Section 404(k)(2)(A) (defining applicable 
     dividends) is amended by striking ``or'' at the end of clause 
     (ii), by redesignating clause (iii) as clause (iv), and by 
     inserting after clause (ii) the following new clause:
       ``(iii) is, at the election of such participants or their 
     beneficiaries--

       ``(I) payable as provided in clause (i) or (ii), or
       ``(II) paid to the plan and reinvested in qualifying 
     employer securities, or''.

       (b) Limitation on Amount of Deduction.--Section 404(k)(1) 
     (relating to deduction for dividends paid on certain employer 
     securities) is amended to read as follows:
       ``(1) Deduction allowed.--
       ``(A) In general.--In the case of a C corporation, there 
     shall be allowed as a deduction for the taxable year an 
     amount equal to--
       ``(i) the amount of any applicable dividend described in 
     clause (i), (ii), or (iv) of paragraph (2)(A), and
       ``(ii) the applicable percentage of any applicable dividend 
     described in clause (iii),
     paid in cash by such corporation during the taxable year with 
     respect to applicable employer securities. Such deduction 
     shall be in addition to the deduction allowed subsection (a).
       ``(B) Applicable percentage.--For purposes of subparagraph 
     (A), the applicable percentage shall be determined in 
     accordance with the following table:


[[Page S5158]]


    ``For taxable years                                  The applicable
      beginning in:                                    percentage is:  
  2002, 2003, and 2004......................................25 percent 
  2005, 2006, and 2007......................................50 percent 
  2008, 2009, and 2010......................................75 percent 
  2011 and thereafter......................................100 percent 
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 663. REPEAL OF TRANSITION RULE RELATING TO CERTAIN 
                   HIGHLY COMPENSATED EMPLOYEES.

       (a) In General.--Paragraph (4) of section 1114(c) of the 
     Tax Reform Act of 1986 is hereby repealed.
       (b) Effective Date.--The repeal made by subsection (a) 
     shall apply to plan years beginning after December 31, 2001.

     SEC. 664. EMPLOYEES OF TAX-EXEMPT ENTITIES.

       (a) In General.--The Secretary of the Treasury shall modify 
     Treasury Regulations section 1.410(b)-6(g) to provide that 
     employees of an organization described in section 
     403(b)(1)(A)(i) of the Internal Revenue Code of 1986 who are 
     eligible to make contributions under section 403(b) of such 
     Code pursuant to a salary reduction agreement may be treated 
     as excludable with respect to a plan under section 401(k) or 
     (m) of such Code that is provided under the same general 
     arrangement as a plan under such section 401(k), if--
       (1) no employee of an organization described in section 
     403(b)(1)(A)(i) of such Code is eligible to participate in 
     such section 401(k) plan or section 401(m) plan; and
       (2) 95 percent of the employees who are not employees of an 
     organization described in section 403(b)(1)(A)(i) of such 
     Code are eligible to participate in such plan under such 
     section 401(k) or (m).
       (b) Effective Date.--The modification required by 
     subsection (a) shall apply as of the same date set forth in 
     section 1426(b) of the Small Business Job Protection Act of 
     1996.

     SEC. 665. CLARIFICATION OF TREATMENT OF EMPLOYER-PROVIDED 
                   RETIREMENT ADVICE.

       (a) In General.--Subsection (a) of section 132 (relating to 
     exclusion from gross income) is amended by striking ``or'' at 
     the end of paragraph (5), by striking the period at the end 
     of paragraph (6) and inserting ``, or'', and by adding at the 
     end the following new paragraph:
       ``(7) qualified retirement planning services.''.
       (b) Qualified Retirement Planning Services Defined.--
     Section 132 is amended by redesignating subsection (m) as 
     subsection (n) and by inserting after subsection (l) the 
     following:
       ``(m) Qualified Retirement Planning Services.--
       ``(1) In general.--For purposes of this section, the term 
     `qualified retirement planning services' means any retirement 
     planning advice or information provided to an employee and 
     his spouse by an employer maintaining a qualified employer 
     plan.
       ``(2) Nondiscrimination rule.--Subsection (a)(7) shall 
     apply in the case of highly compensated employees only if 
     such services are available on substantially the same terms 
     to each member of the group of employees normally provided 
     education and information regarding the employer's qualified 
     employer plan.
       ``(3) Qualified employer plan.--For purposes of this 
     subsection, the term `qualified employer plan' means a plan, 
     contract, pension, or account described in section 
     219(g)(5).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2001.

     SEC. 666. REPORTING SIMPLIFICATION.

       (a) Simplified Annual Filing Requirement for Owners and 
     Their Spouses.--
       (1) In general.--The Secretary of the Treasury shall modify 
     the requirements for filing annual returns with respect to 
     one-participant retirement plans to ensure that such plans 
     with assets of $250,000 or less as of the close of the plan 
     year and each plan year beginning on or after January 1, 
     1994, need not file a return for that year.
       (2) One-participant retirement plan defined.--For purposes 
     of this subsection, the term ``one-participant retirement 
     plan'' means a retirement plan that--
       (A) on the first day of the plan year--
       (i) covered only the employer (and the employer's spouse) 
     and the employer owned the entire business (whether or not 
     incorporated); or
       (ii) covered only one or more partners (and their spouses) 
     in a business partnership (including partners in an S or C 
     corporation);
       (B) meets the minimum coverage requirements of section 
     410(b) of the Internal Revenue Code of 1986 without being 
     combined with any other plan of the business that covers the 
     employees of the business;
       (C) does not provide benefits to anyone except the employer 
     (and the employer's spouse) or the partners (and their 
     spouses);
       (D) does not cover a business that is a member of an 
     affiliated service group, a controlled group of corporations, 
     or a group of businesses under common control; and
       (E) does not cover a business that leases employees.
       (3) Other definitions.--Terms used in paragraph (2) which 
     are also used in section 414 of the Internal Revenue Code of 
     1986 shall have the respective meanings given such terms by 
     such section.
       (b) Effective Date.--The provisions of this section shall 
     take effect on January 1, 2002.

     SEC. 667. IMPROVEMENT OF EMPLOYEE PLANS COMPLIANCE RESOLUTION 
                   SYSTEM.

       The Secretary of the Treasury shall continue to update and 
     improve the Employee Plans Compliance Resolution System (or 
     any successor program) giving special attention to--
       (1) increasing the awareness and knowledge of small 
     employers concerning the availability and use of the program;
       (2) taking into account special concerns and circumstances 
     that small employers face with respect to compliance and 
     correction of compliance failures;
       (3) extending the duration of the self-correction period 
     under the Self-Correction Program for significant compliance 
     failures;
       (4) expanding the availability to correct insignificant 
     compliance failures under the Self-Correction Program during 
     audit; and
       (5) assuring that any tax, penalty, or sanction that is 
     imposed by reason of a compliance failure is not excessive 
     and bears a reasonable relationship to the nature, extent, 
     and severity of the failure.

     SEC. 668. REPEAL OF THE MULTIPLE USE TEST.

       (a) In General.--Paragraph (9) of section 401(m) is amended 
     to read as follows:
       ``(9) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to carry out the purposes of 
     this subsection and subsection (k), including regulations 
     permitting appropriate aggregation of plans and 
     contributions.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to years beginning after December 31, 2001.

     SEC. 669. FLEXIBILITY IN NONDISCRIMINATION, COVERAGE, AND 
                   LINE OF BUSINESS RULES.

       (a) Nondiscrimination.--
       (1) In general.--The Secretary of the Treasury shall, by 
     regulation, provide that a plan shall be deemed to satisfy 
     the requirements of section 401(a)(4) of the Internal Revenue 
     Code of 1986 if such plan satisfies the facts and 
     circumstances test under section 401(a)(4) of such Code, as 
     in effect before January 1, 1994, but only if--
       (A) the plan satisfies conditions prescribed by the 
     Secretary to appropriately limit the availability of such 
     test; and
       (B) the plan is submitted to the Secretary for a 
     determination of whether it satisfies such test.
     Subparagraph (B) shall only apply to the extent provided by 
     the Secretary.
       (2) Effective dates.--
       (A) Regulations.--The regulation required by paragraph (1) 
     shall apply to years beginning after December 31, 2001.
       (B) Conditions of availability.--Any condition of 
     availability prescribed by the Secretary under paragraph 
     (1)(A) shall not apply before the first year beginning not 
     less than 120 days after the date on which such condition is 
     prescribed.
       (b) Coverage Test.--
       (1) In general.--Section 410(b)(1) (relating to minimum 
     coverage requirements) is amended by adding at the end the 
     following:
       ``(D) In the case that the plan fails to meet the 
     requirements of subparagraphs (A), (B) and (C), the plan--
       ``(i) satisfies subparagraph (B), as in effect immediately 
     before the enactment of the Tax Reform Act of 1986,
       ``(ii) is submitted to the Secretary for a determination of 
     whether it satisfies the requirement described in clause (i), 
     and
       ``(iii) satisfies conditions prescribed by the Secretary by 
     regulation that appropriately limit the availability of this 
     subparagraph.
     Clause (ii) shall apply only to the extent provided by the 
     Secretary.''.
       (2) Effective dates.--
       (A) In general.--The amendment made by paragraph (1) shall 
     apply to years beginning after December 31, 2001.
       (B) Conditions of availability.--Any condition of 
     availability prescribed by the Secretary under regulations 
     prescribed by the Secretary under section 410(b)(1)(D) of the 
     Internal Revenue Code of 1986 shall not apply before the 
     first year beginning not less than 120 days after the date on 
     which such condition is prescribed.
       (c) Line of Business Rules.--The Secretary of the Treasury 
     shall, on or before December 31, 2001, modify the existing 
     regulations issued under section 414(r) of the Internal 
     Revenue Code of 1986 in order to expand (to the extent that 
     the Secretary determines appropriate) the ability of a 
     pension plan to demonstrate compliance with the line of 
     business requirements based upon the facts and circumstances 
     surrounding the design and operation of the plan, even 
     though the plan is unable to satisfy the mechanical tests 
     currently used to determine compliance.

     SEC. 670. EXTENSION TO ALL GOVERNMENTAL PLANS OF MORATORIUM 
                   ON APPLICATION OF CERTAIN NONDISCRIMINATION 
                   RULES APPLICABLE TO STATE AND LOCAL PLANS.

       (a) In General.--
       (1) Subparagraph (G) of section 401(a)(5) and subparagraph 
     (H) of section 401(a)(26) are each amended by striking 
     ``section 414(d))'' and all that follows and inserting 
     ``section 414(d)).''.
       (2) Subparagraph (G) of section 401(k)(3) and paragraph (2) 
     of section 1505(d) of the Taxpayer Relief Act of 1997 are 
     each amended by striking ``maintained by a State or local 
     government or political subdivision thereof (or agency or 
     instrumentality thereof)''.
       (b) Conforming Amendments.--
       (1) The heading for subparagraph (G) of section 401(a)(5) 
     is amended to read as follows: ``Governmental plans''.

[[Page S5159]]

       (2) The heading for subparagraph (H) of section 401(a)(26) 
     is amended to read as follows: ``Exception for governmental 
     plans''.
       (3) Subparagraph (G) of section 401(k)(3) is amended by 
     inserting ``Governmental plans.--'' after ``(G)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2001.

                   Subtitle G--Other ERISA Provisions

     SEC. 681. MISSING PARTICIPANTS.

       (a) In General.--Section 4050 of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1350) is amended by 
     redesignating subsection (c) as subsection (e) and by 
     inserting after subsection (b) the following new subsection:
       ``(c) Multiemployer Plans.--The corporation shall prescribe 
     rules similar to the rules in subsection (a) for 
     multiemployer plans covered by this title that terminate 
     under section 4041A.
       ``(d) Plans Not Otherwise Subject to Title.--
       ``(1) Transfer to corporation.--The plan administrator of a 
     plan described in paragraph (4) may elect to transfer a 
     missing participant's benefits to the corporation upon 
     termination of the plan.
       ``(2) Information to the corporation.--To the extent 
     provided in regulations, the plan administrator of a plan 
     described in paragraph (4) shall, upon termination of the 
     plan, provide the corporation information with respect to 
     benefits of a missing participant if the plan transfers such 
     benefits--
       ``(A) to the corporation, or
       ``(B) to an entity other than the corporation or a plan 
     described in paragraph (4)(B)(ii).
       ``(3) Payment by the corporation.--If benefits of a missing 
     participant were transferred to the corporation under 
     paragraph (1), the corporation shall, upon location of the 
     participant or beneficiary, pay to the participant or 
     beneficiary the amount transferred (or the appropriate 
     survivor benefit) either--
       ``(A) in a single sum (plus interest), or
       ``(B) in such other form as is specified in regulations of 
     the corporation.
       ``(4) Plans described.--A plan is described in this 
     paragraph if--
       ``(A) the plan is a pension plan (within the meaning of 
     section 3(2))--
       ``(i) to which the provisions of this section do not apply 
     (without regard to this subsection), and
       ``(ii) which is not a plan described in paragraphs (2) 
     through (11) of section 4021(b), and
       ``(B) at the time the assets are to be distributed upon 
     termination, the plan--
       ``(i) has missing participants, and
       ``(ii) has not provided for the transfer of assets to pay 
     the benefits of all missing participants to another pension 
     plan (within the meaning of section 3(2)).
       ``(5) Certain provisions not to apply.--Subsections (a)(1) 
     and (a)(3) shall not apply to a plan described in paragraph 
     (4).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to distributions made after final regulations 
     implementing subsections (c) and (d) of section 4050 of the 
     Employee Retirement Income Security Act of 1974 (as added by 
     subsection (a)), respectively, are prescribed.

     SEC. 682. REDUCED PBGC PREMIUM FOR NEW PLANS OF SMALL 
                   EMPLOYERS.

       (a) In General.--Subparagraph (A) of section 4006(a)(3) of 
     the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1306(a)(3)(A)) is amended--
       (1) in clause (i), by inserting ``other than a new single-
     employer plan (as defined in subparagraph (F)) maintained by 
     a small employer (as so defined),'' after ``single-employer 
     plan,'',
       (2) in clause (iii), by striking the period at the end and 
     inserting ``, and'', and
       (3) by adding at the end the following new clause:
       ``(iv) in the case of a new single-employer plan (as 
     defined in subparagraph (F)) maintained by a small employer 
     (as so defined) for the plan year, $5 for each individual who 
     is a participant in such plan during the plan year.''.
       (b) Definition of New Single-Employer Plan.--Section 
     4006(a)(3) of the Employee Retirement Income Security Act of 
     1974 (29 U.S.C. 1306(a)(3)) is amended by adding at the end 
     the following new subparagraph:
       ``(F)(i) For purposes of this paragraph, a single-employer 
     plan maintained by a contributing sponsor shall be treated as 
     a new single-employer plan for each of its first 5 plan years 
     if, during the 36-month period ending on the date of the 
     adoption of such plan, the sponsor or any member of such 
     sponsor's controlled group (or any predecessor of either) 
     did not establish or maintain a plan to which this title 
     applies with respect to which benefits were accrued for 
     substantially the same employees as are in the new single-
     employer plan.
       ``(ii)(I) For purposes of this paragraph, the term `small 
     employer' means an employer which on the first day of any 
     plan year has, in aggregation with all members of the 
     controlled group of such employer, 100 or fewer employees.
       ``(II) In the case of a plan maintained by two or more 
     contributing sponsors that are not part of the same 
     controlled group, the employees of all contributing sponsors 
     and controlled groups of such sponsors shall be aggregated 
     for purposes of determining whether any contributing sponsor 
     is a small employer.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to plans established after December 31, 2001.

     SEC. 683. REDUCTION OF ADDITIONAL PBGC PREMIUM FOR NEW AND 
                   SMALL PLANS.

       (a) New Plans.--Subparagraph (E) of section 4006(a)(3) of 
     the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1306(a)(3)(E)) is amended by adding at the end the 
     following new clause:
       ``(v) In the case of a new defined benefit plan, the amount 
     determined under clause (ii) for any plan year shall be an 
     amount equal to the product of the amount determined under 
     clause (ii) and the applicable percentage. For purposes of 
     this clause, the term `applicable percentage' means--
       ``(I) 0 percent, for the first plan year.
       ``(II) 20 percent, for the second plan year.
       ``(III) 40 percent, for the third plan year.
       ``(IV) 60 percent, for the fourth plan year.
       ``(V) 80 percent, for the fifth plan year.
     For purposes of this clause, a defined benefit plan (as 
     defined in section 3(35)) maintained by a contributing 
     sponsor shall be treated as a new defined benefit plan for 
     each of its first 5 plan years if, during the 36-month period 
     ending on the date of the adoption of the plan, the sponsor 
     and each member of any controlled group including the sponsor 
     (or any predecessor of either) did not establish or maintain 
     a plan to which this title applies with respect to which 
     benefits were accrued for substantially the same employees as 
     are in the new plan.''.
       (b) Small Plans.--Paragraph (3) of section 4006(a) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1306(a)), as amended by section 682(b), is amended--
       (1) by striking ``The'' in subparagraph (E)(i) and 
     inserting ``Except as provided in subparagraph (G), the'', 
     and
       (2) by inserting after subparagraph (F) the following new 
     subparagraph:
       ``(G)(i) In the case of an employer who has 25 or fewer 
     employees on the first day of the plan year, the additional 
     premium determined under subparagraph (E) for each 
     participant shall not exceed $5 multiplied by the number of 
     participants in the plan as of the close of the preceding 
     plan year.
       ``(ii) For purposes of clause (i), whether an employer has 
     25 or fewer employees on the first day of the plan year is 
     determined taking into consideration all of the employees of 
     all members of the contributing sponsor's controlled group. 
     In the case of a plan maintained by two or more contributing 
     sponsors, the employees of all contributing sponsors and 
     their controlled groups shall be aggregated for purposes of 
     determining whether the 25-or-fewer-employees limitation has 
     been satisfied.''.
       (c) Effective Dates.--
       (1) Subsection (a).--The amendments made by subsection (a) 
     shall apply to plans established after December 31, 2001.
       (2) Subsection (b).--The amendments made by subsection (b) 
     shall apply to plan years beginning after December 31, 2001.

     SEC. 684. AUTHORIZATION FOR PBGC TO PAY INTEREST ON PREMIUM 
                   OVERPAYMENT REFUNDS.

       (a) In General.--Section 4007(b) of the Employment 
     Retirement Income Security Act of 1974 (29 U.S.C. 1307(b)) is 
     amended--
       (1) by striking ``(b)'' and inserting ``(b)(1)'', and
       (2) by inserting at the end the following new paragraph:
       ``(2) The corporation is authorized to pay, subject to 
     regulations prescribed by the corporation, interest on the 
     amount of any overpayment of premium refunded to a designated 
     payor. Interest under this paragraph shall be calculated at 
     the same rate and in the same manner as interest is 
     calculated for underpayments under paragraph (1).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to interest accruing for periods beginning not 
     earlier than the date of the enactment of this Act.

     SEC. 685. SUBSTANTIAL OWNER BENEFITS IN TERMINATED PLANS.

       (a) Modification of Phase-In of Guarantee.--Section 
     4022(b)(5) of the Employee Retirement Income Security Act of 
     1974 (29 U.S.C. 1322(b)(5)) is amended to read as follows:
       ``(5)(A) For purposes of this paragraph, the term `majority 
     owner' means an individual who, at any time during the 60-
     month period ending on the date the determination is being 
     made--
       ``(i) owns the entire interest in an unincorporated trade 
     or business,
       ``(ii) in the case of a partnership, is a partner who owns, 
     directly or indirectly, 50 percent or more of either the 
     capital interest or the profits interest in such partnership, 
     or
       ``(iii) in the case of a corporation, owns, directly or 
     indirectly, 50 percent or more in value of either the voting 
     stock of that corporation or all the stock of that 
     corporation.
     For purposes of clause (iii), the constructive ownership 
     rules of section 1563(e) of the Internal Revenue Code of 1986 
     shall apply (determined without regard to section 
     1563(e)(3)(C)).
       ``(B) In the case of a participant who is a majority owner, 
     the amount of benefits guaranteed under this section shall 
     equal the product of--
       ``(i) a fraction (not to exceed 1) the numerator of which 
     is the number of years from the later of the effective date 
     or the adoption date of the plan to the termination date, and 
     the denominator of which is 10, and
       ``(ii) the amount of benefits that would be guaranteed 
     under this section if the participant were not a majority 
     owner.''.
       (b) Modification of Allocation of Assets.--

[[Page S5160]]

       (1) Section 4044(a)(4)(B) of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1344(a)(4)(B)) is amended by 
     striking ``section 4022(b)(5)'' and inserting ``section 
     4022(b)(5)(B)''.
       (2) Section 4044(b) of such Act (29 U.S.C. 1344(b)) is 
     amended--
       (A) by striking ``(5)'' in paragraph (2) and inserting 
     ``(4), (5),'', and
       (B) by redesignating paragraphs (3) through (6) as 
     paragraphs (4) through (7), respectively, and by inserting 
     after paragraph (2) the following new paragraph:
       ``(3) If assets available for allocation under paragraph 
     (4) of subsection (a) are insufficient to satisfy in full the 
     benefits of all individuals who are described in that 
     paragraph, the assets shall be allocated first to benefits 
     described in subparagraph (A) of that paragraph. Any 
     remaining assets shall then be allocated to benefits 
     described in subparagraph (B) of that paragraph. If assets 
     allocated to such subparagraph (B) are insufficient to 
     satisfy in full the benefits described in that subparagraph, 
     the assets shall be allocated pro rata among individuals on 
     the basis of the present value (as of the termination date) 
     of their respective benefits described in that 
     subparagraph.''.
       (c) Conforming Amendments.--
       (1) Section 4021 of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1321) is amended--
       (A) in subsection (b)(9), by striking ``as defined in 
     section 4022(b)(6)'', and
       (B) by adding at the end the following new subsection:
       ``(d) For purposes of subsection (b)(9), the term 
     `substantial owner' means an individual who, at any time 
     during the 60-month period ending on the date the 
     determination is being made--
       ``(1) owns the entire interest in an unincorporated trade 
     or business,
       ``(2) in the case of a partnership, is a partner who owns, 
     directly or indirectly, more than 10 percent of either the 
     capital interest or the profits interest in such partnership, 
     or
       ``(3) in the case of a corporation, owns, directly or 
     indirectly, more than 10 percent in value of either the 
     voting stock of that corporation or all the stock of that 
     corporation.
     For purposes of paragraph (3), the constructive ownership 
     rules of section 1563(e) of the Internal Revenue Code of 1986 
     shall apply (determined without regard to section 
     1563(e)(3)(C)).''.
       (2) Section 4043(c)(7) of such Act (29 U.S.C. 1343(c)(7)) 
     is amended by striking ``section 4022(b)(6)'' and inserting 
     ``section 4021(d)''.
       (d) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to plan 
     terminations--
       (A) under section 4041(c) of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1341(c)) with respect to 
     which notices of intent to terminate are provided under 
     section 4041(a)(2) of such Act (29 U.S.C. 1341(a)(2)) after 
     December 31, 2001, and
       (B) under section 4042 of such Act (29 U.S.C. 1342) with 
     respect to which proceedings are instituted by the 
     corporation after such date.
       (2) Conforming amendments.--The amendments made by 
     subsection (c) shall take effect on January 1, 2002.

                  Subtitle H--Miscellaneous Provisions

     SEC. 691. TAX TREATMENT AND INFORMATION REQUIREMENTS OF 
                   ALASKA NATIVE SETTLEMENT TRUSTS.

       (a) Treatment of Alaska Native Settlement Trusts.--Subpart 
     A of part I of subchapter J of chapter 1 (relating to general 
     rules for taxation of trusts and estates) is amended by 
     adding at the end the following new section:

     ``SEC. 646. TAX TREATMENT OF ELECTING ALASKA NATIVE 
                   SETTLEMENT TRUSTS.

       ``(a) In General.--If an election under this section is in 
     effect with respect to any Settlement Trust, the provisions 
     of this section shall apply in determining the income tax 
     treatment of the Settlement Trust and its beneficiaries with 
     respect to the Settlement Trust.
       ``(b) Taxation of Income of Trust.--Except as provided in 
     subsection (f)(1)(B)(ii)--
       ``(1) In general.--There is hereby imposed on the taxable 
     income of an electing Settlement Trust, other than its net 
     capital gain, a tax at the lowest rate specified in section 
     1(c).

       ``(2) Capital gain.--In the case of an electing Settlement 
     Trust with a net capital gain for the taxable year, a tax is 
     hereby imposed on such gain at the rate of tax which would 
     apply to such gain if the taxpayer were subject to a tax on 
     its other taxable income at only the lowest rate specified in 
     section 1(c).

     Any such tax shall be in lieu of the income tax otherwise 
     imposed by this chapter on such income or gain.
       ``(c) One-Time Election.--
       ``(1) In general.--A Settlement Trust may elect to have the 
     provisions of this section apply to the trust and its 
     beneficiaries.
       ``(2) Time and method of election.--An election under 
     paragraph (1) shall be made by the trustee of such trust--
       ``(A) on or before the due date (including extensions) for 
     filing the Settlement Trust's return of tax for the first 
     taxable year of such trust ending after the date of the 
     enactment of this section, and
       ``(B) by attaching to such return of tax a statement 
     specifically providing for such election.
       ``(3) Period election in effect.--Except as provided in 
     subsection (f), an election under this subsection--
       ``(A) shall apply to the first taxable year described in 
     paragraph (2)(A) and all subsequent taxable years, and
       ``(B) may not be revoked once it is made.
       ``(d) Contributions to Trust.--
       ``(1) Beneficiaries of electing trust not taxed on 
     contributions.--In the case of an electing Settlement Trust, 
     no amount shall be includible in the gross income of a 
     beneficiary of such trust by reason of a contribution to such 
     trust.
       ``(2) Earnings and profits.--The earnings and profits of 
     the sponsoring Native Corporation shall not be reduced on 
     account of any contribution to such Settlement Trust:
       ``(e) Tax Treatment of Distributions to Beneficiaries.--
     Amounts distributed by an electing Settlement Trust during 
     any taxable year shall be considered as having the following 
     characteristics in the hands of the recipient beneficiary:
       ``(1) First, as amounts excludable from gross income for 
     the taxable year to the extent of the taxable income of such 
     trust for such taxable year (decreased by any income tax paid 
     by the trust with respect to the income) plus any amount 
     excluded from gross income of the trust under section 103.
       ``(2) Second, as amounts excludable from gross income to 
     the extent of the amount described in paragraph (1) for all 
     taxable years for which an election is in effect under 
     subsection (c) with respect to the trust, and not previously 
     taken into account under paragraph (1).
       ``(3) Third, as amounts distributed by the sponsoring 
     Native Corporation with respect to its stock (within the 
     meaning of section 301(a)) during such taxable year and 
     taxable to the recipient beneficiary as amounts described in 
     section 301(c)(1), to the extent of current or accumulated 
     earnings and profits of the sponsoring Native Corporation as 
     of the close of such taxable year after proper adjustment is 
     made for all distributions made by the sponsoring Native 
     Corporation during such taxable year.
       ``(4) Fourth, as amounts distributed by the trust in excess 
     of the distributable net income of such trust for such 
     taxable year.

     Amounts distributed to which paragraph (3) applies shall not 
     be treated as a corporate distribution subject to section 
     311(b), and for purposes of determining the amount of a 
     distribution for purposes of paragraph (3) and the basis to 
     the recipients, section 643(e) and not section 301(b) or (d) 
     shall apply.
       ``(f) Special Rules Where Transfer Restrictions Modified.--
       ``(1) Transfer of beneficial interests.--If, at any time, a 
     beneficial interest in an electing Settlement Trust may be 
     disposed of to a person in a manner which would not be 
     permitted by section 7(h) of the Alaska Native Claims 
     Settlement Act (43 U.S.C. 1606(h)) if such interest were 
     Settlement Common Stock--
       ``(A) no election may be made under subsection (c) with 
     respect to such trust, and
       ``(B) if such an election is in effect as of such time--
       ``(i) such election shall cease to apply as of the first 
     day of the taxable year in which such disposition is first 
     permitted,
       ``(ii) the provisions of this section shall not apply to 
     such trust for such taxable year and all taxable years 
     thereafter, and
       ``(iii) the distributable net income of such trust shall be 
     increased by the current or accumulated earnings and profits 
     of the sponsoring Native Corporation as of the close of such 
     taxable year after proper adjustment is made for all 
     distributions made by the sponsoring Native Corporation 
     during such taxable year.

     In no event shall the increase under clause (iii) exceed the 
     fair market value of the trust's assets as of the date the 
     beneficial interest of the trust first becomes so disposable. 
     The earnings and profits of the sponsoring Native Corporation 
     shall be adjusted as of the last day of such taxable year by 
     the amount of earnings and profits so included in the 
     distributable net income of the trust.
       ``(2) Stock in corporation.--If--
       ``(A) stock in the sponsoring Native Corporation may be 
     disposed of to a person in a manner which would not be 
     permitted by section 7(h) of the Alaska Native Claims 
     Settlement Act (43 U.S.C. 1606(h)) if such stock were 
     Settlement Common Stock, and
       ``(B) at any time after such disposition of stock is first 
     permitted, such corporation transfers assets to a Settlement 
     Trust,

     paragraph (1)(B) shall be applied to such trust on and after 
     the date of the transfer in the same manner as if the trust 
     permitted dispositions of beneficial interests in the trust 
     in a manner not permitted by such section 7(h).
       ``(3) Certain distributions.--For purposes of this section, 
     the surrender of an interest in a Native Corporation or an 
     electing Settlement Trust in order to accomplish the whole or 
     partial redemption of the interest of a shareholder or 
     beneficiary in such corporation or trust, or to accomplish 
     the whole or partial liquidation of such corporation or 
     trust, shall be deemed to be a transfer permitted by section 
     7(h) of the Alaska Native Claims Settlement Act.
       ``(g) Taxable Income.--For purposes of this title, the 
     taxable income of an electing Settlement Trust shall be 
     determined under section 641(b) without regard to any 
     deduction under section 651 or 661.
       ``(h) Definitions.--For purposes of this section--
       ``(1) Electing settlement trust.--The term `electing 
     Settlement Trust' means a

[[Page S5161]]

     Settlement Trust which has made the election, effective for a 
     taxable year, described in subsection (c).
       ``(2) Native corporation.--The term `Native Corporation' 
     has the meaning given such term by section 3(m) of the Alaska 
     Native Claims Settlement Act (43 U.S.C. 1602(m)).
       ``(3) Settlement common stock.--The term `Settlement Common 
     Stock' has the meaning given such term by section 3(p) of the 
     Alaska Native Claims Settlement Act (43 U.S.C. 1602(p)).
       ``(4) Settlement trust.--The term `Settlement Trust' means 
     a trust that constitutes a settlement trust under section 
     3(t) of the Alaska Native Claims Settlement Act (43 U.S.C. 
     1602(t)).
       ``(5) Sponsoring native corporation.--The term `sponsoring 
     Native Corporation' means the Native Corporation which 
     transfers assets to an electing Settlement Trust.
       ``(i) Special Loss Disallowance Rule.--Any loss that would 
     otherwise be recognized by a shareholder upon a disposition 
     of a share of stock of a sponsoring Native Corporation shall 
     be reduced (but not below zero) by the per share loss 
     adjustment factor. The per share loss adjustment factor shall 
     be the aggregate of all contributions to all electing 
     Settlement Trusts sponsored by such Native Corporation made 
     on or after the first day each trust is treated as an 
     electing Settlement Trust expressed on a per share basis and 
     determined as of the day of each such contribution.
       ``(j) Cross Reference.--

  ``For information required with respect to electing Settlement Trusts 
and sponsoring Native Corporations, see section 6039H.''.

       (b) Reporting.--Subpart A of part III of subchapter A of 
     chapter 61 of subtitle F (relating to information concerning 
     persons subject to special provisions) is amended by 
     inserting after section 6039G the following new section:

     ``SEC. 6039H. INFORMATION WITH RESPECT TO ALASKA NATIVE 
                   SETTLEMENT TRUSTS AND SPONSORING NATIVE 
                   CORPORATIONS.

       ``(a) Requirement.--The fiduciary of an electing Settlement 
     Trust (as defined in section 646(h)(1)) shall include with 
     the return of income of the trust a statement containing the 
     information required under subsection (c).
       ``(b) Application With Other Requirements.--The filing of 
     any statement under this section shall be in lieu of the 
     reporting requirements under section 6034A to furnish any 
     statement to a beneficiary regarding amounts distributed to 
     such beneficiary (and such other reporting rules as the 
     Secretary deems appropriate).
       ``(c) Required Information.--The information required under 
     this subsection shall include--
       ``(1) the amount of distributions made during the taxable 
     year to each beneficiary,
       ``(2) the treatment of such distribution under the 
     applicable provision of section 646, including the amount 
     that is excludable from the recipient beneficiary's gross 
     income under section 646, and
       ``(3) the amount (if any) of any distribution during such 
     year that is deemed to have been made by the sponsoring 
     Native Corporation (as defined in section 646(h)(5)).
       ``(d) Sponsoring Native Corporation.--
       ``(1) In general.--The electing Settlement Trust shall, on 
     or before the date on which the statement under subsection 
     (a) is required to be filed, furnish such statement to the 
     sponsoring Native Corporation (as so defined).
       ``(2) Distributees.--The sponsoring Native Corporation 
     shall furnish each recipient of a distribution described in 
     section 646(e)(3) a statement containing the amount deemed to 
     have been distributed to such recipient by such corporation 
     for the taxable year.''.
       (c) Clerical Amendment.--
       (1) The table of sections for subpart A of part I of 
     subchapter J of chapter 1 of such Code is amended by adding 
     at the end the following new item:

``Sec. 646. Tax treatment of electing Alaska Native Settlement 
              Trusts.''.

       (2) The table of sections for subpart A of part III of 
     subchapter A of chapter 61 of subtitle F of such Code is 
     amended by inserting after the item relating to section 6039G 
     the following new item:

``Sec. 6039H. Information with respect to Alaska Native Settlement 
              Trusts and sponsoring Native Corporations.''.

       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after the date of the 
     enactment of this Act and to contributions made to electing 
     Settlement Trusts for such year or any subsequent year.

          Subtitle I--Compliance With Congressional Budget Act

     SEC. 695. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.

                   TITLE VII--ALTERNATIVE MINIMUM TAX

                         Subtitle A--In General

     SEC. 701. INCREASE IN ALTERNATIVE MINIMUM TAX EXEMPTION.

       (a) In General.--
       (1) Subparagraph (A) of section 55(d)(1) (relating to 
     exemption amount for taxpayers other than corporations) is 
     amended by striking ``$45,000'' and inserting ``$45,000 
     ($49,000 in the case of taxable years beginning in 2001, 
     2002, 2003, 2004, 2005, and 2006)''.
       (2) Subparagraph (B) of section 55(d)(1) (relating to 
     exemption amount for taxpayers other than corporations) is 
     amended by striking ``$33,750'' and inserting ``$33,750 
     ($35,750 in the case of taxable years beginning in 2001, 
     2002, 2003, 2004, 2005, and 2006)''.
       (b) Conforming Amendments.--
       (1) Paragraph (1) of section 55(d) is amended by striking 
     ``and'' at the end of subparagraph (B), by striking 
     subparagraph (C), and by inserting after subparagraph (B) the 
     following new subparagraphs:
       ``(C) 50 percent of the dollar amount applicable under 
     paragraph (1)(A) in the case of a married individual who 
     files a separate return, and
       ``(D) $22,500 in the case of an estate or trust.''.
       (2) Subparagraph (C) of section 55(d)(3) is amended by 
     striking ``paragraph (1)(C)'' and inserting ``subparagraph 
     (C) or (D) of paragraph (1)''.
       (3) The last sentence of section 55(d)(3) is amended--
       (A) by striking ``paragraph (1)(C)(i)'' and inserting 
     ``paragraph (1)(C)''; and
       (B) by striking ``$165,000 or (ii) $22,500'' and inserting 
     ``the minimum amount of such income (as so determined) for 
     which the exemption amount under paragraph (1)(C) is zero, or 
     (ii) such exemption amount (determined without regard to this 
     paragraph)''.
       (c) Effective Date.--The amendments made by this section 
     title shall apply to taxable years beginning after December 
     31, 2000.

          Subtitle B--Compliance With Congressional Budget Act

     SEC. 711. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.

                      TITLE VIII--OTHER PROVISIONS

                         Subtitle A--In General

     SEC. 801. TIME FOR PAYMENT OF CORPORATE ESTIMATED TAXES.

       Notwithstanding section 6655 of the Internal Revenue Code 
     of 1986--
       (1) 70 percent of the amount of any required installment of 
     corporate estimated tax which is otherwise due in September 
     2001 shall not be due until October 1, 2001; and
       (2) 20 percent of the amount of any required installment of 
     corporate estimated tax which is otherwise due in September 
     2004 shall not be due until October 1, 2004.

     SEC. 802. EXPANSION OF AUTHORITY TO POSTPONE CERTAIN TAX-
                   RELATED DEADLINES BY REASON OF PRESIDENTIALLY 
                   DECLARED DISASTER.

       (a) In General.--Section 7508A (relating to authority to 
     postpone certain tax-related deadlines by reason of 
     presidentially declared disaster) is amended by adding at the 
     end the following new subsection:
       ``(c) Duties of Disaster Response Team.--The Secretary 
     shall establish as a permanent office in the national office 
     of the Internal Revenue Service a disaster response team 
     which, in coordination with the Federal Emergency Management 
     Agency, shall assist taxpayers in clarifying and resolving 
     Federal tax matters associated with or resulting from any 
     Presidentially declared disaster (as so defined). One of the 
     duties of the disaster response team shall be to extend in 
     appropriate cases the 90-day period described in subsection 
     (a) by not more than 30 days.''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of enactment of this Act.

          Subtitle B--Compliance With Congressional Budget Act

     SEC. 811. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.
                                  ____

  SA 651. Mrs. LANDRIEU (for herself and Mr. Craig) submitted an 
amendment intended to be proposed by her to the bill H.R. 1836, to 
provide for reconciliation pursuant to section 104 of the concurrent 
resolution on the budget for fiscal year 2002; which was ordered to lie 
on the table; as follows:

       On page 12, strike line 1 and all that follows through line 
     12.
       On page 18, between lines 14 and 15, insert the following:

     SEC. 202. EXPANSION OF ADOPTION CREDIT AND ADOPTION 
                   ASSISTANCE PROGRAMS.

       (a) In General.--
       (1) Adoption credit.--Section 23(a)(1) (relating to 
     allowance of credit) is amended to read as follows:
       ``(1) In general.--In the case of an individual, there 
     shall be allowed as a credit against the tax imposed by this 
     chapter--
       ``(A) in the case of an adoption of a child other than a 
     child with special needs, the amount of the qualified 
     adoption expenses paid or incurred by the taxpayer, and
       ``(B) in the case of an adoption of a child with special 
     needs, $10,000.''.
       (2) Adoption assistance programs.--Section 137(a) (relating 
     to adoption assistance programs) is amended to read as 
     follows:
       ``(a) In General.--Gross income of an employee does not 
     include amounts paid or expenses incurred by the employer for 
     adoption expenses in connection with the adoption of a child 
     by an employee if such amounts are furnished pursuant to an 
     adoption assistance

[[Page S5162]]

     program. The amount of the exclusion shall be--
       ``(1) in the case of an adoption of a child other than a 
     child with special needs, the amount of the qualified 
     adoption expenses paid or incurred by the taxpayer, and
       ``(2) in the case of an adoption of a child with special 
     needs, $10,000.''.
       (b) Dollar Limitations.--
       (1) Dollar amount of allowed expenses.--
       (A) Adoption expenses.--Section 23(b)(1) (relating to 
     allowance of credit) is amended--
       (i) by striking ``$5,000'' and inserting ``$10,000'',
       (ii) by striking ``($6,000, in the case of a child with 
     special needs)'', and
       (iii) by striking ``subsection (a)'' and inserting 
     ``subsection (a)(1)(A)''.
       (B) Adoption assistance programs.--Section 137(b)(1) 
     (relating to dollar limitations for adoption assistance 
     programs) is amended--
       (i) by striking ``$5,000'' and inserting ``$10,000'', and
       (ii) by striking ``($6,000, in the case of a child with 
     special needs)'', and
       (iii) by striking ``subsection (a)'' and inserting 
     ``subsection (a)(1)''.
       (2) Phase-out limitation.--
       (A) Adoption expenses.--Clause (i) of section 23(b)(2)(A) 
     (relating to income limitation) is amended by striking 
     ``$75,000'' and inserting ``$150,000''.
       (B) Adoption assistance programs.--Section 137(b)(2)(A) 
     (relating to income limitation) is amended by striking 
     ``$75,000'' and inserting ``$150,000''.
       (c) Year Credit Allowed.--Section 23(a)(2) (relating to 
     year credit allowed) is amended by adding at the end the 
     following new flush sentence:

     ``In the case of the adoption of a child with special needs, 
     the credit allowed under paragraph (1) shall be allowed for 
     the taxable year in which the adoption becomes final.''.
       (d) Repeal of Sunset Provisions.--
       (1) Children without special needs.--Paragraph (2) of 
     section 23(d) (relating to definition of eligible child) is 
     amended to read as follows:
       ``(2) Eligible child.--The term `eligible child' means any 
     individual who--
       ``(A) has not attained age 18, or
       ``(B) is physically or mentally incapable of caring for 
     himself.''.
       (2) Adoption Assistance Programs.--Section 137 (relating to 
     adoption assistance programs) is amended by striking 
     subsection (f).
       (e) Adjustment of Dollar and Income Limitations for 
     Inflation.--
       (1) Adoption credit.--Section 23 (relating to adoption 
     expenses) is amended by redesignating subsection (h) as 
     subsection (i) and by inserting after subsection (g) the 
     following new subsection:
       ``(h) Adjustments for Inflation.--In the case of a taxable 
     year beginning after December 31, 2002, each of the dollar 
     amounts in subsection (a)(1)(B) and paragraphs (1) and 
     (2)(A)(i) of subsection (b) shall be increased by an amount 
     equal to--
       ``(1) such dollar amount, multiplied by
       ``(2) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, determined by substituting `calendar year 2001' 
     for `calendar year 1992' in subparagraph (B) thereof.''.
       (2) Adoption assistance programs.--Section 137 (relating to 
     adoption assistance programs), as amended by subsection (d), 
     is amended by adding at the end the following new subsection:
       ``(f) Adjustments for Inflation.--In the case of a taxable 
     year beginning after December 31, 2002, each of the dollar 
     amounts in subsection (a)(2) and paragraphs (1) and (2)(A) of 
     subsection (b) shall be increased by an amount equal to--
       ``(1) such dollar amount, multiplied by
       ``(2) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, determined by substituting `calendar year 2001' 
     for `calendar year 1992' in subparagraph (B) thereof.''.
       (f) Limitation Based on Amount of Tax.--
       (1) In general.--Section 23(c) (relating to carryforwards 
     of unused credit) is amended by striking ``the limitation 
     imposed'' and all that follows through ``1400C)'' and 
     inserting ``the applicable tax limitation''.
       (2) Applicable tax limitation.--Section 23(d) (relating to 
     definitions) is amended by adding at the end the following 
     new paragraph:
       ``(4) Applicable tax limitation.--The term `applicable tax 
     limitation' means the sum of--
       ``(A) the taxpayer's regular tax liability for the taxable 
     year, reduced (but not below zero) by the sum of the credits 
     allowed by sections 21, 22, 24 (other than the amount of the 
     increase under subsection (d) thereof), 25, and 25A, and
       ``(B) the tax imposed by section 55 for such taxable 
     year.''.
       (3) Conforming amendments.--
       (A) Section 26(a) (relating to limitation based on amount 
     of tax) is amended by inserting ``(other than section 23)'' 
     after ``allowed by this subpart''.
       (B) Section 53(b)(1) (relating to minimum tax credit) is 
     amended by inserting ``reduced by the aggregate amount taken 
     into account under section 23(d)(3)(B) for all such prior 
     taxable years,'' after ``1986,''.
       (g) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.
       On page 29, strike line 16 and all that follows through 
     page 32, line 2.
                                  ____

  SA 652. Mr. LEAHY (for himself and Mr. Bennett) submitted an 
amendment intended to be proposed by him to the bill H.R. 1836, to 
provide for reconciliation pursuant to section 104 of the concurrent 
resolution on the budget for fiscal year 2002; which was ordered to lie 
on the table; as follows:

       On page 314, after line 21, add the following:

     SEC. 803. CHARITABLE CONTRIBUTIONS OF CERTAIN ITEMS CREATED 
                   BY THE TAXPAYER.

       (a) In General.--Subsection (e) of section 170 (relating to 
     certain contributions of ordinary income and capital gain 
     property) is amended by adding at the end the following new 
     paragraph:
       ``(7) Special rule for certain contributions of literary, 
     musical, or artistic compositions.--
       ``(A) In general.--In the case of a qualified artistic 
     charitable contribution--
       ``(i) the amount of such contribution shall be the fair 
     market value of the property contributed (determined at the 
     time of such contribution), and
       ``(ii) no reduction in the amount of such contribution 
     shall be made under paragraph (1).
       ``(B) Qualified artistic charitable contribution.--For 
     purposes of this paragraph, the term `qualified artistic 
     charitable contribution' means a charitable contribution of 
     any literary, musical, artistic, or scholarly composition, or 
     similar property, or the copyright thereon (or both), but 
     only if--
       ``(i) such property was created by the personal efforts of 
     the taxpayer making such contribution no less than 18 months 
     prior to such contribution,
       ``(ii) the taxpayer--

       ``(I) has received a qualified appraisal of the fair market 
     value of such property in accordance with the regulations 
     under this section, and
       ``(II) attaches to the taxpayer's income tax return for the 
     taxable year in which such contribution was made a copy of 
     such appraisal,

       ``(iii) the donee is an organization described in 
     subsection (b)(1)(A),
       ``(iv) the use of such property by the donee is related to 
     the purpose or function constituting the basis for the 
     donee's exemption under section 501 (or, in the case of a 
     governmental unit, to any purpose or function described under 
     subsection (c)),
       ``(v) the taxpayer receives from the donee a written 
     statement representing that the donee's use of the property 
     will be in accordance with the provisions of clause (iv), and
       ``(vi) the written appraisal referred to in clause (ii) 
     includes evidence of the extent (if any) to which property 
     created by the personal efforts of the taxpayer and of the 
     same type as the donated property is or has been--

       ``(I) owned, maintained, and displayed by organizations 
     described in subsection (b)(1)(A), and
       ``(II) sold to or exchanged by persons other than the 
     taxpayer, donee, or any related person (as defined in section 
     465(b)(3)(C)).

       ``(C) Maximum dollar limitation; no carryover of increased 
     deduction.--The increase in the deduction under this section 
     by reason of this paragraph for any taxable year--
       ``(i) shall not exceed the artistic adjusted gross income 
     of the taxpayer for such taxable year, and
       ``(ii) shall not be taken into account in determining the 
     amount which may be carried from such taxable year under 
     subsection (d).
       ``(D) Artistic adjusted gross income.--For purposes of this 
     paragraph, the term `artistic adjusted gross income' means 
     that portion of the adjusted gross income of the taxpayer for 
     the taxable year attributable to--
       ``(i) income from the sale or use of property created by 
     the personal efforts of the taxpayer which is of the same 
     type as the donated property, and
       ``(ii) income from teaching, lecturing, performing, or 
     similar activity with respect to property described in clause 
     (i).
       ``(E) Paragraph not to apply to certain contributions.--
     Subparagraph (A) shall not apply to any charitable 
     contribution of any letter, memorandum, or similar property 
     which was written, prepared, or produced by or for an 
     individual while the individual is an officer or employee of 
     any person (including any government agency or 
     instrumentality) unless such letter, memorandum, or similar 
     property is entirely personal.
       ``(F) Copyright treated as separate property for partial 
     interest rule.--In the case of a qualified artistic 
     charitable contribution, the tangible literary, musical, 
     artistic, or scholarly composition, or similar property and 
     the copyright on such work shall be treated as separate 
     properties for purposes of this paragraph and subsection 
     (f)(3).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to contributions made after the date of the 
     enactment of this Act in taxable years ending after such 
     date.
                                  ____

  SA 653. Mr. KERRY submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the

[[Page S5163]]

budget for fiscal year 2002; which was ordered to lie on the table; as 
follows:

       On page 9, between lines 11 and 12, strike the table and 
     insert the following:


------------------------------------------------------------------------
                                         The corresponding percentages
                 ``In the case of        shall be substituted for  the
                   taxable years            following percentages:
                 beginning during    -----------------------------------
                  calendar year:        28%      31%      36%     39.6%
------------------------------------------------------------------------
              2002, 2003, and 2004..    27%      30%      35%      39%
              2005 and 2006.........    26%      29%      34%     38.6%
              2007, 2008, and 2009..    25%      28%      33%     37.6%
              2010 and thereafter...    25%      28%      33%      36%
------------------------------------------------------------------------

       Strike section 701 and insert:

     SEC. 701. ALTERNATIVE MINIMUM TAX EXEMPTION FOR CERTAIN 
                   INDIVIDUAL TAXPAYERS.

       (a) Exemption.--Section 55 (relating to imposition of 
     alternative minimum tax) is amended by adding at the end the 
     following:
       ``(f) Exemption for Certain Individuals.--
       ``(1) Reduction in tentative minimum tax.--
       ``(A) In general.--In the case of an individual, the 
     tentative minimum tax for any taxable year (determined 
     without regard to this subsection) shall be reduced by the 
     applicable percentage.
       ``(B) Applicable percentage.--For purposes of subparagraph 
     (A), the applicable percentage with respect to a taxpayer is 
     100 percent reduced (but not below zero) by 10 percentage 
     points for each $1,000 (or fraction thereof) by which the 
     taxpayer's adjusted gross income for the taxable year exceeds 
     $100,000.
       ``(2) Prospective application if subsection ceases to 
     apply.--If paragraph (1) applies to a taxpayer for any 
     taxable year and then ceases to apply to a subsequent taxable 
     year, the rules of paragraphs (2) through (5) of subsection 
     (e) shall apply to the taxpayer to the extent such rules are 
     applicable to individuals.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.
                                  ____

  SA 654. Mr. CONRAD (for himself and Mr. Kennedy) proposed an 
amendment to the bill H.R. 1836, to provide for reconciliation pursuant 
to section 104 of the concurrent resolution on the budget for fiscal 
year 2002; as follows:

       On page 9, strike all after line 11 and before line 15 and 
     insert the following:


------------------------------------------------------------------------
                                         The corresponding percentages
                 ``In the case of        shall be substituted for  the
                   taxable years            following percentages:
                 beginning during    -----------------------------------
                  calendar year:        28%      31%      36%     39.6%
------------------------------------------------------------------------
              2002, 2003, and 2004..    27%      30%      36%     39.6%
              2005 and 2006.........    26%      29%      36%     39.6%
              2007 and 2008.........    25%      28%      36%     39.6%
              2009..................    25%      28%      35%      38%
              2010 and thereafter...    25%      28%      33%      36%
------------------------------------------------------------------------

       ``(3) Adjustment of tables.--The Secretary shall adjust the 
     tables prescribed under subsection (f) to carry out this 
     subsection, and in any fiscal year in which such adjustment 
     results in an on-budget surplus smaller than the medicare HI 
     trust fund surplus, the Secretary shall further adjust such 
     tables to ensure that in such fiscal year the on-budget 
     surplus is not less than such account.''.

       Beginning on page 19, strike line 8 and all that follows 
     through page 20, line 12, and insert the following:
       (1) by striking ``$5,000'' in subparagraph (A) and 
     inserting ``twice the dollar amount in effect under 
     subparagraph (C) for the taxable year'';
       (2) by adding ``or'' at the end of subparagraph (B);
       (3) by striking ``in the case of'' and all that follows in 
     subparagraph (C) and inserting ``in any other case.''; and
       (4) by striking subparagraph (D).
       (b) Technical Amendments.--
       (1) Subparagraph (B) of section 1(f)(6), as amended by 
     section 103(b), is amended by striking ``(other than with'' 
     and all that follows through ``shall be applied'' and 
     inserting ``(other than with respect to sections 63(c)(4) and 
     151(d)(3)(A)) shall be applied''.
       (2) Paragraph (4) of section 63(c) is amended by adding at 
     the end the following flush sentence:
     ``The preceding sentence shall not apply to the amount 
     referred to in paragraph (2)(A).''.
       (c) Effective Date.--The amendments made by

       Beginning on page 20, strike line 21 and all that follows 
     through page 22, line 4, and insert the following:
       ``(8) Elimination of marriage penalty in 15-percent 
     bracket.--
       ``(A) In general.--With respect to taxable years beginning 
     after December 31, 2001, in prescribing the tables under 
     paragraph (1)--
       ``(i) the maximum taxable income in the 15-percent rate 
     bracket in the table contained in subsection (a) (and the 
     minimum taxable income in the next higher taxable income 
     bracket in such table) shall be twice the maximum taxable 
     income in the 15-percent rate bracket in the table contained 
     in subsection (c) (after any other adjustment under this 
     subsection), and
       ``(ii) the comparable taxable income amounts in the table 
     contained in subsection (d) shall be \1/2\ of the amounts 
     determined under clause (i).
       ``(B) Rounding.--If any amount determined under 
     subparagraph (A)(i) is not a multiple of $50, such amount 
     shall be rounded to the next lowest multiple of $50.''.
                                  ____

  SA 655. Mr. SANTORUM submitted an amendment intended to be proposed 
by him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:
       At the end add the following:

         TITLE ____--SAVINGS OPPORTUNITY AND CHARITABLE GIVING

     SEC. ____01. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This title may be cited as the ``Savings 
     Opportunity and Charitable Giving Act of 2001''.
       (b) Table of Contents.--The table of contents is as 
     follows:

         TITLE ____--SAVINGS OPPORTUNITY AND CHARITABLE GIVING

Sec. ____01. Short title; table of contents.

              Subtitle A--Individual Development Accounts

Sec. ____11. Findings and purposes.
Sec. ____12. Definitions.
Sec. ____13. Structure and administration of qualified individual 
              development account programs.
Sec. ____14. Procedures for opening and maintaining an Individual 
              Development Account and qualifying for matching funds.
Sec. ____15. Deposits by qualified individual development account 
              programs.
Sec. ____16. Withdrawal procedures.
Sec. ____17. Certification and termination of qualified individual 
              development account programs.
Sec. ____18. Reporting, monitoring, and evaluation.
Sec. ____19. Authorization of appropriations.
Sec. ____20. Account funds disregarded for purposes of certain means-
              tested Federal programs.
Sec. ____21. Matching funds for Individual Development Accounts 
              provided through a tax credit for qualified financial 
              institutions.

            Subtitle B--Charitable Giving Incentives Package

Sec. ____31. Deduction for portion of charitable contributions to be 
              allowed to individuals who do not itemize deductions.
Sec. ____32. Tax-free distributions from individual retirement accounts 
              for charitable purposes.
Sec. ____33. Charitable deduction for contributions of food inventory.

          Subtitle C--Compliance With Congressional Budget Act

Sec. ____41. Sunset of provisions of title.
Sec. ____42. Restoration of provisions of title.

              Subtitle A--Individual Development Accounts

     SEC. ____11. FINDINGS AND PURPOSES.

       (a) Findings.--Congress makes the following findings:
       (1) For the vast majority of households the pathway to the 
     economic mainstream and financial security is not through 
     spending and consumption, but through saving, investing, and 
     the accumulation of assets. Assets promote economic household 
     stability, decrease economic strain on households, promote 
     educational attainment, decrease marital dissolution, 
     decrease the risk of intergenerational poverty transmission, 
     increase health and satisfaction among adults, increase 
     property values, decrease residential mobility, increase 
     property maintenance, and increase local civic involvement.
       (2) One-third of all Americans have no assets available for 
     investment and another 20 percent have only negligible 
     assets. Assets are distributed far more unevenly than income. 
     Whereas the top 20 percent of American households earn over 
     43 percent of all income, such households hold over 68 
     percent of net worth and almost 87 percent of net financial 
     assets. Moreover, asset poverty and wealth gaps are even 
     higher among minority households by a ratio of more than 11 
     to 1. Up to 20 percent of all households are unbanked and do 
     not have access to the basic financial tools that make asset 
     accumulation possible.
       (3) Public policy has contributed to large asset gaps in 
     the United States. Traditional public assistance programs 
     based on income and consumption have rarely been successful 
     in supporting the transition to economic self-sufficiency. 
     Tax policy, through $288,000,000,000 in annual tax 
     incentives, has helped lay the foundation for the great 
     American middle class, but only for some citizens. Fully 90 
     percent of such current tax benefits accrue to households 
     earning more than $50,000 per year, roughly half of all 
     American households. Lacking an income tax liability, low-
     income working families cannot take advantage of asset 
     development incentives. Moreover, low-income families seeking 
     public assistance must first spend down their assets and face 
     severe asset limits once on assistance.
       (4) Individual Development Accounts, or IDAs, have proven 
     to be successful in helping low-income working families save 
     and accumulate assets. In one national demonstration project, 
     2,378 low-income families saved

[[Page S5164]]

     a total of $834,442 in one year which generated another 
     $1,644,510 in private matching funds. Thus far, IDA savings 
     have been used to purchase long-term, high-return assets, 
     including homes, post-secondary education and training, and 
     small businesses. Presently, about 10,000 IDAs are in 
     existence in the United States, held by a very small fraction 
     of the at least 70 million Americans who are asset poor.
       (5) Therefore, the Federal Government should support, 
     through the tax code, a significant expansion of Individual 
     Development Accounts so that millions of low-income working 
     families across the country can save, accumulate assets, and 
     move their lives forward, and thus make positive 
     contributions to the economic and social well-being of the 
     United States, as well as to its future.
       (b) Purposes.--The purposes of this subtitle are to provide 
     for the establishment of individual development account 
     programs that will--
       (1) provide individuals and families with limited means an 
     opportunity to accumulate assets and to enter the financial 
     mainstream;
       (2) promote education, homeownership, and the development 
     of small businesses;
       (3) stabilize families and build communities; and
       (4) support continued United States economic expansion.

     SEC. ____12. DEFINITIONS.

       As used in this subtitle:
       (1) Eligible individual.--
       (A) In general.--The term ``eligible individual'' means an 
     individual who--
       (i) has attained the age of 18 years but not the age of 61;
       (ii) is a citizen or legal resident of the United States;
       (iii) is not a student (as defined in section 151(c)(4)); 
     and
       (iv) is a taxpayer the adjusted gross income of whom for 
     the preceding taxable year does not exceed--

       (I) $20,000, in the case of a taxpayer described in section 
     1(c) or 1(d) of the Internal Revenue Code of 1986;
       (II) $25,000, in the case of a taxpayer described in 
     section 1(b) of such Code; and
       (III) $40,000, in the case of a taxpayer described in 
     section 1(a) of such Code.

       (B) Inflation adjustment.--
       (i) In general.--In the case of any taxable year beginning 
     after 2002, each dollar amount referred to in subparagraph 
     (A)(iv) shall be increased by an amount equal to--

       (I) such dollar amount, multiplied by
       (II) the cost-of-living adjustment determined under section 
     (1)(f)(3) of the Internal Revenue Code of 1986 for the 
     calendar year in which the taxable year begins, by 
     substituting ``2001'' for ``1992''.

       (ii) Rounding.--If any amount as adjusted under clause (i) 
     is not a multiple of $50, such amount shall be rounded to the 
     nearest multiple of $50.
       (2) Individual development account.--The term ``Individual 
     Development Account'' means an account established for an 
     eligible individual as part of a qualified individual 
     development account program, but only if the written 
     governing instrument creating the account meets the following 
     requirements:
       (A) The sole owner of the account is the individual for 
     whom the account was established.
       (B) No contribution will be accepted unless it is in cash.
       (C) The holder of the account is a qualified financial 
     institution.
       (D) The assets of the account will not be commingled with 
     other property except in a common trust fund or common 
     investment fund.
       (E) Except as provided in section ____16(b), any amount in 
     the account may be paid out only for the purpose of paying 
     the qualified expenses of the account owner.
       (3) Parallel account.--The term ``parallel account'' means 
     a separate, parallel individual or pooled account for all 
     matching funds and earnings dedicated to an Individual 
     Development Account owner as part of a qualified individual 
     development account program, the sole owner of which is a 
     qualified financial institution, a qualified nonprofit 
     organization, or an Indian tribe.
       (4) Qualified financial institution.--
       (A) In general.--The term ``qualified financial 
     institution'' means any person authorized to be a trustee of 
     any individual retirement account under section 408(a)(2) of 
     the Internal Revenue Code of 1986.
       (B) Rule of construction.--Nothing in this paragraph shall 
     be construed as preventing a person described in subparagraph 
     (A) from collaborating with 1 or more contractual affiliates, 
     qualified nonprofit organizations, or Indian tribes to carry 
     out an individual development account program established 
     under section ____13.
       (5) Qualified nonprofit organization.--The term ``qualified 
     nonprofit organization'' means--
       (A) any organization described in section 501(c)(3) of the 
     Internal Revenue Code of 1986 and exempt from taxation under 
     section 501(a) of such Code;
       (B) any community development financial institution 
     certified by the Community Development Financial Institution 
     Fund; or
       (C) any credit union chartered under Federal or State law.
       (6) Indian tribe.--The term ``Indian tribe'' means any 
     Indian tribe as defined in section 4(12) of the Native 
     American Housing Assistance and Self-Determination Act of 
     1996 (25 U.S.C. 4103(12), and includes any tribal subsidiary, 
     subdivision, or other wholly owned tribal entity.
       (7) Qualified individual development account program.--The 
     term ``qualified individual development account program'' 
     means a program established under section ____13 which--
       (A) Individual Development Accounts and parallel accounts 
     are held by a qualified financial institution; and
       (B) additional activities determined by the Secretary as 
     necessary to responsibly develop and administer accounts, 
     including recruiting, providing financial education and other 
     training to account owners, and regular program monitoring, 
     are carried out by the qualified financial institution, a 
     qualified nonprofit organization, or an Indian tribe.
       (8) Qualified expense distribution.--
       (A) In general.--The term ``qualified expense 
     distribution'' means any amount paid (including through 
     electronic payments) or distributed out of an Individual 
     Development Account and a parallel account established for an 
     eligible individual if such amount--
       (i) is used exclusively to pay the qualified expenses of 
     the Individual Development Account owner or such owner's 
     spouse or dependents, as approved by the qualified financial 
     institution, qualified nonprofit organization, or Indian 
     tribe;
       (ii) is paid by the qualified financial institution, 
     qualified nonprofit organization, or Indian tribe--

       (I) except as otherwise provided in this clause, directly 
     to the unrelated third party to whom the amount is due;
       (II) in the case of distributions for working capital under 
     a qualified business plan (as defined in subparagraph 
     (B)(iv)(IV)), directly to the account owner;
       (III) in the case of any qualified rollover, directly to 
     another Individual Development Account and parallel account; 
     or
       (IV) in the case of a qualified final distribution, 
     directly to the spouse, dependent, or other named beneficiary 
     of the deceased account owner; and

       (iii) is paid after the account owner has completed a 
     financial education course as required under section 
     ____14(b).
       (B) Qualified expenses.--
       (i) In general.--The term ``qualified expenses'' means any 
     of the following:

       (I) Qualified higher education expenses.
       (II) Qualified first-time homebuyer costs.
       (III) Qualified business capitalization or expansion costs.
       (IV) Qualified rollovers.
       (V) Qualified final distribution.

       (ii) Qualified higher education expenses.--

       (I) In general.--The term ``qualified higher education 
     expenses'' has the meaning given such term by section 
     72(t)(7) of the Internal Revenue Code of 1986, determined by 
     treating postsecondary vocational educational schools as 
     eligible educational institutions.
       (II) Postsecondary vocational education school.--The term 
     ``postsecondary vocational educational school'' means an area 
     vocational education school (as defined in subparagraph (C) 
     or (D) of section 521(4) of the Carl D. Perkins Vocational 
     and Applied Technology Education Act (20 U.S.C. 2471(4))) 
     which is in any State (as defined in section 521(33) of such 
     Act), as such sections are in effect on the date of the 
     enactment of this Act.
       (III) Coordination with other benefits.--The amount of 
     qualified higher education expenses for any taxable year 
     shall be reduced as provided in section 25A(g)(2) of such 
     Code and may not be taken into account for purposes of 
     determining qualified higher education expenses under section 
     135 or 530 of the Internal Revenue Code of 1986.

       (iii) Qualified first-time homebuyer costs.--The term 
     ``qualified first-time homebuyer costs'' means qualified 
     acquisition costs (as defined in section 72(t)(8) of such 
     Code without regard to subparagraph (B) thereof) with respect 
     to a principal residence (within the meaning of section 121 
     of such Code) for a qualified first-time homebuyer (as 
     defined in section 72(t)(8) of such Code).
       (iv) Qualified business capitalization or expansion 
     costs.--

       (I) In general.--The term ``qualified business 
     capitalization or expansion costs'' means qualified 
     expenditures for the capitalization or expansion of a 
     qualified business pursuant to a qualified business plan.
       (II) Qualified expenditures.--The term ``qualified 
     expenditures'' means expenditures included in a qualified 
     business plan, including capital, plant, equipment, working 
     capital, inventory expenses, attorney and accounting fees, 
     and other costs normally associated with starting or 
     expanding a business.
       (III) Qualified business.--The term ``qualified business'' 
     means any business that does not contravene any law.
       (IV) Qualified business plan.--The term ``qualified 
     business plan'' means a business plan which has been approved 
     by the qualified financial institution, qualified nonprofit 
     organization, or Indian tribe and which meets such 
     requirements as the Secretary may specify.

       (v) Qualified rollovers.--The term ``qualified rollover'' 
     means the complete distribution of the amounts in an 
     Individual Development Account and parallel account to 
     another Individual Development Account and parallel account 
     established in another

[[Page S5165]]

     qualified financial institution, qualified nonprofit 
     organization, or Indian tribe for the benefit of the account 
     owner.
       (vi) Qualified final distribution.--The term ``qualified 
     final distribution'' means, in the case of a deceased account 
     owner, the complete distribution of the amounts in an 
     Individual Development Account and parallel account directly 
     to the spouse, any dependent, or other named beneficiary of 
     the deceased.
       (9) Secretary.--The term ``Secretary'' means the Secretary 
     of the Treasury.

     SEC. ____13. STRUCTURE AND ADMINISTRATION OF QUALIFIED 
                   INDIVIDUAL DEVELOPMENT ACCOUNT PROGRAMS.

       (a) Establishment of Qualified Individual Development 
     Account Programs.--Any qualified financial institution, 
     qualified nonprofit organization, or Indian tribe may 
     establish 1 or more qualified individual development account 
     programs which meet the requirements of this subtitle.
       (b) Basic Program Structure.--
       (1) In general.--All qualified individual development 
     account programs shall consist of the following 2 components:
       (A) An Individual Development Account to which an eligible 
     individual may contribute cash in accordance with section 
     ____14.
       (B) A parallel account to which all matching funds shall be 
     deposited in accordance with section ____15.
       (2) Tailored ida programs.--A qualified financial 
     institution, a qualified nonprofit organization, or an Indian 
     tribe may tailor its qualified individual development account 
     program to allow matching funds to be spent on 1 or more of 
     the categories of qualified expenses.
       (c) Tax Treatment of Parallel Accounts.--Any account 
     described in subparagraph (B) of subsection (b)(1) is exempt 
     from taxation under the Internal Revenue Code of 1986.

     SEC. ____14. PROCEDURES FOR OPENING AND MAINTAINING AN 
                   INDIVIDUAL DEVELOPMENT ACCOUNT AND QUALIFYING 
                   FOR MATCHING FUNDS.

       (a) Opening an Account.--An eligible individual may open an 
     Individual Development Account with a qualified financial 
     institution, a qualified nonprofit organization, or an Indian 
     tribe upon certification that such individual maintains no 
     other Individual Development Account (other than an 
     Individual Development Account to be terminated by a 
     qualified rollover).
       (b) Required Completion of Financial Education Course.--
       (1) In general.--Before becoming eligible to withdraw 
     matching funds to pay for qualified expenses, owners of 
     Individual Development Accounts must complete a financial 
     education course offered by a qualified financial 
     institution, a qualified nonprofit organization, an Indian 
     tribe, or a government entity.
       (2) Standard and applicability of course.--The Secretary, 
     in consultation with representatives of qualified individual 
     development account programs and financial educators, shall 
     establish minimum quality standards for the contents of 
     financial education courses and providers of such courses 
     offered under paragraph (1) and a protocol to exempt 
     individuals from the requirement under paragraph (1) because 
     of hardship or lack of need.
       (c) Proof of Status as an Eligible Individual.--Federal 
     income tax forms from the preceding taxable year (or in the 
     absence of such forms, such documentation as specified by the 
     Secretary proving the eligible individual's adjusted gross 
     income and the status of the individual as an eligible 
     individual) shall be presented to the qualified financial 
     institution, qualified nonprofit organization, or Indian 
     tribe at the time of the establishment of the Individual 
     Development Account and in any taxable year in which 
     contributions are made to the Account to qualify for matching 
     funds under section ____15(b)(1)(A).
       (d) Direct Deposits.--The Secretary may, under regulations, 
     provide for the direct deposit of any portion (not less than 
     $1) of any overpayment of Federal tax of an individual as a 
     contribution to the Individual Development Account of such 
     individual.

     SEC. ____15. DEPOSITS BY QUALIFIED INDIVIDUAL DEVELOPMENT 
                   ACCOUNT PROGRAMS.

       (a) Parallel Accounts.--The qualified financial 
     institution, qualified nonprofit organization, or Indian 
     tribe shall deposit all matching funds for each Individual 
     Development Account into a parallel account at a qualified 
     financial institution, a qualified nonprofit organization, or 
     an Indian tribe.
       (b) Regular Deposits of Matching Funds.--
       (1) In general.--Subject to paragraph (2), the qualified 
     financial institution, qualified nonprofit organization, or 
     Indian tribe shall not less than quarterly (or upon a proper 
     withdrawal request under section ____16, if necessary) 
     deposit into the parallel account with respect to each 
     eligible individual the following:
       (A) A dollar-for-dollar match for the first $500 
     contributed by the eligible individual into an Individual 
     Development Account with respect to any taxable year.
       (B) Any matching funds provided by State, local, or private 
     sources in accordance to the matching ratio set by those 
     sources.
       (2) Inflation adjustment.--
       (A) In general.--In the case of any taxable year beginning 
     after 2002, the dollar amount referred to in paragraph (1)(A) 
     shall be increased by an amount equal to--
       (i) such dollar amount, multiplied by
       (ii) the cost-of-living adjustment determined under section 
     (1)(f)(3) of the Internal Revenue Code of 1986 for the 
     calendar year in which the taxable year begins, by 
     substituting ``2001'' for ``1992''.
       (B) Rounding.--If any amount as adjusted under subparagraph 
     (A) is not a multiple of $20, such amount shall be rounded to 
     the nearest multiple of $20.
       (3) Cross reference.--

  For allowance of tax credit for Individual Development Account 
subsidies, including matching funds, see section 30B of the Internal 
Revenue Code of 1986.
       (c) Deposit of Matching Funds Into Individual Development 
     Account of Individual Who Has Attained Age 61.--In the case 
     of an Individual Development Account owner who attains the 
     age of 61, the qualified financial institution, qualified 
     nonprofit organization, or Indian tribe which holds the 
     parallel account for such individual shall deposit the funds 
     in such parallel account into the Individual Development 
     Account of such individual on the first day of the succeeding 
     taxable year of such individual.
       (d) Uniform Accounting Regulations.--To ensure proper 
     recordkeeping and determination of the tax credit under 
     section 30B of the Internal Revenue Code of 1986, the 
     Secretary shall prescribe regulations with respect to 
     accounting for matching funds in the parallel accounts.
       (e) Regular Reporting of Accounts.--Any qualified financial 
     institution, qualified nonprofit organization, or Indian 
     tribe shall report the balances in any Individual Development 
     Account and parallel account of an individual on not less 
     than an annual basis to such individual.

     SEC. ____16. WITHDRAWAL PROCEDURES.

       (a) Withdrawals for Qualified Expenses.--To withdraw money 
     from an individual's Individual Development Account to pay 
     qualified expenses of such individual or such individual's 
     spouse or dependents, the qualified financial institution, 
     qualified nonprofit organization, or Indian tribe shall 
     directly transfer such funds from the Individual Development 
     Account, and, if applicable, from the parallel account 
     electronically to the distributees described in section 
     ____11(8)(A)(ii). If the distributee is not equipped to 
     receive funds electronically, the qualified financial 
     institution, qualified nonprofit organization, or Indian 
     tribe may issue such funds by paper check to the distributee.
       (b) Withdrawals for Nonqualified Expenses.--An Individual 
     Development Account owner may unilaterally withdraw any 
     amount of funds from the Individual Development Account for 
     purposes other than to pay qualified expenses, but shall 
     forfeit a proportionate amount of matching funds from the 
     individual's parallel account by doing so, unless such 
     withdrawn funds are recontributed to such Account by 
     September 30 following the withdrawal.
       (c) Withdrawals From Accounts of Noneligible Individuals.--
     If the individual for whose benefit an Individual Development 
     Account is established ceases to be an eligible individual, 
     such account shall remain an Individual Development Account, 
     but such individual shall not be eligible for any further 
     matching funds under section ____15(b)(1)(A) during the 
     period--
       (1) beginning on the first day of the taxable year of such 
     individual following the beginning of such ineligibility, and
       (2) ending on the last day of the taxable year of such 
     individual in which such ineligibility ceases.
       (d) Tax Treatment of Matching Funds.--Any amount withdrawn 
     from a parallel account shall not be includible in an 
     eligible individual's gross income.
       (e) Withdrawal Liability Rests Only With Eligible 
     Individuals.--Nothing in this subtitle may be construed to 
     impose liability on a qualified financial institution, a 
     qualified nonprofit organization, or an Indian tribe for non-
     compliance with the requirements of this subtitle related to 
     withdrawals from Individual Development Accounts.

     SEC. ____17. CERTIFICATION AND TERMINATION OF QUALIFIED 
                   INDIVIDUAL DEVELOPMENT ACCOUNT PROGRAMS.

       (a) Certification Procedures.--Upon establishing a 
     qualified individual development account program under 
     section ____13, a qualified financial institution, a 
     qualified nonprofit organization, or an Indian tribe shall 
     certify to the Secretary on forms prescribed by the Secretary 
     and accompanied by any documentation required by the 
     Secretary, that--
       (1) the accounts described in subparagraphs (A) and (B) of 
     section ____13(b)(1) are operating pursuant to all the 
     provisions of this subtitle; and
       (2) the qualified financial institution, qualified 
     nonprofit organization, or Indian tribe agrees to implement 
     an information system necessary to monitor the cost and 
     outcomes of the qualified individual development account 
     program.
       (b) Authority To Terminate Qualified IDA Program.--If the 
     Secretary determines that a qualified financial institution, 
     a qualified nonprofit organization, or an Indian tribe under 
     this subtitle is not operating a qualified individual 
     development account program in accordance with the 
     requirements of this subtitle (and has not implemented any 
     corrective recommendations directed by the Secretary), the 
     Secretary shall terminate such institution's, nonprofit 
     organization's, or Indian tribe's authority to

[[Page S5166]]

     conduct the program. If the Secretary is unable to identify a 
     qualified financial institution, a qualified nonprofit 
     organization, or an Indian tribe to assume the authority to 
     conduct such program, then any funds in a parallel account 
     established for the benefit of any individual under such 
     program shall be deposited into the Individual Development 
     Account of such individual as of the first day of such 
     termination.

     SEC. ____18. REPORTING, MONITORING, AND EVALUATION.

       (a) Responsibilities of Qualified Financial Institutions, 
     Qualified Nonprofit Organizations, and Indian Tribes.--Each 
     qualified financial institution, qualified nonprofit 
     organization, or Indian tribe that operates a qualified 
     individual development account program under section ____13 
     shall report annually to the Secretary within 90 days after 
     the end of each calendar year on--
       (1) the number of eligible individuals making contributions 
     into Individual Development Accounts;
       (2) the amounts contributed into Individual Development 
     Accounts and deposited into parallel accounts for matching 
     funds;
       (3) the amounts withdrawn from Individual Development 
     Accounts and parallel accounts, and the purposes for which 
     such amounts were withdrawn;
       (4) the balances remaining in Individual Development 
     Accounts and parallel accounts; and
       (5) such other information needed to help the Secretary 
     monitor the cost and outcomes of the qualified individual 
     development account program (provided in a non-individually-
     identifiable manner).
       (b) Responsibilities of the Secretary.--
       (1) Monitoring protocol.--Not later than 12 months after 
     the date of the enactment of this Act, the Secretary shall 
     develop and implement a protocol and process to monitor the 
     cost and outcomes of the qualified individual development 
     account programs established under section ____13.
       (2) Annual reports.--In each year after the date of the 
     enactment of this Act, the Secretary shall submit a progress 
     report to Congress on the status of such qualified individual 
     development account programs. Such report shall include from 
     a representative sample of qualified individual development 
     account programs information on--
       (A) the characteristics of participants, including age, 
     gender, race or ethnicity, marital status, number of 
     children, employment status, and monthly income;
       (B) deposits, withdrawals, balances, uses of Individual 
     Development Accounts, and participant characteristics;
       (C) the characteristics of qualified individual development 
     account programs, including match rate, economic education 
     requirements, permissible uses of accounts, staffing of 
     programs in full time employees, and the total costs of 
     programs; and
       (D) process information on program implementation and 
     administration, especially on problems encountered and how 
     problems were solved.

     SEC. ____19. AUTHORIZATION OF APPROPRIATIONS.

       There is authorized to be appropriated to the Secretary 
     $1,000,000 for fiscal year 2002 and for each fiscal year 
     through 2008, for the purposes of implementing this subtitle, 
     including the reporting, monitoring, and evaluation required 
     under section ____18, to remain available until expended.

     SEC. ____20. ACCOUNT FUNDS DISREGARDED FOR PURPOSES OF 
                   CERTAIN MEANS-TESTED FEDERAL PROGRAMS.

       Notwithstanding any other provision of Federal law that 
     requires consideration of 1 or more financial circumstances 
     of an individual, for the purposes of determining eligibility 
     to receive, or the amount of, any assistance or benefit 
     authorized by such provision to be provided to or for the 
     benefit of such individual, an amount equal to the sum of--
       (1) all amounts (including earnings thereon) in any 
     Individual Development Account; plus
       (2) the matching deposits made on behalf of such individual 
     (including earnings thereon) in any parallel account,

     shall be disregarded for such purposes.

     SEC. ____21. MATCHING FUNDS FOR INDIVIDUAL DEVELOPMENT 
                   ACCOUNTS PROVIDED THROUGH A TAX CREDIT FOR 
                   QUALIFIED FINANCIAL INSTITUTIONS.

       (a) In General.--Subpart B of part IV of subchapter A of 
     chapter 1 (relating to other credits) is amended by inserting 
     after section 30A the following new section:

     ``SEC. 30B. INDIVIDUAL DEVELOPMENT ACCOUNT INVESTMENT CREDIT 
                   FOR QUALIFIED FINANCIAL INSTITUTIONS.

       ``(a) Determination of Amount.--There shall be allowed as a 
     credit against the applicable tax for the taxable year an 
     amount equal to the individual development account investment 
     provided by an eligible entity during the taxable year under 
     an individual development account program established under 
     section ____13 of the Savings Opportunity and Charitable 
     Giving Act of 2001.
       ``(b) Applicable Tax.--For the purposes of this section, 
     the term `applicable tax' means the excess (if any) of--
       ``(1) the tax imposed under this chapter (other than the 
     taxes imposed under the provisions described in subparagraphs 
     (C) through (Q) of section 26(b)(2)), over
       ``(2) the credits allowable under subpart B (other than 
     this section) and subpart D of this part.
       ``(c) Individual Development Account Investment.--
       ``(1) In general.--For purposes of this section, the term 
     `individual development account investment' means, with 
     respect to an individual development account program of a 
     qualified financial institution in any taxable year, an 
     amount equal to the sum of--
       ``(A) the aggregate amount of dollar-for-dollar matches 
     under such program under section ____15(b)(1)(A) of the 
     Savings Opportunity and Charitable Giving Act of 2001 for 
     such taxable year, plus
       ``(B) an amount equal to the sum of--
       ``(i) with respect to each Individual Development Account 
     opened during such taxable year, $100, plus
       ``(ii) with respect to each Individual Development Account 
     maintained during such taxable year, $30.
       ``(2) Inflation adjustment.--
       ``(A) In general.--In the case of any taxable year 
     beginning after 2002, each dollar amount referred to in 
     paragraph (1)(B) shall be increased by an amount equal to--
       ``(i) such dollar amount, multiplied by
       ``(ii) the cost-of-living adjustment determined under 
     section (1)(f)(3) for the calendar year in which the taxable 
     year begins, by substituting `2001' for `1992'.
       ``(B) Rounding.--If any amount as adjusted under 
     subparagraph (A) is not a multiple of $5, such amount shall 
     be rounded to the nearest multiple of $5.
       ``(d) Eligible Entity.--For purposes of this section, the 
     term `eligible entity' means a qualified financial 
     institution, or 1 or more contractual affiliates of such an 
     institution as defined by the Secretary in regulations.
       ``(e) Other Definitions.--For purposes of this section, any 
     term used in this section and also in the Savings Opportunity 
     and Charitable Giving Act of 2001 Act shall have the meaning 
     given such term by such Act.
       ``(f) Denial of Double Benefit.--No deduction or credit 
     (other than under this section) shall be allowed under this 
     chapter with respect to any expense which is taken into 
     account under subsection (c)(1)(A) in determining the credit 
     under this section.
       ``(g) Regulations.--The Secretary may prescribe such 
     regulations as may be necessary or appropriate to carry out 
     this section, including regulations providing for a recapture 
     of the credit allowed under this section (notwithstanding any 
     termination date described in subsection (h)) in cases where 
     there is a forfeiture under section ____16(b) of the Savings 
     Opportunity and Charitable Giving Act of 2001 Act in a 
     subsequent taxable year of any amount which was taken into 
     account in determining the amount of such credit.
       ``(h) Application of Section.--This section shall apply to 
     any expenditure made in any taxable year beginning after 
     December 31, 2001, and before January 1, 2009, with respect 
     to any Individual Development Account opened before January 
     1, 2007.''.
       (b) Conforming Amendment.--The table of sections for 
     subpart B of part IV of subchapter A of chapter 1 is amended 
     by inserting after the item relating to section 30A the 
     following new item:

``Sec. 30B. Individual development account investment credit for 
              qualified financial institutions.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

            Subtitle B--Charitable Giving Incentives Package

     SEC. ____31. DEDUCTION FOR PORTION OF CHARITABLE 
                   CONTRIBUTIONS TO BE ALLOWED TO INDIVIDUALS WHO 
                   DO NOT ITEMIZE DEDUCTIONS.

       (a) In General.--Section 170 (relating to charitable, etc., 
     contributions and gifts) is amended by redesignating 
     subsection (m) as subsection (n) and by inserting after 
     subsection (l) the following new subsection:
       ``(m) Deduction for Individuals Not Itemizing Deductions.--
       ``(1) In general.--In the case of an individual who does 
     not itemize his deductions for the taxable year, there shall 
     be taken into account as a direct charitable deduction under 
     section 63 an amount equal to the applicable percentage of 
     the excess of the amount allowable under subsection (a) for 
     the taxable year over the applicable amount.
       ``(2) Applicable percentage.--For purposes of this 
     subsection, the applicable percentage shall be determined 
     under the following table:

``In the case of taxable years beginning The applicable percentage is--
  2002..........................................................50 ....

  2003..........................................................60 ....

  2004..........................................................70 ....

  2005..........................................................80 ....

  2006..........................................................90 ....

  2007 and thereafter..........................................100.....

       ``(3) Applicable amount.--For purposes of this subsection, 
     the applicable amount is equal--
       ``(A) $500 in the case of an individual, and
       ``(B) $1,000 in the case of a joint return.''.
       (b) Direct Charitable Deduction.--
       (1) In general.--Subsection (b) of section 63 is amended by 
     striking ``and'' at the end of paragraph (1), by striking the 
     period at the end of paragraph (2) and inserting ``, and'', 
     and by adding at the end the following new paragraph:
       ``(3) the direct charitable deduction.''.
       (2) Definition.--Section 63 is amended by redesignating 
     subsection (g) as subsection (h) and by inserting after 
     subsection (f) the following new subsection:

[[Page S5167]]

       ``(g) Direct Charitable Deduction.--For purposes of this 
     section, the term `direct charitable deduction' means that 
     portion of the amount allowable under section 170(a) which is 
     taken as a direct charitable deduction for the taxable year 
     under section 170(m).''.
       (3) Conforming amendment.--Subsection (d) of section 63 is 
     amended by striking ``and'' at the end of paragraph (1), by 
     striking the period at the end of paragraph (2) and inserting 
     ``, and'', and by adding at the end the following new 
     paragraph:
       ``(3) the direct charitable deduction.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

     SEC. ____32. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL 
                   RETIREMENT ACCOUNTS FOR CHARITABLE PURPOSES.

       (a) In General.--Subsection (d) of section 408 (relating to 
     individual retirement accounts) is amended by adding at the 
     end the following new paragraph:
       ``(8) Distributions for charitable purposes.--
       ``(A) In general.--No amount shall be includible in gross 
     income by reason of a qualified charitable distribution from 
     an individual retirement account to an organization described 
     in section 170(c).
       ``(B) Special rules relating to charitable remainder 
     trusts, pooled income funds, and charitable gift annuities.--
       ``(i) In general.--No amount shall be includible in gross 
     income by reason of a qualified charitable distribution from 
     an individual retirement account--

       ``(I) to a charitable remainder annuity trust or a 
     charitable remainder unitrust (as such terms are defined in 
     section 664(d)),
       ``(II) to a pooled income fund (as defined in section 
     642(c)(5)), or
       ``(III) for the issuance of a charitable gift annuity (as 
     defined in section 501(m)(5)).

     The preceding sentence shall apply only if no person holds an 
     income interest in the amounts in the trust, fund, or annuity 
     attributable to such distribution other than one or more of 
     the following: the individual for whose benefit such account 
     is maintained, the spouse of such individual, or any 
     organization described in section 170(c).
       ``(ii) Determination of inclusion of amounts distributed.--
     In determining the amount includible in the gross income of 
     any person by reason of a payment or distribution from a 
     trust referred to in clause (i)(I) or a charitable gift 
     annuity (as so defined), the portion of any qualified 
     charitable distribution to such trust or for such annuity 
     which would (but for this subparagraph) have been includible 
     in gross income--

       ``(I) shall be treated as income described in section 
     664(b)(1), and
       ``(II) shall not be treated as an investment in the 
     contract.

       ``(iii) No inclusion for distribution to pooled income 
     fund.--No amount shall be includible in the gross income of a 
     pooled income fund (as so defined) by reason of a qualified 
     charitable distribution to such fund.
       ``(C) Qualified charitable distribution.--For purposes of 
     this paragraph, the term `qualified charitable distribution' 
     means any distribution from an individual retirement 
     account--
       ``(i) which is made on or after the date that the 
     individual for whose benefit the account is maintained has 
     attained age 59\1/2\, and
       ``(ii) which is made directly from the account to--

       ``(I) an organization described in section 170(c), or
       ``(II) a trust, fund, or annuity referred to in 
     subparagraph (B).

       ``(D) Denial of deduction.--The amount allowable as a 
     deduction under section 170 to the taxpayer for the taxable 
     year shall be reduced (but not below zero) by the sum of the 
     amounts of the qualified charitable distributions during such 
     year which would be includible in the gross income of the 
     taxpayer for such year but for this paragraph.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

     SEC. ____33. CHARITABLE DEDUCTION FOR CONTRIBUTIONS OF FOOD 
                   INVENTORY.

       (a) In General.--Subsection (e) of section 170 (relating to 
     certain contributions of ordinary income and capital gain 
     property) is amended by adding at the end the following new 
     paragraph:
       ``(7) Special rule for contributions of food inventory.--
     For purposes of this section--
       ``(A) Contributions by non-corporate taxpayers.--In the 
     case of a charitable contribution of food by a taxpayer, 
     paragraph (3)(A) shall be applied without regard to whether 
     or not the contribution is made by a corporation.
       ``(B) Limit on reduction.--In the case of a charitable 
     contribution of food which is a qualified contribution 
     (within the meaning of paragraph (3)(A), as modified by 
     subparagraph (A) of this paragraph)--
       ``(i) paragraph (3)(B) shall not apply, and
       ``(ii) the reduction under paragraph (1)(A) for such 
     contribution shall be no greater than the amount (if any) by 
     which the amount of such contribution exceeds twice the basis 
     of such food.
       ``(C) Determination of basis.--For purposes of this 
     paragraph, if a taxpayer uses the cash method of accounting, 
     the basis of any qualified contribution of such taxpayer 
     shall be deemed to be 50 percent of the fair market value of 
     such contribution.
       ``(D) Determination of fair market value.--In the case of a 
     charitable contribution of food which is a qualified 
     contribution (within the meaning of paragraph (3), as 
     modified by subparagraphs (A) and (B) of this paragraph) and 
     which, solely by reason of internal standards of the 
     taxpayer, lack of market, or similar circumstances, or which 
     is produced by the taxpayer exclusively for the purposes of 
     transferring the food to an organization described in 
     paragraph (3)(A), cannot or will not be sold, the fair market 
     value of such contribution shall be determined--
       ``(i) without regard to such internal standards, such lack 
     of market, such circumstances, or such exclusive purpose, and
       ``(ii) if applicable, by taking into account the price at 
     which the same or similar food items are sold by the taxpayer 
     at the time of the contribution (or, if not so sold at such 
     time, in the recent past).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2001.

          Subtitle C--Compliance With Congressional Budget Act

     SEC. ____41. SUNSET OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     are in effect on September 30, 2011, shall cease to apply as 
     of the close of September 30, 2011.

     SEC. ____42. RESTORATION OF PROVISIONS OF TITLE.

       All provisions of, and amendments made by, this title which 
     were terminated under section ____41 shall begin to apply 
     again as of October 1, 2011, as provided in each such 
     provision or amendment.
                                  ____

  SA 656. Mr. GREGG (for himself, Mr. Ensign, Mr. Allard, Mr. Kyl, Mr. 
Bunning, and Mr. Allen) submitted an amendment intended to be proposed 
by him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; as follows:

       At the end of subtitle A of title VIII, add the following:

     SEC. ____. TEMPORARY REDUCTION IN CAPITAL GAINS RATE.

       (a) Reduction in Maximum Rate.--The following sections are 
     each amended by striking ``20 percent'' and inserting ``15 
     percent'':
       (1) Section 1(h)(1)(C).
       (2) Section 55(b)(3)(C).
       (3) Section 1445(e)(1).
       (4) The second sentence of section 7518(g)(6)(A).
       (5) The second sentence of section 607(h)(6)(A) of the 
     Merchant Marine Act, 1936.
       (b) Transition Rules for Taxable Years Which Include June 
     1, 2001.--For purposes of applying section 1(h) of the 
     Internal Revenue Code of 1986 in the case of a taxable year 
     which includes June 1, 2001--
       (1) The amount of tax determined under subparagraph (B) of 
     section 1(h)(1) of such Code shall be the sum of--
       (A) 10 percent of the lesser of--
       (i) the net capital gain taking into account only gain or 
     loss properly taken into account for the portion of the 
     taxable year on or after such date (determined without regard 
     to collectibles gain or loss, gain described in section 
     (1)(h)(6)(A)(i) of such Code, and section 1202 gain), or
       (ii) the amount on which a tax is determined under such 
     subparagraph (without regard to this subsection), plus
       (B) 10 percent of the excess (if any) of--
       (i) the amount on which a tax is determined under such 
     subparagraph (without regard to this subsection), over
       (ii) the amount on which a tax is determined under 
     subparagraph (A).
       (2) The amount of tax determined under subparagraph (C) of 
     section (1)(h)(1) of such Code shall be the sum of--
       (A) 15 percent of the lesser of--
       (i) the excess (if any) of the amount of net capital gain 
     determined under subparagraph (A)(i) of paragraph (1) of this 
     subsection over the amount on which a tax is determined under 
     subparagraph (A) of paragraph (1) of this subsection, or
       (ii) the amount on which a tax is determined under such 
     subparagraph (C) (without regard to this subsection), plus
       (B) 20 percent of the excess (if any) of--
       (i) the amount on which a tax is determined under such 
     subparagraph (C) (without regard to this subsection), over
       (ii) the amount on which a tax is determined under 
     subparagraph (A) of this paragraph.
       (3) For purposes of applying section 55(b)(3) of such Code, 
     rules similar to the rules of paragraphs (1) and (2) of this 
     subsection shall apply.
       (4) In applying this subsection with respect to any pass-
     thru entity, the determination of when gains and loss are 
     properly taken into account shall be made at the entity 
     level.
       (5) Terms used in this subsection which are also used in 
     section 1(h) of such Code shall have the respective meanings 
     that such terms have in such section.
       (c) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to sales or 
     exchanges made--
       (A) on or after June 1, 2001, and
       (B) in taxable years beginning before January 1, 2004.

[[Page S5168]]

       (2) Withholding.--The amendment made by subsection (a)(3) 
     shall apply to amounts paid on or after June 1, 2001.
                                  ____

  SA 657. Mr. GREGG submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       In lieu of the matter proposed to be inserted, insert the 
     following:

     SEC.   . EXTENSION OF MORATORIUM ON IMPOSITION OF TAXES ON 
                   THE INTERNET.

       Section 1101(a) of the Omnibus Consolidated and Emergency 
     Supplemental Appropriations Act, 1999 (112 Stat. 2681-719) is 
     amended by striking ``3 years'' and inserting ``6 years''.
                                  ____

  SA 658. Mr. KYL submitted an amendment intended to be proposed by him 
to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       At the end of subtitle A of title VIII, add the following:

     SEC. ____. TEMPORARY REDUCTION IN CAPITAL GAINS RATE.

       (a) Reduction in Maximum Rate.--The following sections are 
     each amended by striking ``20 percent'' and inserting ``15 
     percent'':
       (1) Section 1(h)(1)(C).
       (2) Section 55(b)(3)(C).
       (3) Section 1445(e)(1).
       (4) The second sentence of section 7518(g)(6)(A).
       (5) The second sentence of section 607(h)(6)(A) of the 
     Merchant Marine Act, 1936.
       (b) Transition Rules.--For purposes of applying section 
     1(h) of the Internal Revenue Code of 1986 in the case of a 
     taxable year which includes the date of the enactment of the 
     Restoring Earnings To Lift Individuals and Empower Families 
     (RELIEF) Act of 2001--
       (1) The amount of tax determined under subparagraph (B) of 
     section 1(h)(1) of such Code shall be the sum of--
       (A) 10 percent of the lesser of--
       (i) the net capital gain taking into account only gain or 
     loss properly taken into account for the portion of the 
     taxable year on or after such date (determined without regard 
     to collectibles gain or loss, gain described in section 
     (1)(h)(6)(A)(i) of such Code, and section 1202 gain), or
       (ii) the amount on which a tax is determined under such 
     subparagraph (without regard to this subsection), plus
       (B) 10 percent of the excess (if any) of--
       (i) the amount on which a tax is determined under such 
     subparagraph (without regard to this subsection), over
       (ii) the amount on which a tax is determined under 
     subparagraph (A).
       (2) The amount of tax determined under subparagraph (C) of 
     section (1)(h)(1) of such Code shall be the sum of--
       (A) 15 percent of the lesser of--
       (i) the excess (if any) of the amount of net capital gain 
     determined under subparagraph (A)(i) of paragraph (1) of this 
     subsection over the amount on which a tax is determined under 
     subparagraph (A) of paragraph (1) of this subsection, or
       (ii) the amount on which a tax is determined under such 
     subparagraph (C) (without regard to this subsection), plus
       (B) 20 percent of the excess (if any) of--
       (i) the amount on which a tax is determined under such 
     subparagraph (C) (without regard to this subsection), over
       (ii) the amount on which a tax is determined under 
     subparagraph (A) of this paragraph.
       (3) For purposes of applying section 55(b)(3) of such Code, 
     rules similar to the rules of paragraphs (1) and (2) of this 
     subsection shall apply.
       (4) In applying this subsection with respect to any pass-
     thru entity, the determination of when gains and loss are 
     properly taken into account shall be made at the entity 
     level.
       (5) Terms used in this subsection which are also used in 
     section 1(h) of such Code shall have the respective meanings 
     that such terms have in such section.
       (c) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to sales or 
     exchanges made--
       (A) on or after the date of the enactment of this Act, and
       (B) in taxable years beginning before January 1, 2003.
       (2) Withholding.--The amendment made by subsection (a)(3) 
     shall apply to amounts paid after the date of the enactment 
     of this Act.
  SA 659. Mrs. HUTCHISON (for herself and Mr. Brownback) proposed an 
amendment to the bill H.R. 1836, to provide for reconciliation pursuant 
to section 104 of the concurrent resolution on the budget for fiscal 
year 2002; as follows:

       On page 19, beginning with line 21, strike all through the 
     matter preceding line 1 on page 20, and insert:
       ``(7) Applicable percentage.--For purposes of paragraph 
     (2), the applicable percentage shall be determined in 
     accordance with the following table:

``For taxable years beginning in calendarThe applicable percentage is--
      2002.........................................................170 
      2003.........................................................175 
      2004.........................................................180 
      2005.........................................................185 
      2006.........................................................190 
      2007.........................................................195 
      2008 and thereafter.......................................200.''.

       On page 20, line 14, strike ``2005'' and insert ``2001''.
       On page 29, line 4, strike ``$2,000'' and insert ``the 
     applicable amount''.
       On page 29, line 7, strike ``$2,000'' and insert ``the 
     applicable amount (as defined in section 530(b)(6))''.
       On page 29, between lines 7 and 8, insert:
       (3) Applicable amount.--Section 530(b) is amended by adding 
     at the end the following:
       ``(6) Applicable amount.--The applicable amount shall be 
     determined in accordance with the following table:
``In the case of taxable years beginning in cThe applicable amount is--
      2002 or 2003................................................$500 
      2004 or 2005................................................$750 
      2006 or 2007..............................................$1,000 
      2008 or 2009..............................................$1,500 
      2010 and thereafter....................................$2,000.''.
       On page 35, strike lines 21 through 23, and insert:
       (h) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to taxable years beginning after December 31, 2001.
       (2) Subsection (c).--The amendments made by subsection (c) 
     shall apply to taxable years beginning after December 31, 
     2005.
       Strike section 412 and insert:

     SEC. 412. INCREASE IN INCOME LIMITATION ON STUDENT LOAN 
                   INTEREST DEDUCTION.

       (a) Increase in Income Limitation.--Section 221(b)(2)(B) 
     (relating to amount of reduction) is amended by striking 
     clauses (i) and (ii) and inserting the following:
       ``(i) the excess of--

       ``(I) the taxpayer's modified adjusted gross income for 
     such taxable year, over
       ``(II) $50,000 ($100,000 in the case of a joint return), 
     bears to

       ``(ii) $15,000 ($30,000 in the case of a joint return).''.
       (b) Conforming Amendment.--Section 221(g)(1) is amended by 
     striking ``$40,000 and $60,000 amounts'' and inserting 
     ``$50,000 and $100,000 amounts''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after December 31, 2001.
       On page 53, line 12, strike ``$3,000'' and insert ``$2,000 
     ($1,500 in the case of 2002)''.
       On page 53, line 21, after ``$5,000'' insert ``($3,000''.
       On page 311, line 10, strike ``$49,000'' and insert 
     ``$48,000 in the case of 2004.)''.
       On page 311, line 16, strike ``$35,750'' and insert 
     ``$35,250''.
                                  ____

  SA 660. Mr. McCAIN submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       On page 9, in the matter between lines 11 and 12, strike 
     ``37.6%'' in the item relating to 2005 and 2006 and insert 
     ``38.6%'' and strike ``36%'' in the item relating to 2007 and 
     thereafter and insert ``38.6%''.
       On page 13, between lines 15 and 16, insert:

     SEC. 104. INCREASE IN MAXIMUM TAXABLE INCOME FOR 15 PERCENT 
                   RATE BRACKET.

       Section 1(f) (relating to adjustments in tax tables so that 
     inflation will not result in tax increases), as amended by 
     section 302, is amended--
       (1) in paragraph (2)--
       (A) by redesignating subparagraphs (B) and (C) as 
     subparagraphs (C) and (D),
       (B) by inserting after subparagraph (A) the following:
       ``(B) in the case of the tables contained in subsections 
     (a), (b), (c), and (d), by increasing the maximum taxable 
     income level for the 15 percent rate bracket and the minimum 
     taxable income level for the next highest rate bracket 
     otherwise determined under subparagraph (A) (after 
     application of paragraph (8)) for taxable years beginning in 
     any calendar year after 2004, by the applicable dollar amount 
     for such calendar year,'', and
       (C) by striking ``subparagraph (A)'' in subparagraph (C) 
     (as so redesignated) and inserting ``subparagraphs (A) and 
     (B)'', and
       (2) by adding at the end the following:
       ``(9) Applicable dollar amount.--For purposes of paragraph 
     (2)(B), the applicable dollar amount for any calendar year 
     shall be determined as follows:
       ``(A) Joint returns and surviving spouses.--In the case of 
     the table contained in subsection (a)--

                                                             Applicable
``Calendar year:                                         Dollar Amount:
  2005......................................................$1,000 ....

  2006......................................................$2,000 ....

  2007......................................................$3,000 ....

  2008......................................................$4,000 ....

  2009 and thereafter.......................................$5,000.....

       ``(B) Other tables.--In the case of the table contained in 
     subsection (b), (c), or (d)--

                                                             Applicable
``Calendar year:                                         Dollar Amount:
  2005........................................................$500 ....

  2006......................................................$1,000 ....

  2007......................................................$1,500 ....

  2008......................................................$2,000 ....

  2009 and thereafter.....................................$2,500.''....

[[Page S5169]]


                                  ____
  SA 661. Mr. JOHNSON submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       On page 314, after line 21, add the following:

     SEC. 803. INCREASED FUNDING FOR VETERANS HOSPITAL CARE AND 
                   MEDICAL SERVICES.

         Notwithstanding any other provision of law, there is 
     appropriated, out of any funds in the Treasury not otherwise 
     appropriated, $1,700,000,000 for fiscal year 2002 for 
     purposes of providing hospital care and medical services to 
     veterans under chapter 17 of title 38, United States Code.
                                  ____

  SA 662. Mr. INOUYE (for himself and Mr. Akaka) submitted an amendment 
intended to be proposed by him to the bill H.R. 1836, to provide for 
reconciliation pursuant to section 104 of the concurrent resolution on 
the budget for fiscal year 2002; which was ordered to lie on the table; 
as follows:

       At the appropriate place, insert the following:

     SEC. ____. TREATMENT OF CERTAIN HOSPITAL SUPPORT 
                   ORGANIZATIONS AS QUALIFIED ORGANIZATIONS FOR 
                   PURPOSES OF DETERMINING ACQUISITION 
                   INDEBTEDNESS.

       (a) In General.--Subparagraph (C) of section 514(c)(9) 
     (relating to real property acquired by a qualified 
     organization) is amended by striking ``or'' at the end of 
     clause (ii), by striking the period at the end of clause 
     (iii) and inserting ``; or'', and by adding at the end the 
     following new clause:

       ``(iv) a qualified hospital support organization (as 
     defined in subparagraph (I)).''.

       (b) Qualified Hospital Support Organizations.--Paragraph 
     (9) of section 514(c) is amended by adding at the end the 
     following new subparagraph:
       ``(I) Qualified hospital support organizations.--For 
     purposes of subparagraph (C)(iv), the term `qualified 
     hospital support organization' means, with respect to any 
     eligible indebtedness (including any qualified refinancing of 
     such eligible indebtedness), a support organization (as 
     defined in section 509(a)(3)) which supports a hospital 
     described in section 119(d)(4)(B) and with respect to which--

       ``(i) more than half of its assets (by value) at any time 
     since its organization--

       ``(I) were acquired, directly or indirectly, by gift or 
     devise, and
       ``(II) consisted of real property, and

       ``(ii) the fair market value of the organization's real 
     estate acquired, directly or indirectly, by gift or devise, 
     exceeded 10 percent of the fair market value of all 
     investment assets held by the organization immediately prior 
     to the time that the eligible indebtedness was incurred.

     For purposes of this subparagraph, the term `eligible 
     indebtedness' means indebtedness secured by real property 
     acquired by the organization, directly or indirectly, by gift 
     or devise, the proceeds of which are used exclusively to 
     acquire any leasehold interest in such real property or for 
     improvements on, or repairs to, such real property. A 
     determination under clauses (i) and (ii) of this subparagraph 
     shall be made each time such an eligible indebtedness (or the 
     qualified refinancing of such an eligible indebtedness) is 
     incurred. For purposes of this subparagraph, a refinancing of 
     such an eligible indebtedness shall be considered qualified 
     if such refinancing does not exceed the amount of the 
     refinanced eligible indebtedness immediately before the 
     refinancing.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to indebtedness incurred after December 31, 2003.
                                  ____

  SA 663. Mr. INOUYE (for himself and Mr. Akaka) submitted an amendment 
intended to be proposed by him to the bill H.R. 1836, to provide for 
reconciliation pursuant to section 104 of the concurrent resolution on 
the budget for fiscal year 2002; which was ordered to lie on the table; 
as follows:

     SEC. 573. SPECIAL RULES FOR CLOSELY HELD BUSINESSES WITH 16 
                   TO 75 PARTNERS OR SHAREHOLDERS.

       (a) In General.--Section 6166(b) (relating to definitions 
     and special rules), as amended by section 571, is amended by 
     adding at the end the following new paragraph:
       ``(11) Special rules for business with 16 to 75 partners or 
     shareholders.--If the executor elects the benefits of this 
     paragraph, then, for purposes of this section--
       ``(A) Interest as a partner in a partnership treated as an 
     interest in a closely held business if the partnership had 
     more than 15 but no more than 75 partners.--An interest as 
     partner in a partnership carrying on a trade or business 
     shall be treated as an interest in a closely held business if 
     such partnership had more than 15 but no more than 75 
     partners.
       ``(B) Stock in a corporation treated as an interest in a 
     closely held business if the corporation had more than 15 but 
     no more than 75 shareholders.--Stock in a corporation 
     carrying on a trade or business shall be treated as an 
     interest in a closely held business if such corporation had 
     more than 15 but no more than 75 shareholders.
       ``(C) 5-year deferral for principal not to apply.--The 
     executor shall be treated as having selected under subsection 
     (a)(3) the date prescribed by section 6151(a).
       ``(D) 5 equal installments allowed.--For purposes of 
     applying subsection (a)(1), `5' shall be substituted for 
     `10'.''
       (b) Effective Date.--The amendment made by this section, 
     shall apply to estates of decedents dying after December 31, 
     2001.
                                  ____

  SA 664. Mr. SCHUMER submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       On page 54, between lines 4 and 5, insert the following:
       ``(C) 2006 through 2011.--
       ``(i) In general.--In the case of a taxable year beginning 
     in 2006, 2007, 2008, 2009, 2010, or 2011, the applicable 
     dollar amount shall be equal to the applicable dollar amount 
     determined in the table contained in clause (ii), reduced 
     (but not below zero) by the amount determined under clause 
     (iii).
       ``(ii) Applicable dollar amount.--

``Taxable year beginning in:                  Applicable dollar amount:
  2006.....................................................$10,000 ....

  2007.....................................................$10,000 ....

  2008.....................................................$12,000 ....

  2009.....................................................$12,000 ....

  2010.....................................................$12,000 ....

  2011....................................................$12,000. ....

       ``(iii) Amount of reduction.--The amount determined under 
     this clause for any taxable year is the amount which bears 
     the same ratio to the applicable dollar amount determined in 
     the table contained in clause (ii) for such taxable year as--

       ``(I) the excess of--

       ``(aa) the taxpayer's adjusted gross income for such 
     taxable year, over
       ``(bb) $65,000 ($90,000 in the case of return filed by a 
     head of household (as defined in section 2(b)), and $130,000 
     in the case of a joint return), bears to

       ``(II) $10,000 ($20,000 in the case of a joint return).

       On page 59, line 3, strike ``$500'' and insert ``$1000''.
       Strike section 511 relating to reductions of estate and 
     gift tax rates.
                                  ____

  SA 665. Mr. TORRICELLI submitted an amendment intended to be proposed 
by him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       On page 314, after line 21, add the following:

     SEC. 3. PARTIAL EXCLUSION OF GAIN FROM SALE OF LOW-TO-
                   MODERATE INCOME HOUSING.

       (a) In General.--Part III of subchapter B of chapter 1 
     (relating to items specifically excluded from gross income) 
     is amended by redesignating section 139 as section 140 and 
     inserting after section 138 the following new section:

     ``SEC. 139. CERTAIN GAIN FROM SALE OF LOW-TO-MODERATE INCOME 
                   HOUSING.

       ``(a) In General.--Gross income shall not include the gain 
     from the sale of any qualified low-to-moderate income 
     building made during the taxable year.
       ``(b) Qualified Low-to-Moderate Income Building.--For 
     purposes of this section--
       ``(1) In general.--The term `qualified low-to-moderate 
     income building' means any building which is part of a 
     qualified low-to-moderate income development project.
       ``(2) Qualified low-to-moderate income development 
     project.--
       ``(A) In general.--The term `qualified low-to-moderate 
     income development project' means any development project of 
     1 or more for qualified low-to-moderate income buildings 
     located in an eligible urban area if 40 percent or more of 
     the residential units in such development project are 
     occupied and owned by individuals whose income is 100 percent 
     or less of area median gross income.
       ``(B) Eligible urban area.--The term `eligible urban area' 
     means an area which is either a qualified census tract or an 
     area of chronic economic distress (as defined in paragraphs 
     (2) and (3) of section 143(j), respectively).
       ``(c) Limitation.--The amount of gain which may be taken 
     into account under subsection (a) with respect to the sale of 
     a low-to-moderate income building shall not exceed $10,000 
     for each low-to-moderate income unit in such building.''.
       (b) Conforming Amendment.--The table of sections for part 
     III of subchapter B of chapter 1 is amended by striking the 
     item relating to section 139 and inserting the following new 
     items:

``Sec. 139. Certain gain from sale of low-to-moderate income housing.
``Sec. 140. Cross references to other Acts.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply sales in taxable years beginning after the date 
     of the enactment of this Act for five years.
                                  ____

  SA 666. Mr. TORRICELLI submitted an amendment intended to be proposed 
by him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section

[[Page S5170]]

104 of the concurrent resolution on the budget for fiscal year 2002; 
which was ordered to lie on the table; as follows:

       On page 314, after line 21, add the following:

     SEC. 803. MISCONDUCT OF INTERNAL REVENUE SERVICE EMPLOYEES.

       (a) Discipline or Termination of Employment for 
     Misconduct.--Section 1203 of the Internal Revenue Service 
     Restructuring and Reform Act of 1998 (26 U.S.C. 7804 note) is 
     amended to read as follows:

     ``SEC. 1203. DISCIPLINE OR TERMINATION OF EMPLOYMENT FOR 
                   MISCONDUCT.

       ``(a) In General.--Notwithstanding any other law, the 
     Commissioner of Internal Revenue may impose discipline up to 
     and including termination of the employment of any employee 
     of the Internal Revenue Service if there is a final 
     administrative or judicial determination that such employee 
     committed any act or omission described under subsection (b) 
     in the performance of the employee's official duties. Such 
     termination shall be a removal for cause on charges of 
     misconduct.
       ``(b) Acts or Omissions.--The acts or omissions referred to 
     under subsection (a) are--
       ``(1) willful failure to obtain the required approval 
     signatures on documents authorizing the seizure of a 
     taxpayer's home, personal belongings, or business assets;
       ``(2) willfully providing a false statement under oath with 
     respect to a material matter involving a taxpayer or taxpayer 
     representative;
       ``(3) with respect to a taxpayer, taxpayer representative, 
     or other employee of the Internal Revenue Service, the 
     willful violation of--
       ``(A) any right under the Constitution of the United 
     States; or
       ``(B) any civil right established under--
       ``(i) title VI or VII of the Civil Rights Act of 1964;
       ``(ii) title IX of the Education Amendments of 1972;
       ``(iii) the Age Discrimination in Employment Act of 1967;
       ``(iv) the Age Discrimination Act of 1975;
       ``(v) section 501 or 504 of the Rehabilitation Act of 1973; 
     or
       ``(vi) title I of the Americans with Disabilities Act of 
     1990;
       ``(4) willfully falsifying or destroying documents to 
     conceal mistakes made by any employee with respect to a 
     matter involving a taxpayer or taxpayer representative;
       ``(5) willful assault or battery on a taxpayer, taxpayer 
     representative, or other employee of the Internal Revenue 
     Service, but only if there is a criminal conviction, or a 
     final judgment by a court in a civil case, with respect to 
     the assault or battery;
       ``(6) willful violations of the Internal Revenue Code of 
     1986, Department of Treasury regulations, or policies of the 
     Internal Revenue Service (including the Internal Revenue 
     Manual) for the purpose of retaliating against, or harassing, 
     a taxpayer, taxpayer representative, or other employee of the 
     Internal Revenue Service;
       ``(7) willful misuse of the provisions of section 6103 of 
     the Internal Revenue Code of 1986 for the purpose of 
     concealing information from a congressional inquiry;
       ``(8) willful understatement of Federal tax liability, 
     unless such understatement is due to reasonable cause and not 
     to willful neglect; and
       ``(9) willfully threatening to audit a taxpayer for the 
     purpose of extracting personal gain or benefit.
       ``(c) No Appeal.--Any determination of the Commissioner of 
     Internal Revenue under subsection (a) may not be appealed in 
     any administrative or judicial proceeding.
       ``(d) Definition.--For purposes of the provisions described 
     in clauses (i), (ii), and (iv) of subsection (b)(3)(B), 
     references to a program or activity receiving Federal 
     financial assistance or an education program or activity 
     receiving Federal financial assistance shall include any 
     program or activity conducted by the Internal Revenue Service 
     for a taxpayer.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to acts or omissions occurring on or after the 
     date of enactment of this Act.
                                  ____

  SA 667. Mr. TORRICELLI submitted an amendment intended to be proposed 
by him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       At the end of subtitle A of title II, add the following:

     SEC. ____. ELIMINATION OF THE MARRIAGE PENALTY IN THE CHILD 
                   TAX CREDIT.

       (a) In General.--Section 24(b) (relating to limitation 
     based on adjusted gross income), as amended by section 201, 
     is amended--
       (1) by striking ``$55,000'' in paragraph (2)(C) and 
     inserting ``one-half the amount in subparagraph (A)'', and
       (2) by adding at the end, the following new paragraph:
       ``(4) Inflation adjustment.--In the case of any taxable 
     year beginning after 2001, the dollar amount contained in 
     paragraph (2)(A) shall be increased by an amount equal to--
       ``(A) such dollar amount, multiplied by
       ``(B) the cost-of-living adjustment determined under 
     section (1)(f)(3) for the calendar year in which the taxable 
     year begins, by substituting ``calendar year 2000'' for 
     ``calendar year 1992.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.
                                  ____

  SA 668. Mr. ENSIGN submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       At the end of subtitle A of title VIII, add the following:

     SEC. ____. TEMPORARY REDUCTION IN CAPITAL GAINS RATE.

       (a) In General.--
       (1) Reduction in 10 percent rate.--Section 1(h)(1)(B) is 
     amended by inserting ``(8 percent in the case of 2002 and 
     2003)'' after ``10 percent''.
       (2) Reduction in 20 percent rate.--Section 1(h)(1)(C) 
     (relating to maximum capital gains rate) is amended by 
     inserting ``(15 percent in the case of 2002 and 2003)'' after 
     ``20 percent''.
       (b) Conforming Amendments.--
       (1) Section 1(h)(2)(A) is amended by inserting ``(8 percent 
     in the case of 2002 and 2003)'' after ``10 percent''.
       (2) Section 55(b)(3) is amended--
       (A) in subparagraph (B), by striking ``10 percent'' and 
     inserting ``the rate in effect under subsection 1(h)(1)(B)'', 
     and
       (B) in subparagraph (C), by striking ``20 percent'' and 
     inserting ``the rate in effect under subsection 1(h)(1)(C)''.
       (3) Paragraph (1) of section 1445(e) by striking ``20 
     percent)'' and inserting ``the rate in effect under section 
     1(h)(1)(C))''.
       (4)(A) The second sentence of section 7518(g)(6)(A) is 
     amended by striking ``20 percent'' and inserting ``the rate 
     in effect under section 1(h)(1)(C)''.
       (B) The second sentence of section 607(h)(6)(A) of the 
     Merchant Marine Act, 1936 is amended by striking ``20 
     percent'' and inserting ``the rate in effect under section 
     1(h)(1)(C)''.
                                  ____

  SA 669. Mr. SCHUMER (for himself, Mr. Biden, Mr. Bayh, Mr. Lieberman, 
Mr. Durbin, Mr. Torricelli, Mrs. Clinton, Mr. Daschle, Ms. Stabenow, 
and Mr. Dayton) proposed an amendment to the bill H.R. 1836, to provide 
for reconciliation pursuant to section 104 of the concurrent resolution 
on the budget for fiscal year 2002; as follows:

       On page 54, between lines 4 and 5, insert the following:
       ``(C) 2006 through 2011.--
       ``(i) In general.--In the case of a taxable year beginning 
     in 2006, 2007, 2008, 2009, 2010, or 2011, the applicable 
     dollar amount shall be equal to the applicable dollar amount 
     determined in the table contained in clause (ii), reduced 
     (but not below zero) by the amount determined under clause 
     (iii).
       ``(ii) Applicable dollar amount.--

``Taxable year beginning in:                  Applicable dollar amount:
  2006......................................................$10,000....

  2007.......................................................10,000....

  2008.......................................................12,000....

  2009.......................................................12,000....

  2010.......................................................12,000....

  2011.....................................................12,000 .....

       ``(iii) Amount of reduction.--The amount determined under 
     this clause for any taxable year is the amount which bears 
     the same ratio to the applicable dollar amount determined in 
     the table contained in clause (ii) for such taxable year as--

       ``(I) the excess of--

       ``(aa) the taxpayer's adjusted gross income for such 
     taxable year, over
       ``(bb) $65,000 ($90,000 in the case of return filed by a 
     head of household (as defined in section 2(b)), and $130,000 
     in the case of a joint return), bears to

       ``(II) $10,000 ($20,000 in the case of a joint return).

       On page 59, line 3, strike ``$500'' and insert ``$1,000''.
       Beginning on page 64, line 21, strike all through page 66, 
     before line 2, and insert the following:
       (a) Maximum Rate of Tax Reduced to 53 Percent.--The table 
     contained in section 2001(c)(1) is amended by striking the 
     two highest brackets and inserting the following:

$1,025,800, plus 53% of the excess over $2,500,000.''..................
       (b) Repeal of Phaseout of Graduated Rates.--Subsection (c) 
     of section 2001 is amended by striking paragraph (2).
       On page 68, strike lines 1 through 3.
                                  ____

  SA 670. Mr. FITZGERALD (for himself, Mr. Schumer, Mr. Jeffords, Mrs. 
Clinton, Mr. McCain, Mr. Torricelli, Mr. Domenici, Mr. Allen, Mr. 
Durbin, Mr. Smith of Oregon, Mr. Specter, and Mr. Nelson of Florida) 
proposed an amendment to the bill H.R. 1836, to provide for 
reconciliation pursuant to section 104 of the concurrent resolution on 
the budget for fiscal year 2002; as follows:

       At the end of subtitle A of title VIII, add the following:

[[Page S5171]]

     SEC. ____. NO FEDERAL INCOME TAX ON RESTITUTION RECEIVED BY 
                   VICTIMS OF THE NAZI REGIME OR THEIR HEIRS OR 
                   ESTATES.

       (a) In General.--For purposes of the Internal Revenue Code 
     of 1986, any excludable restitution payments received by an 
     eligible individual (or the individual's heirs or estate)--
       (1) shall not be included in gross income; and
       (2) shall not be taken into account for purposes of 
     applying any provision of such Code which takes into account 
     excludable income in computing adjusted gross income, 
     including section 86 of such Code (relating to taxation of 
     Social Security benefits).

     For purposes of such Code, the basis of any property received 
     by an eligible individual (or the individual's heirs or 
     estate) as part of an excludable restitution payment shall be 
     the fair market value of such property as of the time of the 
     receipt.
       (b) Coordination With Federal Means-Tested Programs.--
       (1) In general.--Any excludable restitution payment shall 
     be disregarded in determining eligibility for, and the amount 
     of benefits or services to be provided under, any Federal or 
     federally assisted program which provides benefits or service 
     based, in whole or in part, on need.
       (2) Prohibition against recovery of value of excessive 
     benefits or services.--No officer, agency, or instrumentality 
     of any government may attempt to recover the value of 
     excessive benefits or services provided under a program 
     described in subsection (a) before January 1, 2000, by reason 
     of any failure to take account of excludable restitution 
     payments received before such date.
       (3) Notice required.--Any agency of government that has 
     taken into account excludable restitution payments in 
     determining eligibility for a program described in subsection 
     (a) before January 1, 2000, shall make a good faith effort to 
     notify any individual who may have been denied eligibility 
     for benefits or services under the program of the potential 
     eligibility of the individual for such benefits or services.
       (4) Coordination with 1994 act.--Nothing in this Act shall 
     be construed to override any right or requirement under ``An 
     Act to require certain payments made to victims of Nazi 
     persecution to be disregarded in determining eligibility for 
     and the amount of benefits or services based on need'', 
     approved August 1, 1994 (Public Law 103-286; 42 U.S.C. 1437a 
     note), and nothing in that Act shall be construed to override 
     any right or requirement under this Act.
       (c) Eligible Individual.--For purposes of this section, the 
     term ``eligible individual'' means a person who was 
     persecuted for racial or religious reasons by Nazi Germany, 
     any other Axis regime, or any other Nazi-controlled or Nazi-
     allied country.
       (d) Excludable Restitution Payment.--For purposes of this 
     section, the term ``excludable restitution payment'' means 
     any payment or distribution to an individual (or the 
     individual's heirs or estate) which--
       (1) is payable by reason of the individual's status as an 
     eligible individual, including any amount payable by any 
     foreign country, the United States of America, or any other 
     foreign or domestic entity, or a fund established by any such 
     country or entity, any amount payable as a result of a final 
     resolution of a legal action, and any amount payable under a 
     law providing for payments or restitution of property;
       (2) constitutes the direct or indirect return of, or 
     compensation or reparation for, assets stolen or hidden from, 
     or otherwise lost to, the individual before, during, or 
     immediately after World War II by reason of the individual's 
     status as an eligible individual, including any proceeds of 
     insurance under policies issued on eligible individuals by 
     European insurance companies immediately before and during 
     World War II; or
       (3) consists of interest which is payable as part of any 
     payment or distribution described in paragraph (1) or (2).
       (e) Effective Date.--
       (1) In general.--This section shall apply to any amount 
     received on or after January 1, 2000.
       (2) No inference.--Nothing in this Act shall be construed 
     to create any inference with respect to the proper tax 
     treatment of any amount received before January 1, 2000.
                                  ____

  SA 671. Mr. ALLARD (for himself, Mr. Gregg, and Mr. Bunning) 
submitted an amendment intended to be proposed by him to the bill H.R. 
1836, to provide for reconciliation pursuant to section 104 of the 
concurrent resolution on the budget for fiscal year 2002; which was 
ordered to lie on the table; as follows:

       At the end of title I, insert:

     SEC. ____. REDUCTION IN CAPITAL GAINS RATES FOR INDIVIDUALS.

       (a) In General.--
       (1) 10-percent rate reduced to 8 percent.--Subparagraph (B) 
     of section 1(h)(1), as amended by section 101, is amended by 
     striking ``10 percent'' and inserting ``8 percent''.
       (2) 20-percent rate reduced to 15 percent.--Subparagraph 
     (C) of section 1(h)(1) is amended by striking ``20 percent'' 
     and inserting ``15 percent''.
       (4) Conforming amendments.--
       (A) Section 57(a)(7) is amended--
       (i) by striking ``42 percent'' and inserting ``28 
     percent'', and
       (ii) by striking the last sentence.
       (B) Paragraph (1) of section 1445(e) is amended by striking 
     ``20 percent'' and inserting ``15 percent''.
       (C) The second sentence of section 7518(g)(6)(A), and the 
     second sentence of section 607(h)(6)(A) of the Merchant 
     Marine Act, 1936, are each amended by striking ``20 percent'' 
     and inserting ``15 percent''.
       (2) Conforming amendments.--Subparagraph (A)(ii) of section 
     1(h)(6), as redesignated by paragraph (1), is amended--
       (A) in subclause (I) by striking ``paragraph (5)(B)'' and 
     inserting ``paragraph (4)(B)'', and
       (B) in subclause (II) by striking ``paragraph (5)(A)'' and 
     inserting ``paragraph (4)(A)''.
       (c) Minimum Tax.--
       (1) In general.--
       (A) 10-percent rate reduced to 8 percent.--Subparagraph (B) 
     of section 55(b)(3) is amended by striking ``10 percent'' and 
     inserting ``8 percent''.
       (B) 20-percent rate reduced to 15 percent.--Subparagraph 
     (C) of section 55(b)(3) is amended by striking ``20 percent'' 
     and inserting ``15 percent''.
       (2) Conforming amendment.--Paragraph (3) of section 55(b) 
     is amended in the matter following subparagraph (D) by 
     striking ``In the case of taxable years beginning after 
     December 31, 2000, rules similar to the rules of section 
     1(h)(2) shall apply for purposes of subparagraphs (B) and 
     (C).''.
       (d) Effective Dates.--
       (1) In general.--Except as provided by paragraph (2), the 
     amendments made by this section shall apply to sales or 
     exchanges after the date of the enactment of this Act and 
     before January 1, 2003.
       (2) Withholding.--The amendment made by subsection 
     (a)(3)(B) shall apply to amounts paid after the date of the 
     enactment of this Act and before January 1, 2003.
                                  ____

  SA 672. Mr. ALLEN submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       On page 55, strike lines 17 through 21, and insert:
       ``(1) Qualified tuition and related expenses.--
       ``(A) In general.--The term `qualified tuition and related 
     expenses' has the meaning given such term by section 25A(f). 
     Such expenses shall be reduced in the same manner as under 
     section 25A(g)(2).
       ``(B) Special rule for computers and internet access for 
     elementary and secondary students.--
       ``(i) In general.--Except as provided in this paragraph, 
     the term `qualified tuition and related expenses' includes, 
     in the case of an individual who maintains a household which 
     includes as a member one or more qualifying students, amounts 
     paid or incurred for computer technology or equipment.
       ``(ii) Limitation.--The amount of expenses under clause (i) 
     which may be taken into account under subsection (a) for any 
     taxable year shall not exceed $1,000, reduced by the amount 
     of expenses taken into account under clause (i) during the 
     preceding 2 taxable years in connection with the purchase of 
     a computer.
       ``(iii) Qualifying student.--For purposes of this 
     subparagraph, the term `qualifying student' means a dependent 
     of the taxpayer (within the meaning of section 152) who is 
     enrolled in school on a full-time basis.
       ``(iv) Computer technology or equipment.--For purposes of 
     this subparagraph, the term `computer technology or 
     equipment' has the meaning given such term by section 
     170(e)(6)(F)(i) and includes Internet access and related 
     services.
       ``(v) School.--For purposes of this subparagraph, the term 
     `school' means any public, charter, private, religious, or 
     home school which provides elementary education or secondary 
     education (kindergarten through grade 12), as determined 
     under State law.
                                  ____

  SA 673. Mr. ALLEN submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       On page 31, lines 3 and 4, strike ``computer equipment 
     (including related software and services)''.
       On page 31, line 10, strike ``and''.
       On page 31, line 17, strike the end period and insert ``, 
     and''.
       On page 31, between lines 17 and 18, insert:
       ``(iii) expenses for the purchase of any computer 
     technology or equipment (as defined in section 
     170(e)(6)(F)(i)) or Internet access and related services, if 
     such technology, equipment, or services are to be used by the 
     beneficiary and the beneficiary's family during any of the 
     years the beneficiary is in school.
                                  ____

  SA 674. Mrs. CARNAHAN (for herself and Mr. Daschle) proposed an 
amendment to the bill H.R. 1836, to provide for reconciliation pursuant 
to section 104 of the concurrent resolution on the budget for fiscal 
year 2002; as follows:

       On page 9, strike lines 5 through 12 and insert the 
     following:
       ``(2) Reductions in rates after 2001.--
       ``(A) In general.--Each rate of tax (other than the 10 
     percent rate) in the tables under

[[Page S5172]]

     subsections (a), (b), (c), (d), and (e) shall be reduced by 1 
     percentage point for taxable years beginning during a 
     calendar year after the trigger year.
       ``(B) Trigger year.--For purposes of subparagraph (A), the 
     trigger year is--
       ``(i) 2002, in the case of the 15 percent rate,
       ``(ii) 2003, in the case of the 28 percent rate,
       ``(iii) 2004, in the case of the 31 percent rate,
       ``(iv) 2005, in the case of the 36 percent rate, and
       ``(v) 2006, in the case of the 39.6 percent rate.
       ``(3) Adjustment of tables.--The Secretary''.
                                  ____

  SA 675. Ms. COLLINS (for herself, Mr. Warner, Mr. Cochran, Ms. 
Landrieu, Mr. Allen, Mr. Smith of Oregon, Mr. Harkin, Ms. Mikulski, Mr. 
Reed, Mr. Hutchinson, Mr. Dodd, and Mr. Enzi) proposed an amendment to 
the bill H.R. 1836, to provide for reconciliation pursuant to section 
104 of the concurrent resolution on the budget for fiscal year 2002; as 
follows:

       At the end of title IV, add the following:

             Subtitle E--Miscellaneous Education Provisions

     SEC. 441. SHORT TITLE.

       This subtitle may be cited as the ``Teacher Relief Act of 
     2001''.

     SEC. 442. ABOVE-THE-LINE DEDUCTION FOR QUALIFIED PROFESSIONAL 
                   DEVELOPMENT EXPENSES OF ELEMENTARY AND 
                   SECONDARY SCHOOL TEACHERS.

       (a) Deduction Allowed.--Part VII of subchapter B of chapter 
     1 (relating to additional itemized deductions for 
     individuals), as amended by section 431(a), is amended by 
     redesignating section 223 as section 224 and by inserting 
     after section 222 the following new section:

     ``SEC. 223. QUALIFIED PROFESSIONAL DEVELOPMENT EXPENSES.

       ``(a) Allowance of Deduction.--In the case of an eligible 
     educator, there shall be allowed as a deduction an amount 
     equal to the qualified professional development expenses paid 
     or incurred by the taxpayer during the taxable year.
       ``(b) Maximum Deduction.--The deduction allowed under 
     subsection (a) for any taxable year shall not exceed $500.
       ``(c) Qualified Professional Development Expenses of 
     Eligible Educators.--For purposes of this section--
       ``(1) Qualified professional development expenses.--
       ``(A) In general.--The term `qualified professional 
     development expenses' means expenses for tuition, fees, 
     books, supplies, equipment, and transportation required for 
     the enrollment or attendance of an individual in a qualified 
     course of instruction.
       ``(B) Qualified course of instruction.--The term `qualified 
     course of instruction' means a course of instruction which--
       ``(i) is--

       ``(I) directly related to the curriculum and academic 
     subjects in which an eligible educator provides instruction,
       ``(II) designed to enhance the ability of an eligible 
     educator to understand and use State standards for the 
     academic subjects in which such educator provides 
     instruction,
       ``(III) designed to provide instruction in how to teach 
     children with different learning styles, particularly 
     children with disabilities and children with special learning 
     needs (including children who are gifted and talented), or
       ``(IV) designed to provide instruction in how best to 
     discipline children in the classroom and identify early and 
     appropriate interventions to help children described in 
     subclause (III) to learn,

       ``(ii) is tied to--

       ``(I) challenging State or local content standards and 
     student performance standards, or
       ``(II) strategies and programs that demonstrate 
     effectiveness in increasing student academic achievement and 
     student performance, or substantially increasing the 
     knowledge and teaching skills of an eligible educator,

       ``(iii) is of sufficient intensity and duration to have a 
     positive and lasting impact on the performance of an eligible 
     educator in the classroom (which shall not include 1-day or 
     short-term workshops and conferences), except that this 
     clause shall not apply to an activity if such activity is 1 
     component described in a long-term comprehensive professional 
     development plan established by an eligible educator and the 
     educator's supervisor based upon an assessment of the needs 
     of the educator, the students of the educator, and the local 
     educational agency involved, and
       ``(iv) is part of a program of professional development 
     which is approved and certified by the appropriate local 
     educational agency as furthering the goals of the preceding 
     clauses.
       ``(C) Local educational agency.--The term `local 
     educational agency' has the meaning given such term by 
     section 14101 of the Elementary and Secondary Education Act 
     of 1965, as in effect on the date of the enactment of this 
     section.
       ``(2) Eligible educator.--
       ``(A) In general.--The term `eligible educator' means an 
     individual who is a kindergarten through grade 12 teacher, 
     instructor, counselor, principal, or aide in an elementary or 
     secondary school for at least 900 hours during a school year.
       ``(B) Elementary or secondary school.--The terms 
     `elementary school' and `secondary school' have the meanings 
     given such terms by section 14101 of the Elementary and 
     Secondary Education Act of 1965 (20 U.S.C. 8801), as so in 
     effect.
       ``(d) Denial of Double Benefit.--
       ``(1) In general.--No other deduction or credit shall be 
     allowed under this chapter for any amount taken into account 
     for which a deduction is allowed under this section.
       ``(2) Coordination with exclusions.--A deduction shall be 
     allowed under subsection (a) for qualified professional 
     development expenses only to the extent the amount of such 
     expenses exceeds the amount excludable under section 135, 
     529(c)(1), or 530(d)(2) for the taxable year.''.
       (b) Deduction Allowed in Computing Adjusted Gross Income.--
     Section 62(a), as amended by section 431(b), is amended by 
     inserting after paragraph (18) the following new paragraph:
       ``(19) Qualified professional development expenses.--The 
     deduction allowed by section 223.''.
       (c) Conforming Amendments.--
       (1) Sections 86(b)(2), 135(c)(4), 137(b)(3), and 219(g)(3) 
     are each amended by inserting ``223,'' after ``221,''.
       (2) Section 221(b)(2)(C) is amended by inserting ``223,'' 
     before ``911''.
       (3) Section 469(i)(3)(E) is amended by striking ``and 221'' 
     and inserting ``, 221, and 223''.
       (4) The table of sections for part VII of subchapter B of 
     chapter 1, as amended by section 431(c), is amended by 
     striking the item relating to section 223 and inserting the 
     following new items:

``Sec. 223. Qualified professional development expenses.
``Sec. 224. Cross reference.''.

       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 442. CREDIT TO ELEMENTARY AND SECONDARY SCHOOL TEACHERS 
                   WHO PROVIDE CLASSROOM MATERIALS.

       (a) In General.--Subpart B of part IV of subchapter A of 
     chapter 1 (relating to other credits) is amended by adding at 
     the end the following new section:

     ``SEC. 30B. CREDIT TO ELEMENTARY AND SECONDARY SCHOOL 
                   TEACHERS WHO PROVIDE CLASSROOM MATERIALS.

       ``(a) Allowance of Credit.--In the case of an eligible 
     educator, there shall be allowed as a credit against the tax 
     imposed by this chapter for the taxable year an amount equal 
     to 50 percent of the qualified elementary and secondary 
     education expenses which are paid or incurred by the taxpayer 
     during such taxable year.
       ``(b) Maximum Credit.--The credit allowed by subsection (a) 
     for any taxable year shall not exceed $250.
       ``(c) Definitions.--
       ``(1) Eligible educator.--The term `eligible educator' has 
     the same meaning given such term in section 223(c).
       ``(2) Qualified elementary and secondary education 
     expenses.--The term `qualified elementary and secondary 
     education expenses' means expenses for books, supplies (other 
     than nonathletic supplies for courses of instruction in 
     health or physical education), computer equipment (including 
     related software and services) and other equipment, and 
     supplementary materials used by an eligible educator in the 
     classroom.
       ``(3) Elementary or secondary school.--The term `elementary 
     or secondary school' means any school which provides 
     elementary education or secondary education (through grade 
     12), as determined under State law.
       ``(d) Special Rules.--
       ``(1) Denial of double benefit.--No deduction shall be 
     allowed under this chapter for any expense for which credit 
     is allowed under this section.
       ``(2) Application with other credits.--The credit allowable 
     under subsection (a) for any taxable year shall not exceed 
     the excess (if any) of--
       ``(A) the regular tax for the taxable year, reduced by the 
     sum of the credits allowable under subpart A and the 
     preceding sections of this subpart, over
       ``(B) the tentative minimum tax for the taxable year.
       ``(e) Election To Have Credit Not Apply.--A taxpayer may 
     elect to have this section not apply for any taxable year.''.
       (b) Clerical Amendment.--The table of sections for subpart 
     B of part IV of subchapter A of chapter 1 is amended by 
     adding at the end the following new item:

``Sec. 30B. Credit to elementary and secondary school teachers who 
              provide classroom materials.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.
                                  ____

  SA 676. Mr. BIDEN (for himself, Mr. Torricelli, Mr. Kerry, Mr. 
Schumer, Mr. Baucus, Mr. Allen, Mrs. Boxer, Mr. Carper, Mr. Chafee, 
Mrs. Clinton, Mr. Corzine, Mr. Dayton, Mr. Dodd, Mr. Durbin, Mr. Leahy, 
Ms. Mikulski, Mrs. Murray, Mr. Rockefeller, Mr. Sarbanes, Mr. Specter, 
and Mr. Warner) submitted an amendment intended to be proposed by him 
to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for

[[Page S5173]]

fiscal year 2002; which was ordered to lie on the table; as follows:

       At the end of subtitle A of title VIII, add the following:

                   TITLE--HIGH-SPEED RAIL INVESTMENT

     SEC. ____. CREDIT TO HOLDERS OF QUALIFIED AMTRAK BONDS.

       (a) In General.--Part IV of subchapter A of chapter 1 
     (relating to credits against tax) is amended by adding at the 
     end the following new subpart:

``Subpart H--Nonrefundable Credit for Holders of Qualified Amtrak Bonds

``Sec. 54. Credit to holders of qualified Amtrak bonds.

     ``SEC. 54. CREDIT TO HOLDERS OF QUALIFIED AMTRAK BONDS.

       ``(a) Allowance of Credit.--In the case of a taxpayer who 
     holds a qualified Amtrak bond on a credit allowance date of 
     such bond which occurs during the taxable year, there shall 
     be allowed as a credit against the tax imposed by this 
     chapter for such taxable year an amount equal to the sum of 
     the credits determined under subsection (b) with respect to 
     credit allowance dates during such year on which the taxpayer 
     holds such bond.
       ``(b) Amount of Credit.--
       ``(1) In general.--The amount of the credit determined 
     under this subsection with respect to any credit allowance 
     date for a qualified Amtrak bond is 25 percent of the annual 
     credit determined with respect to such bond.
       ``(2) Annual credit.--The annual credit determined with 
     respect to any qualified Amtrak bond is the product of--
       ``(A) the applicable credit rate, multiplied by
       ``(B) the outstanding face amount of the bond.
       ``(3) Applicable credit rate.--For purposes of paragraph 
     (2), the applicable credit rate with respect to an issue is 
     the rate equal to an average market yield (as of the day 
     before the date of sale of the issue) on outstanding long-
     term corporate debt obligations (determined under regulations 
     prescribed by the Secretary).
       ``(4) Special rule for issuance and redemption.--In the 
     case of a bond which is issued during the 3-month period 
     ending on a credit allowance date, the amount of the credit 
     determined under this subsection with respect to such credit 
     allowance date shall be a ratable portion of the credit 
     otherwise determined based on the portion of the 3-month 
     period during which the bond is outstanding. A similar rule 
     shall apply when the bond is redeemed.
       ``(c) Limitation Based on Amount of Tax.--
       ``(1) In general.--The credit allowed under subsection (a) 
     for any taxable year shall not exceed the excess of--
       ``(A) the sum of the regular tax liability (as defined in 
     section 26(b)) plus the tax imposed by section 55, over
       ``(B) the sum of the credits allowable under this part 
     (other than this subpart and subpart C).
       ``(2) Carryover of unused credit.--If the credit allowable 
     under subsection (a) exceeds the limitation imposed by 
     paragraph (1) for such taxable year, such excess shall be 
     carried to the succeeding taxable year and added to the 
     credit allowable under subsection (a) for such taxable year.
       ``(d) Qualified Amtrak Bond.--For purposes of this part--
       ``(1) In general.--The term `qualified Amtrak bond' means 
     any bond issued as part of an issue if--
       ``(A) 95 percent or more of the proceeds of such issue are 
     to be used for any qualified project,
       ``(B) the bond is issued by the National Railroad Passenger 
     Corporation,
       ``(C) the issuer--
       ``(i) designates such bond for purposes of this section,
       ``(ii) certifies that it meets the State contribution 
     requirement of paragraph (3) with respect to such project and 
     that it has received the required State contribution payment 
     before the issuance of such bond,
       ``(iii) certifies that it has obtained the written approval 
     of the Secretary of Transportation for such project, 
     including a finding by the Inspector General of the 
     Department of Transportation that there is a reasonable 
     likelihood that the proposed program will result in a 
     positive incremental financial contribution to the National 
     Railroad Passenger Corporation and that the investment 
     evaluation process includes a return on investment, 
     leveraging of funds (including State capital and operating 
     contributions), cost effectiveness, safety improvement, 
     mobility improvement, and feasibility, and
       ``(iv) certifies that it has obtained written certification 
     by the Secretary, after consultation with the Secretary of 
     Transportation, that, in the case of a qualified project 
     which results in passenger trains operating at speeds greater 
     than 79 miles per hour, the issuer has entered into a written 
     agreement with the rail carriers (as defined in section 24102 
     of title 49, United States Code) the properties of which are 
     to be improved by such project as to the scope and estimated 
     cost of such project and the impact on freight capacity of 
     such rail carriers; Provided that the National Railroad 
     Passenger Corporation shall not exercise its rights under 
     section 24308(a) of such title 49 to resolve disputes with 
     respect to such project or the cost of such project,
       ``(D) the term of each bond which is part of such issue 
     does not exceed 20 years,
       ``(E) the payment of principal with respect to such bond is 
     the obligation of the National Railroad Passenger Corporation 
     (regardless of the establishment of the trust account under 
     subsection (j)), and
       ``(F) the issue meets the requirements of subsection (h).
       ``(2) Treatment of changes in use.--For purposes of 
     paragraph (1)(A), the proceeds of an issue shall not be 
     treated as used for a qualified project to the extent that 
     the issuer takes any action within its control which causes 
     such proceeds not to be used for a qualified project. The 
     Secretary shall prescribe regulations specifying remedial 
     actions that may be taken (including conditions to taking 
     such remedial actions) to prevent an action described in the 
     preceding sentence from causing a bond to fail to be a 
     qualified Amtrak bond.
       ``(3) State contribution requirement.--
       ``(A) In general.--For purposes of paragraph (1)(C)(ii), 
     the State contribution requirement of this paragraph is met 
     with respect to any qualified project if the National 
     Railroad Passenger Corporation has a written binding 
     commitment from 1 or more States to make matching 
     contributions not later than the date of issuance of the 
     issue of not less than 20 percent of the cost of the 
     qualified project. State matching contributions may include 
     privately funded contributions.
       ``(B) Use of state matching contributions.--The matching 
     contributions described in subparagraph (A) with respect to 
     each qualified project shall be used--
       ``(i) as necessary to redeem bonds which are a part of the 
     issue with respect to such project, and
       ``(ii) in the case of any remaining amount, at the election 
     of the National Railroad Passenger Corporation and the 
     contributing State--

       ``(I) to fund a qualified project,
       ``(II) to redeem other qualified Amtrak bonds, or
       ``(III) for the purposes of subclauses (I) and (II).

       ``(C) State contribution requirement for certain qualified 
     projects.--
       ``(i) In general.--Notwithstanding any other provision of 
     law, with respect to any qualified project on the high-speed 
     rail corridors designated under section 104(d)(2) of title 
     23, United States Code, the State contribution requirement of 
     this paragraph may include the value of land to be 
     contributed by a State for right-of-way.
       ``(ii) Special rules regarding use of bond proceeds.--
     Proceeds from the issuance of bonds for such a qualified 
     project may be used to the extent necessary for the purpose 
     of subparagraph (B)(i), and any such proceeds deposited into 
     the trust account required under subsection (j) shall be 
     deemed expenditures for the qualified project under 
     subsection (h).
       ``(D) State matching contributions may not include federal 
     funds.--For purposes of this paragraph, State matching 
     contributions shall not be derived, directly or indirectly, 
     from Federal funds, including any transfers from the Highway 
     Trust Fund under section 9503.
       ``(E) No state contribution requirement for certain 
     qualified projects.--With respect to any qualified project 
     described in subsection (e)(4), the State contribution 
     requirement of this paragraph is zero.
       ``(4) Qualified project.--
       ``(A) In general.--The term `qualified project' means--
       ``(i) the acquisition, financing, or refinancing of 
     equipment, rolling stock, and other capital improvements, 
     including station rehabilitation or construction, track or 
     signal improvements, or the elimination of grade crossings, 
     for the northeast rail corridor between Washington, D.C. and 
     Boston, Massachusetts,
       ``(ii) the acquisition, financing, or refinancing of 
     equipment, rolling stock, and other capital improvements, 
     including station rehabilitation or construction, track or 
     signal improvements, or the elimination of grade crossings, 
     for the improvement of train speeds or safety (or both) on 
     the high-speed rail corridors designated under section 
     104(d)(2) of title 23, United States Code, and
       ``(iii) the acquisition, financing, or refinancing of 
     equipment, rolling stock, and other capital improvements, 
     including station rehabilitation or construction, track or 
     signal improvements, or the elimination of grade crossings, 
     for other intercity passenger rail corridors for the purpose 
     of increasing railroad speeds up to 90 miles per hour.
       ``(B) Refinancing rules.--For purposes of subparagraph (A), 
     a refinancing shall constitute a qualified project only if 
     the indebtedness being refinanced (including any obligation 
     directly or indirectly refinanced by such indebtedness) was 
     originally incurred by the National Railroad Passenger 
     Corporation--
       ``(i) after the date of the enactment of this section,
       ``(ii) for a term of not more than 3 years,
       ``(iii) to finance or acquire capital improvements 
     described in subparagraph (A), and
       ``(iv) in anticipation of being refinanced with proceeds of 
     a qualified Amtrak bond.
       ``(C) Prior issuance costs.--For purposes of subparagraph 
     (A), a qualified project may include the costs a State incurs 
     prior to the issuance of the bonds to fulfill any statutory 
     requirements directly necessary for implementation of the 
     project.

[[Page S5174]]

       ``(e) Limitations on Amount of Bonds Designated.--
       ``(1) In general.--There is a qualified Amtrak bond 
     limitation for each fiscal year. Such limitation is--
       ``(A) $1,200,000,000 for each of the fiscal years 2002 
     through 2011, and
       ``(B) except as provided in paragraph (5), zero after 
     fiscal year 2011.
       ``(2) Bonds for rail corridors.--Not more than 
     $3,000,000,000 of the limitation under paragraph (1) may be 
     designated for any 1 rail corridor described in clause (i) or 
     (ii) of subsection (d)(4)(A).
       ``(3) Bonds for other projects.--Not more than $100,000,000 
     of the limitation under paragraph (1) for any fiscal year may 
     be allocated to all qualified projects described in 
     subsection (d)(4)(A)(iii).
       ``(4) Bonds for alaska railroad.--The Secretary of 
     Transportation may allocate to the Alaska Railroad a portion 
     of the qualified Amtrak limitation for any fiscal year in 
     order to allow the Alaska Railroad to issue bonds which meet 
     the requirements of this section for use in financing any 
     project described in subsection (d)(4)(A)(iii) (determined 
     without regard to the requirement of increasing railroad 
     speeds). For purposes of this section, the Alaska Railroad 
     shall be treated in the same manner as the National Railroad 
     Passenger Corporation.
       ``(5) Carryover of unused limitation.--If for any fiscal 
     year--
       ``(A) the limitation amount under paragraph (1), exceeds
       ``(B) the amount of bonds issued during such year which are 
     designated under subsection (d)(1)(C)(i),

     the limitation amount under paragraph (1) for the following 
     fiscal year (through fiscal year 2015) shall be increased by 
     the amount of such excess.
       ``(6) Additional selection criteria.--In selecting 
     qualified projects for allocation of the qualified Amtrak 
     bond limitation under this subsection, the Secretary of 
     Transportation--
       ``(A) may give preference to any project with a State 
     matching contribution rate exceeding 20 percent, and
       ``(B) shall consider regional balance in infrastructure 
     investment and the national interest in ensuring the 
     development of a nation-wide high-speed rail transportation 
     network.
       ``(f) Other Definitions.--For purposes of this subpart--
       ``(1) Bond.--The term `bond' includes any obligation.
       ``(2) Credit allowance date.--The term `credit allowance 
     date' means--
       ``(A) March 15,
       ``(B) June 15,
       ``(C) September 15, and
       ``(D) December 15.

     Such term includes the last day on which the bond is 
     outstanding.
       ``(3) State.--The term `State' means the several States and 
     the District of Columbia, and any subdivision thereof.
       ``(4) Program.--The term `program' means 1 or more projects 
     implemented over 1 or more years to support the development 
     of intercity passenger rail corridors.
       ``(g) Credit Included in Gross Income.--Gross income 
     includes the amount of the credit allowed to the taxpayer 
     under this section (determined without regard to subsection 
     (c)) and the amount so included shall be treated as interest 
     income.
       ``(h) Special Rules Relating to Arbitrage.--
       ``(1) In general.--Subject to paragraph (2), an issue shall 
     be treated as meeting the requirements of this subsection if 
     as of the date of issuance, the issuer reasonably expects--
       ``(A) to spend at least 95 percent of the proceeds of the 
     issue for 1 or more qualified projects within the 5-year 
     period beginning on such date, and
       ``(B) to proceed with due diligence to complete such 
     projects and to spend the proceeds of the issue.
       ``(2) Rules regarding continuing compliance after 5-year 
     determination.--If at least 95 percent of the proceeds of the 
     issue is not expended for 1 or more qualified projects within 
     the 5-year period beginning on the date of issuance, an issue 
     shall be treated as continuing to meet the requirements of 
     this subsection if either--
       ``(A) the issuer uses all unspent proceeds of the issue to 
     redeem bonds of the issue within 90 days after the end of 
     such 5-year period, or
       ``(B) the following requirements are met:
       ``(i) The issuer spends at least 75 percent of the proceeds 
     of the issue for 1 or more qualified projects within the 5-
     year period beginning on the date of issuance.
       ``(ii) The issuer has proceeded with due diligence to spend 
     the proceeds of the issue within such 5-year period and 
     continues to proceed with due diligence to spend such 
     proceeds.
       ``(iii) The issuer pays to the Federal Government any 
     earnings on the proceeds of the issue that accrue after the 
     end of such 5-year period.
       ``(iv) Either--

       ``(I) at least 95 percent of the proceeds of the issue is 
     expended for 1 or more qualified projects within the 6-year 
     period beginning on the date of issuance, or
       ``(II) the issuer uses all unspent proceeds of the issue to 
     redeem bonds of the issue within 90 days after the end of 
     such 6-year period.

       ``(i) Recapture of Portion of Credit Where Cessation of 
     Compliance.--
       ``(1) In general.--If any bond which when issued purported 
     to be a qualified Amtrak bond ceases to be a qualified Amtrak 
     bond, the issuer shall pay to the United States (at the time 
     required by the Secretary) an amount equal to the sum of--
       ``(A) the aggregate of the credits allowable under this 
     section with respect to such bond (determined without regard 
     to subsection (c)) for taxable years ending during the 
     calendar year in which such cessation occurs and the 2 
     preceding calendar years, and
       ``(B) interest at the underpayment rate under section 6621 
     on the amount determined under subparagraph (A) for each 
     calendar year for the period beginning on the first day of 
     such calendar year.
       ``(2) Failure to pay.--If the issuer fails to timely pay 
     the amount required by paragraph (1) with respect to such 
     bond, the tax imposed by this chapter on each holder of any 
     such bond which is part of such issue shall be increased (for 
     the taxable year of the holder in which such cessation 
     occurs) by the aggregate decrease in the credits allowed 
     under this section to such holder for taxable years beginning 
     in such 3 calendar years which would have resulted solely 
     from denying any credit under this section with respect to 
     such issue for such taxable years.
       ``(3) Special rules.--
       ``(A) Tax benefit rule.--The tax for the taxable year shall 
     be increased under paragraph (2) only with respect to credits 
     allowed by reason of this section which were used to reduce 
     tax liability. In the case of credits not so used to reduce 
     tax liability, the carryforwards and carrybacks under section 
     39 shall be appropriately adjusted.
       ``(B) No credits against tax.--Any increase in tax under 
     paragraph (2) shall not be treated as a tax imposed by this 
     chapter for purposes of determining--
       ``(i) the amount of any credit allowable under this part, 
     or
       ``(ii) the amount of the tax imposed by section 55.
       ``(j) Use of Trust Account.--
       ``(1) In general.--The amount of any matching contribution 
     with respect to a qualified project described in subsection 
     (d)(3)(B)(i) or (d)(3)(B)(ii)(II) and the temporary period 
     investment earnings on proceeds of the issue with respect to 
     such project, and any earnings thereon, shall be held in a 
     trust account by a trustee independent of the National 
     Railroad Passenger Corporation to be used to the extent 
     necessary to redeem bonds which are part of such issue.
       ``(2) Use of remaining funds in trust account.--Upon the 
     repayment of the principal of all qualified Amtrak bonds 
     issued under this section, any remaining funds in the trust 
     account described in paragraph (1) shall be available--
       ``(A) to the trustee described in paragraph (1), to meet 
     any remaining obligations under any guaranteed investment 
     contract used to secure earnings sufficient to repay the 
     principal of such bonds, and
       ``(B) to the issuer, for any qualified project.
       ``(k) Other Special Rules.--
       ``(1) Partnership; s corporation; and other pass-thru 
     entities.--Under regulations prescribed by the Secretary, in 
     the case of a partnership, trust, S corporation, or other 
     pass-thru entity, rules similar to the rules of section 41(g) 
     shall apply with respect to the credit allowable under 
     subsection (a).
       ``(2) Bonds held by regulated investment companies.--If any 
     qualified Amtrak bond is held by a regulated investment 
     company, the credit determined under subsection (a) shall be 
     allowed to shareholders of such company under procedures 
     prescribed by the Secretary.
       ``(3) Credits may be stripped.--Under regulations 
     prescribed by the Secretary--
       ``(A) In general.--There may be a separation (including at 
     issuance) of the ownership of a qualified Amtrak bond and the 
     entitlement to the credit under this section with respect to 
     such bond. In case of any such separation, the credit under 
     this section shall be allowed to the person who on the credit 
     allowance date holds the instrument evidencing the 
     entitlement to the credit and not to the holder of the bond.
       ``(B) Certain rules to apply.--In the case of a separation 
     described in subparagraph (A), the rules of section 1286 
     shall apply to the qualified Amtrak bond as if it were a 
     stripped bond and to the credit under this section as if it 
     were a stripped coupon.
       ``(4) Treatment for estimated tax purposes.--Solely for 
     purposes of sections 6654 and 6655, the credit allowed by 
     this section to a taxpayer by reason of holding a qualified 
     Amtrak bond on a credit allowance date shall be treated as if 
     it were a payment of estimated tax made by the taxpayer on 
     such date.
       ``(5) Credit may be transferred.--Nothing in any law or 
     rule of law shall be construed to limit the transferability 
     of the credit allowed by this section through sale and 
     repurchase agreements.
       ``(6) Reporting.--Issuers of qualified Amtrak bonds shall 
     submit reports similar to the reports required under section 
     149(e).''.
       (b) Reporting.--Subsection (d) of section 6049 (relating to 
     returns regarding payments of interest), as amended by 
     section 505(d), is amended by adding at the end the following 
     new paragraph:
       ``(9) Reporting of credit on qualified amtrak bonds.--
       ``(A) In general.--For purposes of subsection (a), the term 
     `interest' includes amounts includible in gross income under 
     section 54(g) and such amounts shall be

[[Page S5175]]

     treated as paid on the credit allowance date (as defined in 
     section 54(f)(2)).
       ``(B) Reporting to corporations, etc.--Except as otherwise 
     provided in regulations, in the case of any interest 
     described in subparagraph (A) of this paragraph, subsection 
     (b)(4) of this section shall be applied without regard to 
     subparagraphs (A), (H), (I), (J), (K), and (L)(i).
       ``(C) Regulatory authority.--The Secretary may prescribe 
     such regulations as are necessary or appropriate to carry out 
     the purposes of this paragraph, including regulations which 
     require more frequent or more detailed reporting.''.
       (c) Clerical Amendments.--
       (1) The table of subparts for part IV of subchapter A of 
     chapter 1 is amended by adding at the end the following new 
     item:

``Subpart H. Nonrefundable Credit for Holders of Qualified Amtrak 
              Bonds.''.

       (2) Section 6401(b)(1) is amended by striking ``and G'' and 
     inserting ``G, and H''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to obligations issued after September 30, 2001.
       (e) Multi-Year Capital Spending Plan and Oversight.--
       (1) Amtrak capital spending plan.--
       (A) In general.--The National Railroad Passenger 
     Corporation shall annually submit to the President and 
     Congress a multi-year capital spending plan, as approved by 
     the Board of Directors of the Corporation.
       (B) Contents of plan.--Such plan shall identify the capital 
     investment needs of the Corporation over a period of not less 
     than 5 years and the funding sources available to finance 
     such needs and shall prioritize such needs according to 
     corporate goals and strategies.
       (C) Initial submission date.--The first plan shall be 
     submitted before the issuance of any qualified Amtrak bonds 
     by the National Railroad Passenger Corporation pursuant to 
     section 54 of the Internal Revenue Code of 1986 (as added by 
     this section).
       (2) Oversight of amtrak trust account and qualified 
     projects.--
       (A) Trust account oversight.--The Secretary of the Treasury 
     shall annually report to Congress as to whether the amount 
     deposited in the trust account established by the National 
     Railroad Passenger Corporation under section 54(j) of such 
     Code (as so added) is sufficient to fully repay at maturity 
     the principal of any outstanding qualified Amtrak bonds 
     issued pursuant to section 54 of such Code (as so added), 
     together with amounts expected to be deposited into such 
     account, as certified by the National Railroad Passenger 
     Corporation in accordance with procedures prescribed by the 
     Secretary of the Treasury.
       (B) Project oversight.--The National Railroad Passenger 
     Corporation shall contract for an annual independent 
     assessment of the costs and benefits of the qualified 
     projects financed by such qualified Amtrak bonds, including 
     an assessment of the investment evaluation process of the 
     Corporation. The annual assessment shall be included in the 
     plan submitted under paragraph (1).
       (C) Oversight funding.--Not more than 0.5 percent of the 
     amounts made available through the issuance of qualified 
     Amtrak bonds by the National Railroad Passenger Corporation 
     pursuant to section 54 of such Code (as so added) may be used 
     by the National Railroad Passenger Corporation for 
     assessments described in subparagraph (B).
       (f) Protection of Highway Trust Fund.--
       (1) Certification by the secretary of the treasury.--The 
     issuance of any qualified Amtrak bonds by the National 
     Railroad Passenger Corporation or the Alaska Railroad 
     pursuant to section 54 of the Internal Revenue Code of 1986 
     (as added by this section) is conditioned on certification by 
     the Secretary of the Treasury, after consultation with the 
     Secretary of Transportation, within 30 days of a request by 
     the issuer, that with respect to funds of the Highway Trust 
     Fund described under paragraph (2), the issuer either--
       (A) has not received such funds during fiscal years 
     commencing with fiscal year 2002 and ending before the fiscal 
     year the bonds are issued, or
       (B) has repaid to the Highway Trust Fund any such funds 
     which were received during such fiscal years.
       (2) Applicability.--This subsection shall apply to funds 
     received directly, or indirectly from a State or local 
     transit authority, from the Highway Trust Fund established 
     under section 9503 of the Internal Revenue Code of 1986, 
     except for funds authorized to be expended under section 
     9503(c) of such Code, as in effect on the date of the 
     enactment of this Act.
       (3) No retroactive effect.--Nothing in this subsection 
     shall adversely affect the entitlement of the holders of 
     qualified Amtrak bonds to the tax credit allowed pursuant to 
     section 54 of the Internal Revenue Code of 1986 (as so added) 
     or to repayment of principal upon maturity.
       (g) Exemption From Taxes for High-Speed Rail Lines and 
     Improvements.--Notwithstanding any other provision of law, no 
     rail carrier (as defined in section 24102 of title 49, United 
     States Code) shall be required to pay any tax or fee imposed 
     by the Internal Revenue Code of 1986 with respect to the 
     acquisition, improvement, or ownership of personal or real 
     property funded by the proceeds of qualified Amtrak bonds (as 
     defined in section 54(d) of the Internal Revenue Code of 1986 
     (as added by this section) or with respect to revenues or 
     income derived from such acquisition, improvement, or 
     ownership (other than revenues or income derived from 
     expanded operations resulting from such acquisition, 
     improvement, or ownership).
       (h) Issuance of Regulations.--The Secretary of the Treasury 
     shall issue regulations required under section 54 of the 
     Internal Revenue Code (as added by this section) not later 
     than 90 days after the date of the enactment of this Act.
       (i) Issuance of Tax-Exempt Bonds for Rail Passenger 
     Projects.--
       (1) Funding state match requirement.--Section 142(a) 
     (relating to exempt facility bond) is amended by striking 
     ``or'' at the end of paragraph (11), by striking the period 
     at the end of paragraph (12) and inserting ``, or'', and by 
     adding at the end the following new paragraph:
       ``(13) the State contribution requirement for qualified 
     projects under section 54.''.
       (2) Repeal of governmental ownership requirement for mass 
     commuting facilities.--Section 142(b)(1)(A) (relating to 
     certain facilities must be governmentally owned) is amended 
     by striking ``(3),''.
       (3) Definition of high-speed intercity rail facilities.--
     Section 142(i)(1) is amended by striking ``in excess of 150 
     miles per hour'' and inserting ``prescribed in section 
     104(d)(2) of title 23, United States Code,''.
       (4) Exemption from volume cap.--Subsection (g) of section 
     146 (relating to exception for certain bonds) is amended by 
     striking paragraph (4) and the last sentence of such 
     subsection and inserting the following new paragraph:
       ``(4) any exempt facility bond issued as part of an issue 
     described in paragraph (3), (11), or (13) of section 142(a) 
     (relating to mass commuting facilities, high-speed intercity 
     rail facilities, and State contribution requirements under 
     section 54).''.
       (5) Effective date.--The amendments made by this subsection 
     shall apply to bonds issued after the date of enactment of 
     this Act.
                                  ____

  SA 677. Mr. KERRY submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       On page 66, in the table set forth between lines 1 and 2, 
     strike that matter relating to years 2007, 2008, 2009, and 
     2010 and insert the following:
  ``2007 and 2008........................................46 percent....

  ``2009 and 2010..................................45 per- cent.''.....

       At the end of subtitle A of title VIII, add the following:

     SEC. ____. CREDIT FOR MEDICAL RESEARCH RELATED TO DEVELOPING 
                   VACCINES AGAINST WIDESPREAD DISEASES.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits), as amended 
     by section 620, is amended by adding at the end the following 
     new section:

     ``SEC. 45G. CREDIT FOR MEDICAL RESEARCH RELATED TO DEVELOPING 
                   VACCINES AGAINST WIDESPREAD DISEASES.

       ``(a) General Rule.--For purposes of section 38, the 
     vaccine research credit determined under this section for the 
     taxable year is an amount equal to 30 percent of the 
     qualified vaccine research expenses for the taxable year.
       ``(b) Qualified Vaccine Research Expenses.--For purposes of 
     this section--
       ``(1) Qualified vaccine research expenses.--
       ``(A) In general.--Except as otherwise provided in this 
     paragraph, the term `qualified vaccine research expenses' 
     means the amounts which are paid or incurred by the taxpayer 
     during the taxable year which would be described in 
     subsection (b) of section 41 if such subsection were applied 
     with the modifications set forth in subparagraph (B).
       ``(B) Modifications; increased incentive for contract 
     research payments.--For purposes of subparagraph (A), 
     subsection (b) of section 41 shall be applied--
       ``(i) by substituting `vaccine research' for `qualified 
     research' each place it appears in paragraphs (2) and (3) of 
     such subsection, and
       ``(ii) by substituting `100 percent' for `65 percent' in 
     paragraph (3)(A) of such subsection.
       ``(C) Exclusion for amounts funded by grants, etc.--The 
     term `qualified vaccine research expenses' shall not include 
     any amount to the extent such amount is funded by any grant, 
     contract, or otherwise by another person (or any governmental 
     entity).
       ``(2) Vaccine research.--The term `vaccine research' means 
     research to develop vaccines and microbicides for--
       ``(A) malaria,
       ``(B) tuberculosis,
       ``(C) HIV, or
       ``(D) any infectious disease (of a single etiology) which, 
     according to the World Health Organization, causes over 
     1,000,000 human deaths annually.
       ``(c) Coordination With Credit for Increasing Research 
     Expenditures.--
       ``(1) In general.--Except as provided in paragraph (2), any 
     qualified vaccine research expenses for a taxable year to 
     which an election under this section applies shall not be

[[Page S5176]]

     taken into account for purposes of determining the credit 
     allowable under section 41 for such taxable year.
       ``(2) Expenses included in determining base period research 
     expenses.--Any qualified vaccine research expenses for any 
     taxable year which are qualified research expenses (within 
     the meaning of section 41(b)) shall be taken into account in 
     determining base period research expenses for purposes of 
     applying section 41 to subsequent taxable years.
       ``(d) Special Rules.--
       ``(1) Limitations on foreign testing.--No credit shall be 
     allowed under this section with respect to any vaccine 
     research (other than human clinical testing) conducted 
     outside the United States.
       ``(2) Pre-clinical research.--No credit shall be allowed 
     under this section for pre-clinical research unless such 
     research is pursuant to a research plan an abstract of which 
     has been filed with the Secretary before the beginning of 
     such year. The Secretary, in consultation with the Secretary 
     of Health and Human Services, shall prescribe regulations 
     specifying the requirements for such plans and procedures for 
     filing under this paragraph.
       ``(3) Certain rules made applicable.--Rules similar to the 
     rules of paragraphs (1) and (2) of section 41(f) shall apply 
     for purposes of this section.
       ``(4) Election.--This section (other than subsection (e)) 
     shall apply to any taxpayer for any taxable year only if such 
     taxpayer elects to have this section apply for such taxable 
     year.
       ``(e) Credit To Be Refundable for Certain Taxpayers.--
       ``(1) In general.--In the case of an electing qualified 
     taxpayer--
       ``(A) the credit under this section shall be determined 
     without regard to section 38(c), and
       ``(B) the credit so determined shall be allowed as a credit 
     under subpart C.
       ``(2) Electing qualified taxpayer.--For purposes of this 
     subsection, the term `electing qualified taxpayer' means, 
     with respect to any taxable year, any domestic C corporation 
     if--
       ``(A) the aggregate gross assets of such corporation at any 
     time during such taxable year are $500,000,000 or less,
       ``(B) the net income tax (as defined in section 38(c)) of 
     such corporation is zero for such taxable year and the 2 
     preceding taxable years,
       ``(C) as of the close of the taxable year, the corporation 
     is not under the jurisdiction of a court in a title 11 or 
     similar case (within the meaning of section 368(a)(3)(A)),
       ``(D) the corporation provides such assurances as the 
     Secretary requires that, not later than 2 taxable years after 
     the taxable year in which the taxpayer receives any refund of 
     a credit under this subsection, the taxpayer will make an 
     amount of qualified vaccine research expenses equal to the 
     amount of such refund, and
       ``(E) the corporation elects the application of this 
     subsection for such taxable year.
       ``(3) Aggregate gross assets.--Aggregate gross assets shall 
     be determined in the same manner as such assets are 
     determined under section 1202(d).
       ``(4) Controlled groups.--A corporation shall be treated as 
     meeting the requirement of paragraph (2)(B) only if each 
     person who is treated with such corporation as a single 
     employer under subsections (a) and (b) of section 52 also 
     meets such requirement.
       ``(5) Special rules.--
       ``(A) Recapture of credit.--The Secretary shall promulgate 
     such regulations as necessary and appropriate to provide for 
     the recapture of any credit allowed under this subsection in 
     cases where the taxpayer fails to make the expenditures 
     described in paragraph (2)(D).
       ``(B) Exclusion of certain qualified vaccine research 
     expenses.--For purposes of determining the credit under this 
     section for a taxable year, the qualified vaccine research 
     expenses taken into account for such taxable year shall not 
     include an amount paid or incurred during such taxable year 
     equal to the amount described in paragraph (2)(D) (and not 
     already taken into account under this subparagraph for a 
     previous taxable year).''.
       (b) Inclusion in General Business Credit.--
       (1) In general.--Section 38(b), as amended by section 620, 
     is amended by striking ``plus'' at the end of paragraph (14), 
     by striking the period at the end of paragraph (15) and 
     inserting ``, plus'', and by adding at the end the following 
     new paragraph:
       ``(16) the vaccine research credit determined under section 
     45G.''.
       (2) Transition rule.--Section 39(d), as amended by section 
     620, is amended by adding at the end the following new 
     paragraph:
       ``(12) No carryback of section 45g credit before 
     enactment.--No portion of the unused business credit for any 
     taxable year which is attributable to the vaccine research 
     credit determined under section 45G may be carried back to a 
     taxable year ending before the date of the enactment of 
     section 45G.''.
       (c) Denial of Double Benefit.--Section 280C is amended by 
     adding at the end the following new subsection:
       ``(d) Credit for Qualified Vaccine Research Expenses.--
       ``(1) In general.--No deduction shall be allowed for that 
     portion of the qualified vaccine research expenses (as 
     defined in section 45G(b)) otherwise allowable as a deduction 
     for the taxable year which is equal to the amount of the 
     credit determined for such taxable year under section 45G(a).
       ``(2) Certain rules to apply.--Rules similar to the rules 
     of paragraphs (2), (3), and (4) of subsection (c) shall apply 
     for purposes of this subsection.''.
       (d) Deduction for Unused Portion of Credit.--Section 196(c) 
     (defining qualified business credits) is amended by striking 
     ``and'' at the end of paragraph (8), by striking the period 
     at the end of paragraph (9) and inserting ``, and'', and by 
     adding at the end the following new paragraph:
       ``(10) the vaccine research credit determined under section 
     45G(a) (other than such credit determined under the rules of 
     section 280C(d)(2)).''.
       (e) Technical Amendments.--
       (1) Section 1324(b)(2) of title 31, United States Code, is 
     amended by inserting ``or from section 45G(e) of such Code,'' 
     after ``1978,''.
       (2) The table of sections for subpart D of part IV of 
     subchapter A of chapter 1, as amended by section 620, is 
     amended by adding at the end the following new item:

``Sec. 45G. Credit for medical research related to developing vaccines 
              against widespread diseases.''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after the date of the 
     enactment of this Act.
                                  ____

  SA 678. Mr. KERRY submitted an amendment intended to be proposed by 
him to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       On page 66, in the table set forth between lines 1 and 2, 
     strike that matter relating to years 2007, 2008, 2009, and 
     2010 and insert the following:
  ``2007 and 2008........................................46 percent....

  ``2009 and 2010..................................45 per- cent.''.....

       At the end of subtitle A of title VIII, add the following:

     SEC. ____. CREDIT FOR MEDICAL RESEARCH RELATED TO DEVELOPING 
                   VACCINES AGAINST WIDESPREAD DISEASES.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits), as amended 
     by section 620, is amended by adding at the end the following 
     new section:

     ``SEC. 45G. CREDIT FOR MEDICAL RESEARCH RELATED TO DEVELOPING 
                   VACCINES AGAINST WIDESPREAD DISEASES.

       ``(a) General Rule.--For purposes of section 38, the 
     vaccine research credit determined under this section for the 
     taxable year is an amount equal to 30 percent of the 
     qualified vaccine research expenses for the taxable year.
       ``(b) Qualified Vaccine Research Expenses.--For purposes of 
     this section--
       ``(1) Qualified vaccine research expenses.--
       ``(A) In general.--Except as otherwise provided in this 
     paragraph, the term `qualified vaccine research expenses' 
     means the amounts which are paid or incurred by the taxpayer 
     during the taxable year which would be described in 
     subsection (b) of section 41 if such subsection were applied 
     with the modifications set forth in subparagraph (B).
       ``(B) Modifications; increased incentive for contract 
     research payments.--For purposes of subparagraph (A), 
     subsection (b) of section 41 shall be applied--
       ``(i) by substituting `vaccine research' for `qualified 
     research' each place it appears in paragraphs (2) and (3) of 
     such subsection, and
       ``(ii) by substituting `100 percent' for `65 percent' in 
     paragraph (3)(A) of such subsection.
       ``(C) Exclusion for amounts funded by grants, etc.--The 
     term `qualified vaccine research expenses' shall not include 
     any amount to the extent such amount is funded by any grant, 
     contract, or otherwise by another person (or any governmental 
     entity).
       ``(2) Vaccine research.--The term `vaccine research' means 
     research to develop vaccines and microbicides for--
       ``(A) malaria,
       ``(B) tuberculosis,
       ``(C) HIV, or
       ``(D) any infectious disease (of a single etiology) which, 
     according to the World Health Organization, causes over 
     1,000,000 human deaths annually.
       ``(c) Coordination With Credit for Increasing Research 
     Expenditures.--
       ``(1) In general.--Except as provided in paragraph (2), any 
     qualified vaccine research expenses for a taxable year to 
     which an election under this section applies shall not be 
     taken into account for purposes of determining the credit 
     allowable under section 41 for such taxable year.
       ``(2) Expenses included in determining base period research 
     expenses.--Any qualified vaccine research expenses for any 
     taxable year which are qualified research expenses (within 
     the meaning of section 41(b)) shall be taken into account in 
     determining base period research expenses for purposes of 
     applying section 41 to subsequent taxable years.
       ``(d) Special Rules.--
       ``(1) Limitations on foreign testing.--No credit shall be 
     allowed under this section with respect to any vaccine 
     research (other than human clinical testing) conducted 
     outside the United States.

[[Page S5177]]

       ``(2) Pre-clinical research.--No credit shall be allowed 
     under this section for pre-clinical research unless such 
     research is pursuant to a research plan an abstract of which 
     has been filed with the Secretary before the beginning of 
     such year. The Secretary, in consultation with the Secretary 
     of Health and Human Services, shall prescribe regulations 
     specifying the requirements for such plans and procedures for 
     filing under this paragraph.
       ``(3) Certain rules made applicable.--Rules similar to the 
     rules of paragraphs (1) and (2) of section 41(f) shall apply 
     for purposes of this section.
       ``(4) Election.--This section (other than subsection (e)) 
     shall apply to any taxpayer for any taxable year only if such 
     taxpayer elects to have this section apply for such taxable 
     year.
       ``(e) Credit To Be Refundable for Certain Taxpayers.--
       ``(1) In general.--In the case of an electing qualified 
     taxpayer--
       ``(A) the credit under this section shall be determined 
     without regard to section 38(c), and
       ``(B) the credit so determined shall be allowed as a credit 
     under subpart C.
       ``(2) Electing qualified taxpayer.--For purposes of this 
     subsection, the term `electing qualified taxpayer' means, 
     with respect to any taxable year, any domestic C corporation 
     if--
       ``(A) the aggregate gross assets of such corporation at any 
     time during such taxable year are $500,000,000 or less,
       ``(B) the net income tax (as defined in section 38(c)) of 
     such corporation is zero for such taxable year and the 2 
     preceding taxable years,
       ``(C) as of the close of the taxable year, the corporation 
     is not under the jurisdiction of a court in a title 11 or 
     similar case (within the meaning of section 368(a)(3)(A)),
       ``(D) the corporation provides such assurances as the 
     Secretary requires that, not later than 2 taxable years after 
     the taxable year in which the taxpayer receives any refund of 
     a credit under this subsection, the taxpayer will make an 
     amount of qualified vaccine research expenses equal to the 
     amount of such refund, and
       ``(E) the corporation elects the application of this 
     subsection for such taxable year.
       ``(3) Aggregate gross assets.--Aggregate gross assets shall 
     be determined in the same manner as such assets are 
     determined under section 1202(d).
       ``(4) Controlled groups.--A corporation shall be treated as 
     meeting the requirement of paragraph (2)(B) only if each 
     person who is treated with such corporation as a single 
     employer under subsections (a) and (b) of section 52 also 
     meets such requirement.
       ``(5) Special rules.--
       ``(A) Recapture of credit.--The Secretary shall promulgate 
     such regulations as necessary and appropriate to provide for 
     the recapture of any credit allowed under this subsection in 
     cases where the taxpayer fails to make the expenditures 
     described in paragraph (2)(D).
       ``(B) Exclusion of certain qualified vaccine research 
     expenses.--For purposes of determining the credit under this 
     section for a taxable year, the qualified vaccine research 
     expenses taken into account for such taxable year shall not 
     include an amount paid or incurred during such taxable year 
     equal to the amount described in paragraph (2)(D) (and not 
     already taken into account under this subparagraph for a 
     previous taxable year).
       ``(f) Termination.--
       ``(1) In general.--This section shall not apply to any 
     amount paid or incurred after June 30, 2004.
       ``(2) Computation of base amount.--In the case of any 
     taxable year with respect to which this section applies to a 
     number of days which is less than the total number of days in 
     such taxable year, the base amount with respect to such 
     taxable year shall be the amount which bears the same ratio 
     to the base amount for such year (determined without regard 
     to this paragraph) as the number of days in such taxable year 
     to which this section applies bears to the total number of 
     days in such taxable year.''.
       (b) Inclusion in General Business Credit.--
       (1) In general.--Section 38(b), as amended by section 620, 
     is amended by striking ``plus'' at the end of paragraph (14), 
     by striking the period at the end of paragraph (15) and 
     inserting ``, plus'', and by adding at the end the following 
     new paragraph:
       ``(16) the vaccine research credit determined under section 
     45G.''.
       (2) Transition rule.--Section 39(d), as amended by section 
     620, is amended by adding at the end the following new 
     paragraph:
       ``(12) No carryback of section 45g credit before 
     enactment.--No portion of the unused business credit for any 
     taxable year which is attributable to the vaccine research 
     credit determined under section 45G may be carried back to a 
     taxable year ending before the date of the enactment of 
     section 45G.''.
       (c) Denial of Double Benefit.--Section 280C is amended by 
     adding at the end the following new subsection:
       ``(d) Credit for Qualified Vaccine Research Expenses.--
       ``(1) In general.--No deduction shall be allowed for that 
     portion of the qualified vaccine research expenses (as 
     defined in section 45G(b)) otherwise allowable as a deduction 
     for the taxable year which is equal to the amount of the 
     credit determined for such taxable year under section 45G(a).
       ``(2) Certain rules to apply.--Rules similar to the rules 
     of paragraphs (2), (3), and (4) of subsection (c) shall apply 
     for purposes of this subsection.''.
       (d) Deduction for Unused Portion of Credit.--Section 196(c) 
     (defining qualified business credits) is amended by striking 
     ``and'' at the end of paragraph (8), by striking the period 
     at the end of paragraph (9) and inserting ``, and'', and by 
     adding at the end the following new paragraph:
       ``(10) the vaccine research credit determined under section 
     45G(a) (other than such credit determined under the rules of 
     section 280C(d)(2)).''.
       (e) Technical Amendments.--
       (1) Section 1324(b)(2) of title 31, United States Code, is 
     amended by inserting ``or from section 45G(e) of such Code,'' 
     after ``1978,''.
       (2) The table of sections for subpart D of part IV of 
     subchapter A of chapter 1, as amended by section 620, is 
     amended by adding at the end the following new item:

``Sec. 45G. Credit for medical research related to developing vaccines 
              against widespread diseases.''.

       (f) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after the date of the 
     enactment of this Act.
                                  ____

  SA 679. Mr. ROCKEFELLER (for himself, Mr. Graham, Mr. Wellstone, Mr. 
Kennedy, Mr. Harkin, Mr. Johnson, Mr. Kerry, Mrs. Clinton, Mr. Dayton, 
and Ms. Stabenow) proposed an amendment to the bill H.R. 1836, to 
provide for reconciliation pursuant to section 104 of the concurrent 
resolution on the budget for fiscal year 2002; as follows:

       On page 9, between lines 14 and 15, insert the following:
       ``(4) Delay of top rate reduction.--
       ``(A) In general.--Notwithstanding paragraph (2), with 
     respect to a calendar year, no percentage described in that 
     paragraph shall be substituted for 39.6 percent until the 
     requirement of subparagraph (B) is met.
       ``(B) Medicare outpatient prescription drug benefit 
     enacted.--Legislation is enacted that adds an outpatient 
     prescription drug benefit to the medicare program established 
     under title XVIII of the Social Security Act, without using 
     funds generated from any surpluses in any trust fund 
     established under the Social Security Act, that is--
       ``(i) voluntary,
       ``(ii) accessible to all medicare beneficiaries,
       ``(iii) designed to assist medicare beneficiaries with the 
     high cost of prescription drugs, protect them from excessive 
     out of pocket costs, and give them bargaining power in the 
     marketplace,
       ``(iv) affordable to all medicare beneficiaries and the 
     medicare program,
       ``(v) administered using private sector entities and 
     competitive purchasing techniques, and
       ``(vi) consistent with broader reform of the medicare 
     program.''.
                                  ____

  SA 680. Mr. SMITH of New Hampshire submitted an amendment intended to 
be proposed by him to the bill H.R. 1836, to provide for reconciliation 
pursuant to section 104 of the concurrent resolution on the budget for 
fiscal year 2002; which was ordered to lie on the table; as follows:

       On page 802, after line 21, add the following:

     SEC. 803. REMOVAL OF LIMITATION.

       (a) In General.--Section 101(h) of the Internal Revenue 
     Code of 1986 (relating to exclusion of survivor benefits from 
     gross income) is amended by adding after paragraph (2) the 
     following new paragraph:
       ``(3) Application.--This subsection shall apply to amounts 
     received after December 31, 2000.''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on the date of the enactment of this Act.
                                  ____

  SA 681. Mr. SMITH of New Hampshire submitted an amendment intended to 
be proposed by him to the bill H.R. 1836, to provide for reconciliation 
pursuant to section 104 of the concurrent resolution on the budget for 
fiscal year 2002; which was ordered to lie on the table; as follows:

       On page 802, after line 21, add the following:

     SEC. 803. PERMANENT MORATORIUM ON IMPOSITION OF TAXES ON THE 
                   INTERNET.

       Section 1101(a) of the Internet Tax Freedom Act (title XI 
     of division C of the Omnibus Consolidated and Emergency 
     Supplemental Appropriations Act, 1999; 47 U.S.C. 151 note) is 
     amended by striking ``during the period beginning on October 
     1, 1998, and ending 3 years after the date of the enactment 
     of this Act'' and inserting ``after September 30, 1998''.
                                  ____

  SA 682. Mrs. HUTCHISON submitted an amendment intended to be proposed 
by her to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       At the end of the bill, add the following:

[[Page S5178]]

  TITLE____--SECTION 527 POLITICAL ORGANIZATION REPORTING REQUIREMENTS

     SEC. ____01. EXEMPTION FOR STATE AND LOCAL CANDIDATE 
                   COMMITTEES FROM NOTIFICATION REQUIREMENTS.

       (a) Exemption From Notification Requirements.--Paragraph 
     (5) of section 527(i) (relating to organizations must notify 
     Secretary that they are section 527 organizations) is amended 
     by striking ``or'' at the end of subparagraph (A), by 
     striking the period at the end of subparagraph (B) and 
     inserting ``, or'', and by adding at the end the following:
       ``(C) which is a political committee of a State or local 
     candidate.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect as if included in the amendments made by 
     Public Law 106-230.

     SEC. ____02. EXEMPTION FOR CERTAIN STATE AND LOCAL POLITICAL 
                   COMMITTEES FROM REPORTING AND ANNUAL RETURN 
                   REQUIREMENTS.

       (a) Exemption From Reporting Requirements.--
       (1) In general.--Section 527(j)(5) (relating to 
     coordination with other requirements) is amended by striking 
     ``or'' at the end of subparagraph (D), by striking the period 
     at the end of subparagraph (E) and inserting ``, or'', and by 
     adding at the end the following:
       ``(F) to any organization described in paragraph (7), but 
     only if, during the calendar year--
       ``(i) such organization is required by State or local law 
     to report, and such organization reports, information 
     regarding each separate expenditure and contribution 
     (including information regarding the person who makes such 
     contribution or receives such expenditure) with respect to 
     which information would otherwise be required to be reported 
     under this subsection, and
       ``(ii) such information is made public by the agency with 
     which such information is filed and is publicly available for 
     inspection in a manner similar to reports under section 
     6104(d)(1).
     An organization shall not be treated as failing to meet the 
     requirements of subparagraph (F)(i) solely because the 
     minimum amount of any expenditure or contribution required to 
     be reported under State or local law is greater (but not by 
     more than $100) than the minimum amount required under this 
     subsection.''.
       (2) Description of organization.--Section 527(j) is amended 
     by adding at the end the following:
       ``(7) Certain organizations.--An organization is described 
     in this paragraph if--
       ``(A) such organization is not described in subparagraph 
     (A), (B), (C), or (D) of paragraph (5),
       ``(B) such organization does not engage in any exempt 
     function activities other than activities for the purpose of 
     influencing or attempting to influence the selection, 
     nomination, election, or appointment of any individual to any 
     State or local public office or office in a State or local 
     political organization, and
       ``(C) no candidate for Federal office or individual holding 
     Federal office--
       ``(i) controls or materially participates in the direction 
     of such organization,
       ``(ii) solicits any contributions to such organization, or
       ``(iii) directs, in whole or in part, any expenditure made 
     by such organization.''.
       (b) Exemption From Requirements for Annual Return Based on 
     Gross Receipts.--Paragraph (6) of section 6012(a) (relating 
     to persons required to make returns of income) is amended by 
     striking ``organization, which'' and all that follows 
     through ``section)'' and inserting ``organization--
       ``(A) which has political organization taxable income 
     (within the meaning of section 527(c)(1)) for the taxable 
     year, or
       ``(B) which--
       ``(i) is not a political committee of a State or local 
     candidate or an organization to which section 527 applies 
     solely by reason of subsection (f)(1) of such section, and
       ``(ii) has gross receipts of--

       ``(I) in the case of political organization described in 
     section 527(j)(5)(F), $100,000 or more for the taxable year, 
     and
       ``(II) in the case of any other political organization, 
     $25,000 or more for the taxable year''.

       (c) Effective Date.--The amendments made by this section 
     shall take effect as if included in the amendments made by 
     Public Law 106-230.

     SEC. ____03. NOTIFICATION OF INTERACTION OF REPORTING 
                   REQUIREMENTS.

       (a) In General.--The Secretary of the Treasury, in 
     consultation with the Federal Election Commission, shall 
     publicize--
       (1) the effect of the amendments made by this title, and
       (2) the interaction of requirements to file a notification 
     or report under section 527 of the Internal Revenue Code of 
     1986 and reports under the Federal Election Campaign Act of 
     1971.
       (b) Information.--Information provided under subsection (a) 
     shall be included in any appropriate form, instruction, 
     notice, or other guidance issued to the public by the 
     Secretary of the Treasury or the Federal Election Commission 
     regarding reporting requirements of political organizations 
     (as defined in section 527 of the Internal Revenue Code of 
     1986) or reporting requirements under the Federal Election 
     Campaign Act of 1971.

     SEC. ____04. WAIVER OF PENALTIES.

       (a) Waiver of Filing Penalties.--Section 527 is amended by 
     adding at the end the following:
       ``(k) Authority To Waive.--The Secretary may waive all or 
     any portion of the--
       ``(1) tax assessed on an organization by reason of the 
     failure of the organization to give notice under subsection 
     (i), or
       ``(2) penalty imposed under subsection (j) for a failure to 
     file a report,
     on a showing that such failure was due to reasonable cause 
     and not due to willful neglect.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to any tax assessed or penalty imposed after June 
     30, 2000.
                                  ____

  SA 683. Mrs. HUTCHISON submitted an amendment intended to be proposed 
by her to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; which was ordered to lie on the table; as follows:

       On page 19, beginning with line 21, strike all through the 
     matter preceding line 1 on page 20, and insert:
       ``(7) Applicable percentage.--For purposes of paragraph 
     (2), the applicable percentage shall be determined in 
     accordance with the following table:

    ``For taxable years
      beginning in calendar                              The applicable
      year--                                            percentage is--
      2002.........................................................170 
      2003.........................................................175 
      2004.........................................................180 
      2005.........................................................185 
      2006.........................................................190 
      2007.........................................................195 
      2008 and thereafter.......................................200.''.

       On page 20, line 14, strike ``2004'' and insert ``2001''.
                                  ____

  SA 684. Mr. KENNEDY (for himself, Mr. Dodd, and Mr. Johnson) 
submitted an amendment intended to be proposed by him to the bill H.R. 
1836, to provide for reconciliation pursuant to section 104 of the 
concurrent resolution on the budget for fiscal year 2002; which was 
ordered to lie on the table; as follows:

       On page 9, between lines 14 and 15, insert:
       ``(4) Delay of top rate reduction.--
       ``(A) In general.--Notwithstanding paragraph (2), with 
     respect to a calendar year, no percentage described in that 
     paragraph shall be substituted for 39.6 percent until the 
     requirement of subparagraph (B) is met.
       ``(B) Fully funding basic education services.--The 
     requirement of this subparagraph is that legislation be 
     enacted that appropriates funds for core education programs 
     at or above the levels that have been authorized for such 
     programs by the Senate in the following amendments to Senate 
     bill 1 (the Better Education for Students and Teachers Act, 
     107th Congress):
       ``(i) Senate Amendment 360 (107th Congress; as offered by 
     Senator Hagel and Senator Harkin), which passed the Senate on 
     a voice vote with no dissenters, to honor the Federal 
     commitment to provide States with 40 percent of the cost of 
     implementing the Individuals with Disabilities Education Act, 
     instead of the 17 percent of costs that the Federal 
     Government currently provides.
       ``(ii) Senate Amendment 365 (107th Congress; as offered by 
     Senator Dodd), which passed the Senate on a vote of 79 to 21, 
     to provide support under title I of the Elementary and 
     Secondary Education Act of 1965 (as amended by the Better 
     Education for Students and Teachers Act) for 100 percent of 
     the economically disadvantaged children rather than the 33 
     percent who are currently aided under such title.
       ``(iii) Senate Amendment 375 (107th Congress; as offered by 
     Senator Kennedy), which passed the Senate on a vote of 69 to 
     31, to improve teacher quality for all students under the 
     bipartisan agreement reflected in part A of title II of the 
     Elementary and Secondary Education Act of 1965 (as amended by 
     the Better Education for Students and Teachers Act).
       ``(iv) Senate Amendment 451 (107th Congress; as offered by 
     Senator Lincoln), which passed the Senate on a vote of 62 to 
     34, to improve the quality of education available to 
     bilingual students with limited English proficiency, 
     especially in light of the nation's growing immigrant 
     population.
       ``(v) Senate Amendment 563 (107th Congress; as offered by 
     Senator Boxer), which passed the Senate on a vote of 60 to 
     39, to ensure that more of the nation's 7,000,000 latchkey 
     children have access to safe, constructive activities after 
     school while their parents are at work.
                                  ____

  SA 685. Mr. BAYH (for himself, Ms. Snowe, Mr. Chafee, Ms. Landrieu, 
Mrs. Feinstein, Ms. Collins, Ms. Stabenow, Mr. Jeffords, Mr. Kohl, Mr. 
Carper, Mr. Nelson of Florida, and Mrs. Clinton) proposed an amendment 
to the bill H.R. 1836, to provide for reconciliation pursuant to 
section 104 of the concurrent resolution on the budget for fiscal year 
2002; as follows:

       At the appropriate place, insert the following:

     SEC. ____. ENSURING DEBT REDUCTION.

       (a) Trigger.--
       (1) In general.--Notwithstanding any other provision of 
     this Act or any other law, the effective date of a provision 
     of law described in paragraph (2) shall be delayed as 
     provided in paragraph (3).

[[Page S5179]]

       (2) Provision described.--A provision of law described in 
     this paragraph is--
       (A) a provision of this Act that takes effect in fiscal 
     year 2005 or 2007 and results in a revenue reduction; or
       (B) a provision of law that--
       (i) is enacted after the date of enactment of this Act; and
       (ii) takes effect in fiscal year 2005 or 2007 and causes 
     increased outlays through mandatory spending.
       (3) Delay.--If, on September 30 of 2004 and 2006, the 
     Secretary of the Treasury determines that the limit on the 
     debt held by the public in section 253A(a) of the Balanced 
     Budget and Emergency Deficit Control Act of 1985 will be 
     exceeded in the fiscal year beginning October 1 of the 
     following year, the effective date of any a provision of law 
     described in paragraph (2) that takes effect during that 
     fiscal year shall be delayed by 1 calendar year.
       (4) Discretionary spending limitation.--Notwithstanding any 
     other provision of law, in any fiscal year subject to the 
     delay provisions of paragraph (3), the amount of 
     discretionary spending in each discretionary spending account 
     shall be the level provided for that account in the preceding 
     fiscal year plus an adjustment for inflation.
       (5) Reports to congress.--On July 1 and September 5 of 2003 
     and 2005, the Secretary of the Treasury shall report to 
     Congress the estimated amount of the debt held by the public 
     for the fiscal year beginning on October 1 of that year.
       (6) Congressional action.--
       (A) Trigger.--
       (i) Modification.--In fiscal year 2005 or 2007, if the 
     level of debt held by the public for that fiscal year would 
     be below the level of debt held by the public for that fiscal 
     year in section 253A(a) of the Balanced Budget and Emergency 
     Deficit Control Act of 1985, due to the provisions of 
     paragraphs (3) and (4) any Member of Congress may move to 
     proceed to a bill that would make changes in law to increase 
     discretionary spending and direct spending and increase 
     revenues (proportionately) in a manner that would increase 
     the debt held by the public for that fiscal year to a level 
     not exceeding the level provided in section 253A(a) of the 
     Balanced Budget and Emergency Deficit Control Act of 1985. 
     The motion to proceed shall be voted on at the end of 4 hours 
     of debate. A bill considered under this clause shall be 
     considered as provided in section 310(e) of the Congressional 
     Budget Act of 1974 (2 U.S.C. 641(e)). Any amendment offered 
     to the bill shall maintain the proportionality requirement.
       (ii) Waiver.--The delay and limitation provided in 
     paragraphs (3) and (4) may be disapproved by a joint 
     resolution. A joint resolution considered under this clause 
     shall not be advanced to third reading in either House unless 
     a motion to proceed to third reading is agreed to by three-
     fifths of the Members, duly chosen and sworn.
       (B) Other fiscal years.--
       (i) In general.--In fiscal year 2003, 2005, 2007, 2008, 
     2009, or 2010, if the level of debt held by the public for 
     that fiscal year would exceed the level of debt held by the 
     public for that fiscal year in section 253A(a) of the 
     Balanced Budget and Emergency Deficit Control Act of 1985, 
     any Member of Congress may move to proceed to a bill that 
     would defer changes in law that take effect in that fiscal 
     year that would increase direct spending and decrease 
     revenues and freeze the amount of discretionary spending in 
     each discretionary spending account for that fiscal year at 
     the level provided for that account in the preceding fiscal 
     year plus an adjustment for inflation (all proportionately) 
     in a manner that would reduce the debt held by the public for 
     that fiscal year to a level not exceeding the level provided 
     in section 253A(a) of the Balanced Budget and Emergency 
     Deficit Control Act of 1985. The motion to proceed shall be 
     voted on at the end of 4 hours of debate. Any amendment 
     offered to the bill shall either defer effective dates or 
     freeze discretionary spending and maintain the 
     proportionality requirement.
       (ii) Consideration of legislation.--A bill considered under 
     clause (i) shall be considered as provided in section 310(e) 
     of the Congressional Budget Act of 1974 (2 U.S.C. 641(e)).
       (b) Public Debt Targets.--The Balanced Budget and Emergency 
     Deficit Control Act of 1985 is amended--
       (1) in section 250(c)(1), by inserting `` ` debt held by 
     the public' '' after ``outlays', ''; and
       (2) by inserting after section 253 the following:

     ``SEC. 253A. DEBT HELD BY THE PUBLIC LIMIT.

       ``(a) Limit.--The debt held by the public shall not 
     exceed--
       ``(1) for fiscal year 2002, $2,955,000,000,000;
       ``(2) for fiscal year 2003, $2,747,000,000,000;
       ``(3) for fiscal year 2004, $2,524,000,000,000;
       ``(4) for fiscal year 2005, $2,279,000,000,000;
       ``(5) for fiscal year 2006, $2,011,000,000,000;
       ``(6) for fiscal year 2007, $1,724,000,000,000;
       ``(7) for fiscal year 2008, $1,418,000,000,000;
       ``(8) for fiscal year 2009, $1,089,000,000,000; and
       ``(9) for fiscal year 2010, $878,000,000,000.
       ``(b) Adjustments to Debt Targets for Inability to 
     Redeem.--
       ``(1) In general.--The debt held by the public targets may 
     be adjusted in a specific fiscal year if the Secretary of the 
     Treasury certifies that the target cannot be reached because 
     the Department of the Treasury will be unable to redeem a 
     sufficient amount of securities from holders of Federal debt 
     to achieve the target.
       ``(2) Certification.--The certification shall--
       ``(A) be transmitted by the President to Congress;
       ``(B) outline the specific reasons that the targets cannot 
     be achieved and the estimated amount of excess reserves that 
     will accumulate due to an inability of the Treasury to redeem 
     Federal debt; and
       ``(C) not be the result of a lack of surplus revenues being 
     available to redeem debt held by the public.
       ``(3) Congressional action.--The adjustment provided in 
     this subsection may be disapproved by a joint resolution. A 
     joint resolution considered under this paragraph shall not be 
     advanced to third reading in either House unless a motion to 
     proceed to third reading is agreed to by a majority of the 
     whole body.''.
       (c) Congressional Budget Process.--
       (1) Point of order.--Section 301 of the Congressional 
     Budget Act of 1974 is amended by adding at the end the 
     following:
       ``(j) Debt Held by the Public Point of Order.--It shall not 
     be in order in the Senate to consider any bill, joint 
     resolution, amendment, motion, or conference report that 
     would--
       ``(1) increase the limit on the debt held by the public in 
     section 253A(a) of the Balanced Budget and Emergency Deficit 
     Control Act of 1985; or
       ``(2) provide additional borrowing authority that would 
     result in the limit on the debt held by the public in section 
     253A(a) of the Balanced Budget and Emergency Deficit Control 
     Act of 1985 being exceeded.''.
       (2) Supermajority waiver and appeal.--Subsections (c)(1) 
     and (d)(2) of section 904 of the Congressional Budget Act of 
     1974 are amended by striking ``305(b)(2),'' and inserting 
     ``301(j), 305(b)(2),''.
       (3) Additional amendments to the budget act.--The 
     Congressional Budget Act of 1974 is amended--
       (A) in section 3, by adding at the end the following:
       ``(11)(A) The term `debt held by the public' means the 
     outstanding face amount of all debt obligations issued by the 
     United States Government that are held by outside investors, 
     including individuals, corporations, State or local 
     governments, foreign governments, and the Federal Reserve 
     System.
       ``(B) For the purpose of this paragraph, the term `face 
     amount', for any month, of any debt obligation issued on a 
     discount basis that is not redeemable before maturity at the 
     option of the holder of the obligation is an amount equal to 
     the sum of--
       ``(i) the original issue price of the obligation; plus
       ``(ii) the portion of the discount on the obligation 
     attributable to periods before the beginning of such 
     month.'';
       (B) in section 301(a) by--
       (i) redesignating paragraphs (6) and (7) as paragraphs (7) 
     and (8), respectfully; and
       (ii) inserting after paragraph (5) the following:
       ``(6) the debt held by the public; and''; and
       (C) in section 310(a) by--
       (i) striking ``or'' at the end of paragraph (3);
       (ii) by redesignating paragraph (4) as paragraph (5); and
       (iii) inserting the following new paragraph;
       ``(4) specify the amounts by which the statutory limit on 
     the debt held by the public is to be changed and direct the 
     committee having jurisdiction to recommend such change; or''.
                                  ____

  SA 686. Ms. LANDRIEU (for herself, Mr. Craig, and Mrs. Lincoln) 
proposed an amendment to the bill H.R. 1836, to provide for 
reconciliation pursuant to section 104 of the concurrent resolution on 
the budget for fiscal year 2002; as follows:

       On page 18, between lines 14 and 15, insert the following:

     SEC. 202. EXPANSION OF ADOPTION CREDIT AND ADOPTION 
                   ASSISTANCE PROGRAMS.

       (a) In General.--
       (1) Adoption credit.--Section 23(a)(1) (relating to 
     allowance of credit) is amended to read as follows:
       ``(1) In general.--In the case of an individual, there 
     shall be allowed as a credit against the tax imposed by this 
     chapter--
       ``(A) in the case of an adoption of a child other than a 
     child with special needs, the amount of the qualified 
     adoption expenses paid or incurred by the taxpayer, and
       ``(B) in the case of an adoption of a child with special 
     needs, $10,000.''.
       (2) Adoption assistance programs.--Section 137(a) (relating 
     to adoption assistance programs) is amended to read as 
     follows:
       ``(a) In General.--Gross income of an employee does not 
     include amounts paid or expenses incurred by the employer for 
     adoption expenses in connection with the adoption of a child 
     by an employee if such amounts are furnished pursuant to an 
     adoption assistance program. The amount of the exclusion 
     shall be--
       ``(1) in the case of an adoption of a child other than a 
     child with special needs, the amount of the qualified 
     adoption expenses paid or incurred by the taxpayer, and
       ``(2) in the case of an adoption of a child with special 
     needs, $10,000.''.
       (b) Dollar Limitations.--
       (1) Dollar amount of allowed expenses.--

[[Page S5180]]

       (A) Adoption expenses.--Section 23(b)(1) (relating to 
     allowance of credit) is amended--
       (i) by striking ``$5,000'' and inserting ``$10,000'',
       (ii) by striking ``($6,000, in the case of a child with 
     special needs)'', and
       (iii) by striking ``subsection (a)'' and inserting 
     ``subsection (a)(1)(A)''.
       (B) Adoption assistance programs.--Section 137(b)(1) 
     (relating to dollar limitations for adoption assistance 
     programs) is amended--
       (i) by striking ``$5,000'' and inserting ``$10,000'', and
       (ii) by striking ``($6,000, in the case of a child with 
     special needs)'', and
       (iii) by striking ``subsection (a)'' and inserting 
     ``subsection (a)(1)''.
       (2) Phase-out limitation.--
       (A) Adoption expenses.--Clause (i) of section 23(b)(2)(A) 
     (relating to income limitation) is amended by striking 
     ``$75,000'' and inserting ``$150,000''.
       (B) Adoption assistance programs.--Section 137(b)(2)(A) 
     (relating to income limitation) is amended by striking 
     ``$75,000'' and inserting ``$150,000''.
       (c) Year Credit Allowed.--Section 23(a)(2) (relating to 
     year credit allowed) is amended by adding at the end the 
     following new flush sentence:
     ``In the case of the adoption of a child with special needs, 
     the credit allowed under paragraph (1) shall be allowed for 
     the taxable year in which the adoption becomes final.''.
       (d) Repeal of Sunset Provisions.--
       (1) Children without special needs.--Paragraph (2) of 
     section 23(d) (relating to definition of eligible child) is 
     amended to read as follows:
       ``(2) Eligible child.--The term `eligible child' means any 
     individual who--
       ``(A) has not attained age 18, or
       ``(B) is physically or mentally incapable of caring for 
     himself.''.
       (2) Adoption Assistance Programs.--Section 137 (relating to 
     adoption assistance programs) is amended by striking 
     subsection (f).
       (e) Adjustment of Dollar and Income Limitations for 
     Inflation.--
       (1) Adoption credit.--Section 23 (relating to adoption 
     expenses) is amended by redesignating subsection (h) as 
     subsection (i) and by inserting after subsection (g) the 
     following new subsection:
       ``(h) Adjustments for Inflation.--In the case of a taxable 
     year beginning after December 31, 2002, each of the dollar 
     amounts in subsection (a)(1)(B) and paragraphs (1) and 
     (2)(A)(i) of subsection (b) shall be increased by an amount 
     equal to--
       ``(1) such dollar amount, multiplied by
       ``(2) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, determined by substituting `calendar year 2001' 
     for `calendar year 1992' in subparagraph (B) thereof.''.
       (2) Adoption assistance programs.--Section 137 (relating to 
     adoption assistance programs), as amended by subsection (d), 
     is amended by adding at the end the following new subsection:
       ``(f) Adjustments for Inflation.--In the case of a taxable 
     year beginning after December 31, 2002, each of the dollar 
     amounts in subsection (a)(2) and paragraphs (1) and (2)(A) of 
     subsection (b) shall be increased by an amount equal to--
       ``(1) such dollar amount, multiplied by
       ``(2) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, determined by substituting `calendar year 2001' 
     for `calendar year 1992' in subparagraph (B) thereof.''.
       (f) Limitation Based on Amount of Tax.--
       (1) In general.--Section 23(c) (relating to carryforwards 
     of unused credit) is amended by striking ``the limitation 
     imposed'' and all that follows through ``1400C)'' and 
     inserting ``the applicable tax limitation''.
       (2) Applicable tax limitation.--Section 23(d) (relating to 
     definitions) is amended by adding at the end the following 
     new paragraph:
       ``(4) Applicable tax limitation.--The term `applicable tax 
     limitation' means the sum of--
       ``(A) the taxpayer's regular tax liability for the taxable 
     year, reduced (but not below zero) by the sum of the credits 
     allowed by sections 21, 22, 24 (other than the amount of the 
     increase under subsection (d) thereof), 25, and 25A, and
       ``(B) the tax imposed by section 55 for such taxable 
     year.''.
       (3) Conforming amendments.--
       (A) Section 26(a) (relating to limitation based on amount 
     of tax) is amended by inserting ``(other than section 23)'' 
     after ``allowed by this subpart''.
       (B) Section 53(b)(1) (relating to minimum tax credit) is 
     amended by inserting ``reduced by the aggregate amount taken 
     into account under section 23(d)(3)(B) for all such prior 
     taxable years,'' after ``1986,''.
       (g) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.
                                  ____

  SA 687. Mr. GRAHAM (for himself, Mr. Corzine, and Mr. Dayton) 
proposed an amendment to the bill H.R. 1836, to provide for 
reconciliation pursuant to section 104 of the concurrent resolution on 
the budget for fiscal year 2002; as follows:

       Strike all after the first word and insert the following:

     SECTION 1. SHORT TITLE; ETC.

       (a) Short Title.--This Act may be cited as the ``Economic 
     Insurance Tax Cut of 2001''.
       (b) Amendment of 1986 Code.--Except as otherwise expressly 
     provided, whenever in this Act an amendment or repeal is 
     expressed in terms of an amendment to, or repeal of, a 
     section or other provision, the reference shall be considered 
     to be made to a section or other provision of the Internal 
     Revenue Code of 1986.
       (c) Section 15 Not To Apply.--No amendment made by this Act 
     shall be treated as a change in a rate of tax for purposes of 
     section 15 of the Internal Revenue Code of 1986.

     SEC. 2. 10-PERCENT INCOME TAX RATE BRACKET FOR INDIVIDUALS.

       (a) Rates for 2001.--Section 1 (relating to tax imposed) is 
     amended by striking subsections (a) through (d) and inserting 
     the following:
       ``(a) Married Individuals Filing Joint Returns and 
     Surviving Spouses.--There is hereby imposed on the taxable 
     income of--
       ``(1) every married individual (as defined in section 7703) 
     who makes a single return jointly with his spouse under 
     section 6013, and
       ``(2) every surviving spouse (as defined in section 2(a)),
     a tax determined in accordance with the following table:

``If taxable income is:                                     The tax is:
10% of taxable income..................................................
$1,900, plus 15% of the excess over $19,000............................
$5,830, plus 28% of the excess over $45,200............................
$23,764, plus 31% of the excess over $109,250..........................
$41,511.50, plus 36% of the excess over $166,500.......................
$88,617.50, plus 39.6% of the excess over $297,350.....................
       ``(b) Heads of Households.--There is hereby imposed on the 
     taxable income of every head of a household (as defined in 
     section 2(b)) a tax determined in accordance with the 
     following table:

``If taxable income is:                                     The tax is:
10% of taxable income..................................................
$1,425, plus 15% of the excess over $14,250............................
$4,725, plus 28% of the excess over $36,250............................
$20,797, plus 31% of the excess over $93,650...........................
$38,777, plus 36% of the excess over $151,650..........................
$91,229, plus 39.6% of the excess over $297,350........................
       ``(c) Unmarried Individuals (Other Than Surviving Spouses 
     and Heads of Households).--There is hereby imposed on the 
     taxable income of every individual (other than a surviving 
     spouse as defined in section 2(a) or the head of a household 
     as defined in section 2(b)) who is not a married individual 
     (as defined in section 7703) a tax determined in accordance 
     with the following table:

``If taxable income is:                                     The tax is:
10% of taxable income..................................................
$950, plus 15% of the excess over $9,500...............................
$3,582.50, plus 28% of the excess over $27,050.........................
$14,362.50, plus 31% of the excess over $65,550........................
$36,434.50, plus 36% of the excess over $136,750.......................
$94,250.50, plus 39.6% of the excess over $297,350.....................
       ``(d) Married Individuals Filing Separate Returns.--There 
     is hereby imposed on the taxable income of every married 
     individual (as defined in section 7703) who does not make a 
     single return jointly with his spouse under section 6013, a 
     tax determined in accordance with the following table:

``If taxable income is:                                     The tax is:
10% of taxable income..................................................
$950, plus 15% of the excess over $9,500...............................
$2,915, plus 28% of the excess over $22,600............................
$11,882, plus 31% of the excess over $54,625...........................
$20,755.75, plus 36% of the excess over $83,250........................
$44,308.75, plus 39.6% of the excess over $148,675.''..................
       (b) Inflation Adjustment To Apply in Determining Rates for 
     2002.--Subsection (f) of section 1 is amended--
       (1) by striking ``1993'' in paragraph (1) and inserting 
     ``2001'',
       (2) by striking ``1992'' in paragraph (3)(B) and inserting 
     ``2000'', and
       (3) by striking paragraph (7).
       (c) Conforming Amendments.--
       (1) The following provisions are each amended by striking 
     ``1992'' and inserting ``2000'' each place it appears:
       (A) Section 25A(h).
       (B) Section 32(j)(1)(B).
       (C) Section 41(e)(5)(C).
       (D) Section 42(h)(3)(H)(i)(II).
       (E) Section 59(j)(2)(B).
       (F) Section 63(c)(4)(B).
       (G) Section 68(b)(2)(B).
       (H) Section 132(f)(6)(A)(ii).
       (I) Section 135(b)(2)(B)(ii).
       (J) Section 146(d)(2)(B).
       (K) Section 151(d)(4).
       (L) Section 220(g)(2).
       (M) Section 221(g)(1)(B).
       (N) Section 512(d)(2)(B).
       (O) Section 513(h)(2)(C)(ii).
       (P) Section 685(c)(3)(B).
       (Q) Section 877(a)(2).
       (R) Section 911(b)(2)(D)(ii)(II).
       (S) Section 2032A(a)(3)(B).
       (T) Section 2503(b)(2)(B).
       (U) Section 2631(c)(2).

[[Page S5181]]

       (V) Section 4001(e)(1)(B).
       (W) Section 4261(e)(4)(A)(ii).
       (X) Section 6039F(d).
       (Y) Section 6323(i)(4)(B).
       (Z) Section 6334(g)(1)(B).
       (AA) Section 6601(j)(3)(B).
       (BB) Section 7430(c)(1).
       (2) Subclause (II) of section 42(h)(6)(G)(i) is amended by 
     striking ``1987'' and inserting ``2000''.
       (d) Additional Conforming Amendments.--
       (1) Section 1(g)(7)(B)(ii)(II) is amended by striking ``15 
     percent'' and inserting ``10 percent''.
       (2) Section 1(h) is amended by striking paragraph (13).
       (3) Section 3402(p)(1)(B) is amended by striking ``7, 15, 
     28, or 31 percent'' and inserting ``5, 10, 15, 28, or 31 
     percent''.
       (4) Section 3402(p)(2) is amended by striking ``15 
     percent'' and inserting ``10 percent''.
       (e) Determination of Withholding Tables.--Section 3402(a) 
     (relating to requirement of withholding) is amended by adding 
     at the following new paragraph:
       ``(3) Changes made by section 2 of the economic insurance 
     tax cut of 2001.--Notwithstanding the provisions of this 
     subsection, the Secretary shall modify the tables and 
     procedures under paragraph (1) through the reduction of the 
     amount of withholding required with respect to taxable years 
     beginning in calendar year 2001 to reflect the effective date 
     of the amendments made by section 2 of the Economic Insurance 
     Tax Cut of 2001, and such modification shall take effect on 
     the first day of the first month beginning after the date of 
     the enactment of such Act.''
       (f) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to taxable years 
     beginning after December 31, 2000.
       (2) Amendments to withholding provisions.--The amendments 
     made by paragraphs (3) and (4) of subsection (d) shall apply 
     to amounts paid after December 31, 2000.
                                  ____

  SA 688. Mr. GRAHAM proposed an amendment to the bill H.R. 1836, to 
provide for reconciliation pursuant to section 104 of the concurrent 
resolution on the budget for fiscal year 2002; as follows:

       Beginning on page 64, line 17, strike all through page 66, 
     before line 2, and insert:

                 Subtitle B--Reduction of Gift Tax Rate

     SEC. 511. REDUCTION OF GIFT TAX RATE AFTER REPEAL.

       On page 66, line 2, strike ``(d)'' and insert ``(a)''.
       On page 67, line 1, strike ``(e)'' and insert ``(b)''.
       Beginning on page 67, line 12, strike all through page 68, 
     line 6, and insert:
       (f) Effective Date.--The amendments made by this section 
     shall apply to gifts made after December 31, 2010.
       On page 68, strike the table between lines 14 and 15, and 
     insert:

``In the case of estates of decedentThe applicable exclusion amount is:
      2002 and 2003.........................................$1,000,000 
      2004, 2005, and 2006..................................$2,000,000 
      2007, 2008, 2009, and 2010.........................$3,000,000.''.
       Beginning on page 70, line 20, strike all through page 79, 
     line 6.

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