[Congressional Record (Bound Edition), Volume 145 (1999), Part 13]
[Senate]
[Pages 18245-18312]
[From the U.S. Government Publishing Office, www.gpo.gov]



                      TAXPAYER REFUND ACT OF 1999

                                 ______
                                 

                      BROWNBACK AMENDMENT NO. 1373

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

       Beginning on page 11, strike line 18 and all that follows 
     through page 32, line 14, and insert the following:

     SEC. 201. ELIMINATION OF MARRIAGE PENALTY IN INDIVIDUAL 
                   INCOME TAX RATES.

       (a) General Rule.--Section 1 (relating to tax imposed) is 
     amended by striking subsections (a) through (e) 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:

The tax is:e income is:
15% of taxable income..................................................
$7,605, plus 28% of the excess over $50,700............................
$27,793, plus 31% of the excess over $122,800..........................
$69,147, plus 36% of the excess over $256,200..........................
$177,399, plus 39.6% of the excess over $556,900.......................
       ``(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:

The tax is:e income is:
15% of taxable income..................................................
$5,092.50, plus 28% of the excess over $33,950.........................
$20,142.50, plus 31% of the excess over $87,700........................
$36,975.50, plus 36% of the excess over $142,000.......................
$86,097.50, plus 39.6% of the excess over $278,450.....................
       ``(c) Other Individuals.--There is hereby imposed on the 
     taxable income of every individual (other than an individual 
     to whom subsection (a) or (b) applies) a tax determined in 
     accordance with the following table:

The tax is:e income is:
15% of taxable income..................................................
$3,802.50, plus 28% of the excess over $25,350.........................
$13,896.50, plus 31% of the excess over $61,400........................
$34,573.50, plus 36% of the excess over $128,100.......................
$88,699.50, plus 39.6% of the excess over $278,450.....................
       ``(d) Estates and Trusts.--There is hereby imposed on the 
     taxable income of--
       ``(1) every estate, and
       ``(2) every trust,
     taxable under this subsection a tax determined in accordance 
     with the following table:

The tax is:e income is:
15% of taxable income..................................................
$255, plus 28% of the excess over $1,700...............................
$899, plus 31% of the excess over $4,000...............................
$1,550, plus 36% of the excess over $6,100.............................
$2,360, plus 39.6% of the excess over $8,350.''........................
       (b) Inflation Adjustment To Apply in Determining Rates for 
     2000.--Subsection (f) of section 1 is amended--
       (1) by striking ``1993'' in paragraph (1) and inserting 
     ``1999'',
       (2) by striking ``1992'' in paragraph (3)(B) and inserting 
     ``1997'', and
       (3) by striking paragraph (7).
       (c) Conforming Amendments.--
       (1) The following provisions are each amended by striking 
     ``1992'' and inserting ``1997'' each place it appears:
       (A) Section 25A(h).
       (B) Section 32(j)(1)(B).
       (C) Section 41(e)(5)(C).
       (D) Section 68(b)(2)(B).
       (E) Section 135(b)(2)(B)(ii).
       (F) Section 151(d)(4).
       (G) Section 221(g)(1)(B).
       (H) Section 512(d)(2)(B).
       (I) Section 513(h)(2)(C)(ii).
       (J) Section 877(a)(2).
       (K) Section 911(b)(2)(D)(ii)(II).
       (L) Section 4001(e)(1)(B).
       (M) Section 4261(e)(4)(A)(ii).
       (N) Section 6039F(d).
       (O) Section 6334(g)(1)(B).
       (P) Section 7430(c)(1).
       (2) Subclause (II) of section 42(h)(6)(G)(i) is amended by 
     striking ``1987'' and inserting ``1997''.
       (3) Subparagraph (B) of section 59(j)(2) is amended by 
     striking ``, determined by substituting `1997' for `1992' in 
     subparagraph (B) thereof''.
       (4) Subparagraph (B) of section 132(f)(6) is amended by 
     inserting before the period ``, determined by substituting 
     `calendar year 1992' for `calendar year 1997' in subparagraph 
     (B) thereof''.
       (5) Paragraph (2) of section 220(g) of such Code is amended 
     by striking ``by substituting `calendar year 1997' for 
     `calendar year 1992' in subparagraph (B) thereof''.
       (6) Subparagraph (B) of section 685(c)(3) is amended by 
     striking ``, by substituting `calendar year 1997' for 
     `calendar year 1992' in subparagraph (B) thereof''.
       (7) Subparagraph (B) of section 2032A(a)(3) is amended by 
     striking ``by substituting `calendar year 1997' for `calendar 
     year 1992' in subparagraph (B) thereof''.
       (8) Subparagraph (B) of section 2503(b)(2) is amended by 
     striking ``by substituting `calendar year 1997' for `calendar 
     year 1992' in subparagraph (B) thereof''.
       (9) Paragraph (2) of section 2631(c) is amended by striking 
     ``by substituting `calendar year 1997' for `calendar year 
     1992' in subparagraph (B) thereof''.
       (10) Subparagraph (B) of section 6601(j)(3) is amended by 
     striking ``by substituting `calendar year 1997' for `calendar 
     year 1992' in subparagraph (B) thereof''.
       (11) Sections 468B(b)(1), 511(b)(1), 641(a), 641(d)(2)(A), 
     and 685(d) are each amended by striking ``section 1(e)'' each 
     place it appears and inserting ``section 1(d)''.
       (12) Sections 1(f)(2) and 904(b)(3)(E)(ii) are each amended 
     by striking ``(d), or (e)'' and inserting ``or (d)''.
       (13) Paragraph (1) of section 1(f) is amended by striking 
     ``(d), and (e)'' and inserting ``and (d)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.

     SEC. 202. ELIMINATION OF MARRIAGE PENALTY IN STANDARD 
                   DEDUCTION.

       (a) In General.--Paragraph (2) of section 63(c) (relating 
     to standard deduction) is amended to read as follows:
       ``(2) Basic standard deduction.--For purposes of paragraph 
     (1), the basic standard deduction is--
       ``(A) $8,500 in the case of--
       ``(i) a joint return, or
       ``(ii) a surviving spouse (as defined in section 2(a)),
       ``(B) $6,250 in the case of a head of household (as defined 
     in section 2(b)), or
       ``(C) $4,250 in any other case.''
       (b) Technical Amendments.--
       (1) Paragraph (4) of section 63(c) is amended to read as 
     follows:
       ``(4) Adjustments for inflation.--In the case of any 
     taxable year beginning in a calendar year after 1999, each 
     dollar amount contained in paragraph (2) or (5) or subsection 
     (f) 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.''
       (2) Subparagraph (A) of section 63(c)(5) is amended by 
     striking ``$500'' and inserting ``$700''.
       (3) Subsection (f) of section 63 is amended by striking 
     ``$600'' each place it appears and inserting ``$850'' and by 
     striking ``$750'' in paragraph (3) and inserting ``$1,050''.
       (4) Subparagraph (B) of section 1(f)(6) is amended by 
     striking ``subsection (c)(4) of section 63 (as it applies to 
     subsections (c)(5)(A) and (f) of such section)'' and 
     inserting ``section 63(c)(4)''.

[[Page 18246]]

       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.
       On page 9, line 12, strike ``2000'' and insert ``2002''.
       Beginning on page 10, strike line 17 and all that follows 
     through page 11, line 12, and insert the following:
       ``(i) Joint returns and surviving spouses.--In the case of 
     the table contained in subsection (a)--

                                                             Applicable
``Calendar year:                                         dollar amount:
  2007 or 2008..............................................$4,000 ....

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

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

                                                             Applicable
``Calendar year:                                         dollar amount:
  2007 or 2008..............................................$2,000 ....

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

       ``(B) Cost-of-living adjustment.--In the case of any 
     taxable year beginning in any calendar year after 2009, the 
     applicable dollar amount shall be increased by an amount 
     equal to--
       ``(i) such dollar amount, multiplied by
       ``(ii) the cost-of living adjustment determined under 
     paragraph (3) for the calendar year in which the taxable year 
     begins, determined by substituting `calendar year 2007' for 
     `calendar year 1992' in subparagraph (B) thereof.''
                                 ______
                                 

                    GREGG AMENDMENTS NOS. 1374-1375

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

                           Amendment No. 1374

       At the appropriate place in the bill, insert the following:

     SEC. __. ONE-YEAR EXTENSION OF PERIOD OF TAX MORATORIUM UNDER 
                   INTERNET TAX FREEDOM ACT.

       Section 1101(a) of the Internet Tax Freedom Act (title XI 
     of division C of Public Law 105-277; 112 Stat. 2681-719; 47 
     U.S.C. 151 note) is amended by striking ``3 years after the 
     date of the enactment of this Act'' and inserting ``4 years 
     after October 21, 1998''.
                                  ____


                           Amendment No. 1375

       On page 21, before line 1, insert:
       (c) Minimum Dependent Care Credit Allowed for Stay-at-Home 
     Parents.--Section 21(e) (relating to special rules) is 
     amended by adding at the end the following:
       ``(11) Minimum credit allowed for stay-at-home parents.--
       ``(A) In general.--Notwithstanding subsection (d), in the 
     case of any taxpayer with 1 or more qualifying individuals 
     described in subsection (b)(1)(A) under the age of 1, such 
     taxpayer shall be deemed to have employment-related expenses 
     for the taxable year with respect to each such qualifying 
     individual in an amount equal to the sum of--
       ``(i) $200 for each month in such taxable year during which 
     such qualifying individual is under the age of 1, and
       ``(ii) the amount of employment-related expenses otherwise 
     incurred for such qualifying individual for the taxable year 
     (determined under this section without regard to this 
     paragraph).
       ``(B) Election to not apply this paragraph.--This paragraph 
     shall not apply with respect to any qualifying individual for 
     any taxable year if the taxpayer elects to not have this 
     paragraph apply to such qualifying individual for such 
     taxable year.''.
       On page 21, line 1, strike ``(c)'' and insert ``(d)''.
       On page 195, strike lines 4 through 23.
                                 ______
                                 

                DASCHLE (AND OTHERS) AMENDMENT NO. 1376

  (Ordered to lie on the table.)
  Mr. DASCHLE (for himself, Mr. Byrd, Mr. Baucus, Mr. Bingaman, and Mr. 
Kerrey) submitted an amendment intended to be proposed by him to the 
bill, S. 1429, supra; as follows:

       At the end of the bill add the following:

              DIVISION II--ENERGY SECURITY TAX INCENTIVES

     SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF 
                   CONTENTS.

       (a) Short Title.--This division may be cited as the 
     ``Energy Security Tax Act of 1999''.
       (b) Amendment of 1986 Code.--Except as otherwise expressly 
     provided, whenever in this division an amendment or repeal is 
     expressed in terms of an amendment to, or repeal of, a 
     section or other provision, the reference shall be considered 
     to be made to a section or other provision of the Internal 
     Revenue Code of 1986.
       (c) Table of Contents.--

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

          TITLE I--ENERGY-EFFICIENT PROPERTY USED IN BUSINESS

Sec. 101. Credit for certain energy-efficient property used in 
              business.

                  TITLE II--NONBUSINESS ENERGY SYSTEMS

Sec. 201. Credit for certain nonbusiness energy systems.

                      TITLE III--ALTERNATIVE FUELS

Sec. 301. Allocation of alcohol fuels credit to patrons of a 
              cooperative.

                         TITLE IV--AUTOMOBILES

Sec. 401. Credit for purchase of fuel cell, electric, and hybrid 
              electric vehicles.

                    TITLE V--CLEAN COAL TECHNOLOGIES

Sec. 501. Credit for investment in qualifying clean coal technology.
Sec. 502. Credit for production from qualifying clean coal technology.
Sec. 503. Risk pool for qualifying clean coal technology.

                       TITLE VI--METHANE RECOVERY

Sec. 601. Expansion of section 29 tax credit.
Sec. 602. Credit for capture of coalbed methane gas.

                   TITLE VII--OIL AND GAS PRODUCTION

Sec. 701. Credit for production of re-refined lubricating oil.
Sec. 702. Repeal certain adjustments based on adjusted current earnings 
              relating to oil and gas assets.
Sec. 703. 10-year carryback for percentage depletion for oil and gas 
              property.

                 TITLE VIII--RENEWABLE POWER GENERATION

Sec. 801. Credit for investment in photovoltaic and wind property 
              manufacturing facilities.
Sec. 802. Modifications to credit for electricity produced from 
              renewable resources.
Sec. 803. Proportional credit for producing electricity through co-
              firing.
Sec. 804. Credit for capital costs of qualified biomass-based 
              generating system.
Sec. 805. Pass-through of renewable energy production incentive 
              payments to end-users.

                         TITLE IX--STEELMAKING

Sec. 901. Credit for energy-efficient steelmaking capacity.
Sec. 902. Extension of credit for electricity to production from steel 
              cogeneration.

                          TITLE X--AGRICULTURE

Sec. 1001. Agricultural conservation tax credit.

          TITLE I--ENERGY-EFFICIENT PROPERTY USED IN BUSINESS

     SEC. 101. CREDIT FOR CERTAIN ENERGY-EFFICIENT PROPERTY USED 
                   IN BUSINESS.

       (a) In General.--Subpart E of part IV of subchapter A of 
     chapter 1 (relating to rules for computing investment credit) 
     is amended by inserting after section 48 the following:

     ``SEC. 48A. ENERGY CREDIT.

       ``(a) In General.--For purposes of section 46, the energy 
     credit for any taxable year is the sum of--
       ``(1) the amount equal to the energy percentage of the 
     basis of each energy property placed in service during such 
     taxable year, and
       ``(2) the credit amount for each qualified hybrid vehicle 
     placed in service during the taxable year.
       ``(b) Energy Percentage.--
       ``(1) In general.--The energy percentage is--
       ``(A) except as otherwise provided in this subparagraph, 10 
     percent,
       ``(B) in the case of energy property described in clauses 
     (i), (iii), (vi), (vii), and (viii) of subsection (c)(1)(A), 
     20 percent,
       ``(C) in the case of energy property described in 
     subsection (c)(1)(A)(v), 15 percent, and
       ``(D) in the case of energy property described in 
     subsection (c)(1)(A)(ii) relating to a high risk geothermal 
     well, 20 percent.
       ``(2) Coordination with rehabilitation.--The energy 
     percentage shall not apply to that portion of the basis of 
     any property which is attributable to qualified 
     rehabilitation expenditures.
       ``(c) Energy Property Defined.--
       ``(1) In general.--For purposes of this subpart, the term 
     `energy property' means any property--
       ``(A) which is--
       ``(i) solar energy property,
       ``(ii) geothermal energy property,
       ``(iii) energy-efficient building property,
       ``(iv) combined heat and power system property,
       ``(v) low core loss distribution transformer property,
       ``(vi) fuel-efficient farm equipment property,
       ``(vii) qualified aerobic digester property, or
       ``(viii) qualified wind energy systems equipment property,
       ``(B)(i) the construction, reconstruction, or erection of 
     which is completed by the taxpayer, or
       ``(ii) which is acquired by the taxpayer if the original 
     use of such property commences with the taxpayer,
       ``(C) which can reasonably be expected to remain in 
     operation for at least 5 years,
       ``(D) with respect to which depreciation (or amortization 
     in lieu of depreciation) is allowable, and
       ``(E) which meets the performance and quality standards (if 
     any) which--

[[Page 18247]]

       ``(i) have been prescribed by the Secretary by regulations 
     (after consultation with the Secretary of Energy), and
       ``(ii) are in effect at the time of the acquisition of the 
     property.
       ``(2) Exceptions.--
       ``(A) Public utility property.--Such term shall not include 
     any property which is public utility property (as defined in 
     section 46(f)(5) as in effect on the day before the date of 
     the enactment of the Revenue Reconciliation Act of 1990), 
     except for property described in paragraph (1)(A)(iv).
       ``(B) Certain wind equipment.--Such term shall not include 
     equipment described in paragraph (1)(A)(viii) which is taken 
     into account for purposes of section 45 for the taxable year.
       ``(d) Definitions Relating to Types of Energy Property.--
     For purposes of this section--
       ``(1) Solar energy property.--
       ``(A) In general.--The term `solar energy property' means 
     general solar energy property, solar water heating property, 
     and photovoltaic property.
       ``(B) General solar energy property.--The term `general 
     solar energy property' means equipment which uses solar 
     energy to generate electricity, to heat or cool a structure, 
     or to provide solar process heat.
       ``(C) Solar water heating property.--
       ``(i) In general.--The term `solar water heating property' 
     means property which, when installed in connection with a 
     structure, uses solar energy for the purpose of providing hot 
     water for use within such structure.
       ``(ii) Limitation on amount of credit.--The credit under 
     subsection (a)(1) for the taxable year with respect to solar 
     water heating property shall not exceed $1,000.
       ``(iii) Election to treat property as solar water heating 
     property.--Property that is both general solar energy 
     property and solar water heating property shall be treated as 
     general solar energy property for purposes of this section 
     unless the taxpayer elects to treat such property as being 
     only solar water heating property. If such an election is 
     made the energy percentage under subsection (b)(1) shall be 
     15 percent in lieu of 10 percent.
       ``(D) Photovoltaic property.--
       ``(i) In general.--The term `photovoltaic property' means 
     property which, when installed in connection with a 
     structure, uses a solar photovoltaic process to generate 
     electricity for use in such dwelling.
       ``(ii) Limitation on amount of credit.--The credit under 
     subsection (a)(1) for the taxable year with respect to 
     photovoltaic property shall not exceed $2,000.
       ``(E) Swimming pools, etc., used as storage medium.--The 
     term `solar energy property' shall not include property with 
     respect to which expenditures are properly allocable to a 
     swimming pool, hot tub, or any other energy storage medium 
     which has a function other than the function of such storage.
       ``(F) Solar panels.--No solar panel or other property 
     installed as a roof (or portion thereof) shall fail to be 
     treated as solar energy property solely because it 
     constitutes a structural component of the structure on which 
     it is installed.
       ``(2) Geothermal energy property.--
       ``(A) In general.--The term `geothermal energy property' 
     means equipment used to produce, distribute, or use energy 
     derived from a geothermal deposit (within the meaning of 
     section 613(e)(2)), but only, in the case of electricity 
     generated by geothermal power, up to (but not including) the 
     electrical transmission stage.
       ``(B) High risk geothermal well.--The term `high risk 
     geothermal well' means a geothermal deposit (within the 
     meaning of section 613(e)(2)) which requires high risk 
     drilling techniques. Such deposit may not be located in a 
     State or national park or in an area in which the relevant 
     State park authority or the National Park Service determines 
     the development of such a deposit will negatively impact on a 
     State or national park.
       ``(3) Energy-efficient building property.--
       ``(A) In general.--The term `energy-efficient building 
     property' means--
       ``(i) a fuel cell that--

       ``(I) generates electricity and heat using an 
     electrochemical process,
       ``(II) has an electricity-only generation efficiency 
     greater than 35 percent, and
       ``(III) has a minimum generating capacity of 5 kilowatts,

       ``(ii) an electric heat pump hot water heater that yields 
     an energy factor of 1.7 or greater under standards prescribed 
     by the Secretary of Energy,
       ``(iii) an electric heat pump that has a heating system 
     performance factor (HSPF) of 9 or greater and a cooling 
     seasonal energy efficiency ratio (SEER) of 13 or greater,
       ``(iv) a natural gas heat pump that has a coefficient of 
     performance of not less than 1.25 for heating and not less 
     than 0.60 for cooling,
       ``(v) a central air conditioner that has a cooling seasonal 
     energy efficiency ratio (SEER) of 13 or greater,
       ``(vi) an advanced natural gas water heater that--

       ``(I) increases steady state efficiency and reduces standby 
     and vent losses, and
       ``(II) has an energy factor of at least 0.65,

       ``(vii) an advanced natural gas furnace that achieves a 95 
     percent AFUE, and
       ``(viii) natural gas cooling equipment--

       ``(I) that has a coefficient of performance of not less 
     than .60, or
       ``(II) that uses desiccant technology and has an efficiency 
     rating of 40 percent.

       ``(B) Limitations.--The credit under subsection (a)(1) for 
     the taxable year may not exceed--
       ``(i) $500 in the case of property described in 
     subparagraph (A) other than clauses (i) and (iv) thereof,
       ``(ii) $500 for each kilowatt of capacity in the case of a 
     fuel cell described in subparagraph (A)(i), and
       ``(iii) $1,000 in the case of a natural gas heat pump 
     described in subparagraph (A)(iv).
       ``(4) Combined heat and power system property.--
       ``(A) In general.--The term `combined heat and power system 
     property' means property--
       ``(i) comprising a system for using the same energy source 
     for the sequential generation of electrical power, mechanical 
     shaft power, or both, in combination with steam, heat, or 
     other forms of useful energy,
       ``(ii) that has an electrical capacity of more than 50 
     kilowatts, and
       ``(iii) that produces at least 20 percent of its total 
     useful energy in the form of both thermal energy and 
     electrical or mechanical power.
       ``(B) Accounting rule for public utility property.--In the 
     case that combined heat and power system property is public 
     utility property (as defined in section 46(f)(5) as in effect 
     on the day before the date of the enactment of the Revenue 
     Reconciliation Act of 1990), the taxpayer may only claim the 
     credit under subsection (a)(1) if, with respect to such 
     property, the taxpayer uses a normalization method of 
     accounting.
       ``(5) Low core loss distribution transformer property.--The 
     term `low core loss distribution transformer property' means 
     a distribution transformer which has energy savings from a 
     highly efficient core of at least 20 percent more than the 
     average for power ratings reported by studies required under 
     section 124 of the Energy Policy Act of 1992.
       ``(6) Fuel-efficient farm equipment property.--The term 
     `fuel-efficient farm equipment property' means equipment used 
     in a farming business (as defined in section 263A(e)(4)) 
     which achieves a fuel efficiency level equal to or greater 
     than the 90th percentile of that type of equipment for the 
     year in which such equipment is placed in service.
       ``(7) Qualified aerobic digester property.--The term 
     `qualified aerobic digester property' means an aerobic 
     digester for manure or crop waste that achieves at least 65 
     percent efficiency measured in terms of the fraction of 
     energy input converted to electricity and useful thermal 
     energy.
       ``(8) Qualified wind energy systems equipment property.--
     The term `qualified wind energy systems equipment property' 
     means wind energy systems equipment with a turbine size of 
     not more than 50 kilowatts rated capacity.
       ``(e) Qualified Hybrid Vehicles.--For purposes of 
     subsection (a)(2)--
       ``(1) Credit amount.--
       ``(A) In general.--The credit amount for each qualified 
     hybrid vehicle with a rechargeable energy storage system that 
     provides the applicable percentage of the maximum available 
     power shall be the amount specified in the following table:
       

------------------------------------------------------------------------
               ``Applicable percentage
------------------------------------------------------ Credit amount is:
    Greater than or equal to--         Less than--
------------------------------------------------------------------------
5 percent.........................      10 percent           $  500
10 percent........................      20 percent           $1,000
20 percent........................      30 percent           $1,500
30 percent........................                           $2,000
------------------------------------------------------------------------

       ``(B) Increase in credit amount for regenerative braking 
     system.--In the case of a qualified hybrid vehicle that 
     actively employs a regenerative braking system which supplies 
     to the rechargeable energy storage system the applicable 
     percentage of the energy available from braking in a typical 
     60 miles per hour to 0 miles per hour braking event, the 
     credit amount determined under subparagraph (A) shall be 
     increased by the amount specified in the following table:
       

------------------------------------------------------------------------
               ``Applicable percentage
------------------------------------------------------   Credit amount
    Greater than or equal to--         Less than--        increase is:
------------------------------------------------------------------------
20 percent........................      40 percent           $  250
40 percent........................      60 percent           $  500
60 percent........................                           $1,000
------------------------------------------------------------------------

       ``(2) Qualified hybrid vehicle.--The term `qualified hybrid 
     vehicle means an automobile that meets all applicable 
     regulatory requirements and that can draw propulsion energy 
     from both of the following on-board sources of stored energy:
       ``(A) A consumable fuel.
       ``(B) A rechargeable energy storage system.
       ``(3) Maximum available power.--The term `maximum available 
     power' means the maximum value of the sum of the heat engine 
     and electric drive system power or other

[[Page 18248]]

     non-heat energy conversion devices available for a driver's 
     command for maximum acceleration at vehicle speeds under 75 
     miles per hour.
       ``(4) Automobile.--The term `automobile' has the meaning 
     given such term by section 4064(b)(1) (without regard to 
     subparagraphs (B) and (C) thereof). A vehicle shall not fail 
     to be treated as an automobile solely by reason of weight if 
     such vehicle is rated at 8,500 pounds gross vehicle weight 
     rating or less.
       ``(5) Double benefit; property used outside united states, 
     etc., not qualified.--No credit shall be allowed under 
     subsection (a)(2) with respect to--
       ``(A) any property for which a credit is allowed under 
     section 25B or 30,
       ``(B) any property referred to in section 50(b), and
       ``(C) the portion of the cost of any property taken into 
     account under section 179 or 179A.
       ``(6) Regulations.--
       ``(A) Treasury.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this subsection.
       ``(B) Environmental protection agency.--The Administrator 
     of the Environmental Protection Agency shall prescribe such 
     regulations as may be necessary or appropriate to specify the 
     testing and calculation procedures that would be used to 
     determine whether a vehicle meets the qualifications for a 
     credit under this subsection.
       ``(7) Termination.--Paragraph (2) shall not apply with 
     respect to any vehicle placed in service during a calendar 
     year ending before January 1, 2003, or after December 31, 
     2006.
       ``(f) Special Rules.--For purposes of this section--
       ``(1) Special rule for property financed by subsidized 
     energy financing or industrial development bonds.--
       ``(A) Reduction of basis.--For purposes of applying the 
     energy percentage to any property, if such property is 
     financed in whole or in part by--
       ``(i) subsidized energy financing, or
       ``(ii) the proceeds of a private activity bond (within the 
     meaning of section 141) the interest on which is exempt from 
     tax under section 103,

     the amount taken into account as the basis of such property 
     shall not exceed the amount which (but for this subparagraph) 
     would be so taken into account multiplied by the fraction 
     determined under subparagraph (B).
       ``(B) Determination of fraction.--For purposes of 
     subparagraph (A), the fraction determined under this 
     subparagraph is 1 reduced by a fraction--
       ``(i) the numerator of which is that portion of the basis 
     of the property which is allocable to such financing or 
     proceeds, and
       ``(ii) the denominator of which is the basis of the 
     property.
       ``(C) Subsidized energy financing.--For purposes of 
     subparagraph (A), the term `subsidized energy financing' 
     means financing provided under a Federal, State, or local 
     program a principal purpose of which is to provide subsidized 
     financing for projects designed to conserve or produce 
     energy.
       ``(2) Certain progress expenditure rules made applicable.--
     Rules similar to the rules of subsections (c)(4) and (d) of 
     section 46 (as in effect on the day before the date of the 
     enactment of the Revenue Reconciliation Act of 1990) shall 
     apply for purposes of this section.
       ``(g) Application of Section.--
       ``(1) In general.--Except as provided by paragraph (2) and 
     subsection (e), this section shall apply to property placed 
     in service after December 31, 1999, and before January 1, 
     2004.
       ``(2) Exceptions.--
       ``(A) Solar energy, geothermal energy, and low core loss 
     distribution transformer property.--Paragraph (1) shall not 
     apply to general solar energy property or geothermal energy 
     property.
       ``(B) Photovoltaic property.--In the case of photovoltaic 
     property, this section shall apply to property placed in 
     service after December 31, 1999, and before January 1, 2006.
       ``(C) Fuel cell property.--In the case of property that is 
     a fuel cell described in subsection (d)(3)(A)(i), this 
     section shall apply to property placed in service after 
     December 31, 1999, and before January 1, 2005.''
       (b) Energy Credit Allowable Against Entire Regular Tax and 
     Alternative Minimum Tax.--
       (1) In general.--Section 38(c) (relating to limitation 
     based on amount of tax) is amended by redesignating paragraph 
     (3) as paragraph (4) and by inserting after paragraph (2) the 
     following:
       ``(3) Special rules for energy credit.--
       ``(A) In general.--In the case of a C corporation, this 
     section and section 39 shall be applied separately--
       ``(i) first with respect to so much of the credit allowed 
     by subsection (a) as is not attributable to the energy 
     credit, and
       ``(ii) then with respect to the energy credit.
       ``(B) Rules for application of energy credit.--
       ``(i) In general.--In the case of the energy credit, in 
     lieu of applying the preceding paragraphs of this subsection, 
     the amount of such credit allowed under subsection (a) for 
     any taxable year shall not exceed the net chapter 1 tax for 
     such year.
       ``(ii) Net chapter 1 tax.--For purposes of clause (i), the 
     term `net chapter 1 tax' means the sum of the regular tax 
     liability for the taxable year and the tax imposed by section 
     55 for the taxable year, reduced by the sum of the credits 
     allowable under this part for the taxable year (other than 
     under section 34 and other than the energy credit).
       ``(C) Energy credit.--For purposes of this paragraph, the 
     term `energy credit' means the portion of the credit under 
     subsection (a) which is attributable to the credit determined 
     under section 48A and allowable under section 46 (relating to 
     energy credit).''
       (2) Conforming amendment.--Section 38(c)(2)(A)(ii)(II) is 
     amended by striking ``(other than the empowerment zone 
     employment credit)'' and inserting ``(other than the credits 
     described in this paragraph and paragraph (3))''.
       (c) Conforming Amendments.--
       (1) Section 48 is amended to read as follows:

     ``SEC. 48. REFORESTATION CREDIT.

       ``(a) In General.--For purposes of section 46, the 
     reforestation credit for any taxable year is 20 percent of 
     the portion of the amortizable basis of any qualified timber 
     property which was acquired during such taxable year and 
     which is taken into account under section 194 (after the 
     application of section 194(b)(1)).
       ``(b) Definitions.--For purposes of this subpart, the terms 
     `amortizable basis' and `qualified timber property' have the 
     respective meanings given to such terms by section 194.''
       (2) Section 39(d) is amended by adding at the end the 
     following:
       ``(9) No carryback of energy credit before effective 
     date.--No portion of the unused business credit for any 
     taxable year which is attributable to the energy credit 
     determined under section 48A may be carried back to a taxable 
     year ending before the date of the enactment of section 
     48A.''
       (3) Section 280C is amended by adding at the end the 
     following:
       ``(d) Credit for Energy Property Expenses.--
       ``(1) In general.--No deduction shall be allowed for that 
     portion of the expenses for energy property (as defined in 
     section 48A(c)) 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 48A(a).
       ``(2) Similar rule where taxpayer capitalizes rather than 
     deducts expenses.--If--
       ``(A) the amount of the credit allowable for the taxable 
     year under section 48A (determined without regard to section 
     38(c)), exceeds
       ``(B) the amount allowable as a deduction for the taxable 
     year for expenses for energy property (determined without 
     regard to paragraph (1)),

     the amount chargeable to capital account for the taxable year 
     for such expenses shall be reduced by the amount of such 
     excess.
       ``(3) Controlled groups.--Paragraph (3) of subsection (b) 
     shall apply for purposes of this subsection.''
       (4) Section 29(b)(3)(A)(i)(III) is amended by striking 
     ``section 48(a)(4)(C)'' and inserting ``section 
     48A(f)(1)(C)''.
       (5) Section 50(a)(2)(E) is amended by striking ``section 
     48(a)(5)'' and inserting ``section 48A(f)(2)''.
       (6) Section 168(e)(3)(B) is amended--
       (A) by striking clause (vi)(I) and inserting the following:

       ``(I) is described in paragraph (1)(B) or (2) of section 
     48A(d) (or would be so described if `solar and wind' were 
     substituted for `solar' in paragraph (1)(B)),'', and

       (B) in the last sentence by striking ``section 48(a)(3)'' 
     and inserting ``section 48A(c)(2)(A)''.
       (d) Clerical Amendment.--The table of sections for subpart 
     E of part IV of subchapter A of chapter 1 is amended by 
     striking the item relating to section 48 and inserting the 
     following:

``Sec. 48. Reforestation credit.
``Sec. 48A. Energy credit.''
       (e) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after December 31, 
     1999, under rules similar to the rules of section 48(m) of 
     the Internal Revenue Code of 1986 (as in effect on the day 
     before the date of the enactment of the Revenue 
     Reconciliation Act of 1990).

                  TITLE II--NONBUSINESS ENERGY SYSTEMS

     SEC. 201. CREDIT FOR CERTAIN NONBUSINESS ENERGY SYSTEMS.

       (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:

     ``SEC. 25B. NONBUSINESS ENERGY PROPERTY.

       ``(a) Allowance of Credit.--
       ``(1) In general.--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 sum of--
       ``(A) the applicable percentage of residential energy 
     property expenditures made by the taxpayer during such year,
       ``(B) the credit amount (determined under section 48A(f)) 
     for each vehicle purchased

[[Page 18249]]

     during the taxable year which is a qualified hybrid vehicle 
     (as defined in section 48A(f)(2)), and
       ``(C) the credit amount specified in the following table 
     for a new, highly energy-efficient principal residence:

``New, Highly Energy-Efficient Principal Residence:      Credit Amount:
  30 percent property...........................................$1,000.
  40 percent property...........................................$1,500.
  50 percent property...........................................$2,000.
       ``(2) Applicable percentage.--
       ``(A) In general.--The applicable percentage shall be 
     determined in accordance with the following table:
       

------------------------------------------------------------------------
   ``Column A--Description       Column B--         Column C--Period
------------------------------   Applicable   --------------------------
                                 Percentage         For the period:
                              ------------------------------------------
       In the case of:         The applicable    Beginning
                               percentage is:       on:       Ending on:
------------------------------------------------------------------------
20 percent energy-efficient    20 percent       1/1/2000     12/31/2003
 building property
10 percent energy-efficient    10 percent       1/1/2000     12/31/2001
 building property
Solar water heating property   15 percent       1/1/2000     12/31/2006
Photovoltaic property          15 percent       1/1/2000     12/31/2006.
------------------------------------------------------------------------

       ``(B) Periods for which percentage not specified.--In the 
     case of any residential energy property, the applicable 
     percentage shall be zero for any period for which an 
     applicable percentage is not specified for such property 
     under subparagraph (A).
       ``(b) Maximum Credit.--
       ``(1) In general.--In the case of property described in the 
     following table, the amount of the credit allowed under 
     subsection (a)(1)(A) for the taxable year for each item of 
     such property with respect to a dwelling unit shall not 
     exceed the amount specified for such property in such table:

       

------------------------------------------------------------------------
                                         Maximum allowable credit amount
    ``Description of property item:                    is:
------------------------------------------------------------------------
20 percent energy-efficient building         $500.
 property (other than a fuel cell or
 natural gas heat pump).
20 percent energy-efficient building     ...............................
 property:
  fuel cell described in section 48A(e)      $  500 per each kw/hr of
   (3)(A).                                capacity.
  natural gas heat pump described in         $1,000.
   section 48A(e) (3)(D).
10 percent energy-efficient building         $ 250.
 property.
Solar water heating property...........      $1,000.
Photovoltaic property..................      $2,000.
------------------------------------------------------------------------

       ``(2) Coordination of limitations.--If a credit is allowed 
     to the taxpayer for any taxable year by reason of an 
     acquisition of a new, highly energy-efficient principal 
     residence, no other credit shall be allowed under subsection 
     (a)(1)(A) with respect to such residence during the 1-taxable 
     year period beginning with such taxable year.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Residential Energy Property Expenditures.--The term 
     `residential energy property expenditures' means expenditures 
     made by the taxpayer for qualified energy property installed 
     on or in connection with a dwelling unit which--
       ``(A) is located in the United States, and
       ``(B) is used by the taxpayer as a residence.

     Such term includes expenditures for labor costs properly 
     allocable to the onsite preparation, assembly, or original 
     installation of the property.
       ``(2) Qualified energy property.--
       ``(A) In general.--The term `qualified energy property' 
     means--
       ``(i) energy-efficient building property,
       ``(ii) solar water heating property, and
       ``(iii) photovoltaic property.
       ``(B) Swimming pool, etc., used as storage medium; solar 
     panels.--For purposes of this paragraph, the provisions of 
     subparagraphs (D) and (E) section 48A(e)(1) shall apply.
       ``(3) Energy-efficient building property.--The term 
     `energy-efficient building property' has the meaning given to 
     such term by paragraphs (3) and (4) of section 48A(e).
       ``(4) Solar water heating property.--The term `solar water 
     heating property' means property which, when installed in 
     connection with a structure, uses solar energy for the 
     purpose of providing hot water for use within such structure.
       ``(5) Photovoltaic property.--The term `photovoltaic 
     property' has the meaning given to such term by section 
     48A(e)(1)(C).
       ``(6) New, highly energy-efficient principal residence.--
       ``(A) In general.--Property is a new, highly energy-
     efficient principal residence if--
       ``(i) such property is located in the United States,
       ``(ii) the original use of such property commences with the 
     taxpayer and is, at the time of such use, the principal 
     residence of the taxpayer, and
       ``(iii) such property is certified before such use 
     commences as being 50 percent property, 40 percent property, 
     or 30 percent property.
       ``(B) 50, 40, or 30 percent property.--
       ``(i) In general.--For purposes of subparagraph (A), 
     property is 50 percent property, 40 percent property, or 30 
     percent property if the projected energy usage of such 
     property is reduced by 50 percent, 40 percent, or 30 percent, 
     respectively, compared to the energy usage of a reference 
     house that complies with minimum standard practice, such as 
     the 1998 International Energy Conservation Code of the 
     International Code Council, as determined according to the 
     requirements specified in clause (ii).
       ``(ii) Procedures.--

       ``(I) In general.--For purposes of clause (i), energy usage 
     shall be demonstrated either by a component-based approach or 
     a performance-based approach.
       ``(II) Component approach.--Compliance by the component 
     approach is achieved when all of the components of the house 
     comply with the requirements of prescriptive packages 
     established by the Secretary of Energy, in consultation with 
     the Administrator of the Environmental Protection Agency, 
     such that they are equivalent to the results of using the 
     performance-based approach of subclause (III) to achieve the 
     required reduction in energy usage.

       ``(III) Performance-based approach.--Performance-based 
     compliance shall be demonstrated in terms of the required 
     percentage reductions in projected energy use. Computer 
     software used in support of performance-based compliance must 
     meet all of the procedures and methods for calculating energy 
     savings reductions that are promulgated by the Secretary of 
     Energy. Such regulations on the specifications for software 
     shall be based in the 1998 California Residential Alternative 
     Calculation Method Approval Manual, except that the 
     calculation procedures shall be developed such that the same 
     energy efficiency measures qualify a home for tax credits 
     regardless of whether the home uses a gas or oil furnace or 
     boiler, or an electric heat pump.
       ``(IV) Approval of software submissions.--The Secretary of 
     Energy shall approve software submissions that comply with 
     the calculation requirements of subclause (III).

       ``(C) Determinations of compliance.--A determination of 
     compliance made for the purposes of this paragraph shall be 
     filed with the Secretary of Energy within 1 year of the date 
     of such determination and shall include the TIN of the 
     certifier, the address of the building in compliance, and the 
     identity of the person for whom such determination was 
     performed. Determinations of compliance filed with the 
     Secretary of Energy shall be available for inspection by the 
     Secretary.
       ``(D) Compliance.--
       ``(i) In general.--The Secretary of Energy in consultation 
     with the Secretary of the Treasury shall establish 
     requirements for certification and compliance procedures 
     after examining the requirements for energy consultants and 
     home energy ratings providers specified by the Mortgage 
     Industry National Accreditation Procedures for Home Energy 
     Rating Systems.
       ``(ii) Individuals qualified to determine compliance.--
     Individuals qualified to determine compliance shall be only 
     those individuals who are recognized by an organization 
     certified by the Secretary of Energy for such purposes.
       ``(D) Principal residence.--The term `principal residence' 
     has the same meaning as when used in section 121, except that 
     the period for which a building is treated as the principal 
     residence of the taxpayer shall also include the 60-day 
     period ending on the 1st day on which it would (but for this 
     subparagraph) first be treated as his principal residence.
       ``(d) Special Rules.--For purposes of this section--
       ``(1) Dollar amounts in case of joint occupancy.--In the 
     case of any dwelling unit which if jointly occupied and used 
     during any calendar year as a residence by 2 or more 
     individuals the following shall apply:
       ``(A) The amount of the credit allowable under subsection 
     (a) by reason of expenditures made during such calendar year 
     by any of such individuals with respect to such dwelling unit 
     shall be determined by treating all of such individuals as 1 
     taxpayer whose taxable year is such calendar year.
       ``(B) There shall be allowable with respect to such 
     expenditures to each of such individuals, a credit under 
     subsection (a) for the taxable year in which such calendar 
     year ends in an amount which bears the same ratio to the 
     amount determined under subparagraph (A) as the amount of 
     such expenditures made by such individual during such 
     calendar year bears to the aggregate of such expenditures 
     made by all of such individuals during such calendar year.
       ``(2) Tenant-stockholder in cooperative housing 
     corporation.--In the case of an individual who is a tenant-
     stockholder (as defined in section 216) in a cooperative 
     housing corporation (as defined in such section), such 
     individual shall be treated as having made his tenant-
     stockholder's proportionate share (as defined in section 
     216(b)(3)) of any expenditures of such corporation.
       ``(3) Condominiums.--
       ``(A) In general.--In the case of an individual who is a 
     member of a condominium management association with respect 
     to a condominium which he owns, such individual shall be 
     treated as having made his proportionate share of any 
     expenditures of such association.

[[Page 18250]]

       ``(B) Condominium management association.--For purposes of 
     this paragraph, the term `condominium management association' 
     means an organization which meets the requirements of 
     paragraph (1) of section 528(c) (other than subparagraph (E) 
     thereof) with respect to a condominium project substantially 
     all of the units of which are used as residences.
       ``(4) Joint ownership of energy items.--
       ``(A) In general.--Any expenditure otherwise qualifying as 
     a residential energy property expenditure shall not be 
     treated as failing to so qualify merely because such 
     expenditure was made with respect to 2 or more dwelling 
     units.
       ``(B) Limits applied separately.--In the case of any 
     expenditure described in subparagraph (A), the amount of the 
     credit allowable under subsection (a) shall (subject to 
     paragraph (1)) be computed separately with respect to the 
     amount of the expenditure made for each dwelling unit.
       ``(5) Allocation in certain cases.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     if less than 80 percent of the use of an item is for 
     nonbusiness purposes, only that portion of the expenditures 
     for such item which is properly allocable to use for 
     nonbusiness purposes shall be taken into account. For 
     purposes of this paragraph, use for a swimming pool shall be 
     treated as use which is not for nonbusiness purposes.
       ``(B) Special rule for vehicles.--For purposes of this 
     section and section 48A, a vehicle shall be treated as used 
     entirely for business or nonbusiness purposes if the majority 
     of the use of such vehicle is for business or nonbusiness 
     purposes, as the case may be.
       ``(6) Double benefit; property used outside United States, 
     etc., not qualified.--No credit shall be allowed under 
     subsection (a)(1)(B) with respect to--
       ``(A) any property for which a credit is allowed under 
     section 30 or 48A,
       ``(B) any property referred to in section 50(b), and
       ``(C) the portion of the cost of any property taken into 
     account under section 179 or 179A.
       ``(7) When expenditure made; amount of expenditure.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     an expenditure with respect to an item shall be treated as 
     made when the original installation of the item is completed.
       ``(B) Expenditures part of building construction.--In the 
     case of an expenditure in connection with the construction of 
     a structure, such expenditure shall be treated as made when 
     the original use of the constructed structure by the taxpayer 
     begins.
       ``(C) Amount.--The amount of any expenditure shall be the 
     cost thereof.
       ``(8) Property financed by subsidized energy financing.--
       ``(A) Reduction of expenditures.--For purposes of 
     determining the amount of residential energy property 
     expenditures made by any individual with respect to any 
     dwelling unit, there shall not be taken in to account 
     expenditures which are made from subsidized energy financing 
     (as defined in section 48A(g)(1)).
       ``(B) Dollar limits reduced.--The dollar amounts in the 
     table contained in subsection (b)(1) with respect to each 
     property purchased for such dwelling unit for any taxable 
     year of such taxpayer shall be reduced proportionately by an 
     amount equal to the sum of--
       ``(i) the amount of the expenditures made by the taxpayer 
     during such taxable year with respect to such dwelling unit 
     and not taken into account by reason of subparagraph (A), and
       ``(ii) the amount of any Federal, State, or local grant 
     received by the taxpayer during such taxable year which is 
     used to make residential energy property expenditures with 
     respect to the dwelling unit and is not included in the gross 
     income of such taxpayer.
       ``(e) Basis Adjustments.--For purposes of this subtitle, if 
     a credit is allowed under this section for any expenditure 
     with respect to any property, the increase in the basis of 
     such property which would (but for this subsection) result 
     from such expenditure shall be reduced by the amount of the 
     credit so allowed.''.
       (b) Conforming Amendments.--
       (1) Section 1016(a) is amended by striking ``and'' at the 
     end of paragraph (26), by striking the period at the end of 
     paragraph (27) and inserting ``; and'', and by adding at the 
     end the following:
       ``(28) to the extent provided in section 25B(e), in the 
     case of amounts with respect to which a credit has been 
     allowed under section 25B.''
       (2) 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:

``Sec. 25B. Nonbusiness energy property.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to expenditures after December 31, 1999.

                      TITLE III--ALTERNATIVE FUELS

     SEC. 301. ALLOCATION OF ALCOHOL FUELS CREDIT TO PATRONS OF A 
                   COOPERATIVE.

       (a) In General.--Section 40(d) (relating to alcohol used as 
     fuel) is amended by adding at the end the following:
       ``(6) Allocation of small ethanol producer credit to 
     patrons of cooperative.--
       ``(A) In general.--In the case of a cooperative 
     organization described in section 1381(a), any portion of the 
     credit determined under subsection (a)(3) for the taxable 
     year may, at the election of the organization made on a 
     timely filed return (including extensions) for such year, be 
     apportioned pro rata among patrons of the organization on the 
     basis of the quantity or value of business done with or for 
     such patrons for the taxable year. Such an election, once 
     made, shall be irrevocable for such taxable year.
       ``(B) Treatment of organizations and patrons.--The amount 
     of the credit apportioned to patrons pursuant to subparagraph 
     (A)--
       ``(i) shall not be included in the amount determined under 
     subsection (a) for the taxable year of the organization, and
       ``(ii) shall be included in the amount determined under 
     subsection (a) for the taxable year of each patron in which 
     the patronage dividend for the taxable year referred to in 
     subparagraph (A) is includible in gross income.
       ``(C) Special rule for decreasing credit for taxable 
     year.--If the amount of the credit of a cooperative 
     organization determined under subsection (a)(3) for a taxable 
     year is less than the amount of such credit shown on the 
     cooperative organization's return for such year, an amount 
     equal to the excess of such reduction over the amount not 
     apportioned to the patrons under subparagraph (A) for the 
     taxable year shall be treated as an increase in tax imposed 
     by this chapter on the organization. Any such increase shall 
     not be treated as tax imposed by this chapter for purposes of 
     determining the amount of any credit under this subpart or 
     subpart A, B, E, or G of this part.''
       (b) Technical Amendment.--Section 1388 (relating to 
     definitions and special rules for cooperative organizations) 
     is amended by adding at the end the following:
       ``(k) Cross Reference.--

  ``For provisions relating to the apportionment of the alcohol fuels 
credit between cooperative organizations and their patrons, see section 
40(d)(6).''
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.

                         TITLE IV--AUTOMOBILES

     SEC. 401. EXTENSION OF CREDIT FOR QUALIFIED ELECTRIC 
                   VEHICLES.

       (a) Extension of Credit for Qualified Electric Vehicles.--
     Subsection (f) of section 30 (relating to termination) is 
     amended by striking ``December 31, 2004'' and inserting 
     ``December 31, 2006''.
       (b) Repeal of Phaseout.--Subsection (b) of section 30 
     (relating to limitations) is amended by striking paragraph 
     (2) and redesignating paragraph (3) as paragraph (2).
       (c) No Double Benefit.--
       (1) Subsection (d) of section 30 (relating to special 
     rules) is amended by adding at the end the following:
       ``(5) No double benefit.--No credit shall be allowed under 
     subsection (a) with respect to any vehicle if the taxpayer 
     claims a credit for such vehicle under section 25B(a)(1)(B) 
     or 48A(e).''
       (2) Paragraph (3) of section 30(d) (relating to property 
     used outside United States, etc., not qualified) is amended 
     by striking ``section 50(b)'' and inserting ``section 25B, 
     48A, or 50(b)''.
       (3) Paragraph (5) of section 179A(e) (relating to property 
     used outside United States, etc., not qualified) is amended 
     by striking ``section 50(b)'' and inserting ``section 25B, 
     48A, or 50(b)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after the date of 
     the enactment of this Act.

                    TITLE V--CLEAN COAL TECHNOLOGIES

     SEC. 501. CREDIT FOR INVESTMENT IN QUALIFYING CLEAN COAL 
                   TECHNOLOGY.

       (a) Allowance of Qualifying Clean Coal Technology Facility 
     Credit.--Section 46 (relating to amount of credit) is amended 
     by striking ``and'' at the end of paragraph (2), by striking 
     the period at the end of paragraph (3) and inserting ``, 
     and'', and by adding at the end the following:
       ``(4) the qualifying clean coal technology facility 
     credit.''
       (b) Amount of Qualifying Clean Coal Technology Facility 
     Credit.--Subpart E of part IV of subchapter A of chapter 1 
     (relating to rules for computing investment credit), as 
     amended by section 101(a), is amended by inserting after 
     section 48A the following:

     ``SEC. 48B. QUALIFYING CLEAN COAL TECHNOLOGY FACILITY CREDIT.

       ``(a) In General.--For purposes of section 46, the 
     qualifying clean coal technology facility credit for any 
     taxable year is an amount equal to 10 percent of the 
     qualified investment in a qualifying clean coal technology 
     facility for such taxable year.
       ``(b) Qualifying Clean Coal Technology Facility.--
       ``(1) In general.--For purposes of subsection (a), the term 
     `qualifying clean coal technology facility' means a facility 
     of the taxpayer--
       ``(A)(i) the original use of which commences with the 
     taxpayer or the reconstruction of which is completed by the 
     taxpayer (but only with respect to that portion of the

[[Page 18251]]

     basis which is properly attributable to such reconstruction), 
     or
       ``(ii) that is acquired through purchase (as defined by 
     section 179(d)(2)),
       ``(B) that is depreciable under section 167,
       ``(C) that has a useful life of not less than 4 years, and
       ``(D) that is used for qualifying clean coal technology.
       ``(2) Special rule for sale-leasebacks.--For purposes of 
     subparagraph (A) of paragraph (1), in the case of a facility 
     that--
       ``(A) is originally placed in service by a person, and
       ``(B) is sold and leased back by such person, or is leased 
     to such person, within 3 months after the date such facility 
     was originally placed in service, for a period of not less 
     than 12 years,

     such facility shall be treated as originally placed in 
     service not earlier than the date on which such property is 
     used under the leaseback (or lease) referred to in 
     subparagraph (B). The preceding sentence shall not apply to 
     any property if the lessee and lessor of such property make 
     an election under this sentence. Such an election, once made, 
     may be revoked only with the consent of the Secretary.
       ``(3) Qualifying clean coal technology.--For purposes of 
     paragraph (1)(D)--
       ``(A) In general.--The term `qualifying clean coal 
     technology' means, with respect to clean coal technology--
       ``(i) applications totaling 1,000 megawatts of advanced 
     pulverized coal or atmospheric fluidized bed combustion 
     technology installed as a new, retrofit, or repowering 
     application and operated between 2000 and 2013 that has a 
     design average net heat rate of not more than 8,750 Btu's per 
     kilowatt hour,
       ``(ii) applications totaling 1,500 megawatts of pressurized 
     fluidized bed combustion technology installed as a new, 
     retrofit, or repowering application and operated between 2000 
     and 2013 that has a design average net heat rate of not more 
     than 8,400 Btu's per kilowatt hour,
       ``(iii) applications totaling 1,500 megawatts of integrated 
     gasification combined cycle technology installed as a new, 
     retrofit, or repowering application and operated between 2000 
     and 2013 that has a design average net heat rate of not more 
     than 8,550 Btu's per kilowatt hour, and
       ``(iv) applications totaling 2,000 megawatts or equivalent 
     of technology for the production of electricity installed as 
     a new, retrofit, or repowering application and operated 
     between 2000 and 2013 that has a carbon emission rate that is 
     not more than 85 percent of conventional technology.
       ``(B) Exceptions.--Such term shall not include clean coal 
     technology projects receiving or scheduled to receive funding 
     under the Clean Coal Technology Program of the Department of 
     Energy.
       ``(C) Clean coal technology.--The term `clean coal 
     technology' means advanced technology that utilizes coal to 
     produce 50 percent or more of its thermal output as 
     electricity including advanced pulverized coal or atmospheric 
     fluidized bed combustion, pressurized fluidized bed 
     combustion, integrated gasification combined cycle, and any 
     other technology for the production of electricity that 
     exceeds the performance of conventional technology.
       ``(D) Conventional technology.--The term `conventional 
     technology' means--
       ``(i) coal-fired combustion technology with a design 
     average net heat rate of not less than 9,300 Btu's per 
     kilowatt hour (HHV) and a carbon equivalents emission rate of 
     not more than 0.53 pounds of carbon per kilowatt hour; or
       ``(ii) natural gas-fired combustion technology with a 
     design average net heat rate of not less than 7,500 Btu's per 
     kilowatt hour (HHV) and a carbon equivalents emission rate of 
     not more than 0.24 pounds of carbon per kilowatt hour.
       ``(E) Design average net heat rate.--The term `design 
     average net heat rate' shall be based on the design average 
     annual heat input to and the design average annual net 
     electrical output from the qualifying clean coal technology 
     (determined without regard to such technology's co-generation 
     of steam).
       ``(F) Selection criteria.--Selection criteria for clean 
     coal technology facilities--
       ``(i) shall be established by the Secretary of Energy as 
     part of a competitive solicitation,
       ``(ii) shall include primary criteria of minimum design 
     average net heat rate, maximum design average thermal 
     efficiency, and lowest cost to the government, and
       ``(iii) shall include supplemental criteria as determined 
     appropriate by the Secretary of Energy.
       ``(c) Qualified Investment.--For purposes of subsection 
     (a), the term `qualified investment' means, with respect to 
     any taxable year, the basis of a qualifying clean coal 
     technology facility placed in service by the taxpayer during 
     such taxable year.
       ``(d) Qualified Progress Expenditures.--
       ``(1) Increase in qualified investment.--In the case of a 
     taxpayer who has made an election under paragraph (5), the 
     amount of the qualified investment of such taxpayer for the 
     taxable year (determined under subsection (c) without regard 
     to this section) shall be increased by an amount equal to the 
     aggregate of each qualified progress expenditure for the 
     taxable year with respect to progress expenditure property.
       ``(2) Progress expenditure property defined.--For purposes 
     of this subsection, the term `progress expenditure property' 
     means any property being constructed by or for the taxpayer 
     and which it is reasonable to believe will qualify as a 
     qualifying clean coal technology facility which is being 
     constructed by or for the taxpayer when it is placed in 
     service.
       ``(3) Qualified progress expenditures defined.--For 
     purposes of this subsection--
       ``(A) Self-constructed property.--In the case of any self-
     constructed property, the term `qualified progress 
     expenditures' means the amount which, for purposes of this 
     subpart, is properly chargeable (during such taxable year) to 
     capital account with respect to such property.
       ``(B) Non-self-constructed property.--In the case of non-
     self-constructed property, the term `qualified progress 
     expenditures' means the amount paid during the taxable year 
     to another person for the construction of such property.
       ``(4) Other definitions.--For purposes of this subsection--
       ``(A) Self-constructed property.--The term `self-
     constructed property' means property for which it is 
     reasonable to believe that more than half of the construction 
     expenditures will be made directly by the taxpayer.
       ``(B) Non-self-constructed property.--The term `non-self-
     constructed property' means property which is not self-
     constructed property.
       ``(C) Construction, etc.--The term `construction' includes 
     reconstruction and erection, and the term `constructed' 
     includes reconstructed and erected.
       ``(D) Only construction of qualifying clean coal technology 
     facility to be taken into account.--Construction shall be 
     taken into account only if, for purposes of this subpart, 
     expenditures therefor are properly chargeable to capital 
     account with respect to the property.
       ``(5) Election.--An election under this subsection may be 
     made at such time and in such manner as the Secretary may by 
     regulations prescribe. Such an election shall apply to the 
     taxable year for which made and to all subsequent taxable 
     years. Such an election, once made, may not be revoked except 
     with the consent of the Secretary.
       ``(e) Coordination with other credits.--This section shall 
     not apply to any property with respect to which the 
     rehabilitation credit under section 47 or the energy credit 
     under section 48A is allowed unless the taxpayer elects to 
     waive the application of such credit to such property.''
       (c) Recapture.--Section 50(a) (relating to other special 
     rules) is amended by adding at the end the following:
       ``(6) Special rules relating to qualifying clean coal 
     technology facility.--For purposes of applying this 
     subsection in the case of any credit allowable by reason of 
     section 48B, the following shall apply:
       ``(A) General rule.--In lieu of the amount of the increase 
     in tax under paragraph (1), the increase in tax shall be an 
     amount equal to the investment tax credit allowed under 
     section 38 for all prior taxable years with respect to a 
     qualifying clean coal technology facility (as defined by 
     section 48B(b)) multiplied by a fraction whose numerator is 
     the number of years remaining to fully depreciate under this 
     title the qualifying clean coal technology facility disposed 
     of, and whose denominator is the total number of years over 
     which such facility would otherwise have been subject to 
     depreciation. For purposes of the preceding sentence, the 
     year of disposition of the qualifying clean coal technology 
     facility property shall be treated as a year of remaining 
     depreciation.
       ``(B) Property ceases to qualify for progress 
     expenditures.--Rules similar to the rules of paragraph (2) 
     shall apply in the case of qualified progress expenditures 
     for a qualifying clean coal technology facility under section 
     48B, except that the amount of the increase in tax under 
     subparagraph (A) of this paragraph shall be substituted in 
     lieu of the amount described in such paragraph (2).
       ``(C) Application of paragraph.--This paragraph shall be 
     applied separately with respect to the credit allowed under 
     section 38 regarding a qualifying clean coal technology 
     facility.''
       (d) Transitional Rule.--Section 39(d) of the Internal 
     Revenue Code of 1986 (relating to transitional rules), as 
     amended by section 101(c)(2), is amended by adding at the end 
     the following:
       ``(10) No carryback of section 48B credit before effective 
     date.--No portion of the unused business credit for any 
     taxable year which is attributable to the qualifying clean 
     coal technology facility credit determined under section 48B 
     may be carried back to a taxable year ending before the date 
     of the enactment of section 48B.''
       (e) Credit Allowed Against Minimum Tax.--
       (1) In general.--Section 38(c) of the Internal Revenue Code 
     of 1986 (relating to limitation based on amount of tax), as 
     amended by section 101(b)(1), is amended by redesignating 
     paragraph (4) as paragraph (5) and by inserting after 
     paragraph (3) the following:
       ``(4) Special rules for clean coal technology credit.--

[[Page 18252]]

       ``(A) In general.--In the case of the qualifying clean coal 
     technology facility credit--
       ``(i) this section and section 39 shall be applied 
     separately with respect to the credit, and
       ``(ii) in applying paragraph (1) to the credit--

       ``(I) subparagraph (A) shall not apply, and
       ``(II) the limitation under paragraph (1) (as modified by 
     subclause (I)) shall be reduced by the credit allowed under 
     subsection (a) for the taxable year (other than the credits 
     described in this paragraph and paragraphs (2) and (3)).

       ``(B) Qualifying clean coal technology facility credit.--
     For purposes of this paragraph, the term `qualifying clean 
     coal technology facility credit' means the portion of the 
     credit under subsection (a) which is attributable to the 
     credit determined under section 48B.''
       (2) Conforming amendment.--Section 38(c)(2)(A)(ii)(II) of 
     such Code, as amended by section 101(b)(2), is amended by 
     striking ``(other than the credits described in this 
     paragraph and paragraph (3))'' and inserting ``(other than 
     the credits described in this paragraph and paragraphs (3) 
     and (4))''.
       (f) Technical Amendments.--
       (1) Section 49(a)(1)(C) is amended by striking ``and'' at 
     the end of clause (ii), by striking the period at the end of 
     clause (iii) and inserting ``, and'', and by adding at the 
     end the following:
       ``(iv) the portion of the basis of any qualifying clean 
     coal technology facility attributable to any qualified 
     investment (as defined by section 48B(c)).''
       (2) Section 50(a)(4) is amended by striking ``and (2)'' and 
     inserting ``, (2), and (6)''.
       (3) The table of sections for subpart E of part IV of 
     subchapter A of chapter 1, as amended by section 101(e), is 
     amended by inserting after the item relating to section 48A 
     the following:

``Sec. 48B. Qualifying clean coal technology facility credit.''
       (g) Effective Date.--The amendments made by this section 
     shall apply to periods after December 31, 1999, and before 
     January 1, 2013, under rules similar to the rules of section 
     48(m) of the Internal Revenue Code of 1986 (as in effect on 
     the day before the date of the enactment of the Revenue 
     Reconciliation Act of 1990).

     SEC. 502. CREDIT FOR PRODUCTION FROM QUALIFYING CLEAN COAL 
                   TECHNOLOGY.

       (a) Credit for Production From Qualifying Clean Coal 
     Technology.--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:

     ``SEC. 45D. CREDIT FOR PRODUCTION FROM QUALIFYING CLEAN COAL 
                   TECHNOLOGY.

       ``(a) General Rule.--For purposes of section 38, the 
     qualifying clean coal technology production credit of any 
     taxpayer for any taxable year is equal to the applicable 
     amount for each kilowatt hour--
       ``(1) produced by the taxpayer at a qualifying clean coal 
     technology facility during the 10-year period beginning on 
     the date the facility was originally placed in service, and
       ``(2) sold by the taxpayer to an unrelated person during 
     such taxable year.
       ``(b) Applicable amount.--For purposes of this section, the 
     applicable amount with respect to production from a 
     qualifying clean coal technology facility shall be determined 
     as follows:
       ``(1) In the case of a facility originally placed in 
     service before 2006, if--
       

------------------------------------------------------------------------
          ``The facility design         The applicable amount is:
             average net heat   ----------------------------------------
           rate, Btu/kWh (HHV)    For 1st 5 years of   For 2d 5 years of
               is equal to:          such service        such service
------------------------------------------------------------------------
          Not more than 8400...         $.0130              $.0110
          More than 8400 but            $.0100              $.0085
           not more than 8550.
          More than 8550 but            $.0090              $.0070.
           not more than 8750.
------------------------------------------------------------------------

       ``(2) In the case of a facility originally placed in 
     service after 2005 and before 2010, if--
       

------------------------------------------------------------------------
          ``The facility design         The applicable amount is:
             average net heat   ----------------------------------------
           rate, Btu/kWh (HHV)    For 1st 5 years of   For 2d 5 years of
               is equal to:          such service        such service
------------------------------------------------------------------------
          Not more than 7770...         $.0100              $.0080
          More than 7770 but            $.0080              $.0065
           not more than 8125.
          More than 8125 but            $.0070              $.0055.
           not more than 8350.
------------------------------------------------------------------------

       ``(3) In the case of a facility originally placed in 
     service after 2009 and before 2014, if--
       

------------------------------------------------------------------------
          ``The facility design         The applicable amount is:
             average net heat   ----------------------------------------
           rate, Btu/kWh (HHV)    For 1st 5 years of   For 2d 5 years of
               is equal to:          such service        such service
------------------------------------------------------------------------
          Not more than 7720...         $.0085              $.0070
          More than 7720 but            $.0070              $.0045.
           not more than 7380.
------------------------------------------------------------------------

       ``(c) Inflation Adjustment Factor.--Each amount in 
     paragraphs (1), (2), and (3) shall each be adjusted by 
     multiplying such amount by the inflation adjustment factor 
     for the calendar year in which the amount is applied. If any 
     amount as increased under the preceding sentence is not a 
     multiple of 0.01 cent, such amount shall be rounded to the 
     nearest multiple of 0.01 cent.
       ``(d) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) any term used in this section which is also used in 
     section 48B shall have the meaning given such term in section 
     48B,
       ``(2) the rules of paragraphs (3), (4), and (5) of section 
     45 shall apply,
       ``(3) the term `inflation adjustment factor' means, with 
     respect to a calendar year, a fraction the numerator of which 
     is the GDP implicit price deflator for the preceding calendar 
     year and the denominator of which is the GDP implicit price 
     deflator for the calendar year 1998, and
       ``(4) the term `GDP implicit price deflator' means the most 
     recent revision of the implicit price deflator for the gross 
     domestic product as computed by the Department of Commerce 
     before March 15 of the calendar year.''
       (b) Credit Treated as Business Credit.--Section 38(b) is 
     amended by striking ``plus'' at the end of paragraph (11), by 
     striking the period at the end of paragraph (12) and 
     inserting ``, plus'', and by adding at the end the following:
       ``(13) the qualifying clean coal technology production 
     credit determined under section 45D(a).''
       (c) Transitional Rule.--Section 39(d) (relating to 
     transitional rules), as amended by section 501(d), is amended 
     by adding at the end the following:
       ``(11) No carryback of certain credits before effective 
     date.--No portion of the unused business credit for any 
     taxable year which is attributable to the credits allowable 
     under any section added to this subpart by the amendments 
     made by the Energy Security Tax Act of 1999 may be carried 
     back to a taxable year ending before the date of the 
     enactment of such Act.''
       (d) Credit Allowed Against Minimum Tax.--
       (1) In general.--Section 38(c) (relating to limitation 
     based on amount of tax), as amended by section 501(e)(1), is 
     amended by redesignating paragraph (5) as paragraph (6) and 
     by inserting after paragraph (4) the following:
       ``(5) Special rules for clean coal production credit.--
       ``(A) In general.--In the case of the qualifying clean coal 
     technology production credit--
       ``(i) this section and section 39 shall be applied 
     separately with respect to the credit, and
       ``(ii) in applying paragraph (1) to the credit--

       ``(I) subparagraph (A) shall not apply, and
       ``(II) the limitation under paragraph (1) (as modified by 
     subclause (I)) shall be reduced by the credit allowed under 
     subsection (a) for the taxable year (other than the credits 
     described in this paragraph and paragraphs (2), (3), and 
     (4)).

       ``(B) Qualifying clean coal technology production credit.--
     For purposes of this paragraph, the term `qualifying clean 
     coal technology production credit' means the portion of the 
     credit under subsection (a) which is attributable to the 
     credit determined under section 45D.''
       (2) Conforming amendment.--Section 38(c)(2)(A)(ii)(II), as 
     amended by section 501(e)(2), is amended by striking ``(other 
     than the credits described in this paragraph and paragraphs 
     (3) and (4))'' and inserting ``(other than the credits 
     described in this paragraph and paragraphs (3), (4), and 
     (5))''.
       (e) Clerical Amendment.--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:

``Sec. 45D. Credit for production from qualifying clean coal 
              technology.''
       (f) Effective Date.--The amendments made by this section 
     shall apply to production after the date of the enactment of 
     this Act.

     SEC. 503. RISK POOL FOR QUALIFYING CLEAN COAL TECHNOLOGY.

       (a) Establishment.--The Secretary of the Treasury shall 
     establish a financial risk pool which shall be available to 
     any United States owner of qualifying clean coal technology 
     (as defined in section 48B(b)(3) of the Internal Revenue Code 
     of 1986) to offset for the first 3 three years of the 
     operation of such technology the costs (not to exceed 5 
     percent of the total cost of installation) for modifications 
     resulting from the technology's failure to achieve its design 
     performance.
       (b) Authorization of Appropriations.--There is authorized 
     to be appropriated such sums as are necessary to carry out 
     the purposes of this section.

                       TITLE VI--METHANE RECOVERY

     SEC. 601. EXPANSION OF SECTION 29 TAX CREDIT.

       (a) 10-year Extension.--Section 29(f) (relating to 
     application of section) is amended--
       (1) by inserting ``and after December 31, 1999, and before 
     January 1, 2009,'' after ``1993,'' in paragraphs (1)(A) and 
     (1)(B), and
       (2) by striking ``2003'' in paragraph (2) and inserting 
     ``2013''.
       (b) Expansion of Definition of Biomass.--
       (1) In general.--Section 29(c)(3) is amended to read as 
     follows:

[[Page 18253]]

       ``(3) Biomass.--The term `biomass' means--
       ``(A) any organic material other than--
       ``(i) oil and natural gas (or any product thereof), and
       ``(ii) coal (including lignite) or any product thereof, and
       ``(B) any solid, nonhazardous, cellulosic waste material, 
     which is segregated from other waste materials, and which is 
     derived from--
       ``(i) any of the following forest-related resources: mill 
     residues, precommercial thinnings, slash, and brush, but not 
     including old-growth timber,
       ``(ii) urban sources, including waste pallets, crates, and 
     dunnage, manufacturing and construction wood wastes, and 
     landscape or right-of-way tree trimmings, but not including 
     unsegregated municipal solid waste (garbage), or
       ``(iii) agriculture sources, including orchard tree crops, 
     vineyard, grain, legumes, poultry litter, animal manure, 
     sugar, and other crop by-products or residues.''
       (2) Effective date.--The amendment made by this subsection 
     shall apply to production after the date of the enactment of 
     this Act.

     SEC. 602. CREDIT FOR CAPTURE OF COALBED METHANE GAS.

       (a) Credit for Capture of Coalbed Methane Gas.--Subpart D 
     of part IV of subchapter A of chapter 1 (relating to business 
     related credits), as amended by section 502(a), is amended by 
     adding at the end the following:

     ``SEC. 45E. CREDIT FOR CAPTURE OF COALBED METHANE GAS.

       ``For purposes of section 38, the coalbed methane gas 
     capture credit of any taxpayer for any taxable year is $10 
     for each ton of carbon-equivalent coalbed methane gas 
     captured by the taxpayer during such taxable year.''
       (b) Credit Treated as Business Credit.--Section 38(b), as 
     amended by section 502(b), 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:
       ``(14) the coalbed methane gas capture credit determined 
     under section 45E(a).''
       (c) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1, as amended by 
     section 502(e), is amended by adding at the end the 
     following:

``Sec. 45E. Credit for capture of coalbed methane gas.''
       (d) Effective Date.--The amendments made by this section 
     shall apply to production after the date of the enactment of 
     this Act.

                   TITLE VII--OIL AND GAS PRODUCTION

     SEC. 701. CREDIT FOR PRODUCTION OF RE-REFINED LUBRICATING 
                   OIL.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits), as amended 
     by section 602(a), is amended by adding at the end the 
     following:

     ``SEC. 45F. CREDIT FOR PRODUCING RE-REFINED LUBRICATING OIL.

       ``(a) General Rule.--For purposes of section 38, the re-
     refined lubricating oil production credit of any taxpayer for 
     any taxable year is equal to $4.05 per barrel of qualified 
     re-refined lubricating oil production which is attributable 
     to the taxpayer (within the meaning of section 29(d)(3)).
       ``(b) Qualified Re-Refined Lubricating Oil Production.--For 
     purposes of this section--
       ``(1) In general.--The term `qualified re-refined 
     lubricating oil production' means a base oil manufactured 
     from at least 95 percent used oil and not more than 2 percent 
     of previously unused oil by a re-refining process which 
     effectively removes physical and chemical impurities and 
     spent and unspent additives to the extent that such base oil 
     meets industry standards for engine oil as defined by the 
     American Petroleum Institute document API 1509 as in effect 
     on the date of the enactment of this section.
       ``(2) Limitation on amount of production which may 
     qualify.--Re-refined lubricating oil produced during any 
     taxable year shall not be treated as qualified re-refined 
     lubricating oil production but only to the extent average 
     daily production during the taxable year exceeds 7,000 
     barrels.
       ``(3) Barrel.--The term `barrel' has the meaning given such 
     term by section 613A(e)(4).
       ``(c) Inflation Adjustment.--In the case of any taxable 
     year beginning in a calendar year after 1999, the dollar 
     amount contained in subsection (a) shall be increased to an 
     amount equal to such dollar amount multiplied by the 
     inflation adjustment factor for such calendar year 
     (determined under section 29(d)(2)(B) by substituting `1998' 
     for `1979').''
       (b) Credit Treated as Business Credit.--Section 38(b) 
     (relating to current year business credit), as amended by 
     section 602(b), 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:
       ``(15) the re-refined lubricating oil production credit 
     determined under section 45F(a).''
       (c) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1, as amended by 
     section 602(c), is amended by adding at the end the 
     following:

``Sec. 45F. Credit for producing re-refined lubricating oil.''
       (d) Effective Date.--The amendments made by this section 
     shall apply to production after the date of the enactment of 
     this Act.

     SEC. 702. REPEAL CERTAIN ADJUSTMENTS BASED ON ADJUSTED 
                   CURRENT EARNINGS RELATING TO OIL AND GAS 
                   ASSETS.

       (a) Intangible Drilling Costs.--Clause (i) of section 
     56(g)(4)(D) (relating to certain other earnings and profits 
     adjustments) is amended by striking the second sentence and 
     inserting the following: ``In the case of any oil or gas 
     well, this clause shall not apply to amounts paid or incurred 
     in taxable years beginning after December 31, 1999.''
       (b) Depletion.--Clause (ii) of section 56(g)(4)(F) 
     (relating to depletion) is amended to read as follows:
       ``(ii) Exception for oil and gas wells.--In the case of any 
     taxable year beginning after December 31, 1999, clause (i) 
     (and subparagraph (C)(i)) shall not apply to any deduction 
     for depletion computed in accordance with section 613A.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.

     SEC. 202. 10-YEAR CARRYBACK FOR PERCENTAGE DEPLETION FOR OIL 
                   AND GAS PROPERTY.

       (a) In General.--Subsection (d)(1) of section 613A 
     (relating to limitations on percentage depletion in case of 
     oil and gas wells) is amended to read as follows:
       ``(1) Limitation based on taxable income.--
       ``(A) In general.--The deduction for the taxable year 
     attributable to the application of subsection (c) shall not 
     exceed so much of the taxpayer's taxable income for the year 
     as the taxpayer elects under subparagraph (B)(iii) computed 
     without regard to--
       ``(i) any depletion on production from an oil or gas 
     property which is subject to the provisions of subsection 
     (c),
       ``(ii) any net operating loss carryback to the taxable year 
     under section 172,
       ``(iii) any capital loss carryback to the taxable year 
     under section 1212, and
       ``(iv) in the case of a trust, any distributions to its 
     beneficiary, except in the case of any trust where any 
     beneficiary of such trust is a member of the family (as 
     defined in section 267(c)(4)) of a settlor who created inter 
     vivos and testamentary trusts for members of the family and 
     such settlor died within the last six days of the fifth month 
     in 1970, and the law in the jurisdiction in which such trust 
     was created requires all or a portion of the gross or net 
     proceeds of any royalty or other interest in oil, gas, or 
     other mineral representing any percentage depletion allowance 
     to be allocated to the principal of the trust.
       ``(B) Carrybacks and carryforwards.--
       ``(i) In general.--If any amount is disallowed as a 
     deduction for the taxable year (in this subparagraph referred 
     to as the `unused depletion year') by reason of the 
     application of subparagraph (A), the disallowed amount shall 
     be treated as an amount allowable as a deduction under 
     subsection (c) for--

       ``(I) each of the 10 taxable years preceding the unused 
     depletion year, and
       ``(II) the taxable year following the unused depletion 
     year,

     subject to the application of subparagraph (A) to such 
     taxable year.
       ``(ii) Applicable rules.--Rules similar to the rules of 
     section 39 shall apply for purposes of this subparagraph.
       ``(iii) Election to waive carryback.--Any taxpayer entitled 
     to a carryback period under this subparagraph may elect to 
     waive such carryback for any of the taxable years to which 
     such carryback would apply. Such election made in any taxable 
     year may be revised in the next succeeding taxable year in 
     such manner as the Secretary may prescribe.
       ``(C) Allocation of disallowed amounts.--For purposes of 
     basis adjustments and determining whether cost depletion 
     exceeds percentage depletion with respect to the production 
     from a property, any amount disallowed as a deduction on the 
     application of this paragraph shall be allocated to the 
     respective properties from which the oil or gas was produced 
     in proportion to the percentage depletion otherwise allowable 
     to such properties under subsection (c).''
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1999, and to any taxable year beginning on or before such 
     date to the extent necessary to apply section 613A(d)(1)(B) 
     of the Internal Revenue Code of 1986 (as added by subsection 
     (a)).

                 TITLE VIII--RENEWABLE POWER GENERATION

     SEC. 801. CREDIT FOR INVESTMENT IN PHOTOVOLTAIC AND WIND 
                   PROPERTY MANUFACTURING FACILITIES.

       (a) Allowance of Photovoltaic or Wind Property 
     Manufacturing Facility Credit.--Section 46 (relating to 
     amount of credit), as amended by section 501(a), is amended 
     by striking ``and'' at the end of paragraph (3), by striking 
     the period at the end of paragraph (4) and inserting ``, 
     and'', and by adding at the end the following:

[[Page 18254]]

       ``(5) the photovoltaic or wind property manufacturing 
     facility credit.''
       (b) Amount of Credit.--Subpart E of part IV of subchapter A 
     of chapter 1 (relating to rules for computing investment 
     credit), as amended by section 501(b), is amended by 
     inserting after section 48B the following:

     ``SEC. 48C. PHOTOVOLTAIC OR WIND PROPERTY MANUFACTURING 
                   FACILITY CREDIT.

       ``(a) In General.--For purposes of section 46, the 
     photovoltaic or wind property manufacturing facility credit 
     for any taxable year is an amount equal to 10 percent of the 
     qualified investment in a photovoltaic or wind property 
     manufacturing facility for such taxable year.
       ``(b) Photovoltaic or Wind Property Manufacturing 
     Facility.--
       ``(1) In general.--For purposes of subsection (a), the term 
     `photovoltaic or wind property manufacturing facility' means 
     a facility of the taxpayer--
       ``(A)(i) the original use of which commences with the 
     taxpayer or the reconstruction of which is completed by the 
     taxpayer (but only with respect to that portion of the basis 
     which is properly attributable to such reconstruction), or
       ``(ii) that is acquired through purchase (as defined by 
     section 179(d)(2)),
       ``(B) that is depreciable under section 167,
       ``(C) that has a useful life of not less than 4 years, and
       ``(D) that is used to manufacture photovoltaic or wind 
     property.
       ``(2) Special rule for sale-leasebacks.--For purposes of 
     subparagraph (A) of paragraph (1), in the case of a facility 
     that--
       ``(A) is originally placed in service by a person, and
       ``(B) is sold and leased back by such person, or is leased 
     to such person, within 3 months after the date such facility 
     was originally placed in service, for a period of not less 
     than 12 years,

     such facility shall be treated as originally placed in 
     service not earlier than the date on which such property is 
     used under the leaseback (or lease) referred to in 
     subparagraph (B). The preceding sentence shall not apply to 
     any property if the lessee and lessor of such property make 
     an election under this sentence. Such an election, once made, 
     may be revoked only with the consent of the Secretary.
       ``(3) Photovoltaic or wind property.--For purposes of 
     paragraph (1)(D)--
       ``(A) Photovoltaic property.--The term `photovoltaic 
     property' has the meaning given to such term by section 
     48A(d)(1)(D).
       ``(B) Wind property.--The term `wind property' has the 
     meaning given to the term `qualified wind energy systems 
     equipment property' by section 48A(d)(8).
       ``(c) Qualified Investment.--For purposes of subsection 
     (a), the term `qualified investment' means, with respect to 
     any taxable year, the basis of a photovoltaic or wind 
     property manufacturing facility placed in service by the 
     taxpayer during such taxable year in an aggregate amount of 
     not less than $5,000,000.
       ``(d) Qualified Progress Expenditures.--
       ``(1) Increase in qualified investment.--In the case of a 
     taxpayer who has made an election under paragraph (5), the 
     amount of the qualified investment of such taxpayer for the 
     taxable year (determined under subsection (c) without regard 
     to this section) shall be increased by an amount equal to the 
     aggregate of each qualified progress expenditure for the 
     taxable year with respect to progress expenditure property.
       ``(2) Progress expenditure property defined.--For purposes 
     of this subsection, the term `progress expenditure property' 
     means any property being constructed by or for the taxpayer 
     and which--
       ``(A) cannot reasonably be expected to be completed in less 
     than 18 months, and
       ``(B) it is reasonable to believe will qualify as a 
     photovoltaic or wind property manufacturing facility which is 
     being constructed by or for the taxpayer when it is placed in 
     service.
       ``(3) Qualified progress expenditures defined.--For 
     purposes of this subsection--
       ``(A) Self-constructed property.--In the case of any self-
     constructed property, the term `qualified progress 
     expenditures' means the amount which, for purposes of this 
     subpart, is properly chargeable (during such taxable year) to 
     capital account with respect to such property.
       ``(B) Non-self-constructed property.--In the case of non-
     self-constructed property, the term `qualified progress 
     expenditures' means the amount paid during the taxable year 
     to another person for the construction of such property.
       ``(4) Other definitions.--For purposes of this subsection--
       ``(A) Self-constructed property.--The term `self-
     constructed property' means property for which it is 
     reasonable to believe that more than half of the construction 
     expenditures will be made directly by the taxpayer.
       ``(B) Non-self-constructed property.--The term `non-self-
     constructed property' means property which is not self-
     constructed property.
       ``(C) Construction, etc.--The term `construction' includes 
     reconstruction and erection, and the term `constructed' 
     includes reconstructed and erected.
       ``(D) Only construction of photovoltaic or wind property 
     manufacturing facility to be taken into account.--
     Construction shall be taken into account only if, for 
     purposes of this subpart, expenditures therefor are properly 
     chargeable to capital account with respect to the property.
       ``(5) Election.--An election under this subsection may be 
     made at such time and in such manner as the Secretary may by 
     regulations prescribe. Such an election shall apply to the 
     taxable year for which made and to all subsequent taxable 
     years. Such an election, once made, may not be revoked except 
     with the consent of the Secretary.
       ``(e) Coordination with other credits.--This section shall 
     not apply to any property with respect to which the energy 
     credit under section 48A or the rehabilitation credit under 
     section 47 is allowed unless the taxpayer elects to waive the 
     application of such credits to such property.''
       (c) Recapture.--Section 50(a) (relating to other special 
     rules), as amended by section 501(c), is amended by adding at 
     the end the following:
       ``(7) Special rules relating to photovoltaic or wind 
     property manufacturing facility.--For purposes of applying 
     this subsection in the case of any credit allowable by reason 
     of section 48C, the following shall apply:
       ``(A) General rule.--In lieu of the amount of the increase 
     in tax under paragraph (1), the increase in tax shall be an 
     amount equal to the investment tax credit allowed under 
     section 38 for all prior taxable years with respect to a 
     photovoltaic or wind property manufacturing facility (as 
     defined by section 48C(b)) multiplied by a fraction whose 
     numerator is the number of years remaining to fully 
     depreciate under this title the photovoltaic or wind property 
     manufacturing facility disposed of, and whose denominator is 
     the total number of years over which such facility would 
     otherwise have been subject to depreciation. For purposes of 
     the preceding sentence, the year of disposition of the 
     photovoltaic or wind property manufacturing facility shall be 
     treated as a year of remaining depreciation.
       ``(B) Property ceases to qualify for progress 
     expenditures.--Rules similar to the rules of paragraph (2) 
     shall apply in the case of qualified progress expenditures 
     for a photovoltaic or wind property manufacturing facility 
     under section 48C, except that the amount of the increase in 
     tax under subparagraph (A) of this paragraph shall be 
     substituted in lieu of the amount described in such paragraph 
     (2).
       ``(C) Application of paragraph.--This paragraph shall be 
     applied separately with respect to the credit allowed under 
     section 38 regarding a photovoltaic or wind property 
     manufacturing facility.''
       (d) Technical Amendments.--
       (1) Section 49(a)(1)(C), as amended by section 501(f), 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 adding at the end the following:
       ``(v) the portion of the basis of any photovoltaic or wind 
     property manufacturing facility attributable to any qualified 
     investment (as defined by section 48C(c)).''
       (2) Section 50(a)(4), as amended by section 504(f), is 
     amended by striking ``and (6)'' and inserting ``, (6), and 
     (7)''.
       (3) The table of sections for subpart E of part IV of 
     subchapter A of chapter 1, as amended by section 501(f), is 
     amended by inserting after the item relating to section 48B 
     the following:

``Sec. 48C. Photovoltaic or wind property manufacturing facility 
              credit.''
       (e) Effective Date.--The amendments made by this section 
     shall apply to periods after December 31, 1999, under rules 
     similar to the rules of section 48(m) of the Internal Revenue 
     Code of 1986 (as in effect on the day before the date of the 
     enactment of the Revenue Reconciliation Act of 1990).

     SEC. 802. MODIFICATIONS TO CREDIT FOR ELECTRICITY PRODUCED 
                   FROM RENEWABLE RESOURCES.

       (a) Qualified Facilities Include All Biomass Facilities.--
       (1) In general.--Subparagraph (B) of section 45(c)(1) 
     (relating to credit for electricity produced from certain 
     renewable resources) is amended to read as follows:
       ``(B) biomass.''
       (2) Biomass defined.--Paragraph (2) of section 45(c) is 
     amended to read as follows:
       ``(2) Biomass.--The term `biomass' means--
       ``(A) any organic material from a plant which is planted 
     exclusively for purposes of being used at a qualified 
     facility to produce electricity, and
       ``(B) any solid, nonhazardous, cellulosic waste material 
     which is segregated from other waste materials and which is 
     derived from--
       ``(i) any of the following forest-related resources: mill 
     residues, precommercial thinnings, slash, and brush, but not 
     including old-growth timber,
       ``(ii) urban sources, including waste pallets, crates, and 
     dunnage, manufacturing and construction wood wastes, and 
     landscape or right-of-way tree trimmings, but not including 
     unsegregated municipal solid waste (garbage),
       ``(iii) agriculture sources, including orchard tree crops, 
     vineyard, grain, legumes,

[[Page 18255]]

     sugar, and other crop by-products or residues, or
       ``(iv) poultry waste.''
       (b) Extension and Modification of Placed in Service 
     Rules.--Paragraph (3) of section 45(c) is amended to read as 
     follows:
       ``(3) Qualified facility.--
       ``(A) Wind facilities.--In the case of a facility using 
     wind to produce electricity, the term `qualified facility' 
     means any facility owned by the taxpayer which is originally 
     placed in service after December 31, 1993, and before July 1, 
     2004.
       ``(B) Biomass facilities.--
       ``(i) In general.--In the case of a facility using biomass 
     to produce electricity, the term `qualified facility' means 
     any facility owned by the taxpayer which is originally placed 
     in service before July 1, 2004.
       ``(ii) Combined production facilities included.--For 
     purposes of clause (i), the term `qualified facility' shall 
     include a facility using biomass to produce electricity and 
     ethanol.
       ``(iii) Special rules.--In the case of a qualified facility 
     described in this subparagraph--

       ``(I) the 10-year period referred to in subsection (a) 
     shall be treated as beginning no earlier than the date of the 
     enactment of this paragraph, and
       ``(II) subsection (b)(3) shall not apply to any such 
     facility originally placed in service before January 1, 
     1997.''

       (c) Coordination With Other Credits.--Section 45(d) 
     (relating to definitions and special rules) is amended by 
     adding at the end the following:
       ``(6) Coordination with other credits.--This section shall 
     not apply to any production with respect to which the clean 
     coal technology production credit under section 45B is 
     allowed unless the taxpayer elects to waive the application 
     of such credit to such production.''
       (d) Effective Date.--The amendments made by this section 
     shall apply to electricity produced after the date of the 
     enactment of this Act.

     SEC. 803. PROPORTIONAL CREDIT FOR PRODUCING ELECTRICITY 
                   THROUGH CO-FIRING.

       (a) In General.--Section 45(b) (relating to limitations and 
     adjustments) is amended by adding at the end the following:
       ``(4) Proportional credit for co-firing.--In the case of a 
     qualified facility as defined in subsection (c)(3)(B) using 
     coal to co-fire with biomass, the amount of the credit 
     determined under subsection (a) for the taxable year shall be 
     reduced by the percentage coal comprises (on a Btu basis) of 
     the average fuel input of the facility for the taxable 
     year.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to electricity produced after the date of the 
     enactment of this Act.

     SEC. 804. CREDIT FOR CAPITAL COSTS OF QUALIFIED BIOMASS-BASED 
                   GENERATING SYSTEM.

       (a) Allowance of Qualified Biomass-Based Generating System 
     Facility Credit.--Section 46 (relating to amount of credit), 
     as amended by section 801(a), is amended by striking ``and'' 
     at the end of paragraph (5), by striking the period at the 
     end of paragraph (5) and inserting ``, and'', and by adding 
     at the end the following:
       ``(6) the qualified biomass-based generating system 
     facility credit.''
       (b) Amount of Credit.--Subpart E of part IV of subchapter A 
     of chapter 1 (relating to rules for computing investment 
     credit), as amended by section 801(b), is amended by 
     inserting after section 48C the following:

     ``SEC. 48D. QUALIFIED BIOMASS-BASED GENERATING SYSTEM 
                   FACILITY CREDIT.

       ``(a) In General.--For purposes of section 46, the 
     qualified biomass-based generating system facility credit for 
     any taxable year is an amount equal to 20 percent of the 
     qualified investment in a qualified biomass-based generating 
     system facility for such taxable year.
       ``(b) Qualified Biomass-Based Generating System Facility.--
       ``(1) In general.--For purposes of subsection (a), the term 
     `qualified biomass-based generating system facility' means a 
     facility of the taxpayer--
       ``(A)(i) the original use of which commences with the 
     taxpayer or the reconstruction of which is completed by the 
     taxpayer (but only with respect to that portion of the basis 
     which is properly attributable to such reconstruction), or
       ``(ii) that is acquired through purchase (as defined by 
     section 179(d)(2)),
       ``(B) that is depreciable under section 167,
       ``(C) that has a useful life of not less than 4 years, and
       ``(D) that uses a qualified biomass-based generating 
     system.
       ``(2) Special rule for sale-leasebacks.--For purposes of 
     subparagraph (A) of paragraph (1), in the case of a facility 
     that--
       ``(A) is originally placed in service by a person, and
       ``(B) is sold and leased back by such person, or is leased 
     to such person, within 3 months after the date such facility 
     was originally placed in service, for a period of not less 
     than 12 years,
     such facility shall be treated as originally placed in 
     service not earlier than the date on which such property is 
     used under the leaseback (or lease) referred to in 
     subparagraph (B). The preceding sentence shall not apply to 
     any property if the lessee and lessor of such property make 
     an election under this sentence. Such an election, once made, 
     may be revoked only with the consent of the Secretary.
       ``(3) Qualified biomass-based generating system.--For 
     purposes of paragraph (1)(D), the term `qualified biomass-
     based generating system' means a biomass-based integrated 
     gasification combined cycle (IGCC) generating system which 
     has an electricity-only generation efficiency greater than 40 
     percent.
       ``(c) Qualified Investment.--For purposes of subsection 
     (a), the term `qualified investment' means, with respect to 
     any taxable year, the basis of a qualified biomass-based 
     generating system facility placed in service by the taxpayer 
     during such taxable year.
       ``(d) Qualified Progress Expenditures.--
       ``(1) Increase in qualified investment.--In the case of a 
     taxpayer who has made an election under paragraph (5), the 
     amount of the qualified investment of such taxpayer for the 
     taxable year (determined under subsection (c) without regard 
     to this section) shall be increased by an amount equal to the 
     aggregate of each qualified progress expenditure for the 
     taxable year with respect to progress expenditure property.
       ``(2) Progress expenditure property defined.--For purposes 
     of this subsection, the term `progress expenditure property' 
     means any property being constructed by or for the taxpayer 
     and which--
       ``(A) cannot reasonably be expected to be completed in less 
     than 18 months, and
       ``(B) it is reasonable to believe will qualify as a 
     qualified biomass-based generating system facility which is 
     being constructed by or for the taxpayer when it is placed in 
     service.
       ``(3) Qualified progress expenditures defined.--For 
     purposes of this subsection--
       ``(A) Self-constructed property.--In the case of any self-
     constructed property, the term `qualified progress 
     expenditures' means the amount which, for purposes of this 
     subpart, is properly chargeable (during such taxable year) to 
     capital account with respect to such property.
       ``(B) Non-self-constructed property.--In the case of non-
     self-constructed property, the term `qualified progress 
     expenditures' means the amount paid during the taxable year 
     to another person for the construction of such property.
       ``(4) Other definitions.--For purposes of this subsection--
       ``(A) Self-constructed property.--The term `self-
     constructed property' means property for which it is 
     reasonable to believe that more than half of the construction 
     expenditures will be made directly by the taxpayer.
       ``(B) Non-self-constructed property.--The term `non-self-
     constructed property' means property which is not self-
     constructed property.
       ``(C) Construction, etc.--The term `construction' includes 
     reconstruction and erection, and the term `constructed' 
     includes reconstructed and erected.
       ``(D) Only construction of qualified biomass-based 
     generating system facility to be taken into account.--
     Construction shall be taken into account only if, for 
     purposes of this subpart, expenditures therefor are properly 
     chargeable to capital account with respect to the property.
       ``(5) Election.--An election under this subsection may be 
     made at such time and in such manner as the Secretary may by 
     regulations prescribe. Such an election shall apply to the 
     taxable year for which made and to all subsequent taxable 
     years. Such an election, once made, may not be revoked except 
     with the consent of the Secretary.
       ``(e) Coordination with other credits.--This section shall 
     not apply to any property with respect to which the energy 
     credit under section 48A or the rehabilitation credit under 
     section 47 is allowed unless the taxpayer elects to waive the 
     application of such credits to such property.''
       (c) Recapture.--Section 50(a) (relating to other special 
     rules), as amended by section 801(c), is amended by adding at 
     the end the following:
       ``(8) Special rules relating to qualified biomass-based 
     generating system facility.--For purposes of applying this 
     subsection in the case of any credit allowable by reason of 
     section 48D, the following shall apply:
       ``(A) General rule.--In lieu of the amount of the increase 
     in tax under paragraph (1), the increase in tax shall be an 
     amount equal to the investment tax credit allowed under 
     section 38 for all prior taxable years with respect to a 
     qualified biomass-based generating system facility (as 
     defined by section 48D(b)) multiplied by a fraction whose 
     numerator is the number of years remaining to fully 
     depreciate under this title the qualified biomass-based 
     generating system facility disposed of, and whose denominator 
     is the total number of years over which such facility would 
     otherwise have been subject to depreciation. For purposes of 
     the preceding sentence, the year of disposition of the 
     qualified biomass-based generating system facility shall be 
     treated as a year of remaining depreciation.
       ``(B) Property ceases to qualify for progress 
     expenditures.--Rules similar to

[[Page 18256]]

     the rules of paragraph (2) shall apply in the case of 
     qualified progress expenditures for a qualified biomass-based 
     generating system facility under section 48D, except that the 
     amount of the increase in tax under subparagraph (A) of this 
     paragraph shall be substituted in lieu of the amount 
     described in such paragraph (2).
       ``(C) Application of paragraph.--This paragraph shall be 
     applied separately with respect to the credit allowed under 
     section 38 regarding a qualified biomass-based generating 
     system facility.''
       (d) Technical Amendments.--
       (1) Section 49(a)(1)(C), as amended by section 801(d), 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 adding at the end the following:
       ``(vi) the portion of the basis of any qualified biomass-
     based generating system facility attributable to any 
     qualified investment (as defined by section 48D(c)).''
       (2) Section 50(a)(4), as amended by section 801(d), is 
     amended by striking ``and (7)'' and inserting ``, (7), and 
     (8)''.
       (3) The table of sections for subpart E of part IV of 
     subchapter A of chapter 1, as amended by section 801(d), is 
     amended by inserting after the item relating to section 48C 
     the following:

``Sec. 48D. Qualified biomass-based generating system facility 
              credit.''
       (e) Effective Date.--The amendments made by this section 
     shall apply to periods after December 31, 1999, under rules 
     similar to the rules of section 48(m) of the Internal Revenue 
     Code of 1986 (as in effect on the day before the date of the 
     enactment of the Revenue Reconciliation Act of 1990).

     SEC. 805. PASS-THROUGH OF RENEWABLE ENERGY PRODUCTION 
                   INCENTIVE PAYMENTS TO END-USERS.

       (a) In General.--Subpart A of part IV of subchapter A of 
     chapter 1 (relating to nonrefundable personal credits), as 
     amended by section 201(a), is amended by inserting after 
     section 25B the following new section:

     ``SEC. 25C. PURCHASE OF RENEWABLE ENERGY PUBLIC POWER 
                   PRODUCTION.

       ``(a) Allowance of Credit.--In the case of an eligible 
     individual, there shall be allowed as a credit against the 
     tax imposed by this chapter for the 1st taxable year 
     beginning after the 10-year period described in subsection 
     (b) an amount equal to--
       ``(1) the renewable energy production percentage for such 
     year, times
       ``(2) the taxpayer's renewable energy public power 
     production amount.
       ``(b) Eligible Individual.--For purposes of this section, 
     the term `eligible individual' means an individual who, 
     pursuant to a written agreement, has purchased electricity 
     from a renewable energy public power facility under a 
     separate rate schedule for a single 10-year period.
       ``(c) Renewable Energy Public Power Facility.--For purposes 
     of this section, the term `renewable energy public power 
     facility' means, with respect to any taxable year, a facility 
     which would have been eligible for a credit under section 45 
     for electricity produced during such year if such facility 
     had been privately owned.
       ``(d) Renewable Energy Production Percentage.--For purposes 
     of this section, the renewable energy production percentage 
     for any taxable year is equal to __.
       ``(e) Renewable Energy Public Power Production Amount.--For 
     purposes of this section, the renewable energy public power 
     production amount for any taxpayer is equal to the amount of 
     kilowatt hours of electricity purchased during the 10-year 
     period described in subsection (b) and reported to the 
     taxpayer by the renewable energy public power facility under 
     the agreement described in such subsection.
       ``(f) Carryforward of Unused Credit.--If the credit 
     allowable under subsection (a) exceeds the limitation imposed 
     by section 26(a) for such taxable year reduced by the sum of 
     the credits allowable under subpart A of part IV of 
     subchapter A (other than this section), such excess shall be 
     carried to each succeeding taxable year.''
       (b) Conforming Amendments.--
       (1) Subsection (c) of section 23 is amended by inserting 
     ``, section 25C, and section 1400C'' after ``other than this 
     section''.
       (2) Subparagraph (C) of section 25(e)(1) is amended by 
     striking ``section 23'' and inserting ``sections 23, 25C, and 
     1400C''.
       (3) Subsection (d) of section 1400C is amended by inserting 
     ``and section 25C'' after ``other than this section''.
       (4) The table of sections for subpart A of part IV of 
     subchapter A of chapter 1, as amended by section 201(b), is 
     amended by inserting after the item relating to section 25B 
     the following new item:

``Sec. 25C. Purchase of renewable energy public power production.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to agreements entered into after December 31, 
     1999.

                         TITLE IX--STEELMAKING

     SEC. 901. CREDIT FOR ENERGY-EFFICIENT STEELMAKING CAPACITY.

       (a) Allowance of Energy-Efficient Steelmaking Capacity 
     Credit.--Subpart D of part IV of subchapter A of chapter 1 
     (relating to business related credits), as amended by section 
     701(a), is amended by adding at the end the following:

     ``SEC. 45G. ENERGY-EFFICIENT STEELMAKING CAPACITY CREDIT.

       ``(a) In General.--For purposes of section 38, the energy-
     efficient steelmaking capacity credit for any taxable year is 
     an amount equal to the product of--
       ``(1) $50, multiplied by
       ``(2) the metric tons of steel produced during such taxable 
     year from a qualified steelmaking system placed in service by 
     the taxpayer or that is acquired through purchase (as defined 
     by section 179(d)(2)) by such taxpayer.
       ``(b) Qualified Steelmaking System.--For purposes of this 
     section, the term `qualified steelmaking system' means a 
     system which produces steel at a maximum net specific energy 
     consumption of 17 GJ per metric ton.''
       (b) Credit Treated as Business Credit.--Section 38(b), as 
     amended by section 701(b), 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:
       ``(16) the energy-efficient steelmaking capacity credit 
     determined under section 45G(a).''
       (c) Credit Allowed Against Minimum Tax.--
       (1) In general.--Section 38(c) (relating to limitation 
     based on amount of tax), as amended by section 502(c)(1), is 
     amended by redesignating paragraph (6) as paragraph (7) and 
     by inserting after paragraph (5) the following:
       ``(6) Special rules for energy-efficient steelmaking 
     capacity credit.--
       ``(A) In general.--In the case of the energy-efficient 
     steelmaking capacity credit--
       ``(i) this section and section 39 shall be applied 
     separately with respect to such credits, and
       ``(ii) in applying paragraph (1) to such credits--

       ``(I) subparagraph (A) shall not apply, and
       ``(II) the limitation under paragraph (1) (as modified by 
     subclause (I)) shall be reduced by the credit allowed under 
     subsection (a) for the taxable year (other than the credits 
     described in this paragraph and paragraphs (2), (3), (4), and 
     (5)).

       ``(B) Energy-efficient steelmaking capacity credit.--For 
     purposes of this paragraph, the term `energy-efficient 
     steelmaking capacity credit' means the portion of the credit 
     under subsection (a) which is attributable to the credit 
     determined under section 45G(a).''
       (2) Conforming amendment.--Section 38(c)(2)(A)(ii)(II), as 
     amended by section 502(c)(2), is amended by striking ``(other 
     than the credits described in this paragraph and paragraphs 
     (3), (4), and (5))'' and inserting ``(other than the credits 
     described in this paragraph and paragraphs (3), (4), (5), and 
     (6))''.
       (d) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1, as amended by 
     section 701(c), is amended by adding at the end the 
     following:

``Sec. 45G. Energy-efficient steelmaking capacity credit.''
       (e) Effective Date.--The amendments made by this section 
     shall apply to production after the date of the enactment of 
     this Act.

     SEC. 902. EXTENSION OF CREDIT FOR ELECTRICITY TO PRODUCTION 
                   FROM STEEL COGENERATION.

       (a) Extension of Credit for Coke Production and Steel 
     Manufacturing Facilities.--Section 45(c)(1) (defining 
     qualified energy resources), as amended by section 802(a)(1), 
     is amended by striking ``and'' at the end of subparagraph 
     (A), by striking the period at the end of subparagraph (B) 
     and inserting ``, and'', and by adding at the end the 
     following:
       ``(C) steel cogeneration.''
       (b) Steel Cogeneration.--Section 45(c) is amended by adding 
     at the end the following:
       ``(4) Steel cogeneration.--The term `steel cogeneration' 
     means the production of steam or other form of thermal energy 
     of at least 20 percent of total production and the production 
     of electricity or mechanical energy (or both) of at least 20 
     percent of total production which meet regulatory energy-
     efficiency standards established by the Secretary, to the 
     extent that such energy is produced from--
       ``(A) gases or heat generated during the production of 
     coke,
       ``(B) blast furnace gases or heat generated during the 
     production of iron, or
       ``(C) waste gases or heat generated from the manufacture of 
     steel that uses at least 20 percent recycled material.''
       (c) Modification of Placed in Service Rules for Steel 
     Cogeneration Facilities.--Section 45(c)(3) (defining 
     qualified facility), as amended by section 802(b), is amended 
     by adding at the end the following:
       ``(C) Steel cogeneration facilities.--In the case of a 
     facility using steel cogeneration to produce electricity, the 
     term `qualified facility' means any facility meeting the 
     environmental requirements of the Clean Air Act Amendments of 
     1990 which is owned by the taxpayer and originally placed in 
     service after December 31, 1999, and before January 1, 2005. 
     Such a facility may be treated as originally placed in 
     service when such facility was last upgraded to increase 
     efficiency or generation capability.''

[[Page 18257]]

       (d) Conforming Amendments.--
       (1) The heading for section 45 is amended by inserting 
     ``and waste energy'' after ``renewable''.
       (2) The item relating to section 45 in the table of 
     sections subpart D of part IV of subchapter A of chapter 1 is 
     amended by inserting ``and waste energy'' after 
     ``renewable''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to electricity produced in taxable years 
     beginning after December 31, 2001, and before January 1, 
     2005.

                          TITLE X--AGRICULTURE

     SEC. 1001. AGRICULTURAL CONSERVATION TAX CREDIT.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits), as amended 
     by section 901(a), is amended by adding at the end the 
     following:

     ``SEC. 45H. AGRICULTURAL CONSERVATION CREDIT.

       ``(a) In General.--For purposes of section 38, in the case 
     of an eligible person, the agricultural conservation credit 
     determined under this section for the taxable year is an 
     amount equal to--
       ``(1) 25 percent of the eligible conservation tillage 
     equipment expenses, and
       ``(2) 25 percent of the eligible irrigation equipment 
     expenses,
     paid or incurred by such person in connection with the active 
     conduct of the trade or business of farming for the taxable 
     year.
       ``(b) Eligible Person.--For purposes of this section, the 
     term `eligible person' means, with respect to any taxable 
     year, any person if the average annual gross receipts of such 
     person for the 3 preceding taxable years do not exceed 
     $1,000,000. For purposes of the preceding sentence, rules 
     similar to the rules of section 448(c)(3) shall apply.
       ``(c) Limitation.--The amount of the credit allowed under 
     subsection (a) for any taxable year shall not exceed $2,500 
     for each credit determined under paragraph (1) or (2) of such 
     subsection.
       ``(d) Definitions.--For purposes of this section--
       ``(1) Eligible conservation tillage equipment expenses.--
       ``(A) In general.--The term `eligible conservation tillage 
     equipment expenses' means amounts paid or incurred by a 
     taxpayer to purchase and install conservation tillage 
     equipment for use in the trade or business of the taxpayer.
       ``(B) Conservation tillage equipment.--The term 
     `conservation tillage equipment' means a no-till planter or 
     drill designed to minimize the disturbance of the soil in 
     planting crops, including such planters or drills which may 
     be attached to equipment already owned by the taxpayer.
       ``(2) Eligible irrigation equipment expenses.--The term 
     `eligible irrigation equipment expenses' means amounts paid 
     or incurred by a taxpayer--
       ``(A) to purchase and install on currently irrigated lands 
     new or upgraded equipment which will improve the efficiency 
     of existing irrigation systems used in the trade or business 
     of the taxpayer, including--
       ``(i) spray jets or nozzles which improve water 
     distribution efficiency,
       ``(ii) irrigation well meters,
       ``(iii) surge valves and surge irrigation systems, and
       ``(iv) conversion of equipment from gravity irrigation to 
     sprinkler or drip irrigation, including center pivot systems, 
     and
       ``(B) for service required to schedule the use of such 
     irrigation equipment as necessary to manage water application 
     to the crop requirement based on local evaporation and 
     transpiration rates or soil moisture.
       ``(e) Special Rules.--
       ``(1) Reduction in basis.--For purposes of this subtitle, 
     if a credit is determined under this section with respect to 
     any property, the basis of such property shall be reduced by 
     the amount of the credit so determined.
       ``(2) Pass-thru in the case of estates and trusts.--For 
     purposes of this section, under regulations prescribed by the 
     Secretary, rules similar to the rules of subsection (d) of 
     section 52 shall apply.
       ``(3) Allocation in the case of partnerships.--For purposes 
     of this section, in the case of partnerships, the credit 
     shall be allocated among partners under regulations 
     prescribed by the Secretary.
       ``(4) Denial of double benefit.--No other deduction or 
     credit shall be allowed to the taxpayer under this chapter 
     for any amount taken into account in determining the credit 
     under this section.''
       (b) Conforming Amendments.--
       (1) Section 38(b), as amended by section 901(b), is amended 
     by striking ``plus'' at the end of paragraph (15), by 
     striking the period at the end of paragraph (16), and 
     inserting ``, plus'', and by adding at the end the following:
       ``(17) the agricultural conservation credit determined 
     under section 45H.''
       (2) The table of sections for subpart D of part IV of 
     subchapter A of chapter 1, as amended by section 901(d), is 
     amended by adding at the end the following:

``Sec. 45H. Agricultural conservation credit.''
       (3) Section 1016(a), as amended by section 201(b)(1), is 
     amended by striking ``and'' at the end of paragraph (27), 
     striking the period at the end of paragraph (28) and 
     inserting ``; and'', and adding at the end the following:
       ``(29) in the case of property with respect to which a 
     credit was allowed under section 45H, to the extent provided 
     in section 45H(d)(1).''
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.
                                 ______
                                 

                       BUNNING AMENDMENT NO. 1377

  (Ordered to lie on the table.)
  Mr. BUNNING submitted an amendment to be proposed by him to the bill, 
S. 1429, supra; as follows:

       On page 268, between lines 3 and 4, insert the following:

     SEC. __ CERTAIN COSTS OF PRIVATE FOUNDATION IN REMOVING 
                   HAZARDOUS SUBSTANCES TREATED AS QUALIFYING 
                   DISTRIBUTION.

       (a) In General.--In the case of any taxable year beginning 
     after December 31, 1999, the distributable amount of a 
     private foundation for such taxable year for purposes of 
     section 4942 of the Internal Revenue Code of 1986 shall be 
     reduced (but not below zero) by any amount paid or incurred 
     (or set aside) by such private foundation for the 
     investigatory costs and direct costs of removal or taking 
     remedial action with respect to a hazardous substance 
     released at a facility which was owned or operated by such 
     private foundation.
       (b) Limitations.--Subsection (a) shall only apply to 
     costs--
       (1) incurred with respect to hazardous substances disposed 
     of at a facility owned or operated by the private foundation 
     but only if--
       (A) such facility was transferred to such foundation by 
     bequest before December 11, 1980, and
       (B) the active operation of such facility by such 
     foundation was terminated before December 12, 1980, and
       (2) which were not incurred pursuant to a pending order 
     issued to the private foundation unilaterally by the 
     President or the President's assignee under section 106 of 
     the Comprehensive Environmental Response, Compensation, and 
     Liability Act of 1980 (42 U.S.C. 9606), or pursuant to a 
     nonconsensual judgment against the private foundation issued 
     in a governmental cost recovery action under section 107 of 
     such Act (42 U.S.C. 9607).
       (c) Hazardous Substance.--For purposes of this section, the 
     term ``hazardous substance'' has the meaning given such term 
     by section 101(14) of the Comprehensive Environmental 
     Response, Compensation, and Liability Act of 1980 (42 U.S.C. 
     9601(14)).
                                 ______
                                 

                  ALLARD (AND ROBB) AMENDMENT NO. 1378

  (Ordered to lie on the table.)
  Mr. ALLARD (for himself and Mr. Robb) submitted an amendment to be 
proposed by them to the bill, S. 1429, supra; as follows:

       At the end, add the following:
     TITLE __--SMALL BUSINESS AND FINANCIAL INSTITUTIONS TAX RELIEF

     SEC. __0. SHORT TITLE.

       This title may be cited as the ``Small Business and 
     Financial Institutions Tax Relief Act of 1999''.
                         Subtitle A--Tax Relief

     SEC. __1. EXPANSION OF S CORPORATION ELIGIBLE SHAREHOLDERS TO 
                   INCLUDE IRAS.

       (a) In General.--Section 1361(c)(2)(A) (relating to certain 
     trusts permitted as shareholders) is amended by inserting 
     after clause (v) the following:
       ``(vi) A trust which constitutes an individual retirement 
     account under section 408(a), including one designated as a 
     Roth IRA under section 408A.''
       (b) Treatment as Shareholder.--Section 1361(c)(2)(B) 
     (relating to treatment as shareholders) is amended by adding 
     at the end the following:
       ``(vi) In the case of a trust described in clause (vi) of 
     subparagraph (A), the individual for whose benefit the trust 
     was created shall be treated as a shareholder.''
       (c) Sale of Stock in IRA Relating to S Corporation Election 
     Exempt From Prohibited Transaction Rules.--Section 4975(d) 
     (relating to exemptions) is amended by striking ``or'' at the 
     end of paragraph (14), by striking the period at the end of 
     paragraph (15) and inserting ``; or'', and by adding at the 
     end the following:
       ``(16) a sale of stock held by a trust which constitutes an 
     individual retirement account under section 408(a) to the 
     individual for whose benefit such account is established if 
     such sale is pursuant to an election under section 1362(a).''
       (d) Conforming Amendment.--Section 512(e)(1) is amended by 
     inserting ``1361(c)(2)(A)(vi) or'' before ``1361(c)(6)''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to trusts which constitute individual retirement 
     accounts on the date of the enactment of this Act in taxable 
     years beginning after December 31, 2000.

[[Page 18258]]



     SEC. __2. EXCLUSION OF INVESTMENT SECURITIES INCOME FROM 
                   PASSIVE INCOME TEST FOR BANK S CORPORATIONS.

       (a) In General.--Section 1362(d)(3)(C) (defining passive 
     investment income) is amended by adding at the end the 
     following:
       ``(v) Exception for banks; etc.--In the case of a bank (as 
     defined in section 581), a bank holding company (as defined 
     in section 246A(c)(3)(B)(ii)), or a qualified subchapter S 
     subsidiary bank, the term `passive investment income' shall 
     not include--

       ``(I) interest income earned by such bank, bank holding 
     company, or qualified subchapter S subsidiary bank, or
       ``(II) dividends on assets required to be held by such 
     bank, bank holding company, or qualified subchapter S 
     subsidiary bank to conduct a banking business, including 
     stock in the Federal Reserve Bank, the Federal Home Loan 
     Bank, or the Federal Agricultural Mortgage Bank or 
     participation certificates issued by a Federal Intermediate 
     Credit Bank.''

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

     SEC. __3. TREATMENT OF QUALIFYING DIRECTOR SHARES.

       (a) In General.--Section 1361 is amended by adding at the 
     end the following:
       ``(f) Treatment of Qualifying Director Shares.--
       ``(1) In general.--For purposes of this subchapter--
       ``(A) qualifying director shares shall not be treated as a 
     second class of stock, and
       ``(B) no person shall be treated as a shareholder of the 
     corporation by reason of holding qualifying director shares.
       ``(2) Qualifying director shares defined.--For purposes of 
     this subsection, the term `qualifying director shares' means 
     any shares of stock in a bank (as defined in section 581) or 
     in a bank holding company registered as such with the Federal 
     Reserve System--
       ``(i) which are held by an individual solely by reason of 
     status as a director of such bank or company or its 
     controlled subsidiary; and
       ``(ii) which are subject to an agreement pursuant to which 
     the holder is required to dispose of the shares of stock upon 
     termination of the holder's status as a director at the same 
     price as the individual acquired such shares of stock.
       ``(3) Distributions.--A distribution (not in part or full 
     payment in exchange for stock) made by the corporation with 
     respect to qualifying director shares shall be includible as 
     ordinary income of the holder and deductible to the 
     corporation as an expense in computing taxable income under 
     section 1363(b) in the year such distribution is received.''
       (b) Conforming Amendments.--
       (1) Section 1361(b)(1) is amended by inserting ``, except 
     as provided in subsection (f),'' before ``which does not''.
       (2) Section 1366(a) is amended by adding at the end the 
     following:
       ``(3) Allocation with respect to qualifying director 
     shares.--The holders of qualifying director shares (as 
     defined in section 1361(f)) shall not, with respect to such 
     shares of stock, be allocated any of the items described in 
     paragraph (1).''
       (3) Section 1373(a) 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 adding at the end 
     the following:
       ``(3) no amount of an expense deductible under this 
     subchapter by reason of section 1361(f)(3) shall be 
     apportioned or allocated to such income.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. __4. ISSUANCE OF PREFERRED STOCK PERMITTED.

       (a) In General.--Section 1361, as amended by section 
     __6(a), is amended by adding at the end the following:
       ``(g) Treatment of Qualified Preferred Stock.--
       ``(1) In general.--For purposes of this subchapter--
       ``(A) qualified preferred stock shall not be treated as a 
     second class of stock, and
       ``(B) no person shall be treated as a shareholder of the 
     corporation by reason of holding qualified preferred stock.
       ``(2) Qualified preferred stock defined.--For purposes of 
     this subsection, the term `qualified preferred stock' means 
     stock which meets the requirements of subparagraphs (A), (B), 
     and (C) of section 1504(a)(4). Stock shall not fail to be 
     treated as qualified preferred stock solely because it is 
     convertible into other stock.
       ``(3) Distributions.--A distribution (not in part or full 
     payment in exchange for stock) made by the corporation with 
     respect to qualified preferred stock shall be includible as 
     ordinary income of the holder and deductible to the 
     corporation as an expense in computing taxable income under 
     section 1363(b) in the year such distribution is received.''
       (b) Conforming Amendments.--
       (1) Section 1361(b)(1), as amended by section __6(b)(1), is 
     amended by striking ``subsection (f)'' and inserting 
     ``subsections (f) and (g)''.
       (2) Section 1366(a), as amended by section __6(b)(2), is 
     amended by adding at the end the following:
       ``(4) Allocation with respect to qualified preferred 
     stock.--The holders of qualified preferred stock (as defined 
     in section 1361(g)) shall not, with respect to such stock, be 
     allocated any of the items described in paragraph (1).''
       (3) Section 1373(a)(3), as added by section __6(b)(3), is 
     amended by inserting ``or 1361(g)(3)'' after ``section 
     1361(f)(3)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.
                      Subtitle B--Revenue Offsets

     SEC. __11. PREVENTION OF MISMATCHING OF DEDUCTIONS AND INCOME 
                   IN TRANSACTIONS WITH RELATED FOREIGN PERSONS.

       (a) In General.--Paragraph (3) of section 267(a) (relating 
     to losses, expenses, and interest with respect to 
     transactions between related taxpayers) is amended to read as 
     follows:
       ``(3) Payments to foreign persons.--
       ``(A) In general.--If--
       ``(i) a payment is to be made by a taxpayer using an 
     accrual method of accounting to a foreign person,
       ``(ii) such payment is not, as of the date accrued by the 
     taxpayer, currently subject to tax under this chapter, and
       ``(iii) at the close of the taxable year of the taxpayer 
     for which (but for this paragraph) the amount would be 
     deductible under this chapter, both the taxpayer and the 
     person to whom the payment is to be made are persons 
     specified in any of the paragraphs of subsection (b),

     then any deduction allowable under this chapter in respect of 
     such amount shall be allowable as of the day as of which such 
     amount is paid (or, if earlier, the day on which includible 
     in the gross income of any United States person).
       ``(B) Currently subject to tax.--For purposes of 
     subparagraph (A)(ii), a payment is currently subject to tax 
     under this chapter as of the date accrued by the taxpayer if 
     such payment--
       ``(i) is includible in the gross income of the foreign 
     person as of such date, and
       ``(ii)(I) is effectively connected with the conduct by the 
     foreign person of a trade or business within the United 
     States, or
       ``(II) is includible in the gross income of any citizen or 
     resident of the United States or any domestic corporation for 
     the taxable year of such citizen, resident, or corporation in 
     which the taxable year of the foreign person ends.
     The preceding sentence shall not apply if the payment is 
     exempt from taxation (or is subject to a reduced rate of tax) 
     pursuant to a treaty obligation of the United States.
       ``(C) Exception for payments in ordinary course of 
     business.--Subparagraph (A) shall not apply to any payment 
     made in the ordinary course of the trade or business in which 
     the payor is predominantly engaged if such payment is made 
     within a reasonable period after the day on which such 
     payment would be allowable as a deduction but for this 
     paragraph.
       ``(D) Other exceptions.--The Secretary may by regulation 
     provide exceptions (consistent with the purposes of this 
     paragraph) to the application of subparagraph (A).''
       (b) Conforming Amendments.--
       (1) Subsection (e) of section 163 is amended by striking 
     paragraph (3) and by redesignating paragraphs (4), (5), and 
     (6) as paragraphs (3), (4), and (5), respectively.
       (2) Paragraph (5) of section 163(e) (as redesignated by 
     paragraph (1)) is amended by adding at the end the following:

  ``For treatment of original issue discount on obligations held by 
related foreign persons, see section 267(a)(3).''
       (c) Effective Date.--The amendments made by this section 
     shall apply to payments accrued after the date of enactment 
     of this Act.
                                 ______
                                 

                      McCONNELL AMENDMENT NO. 1379

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

       On page 268, between lines 3 and 4, insert the following:

     SEC.   . HOLDING PERIOD REDUCED TO 12 MONTHS FOR PURPOSES OF 
                   DETERMINING WHETHER HORSES ARE SECTION 1231 
                   ASSETS.

       (a) In General.--Subparagraph (A) of section 1231(b)(3) 
     (relating to definition of property used in the trade or 
     business) is amended by striking ``and horses''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.
       On page 286, line 6, strike ``1999'' and inserting 
     ``2000''.
                                 ______
                                 

                       ABRAHAM AMENDMENT NO. 1380

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

       At the appropriate place in title XI, insert the following:

     SECTON 11  . THE CADDIE RELIEF ACT.

       (a) Short Title.--This section may be cited as the ``Caddie 
     Relief Act of 1999''.

[[Page 18259]]

       (b) Treatment of Golf Caddies.
       (1) In general.--Subsection (a) of section 3508 of the 
     Internal Revenue Code of 1986 (relating to treatment of real 
     estate agents and direct sellers) is amended by striking 
     ``qualified real estate agent or as a direct seller'' and 
     insert ``qualified real estate agent, direct seller, or golf 
     caddie''.
       (2) Definition.--Subsection (b) of section 3508 of such 
     Code is amended by redesignating paragraph (3) as paragraph 
     (4) and by inserting after paragraph (2) the following new 
     paragraph:
       ``(3) Golf caddie.--The term ``golf caddie'' means an 
     individual who performs the service of carrying golf clubs 
     for, or otherwise assisting, a non-professional golfer and, 
     with respect to whom, substantially all the remuneration 
     (whether or not paid in cash) for the performance of such 
     service is--
       ``(A) directly related to performing such services rather 
     than to the number of hours worked, and
       ``(B) paid to such individual directly by the golfer or by 
     a third party as an agent of the golfer where the third party 
     incurs no obligation itself to pay such remuneration.''.
       (3) Clerical amendments.--
       (A) The heading of section 3508 of such Code is amended to 
     read as follows:

     ``SEC. 3508. TREATMENT OF REAL ESTATE AGENTS, DIRECT SELLERS, 
                   AND GOLF CADDIES.''.

       (B) The item relating to section 3508 in the table of 
     sections for chapter 25 of such Code is amended to read as 
     follows:

``Sec. 3508. Treatment of real estate agents, direct sellers, and golf 
              caddies.''.

       (4) Effective date.--The amendments made by this section 
     shall apply to remuneration paid for services performed in 
     taxable years ending after the date of the enactment of this 
     Act.
                                 ______
                                 

                    HELMS AMENDMENTS NOS. 1381-1382

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

                           Amendment No. 1381

       On page 371, between lines 16 and 17, insert the following:

     SEC. __. TAX TREATMENT OF STATE ACQUISITION OF RAILROAD REAL 
                   ESTATE INVESTMENT TRUST.

       (a) In General.--If a State acquires all of the outstanding 
     stock of a real estate investment trust which is a non-
     operating class III railroad and substantially all of the 
     activities of which consist of the ownership, leasing, and 
     operation by such trust of facilities, equipment, and other 
     property used by the trust or other persons in railroad 
     transportation, then, for purposes of section 115 of the 
     Internal Revenue Code of 1986--
       (1) such activities shall be treated as the exercise of an 
     essential governmental function, and
       (2) income derived from such activities shall be treated as 
     accruing to the State.
       (b) Gain or Loss Not Recognized on Conversion.--
     Notwithstanding section 337(d) of the Internal Revenue Code 
     of 1986, no gain or loss shall be recognized under section 
     336 or 337 of such Code because of the change of status of 
     the real estate investment trust to a tax-exempt entity by 
     reason of the application of subsection (a).
       (c) Tax-Exempt Financing.--Any obligation issued by the 
     entity described in subsection (a) shall be treated as an 
     obligation of the State for purposes of applying section 103 
     and part IV of subchapter B of chapter 1 of the Internal 
     Revenue Code of 1986.
       (d) Definitions.--For purposes of this section--
       (1) Real estate investment trust.--The term ``real estate 
     investment trust'' has the meaning given such term by section 
     856(a) of the Internal Revenue Code of 1986.
       (2) Non-operating class iii railroad.--The term ``non-
     operating class III railroad'' has the meaning given such 
     term by part A of subtitle IV of title 49, United States Code 
     (49 U.S.C. 10101 et seq.) and the regulations thereunder.
       (3) State.--The term ``State'' includes--
       (A) the District of Columbia and any possession of the 
     United States, and
       (B) any authority, agency, or public corporation of a 
     State.
       (e) Applicability.--This section shall apply on and after 
     the date of any acquisition described in subsection (a).
                                  ____


                           Amendment No. 1382

       At the end of title XI, insert:

     SEC. __. CREDIT FOR DRY CLEANING EQUIPMENT USING REDUCED 
                   AMOUNTS OF HAZARDOUS SUBSTANCES; REVENUE 
                   OFFSET.

       (a) Credit.--
       (1) In general.--Section 46 (relating to amount of 
     investment credit) is amended by striking ``and'' at the end 
     of paragraph (2), by striking the period at the end of 
     paragraph (3) and inserting ``, and'', and by adding at the 
     end thereof the following paragraph:
       ``(4) the dry cleaning equipment credit.''
       (2) Dry cleaning equipment credit.--Section 48 is amended 
     by adding at the end the following new subsection:
       ``(c) Dry Cleaning Equipment Using Reduced Amounts of 
     Hazardous Substances.--
       ``(1) In general.--For purposes of section 46, the dry 
     cleaning equipment credit for any taxable year is 20 percent 
     of the basis of each qualified dry cleaning property placed 
     in service during the taxable year.
       ``(2) Limitation.--The credit under this subsection for the 
     taxable year shall apply to only one qualified dry cleaning 
     property placed in service during such year at each business 
     premise of the taxpayer.
       ``(3) Qualified dry cleaning property.--For purposes of 
     this subsection, the term `qualified dry cleaning property' 
     means equipment designed primarily to dry clean clothing and 
     other fabric if--
       ``(A) such equipment does not use any hazardous solvent as 
     the primary process solvent,
       ``(B) the original use of such property commences with the 
     taxpayer, and
       ``(C) with respect to which depreciation (or amortization 
     in lieu of depreciation) is allowable.
       ``(4) Hazardous solvent.--For purposes of paragraph (3)--
       ``(A) In general.--The term `hazardous solvent' means any 
     solvent any portion of which consists of a chlorinated 
     solvent, a petroleum-based solvent, or any other hazardous or 
     regulated substance.
       ``(B) Exception.--Such term shall not include any solvent--
       ``(i) not more than 10 percent of which consists of 
     petroleum or petroleum derivatives, and
       ``(ii) which does not contain any substance determined by 
     the Administrator of the Environmental Protection Agency, the 
     Director of the National Institute for Occupational Safety 
     and Health, the Director of the International Agency for 
     Research on Cancer, the Director of the National Institute of 
     Environmental Health Sciences' National Toxicology Program, 
     or the director of any other appropriate Federal agency to 
     possess--

       ``(I) carcinogenic potential in humans, or
       ``(II) bioaccumulative properties.''

       (3) Clerical amendments.--
       (A) The section heading for section 48 is amended to read 
     as follows:

     ``SEC. 48. ENERGY CREDIT; REFORESTATION CREDIT; DRY CLEANING 
                   EQUIPMENT CREDIT.''

       (B) The item relating to section 48 in the table of 
     sections for subpart E of part IV of subchapter A of chapter 
     1 is amended to read as follows:

``Sec. 48. Energy credit; reforestation credit; dry cleaning equipment 
              credit.''
       (4) Effective date.--The amendments made by this section 
     shall apply to property placed in service on or after January 
     1, 1999.
       (b) Clarification of Coordination of Expense Allocation 
     Regulations and Treaties of the United States.--
       (1) In general.--In the case of any nonresident alien 
     individual or foreign corporation having a permanent 
     establishment in the United States, the allocation of items 
     with respect to the permanent establishment in accordance 
     with Treasury Regulation Sec. 1.861-8 or Sec. 1.882-5 shall 
     not be treated as inconsistent with any treaty of the United 
     States.
       (2) Effective date.--
       (A) In general.--This subsection shall apply to taxable 
     years beginning before, on, or after the date of the 
     enactment of this Act.
       (B) Exception.--This subsection shall not apply to any 
     taxpayer for any taxable year beginning on or before such 
     date of enactment if--
       (i) there has been a decision by a Federal court on or 
     before such date reaching a result inconsistent with the 
     provisions of this subsection, and
       (ii) such decision is not overturned on appeal.
                                 ______
                                 

                       KENNEDY AMENDMENT NO. 1383

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

       On page 371, between lines 16 and 17, insert the following:

     SEC. __. FAIR MINIMUM WAGE.

       (a) Short Title.--This section may be cited as the ``Fair 
     Minimum Wage Act of 1999''.
       (b) Minimum Wage Increase.--
       (1) Wage.--Paragraph (1) of section 6(a) of the Fair Labor 
     Standards Act of 1938 (29 U.S.C. 206(a)(1)) is amended to 
     read as follows:
       ``(1) except as otherwise provided in this section, not 
     less than--
       ``(A) $5.65 an hour during the year beginning on September 
     1, 1999; and
       ``(B) $6.15 an hour beginning on September 1, 2000;''.
       (2) Effective date.--The amendment made by paragraph (1) 
     takes effect on September 1, 1999.
       (c) Applicability of Minimum Wage to the Commonwealth of 
     the Northern Mariana Islands.--The provisions of section 6 of 
     the Fair Labor Standards Act of 1938 (29 U.S.C. 206) shall 
     apply to the Commonwealth of the Northern Mariana Islands.

[[Page 18260]]


                                 ______
                                 

                MOYNIHAN (AND OTHERS) AMENDMENT NO. 1384

  Mr. MOYNIHAN (for himself, Mr. Baucus, Mr. Rockefeller, Mr. Breaux, 
Mr. Conrad, Mr. Graham, Mr. Bryan, Mr. Kerrey, and Mr. Robb) proposed 
an amendment to the bill, S. 1429, supra; as follows:

       Strike all after the first word and insert:

             1. SHORT TITLE; ETC.

       (a) Short Title.--This Act may be cited as the ``Tax and 
     Public Debt Reduction Act of 1999''.
       (b) Amendment of 1986 Code.--Except as otherwise expressly 
     provided, whenever in this Act an amendment or repeal is 
     expressed in terms of an amendment to, or repeal of, a 
     section or other provision, the reference shall be considered 
     to be made to a section or other provision of the Internal 
     Revenue Code of 1986.
       (c) Section 15 Not To Apply.--No amendment made by this Act 
     shall be treated as a change in a rate of tax for purposes of 
     section 15 of the Internal Revenue Code of 1986.
       (d) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; etc.

                TITLE I--TAX RELIEF FOR WORKING FAMILIES

Sec. 101. Increase in standard deduction.
Sec. 102. Deduction for two-earner married couples.

         TITLE II--HEALTH CARE AFFORDABILITY AND ACCESSIBILITY

Sec. 201. Deduction for 100 percent of health insurance costs of self-
              employed individuals.
Sec. 202. Refundable credit for health insurance costs of employees.
Sec. 203. Deduction for premiums for long-term care insurance.
Sec. 204. Long-term care tax credit.
Sec. 205. Credit for clinical testing research expenses attributable to 
              certain qualified academic institutions including 
              teaching hospitals.
Sec. 206. Treatment of certain hospital support organizations as 
              qualified organizations for purposes of determining 
              acquisition indebtedness.
Sec. 207. Technical amendments related to Vaccine Injury Compensation 
              Trust Fund.

                    TITLE III--ESTATE TAX PROVISIONS

Sec. 301. Increase in unified estate and gift tax credit.
Sec. 302. Increase in estate tax deduction for family-owned business 
              interest.

               TITLE IV--ALTERNATIVE MINIMUM TAX REFORMS

Sec. 401. Allowance of nonrefundable personal credits fully against 
              regular tax liability.
Sec. 402. Repeal of foreign tax credit limitation under alternative 
              minimum tax.
Sec. 403. Income averaging for farmers not to increase alternative 
              minimum tax liability.
Sec. 404. Long-term unused credits allowed against minimum tax.

               TITLE V--EXTENSION OF EXPIRING INCENTIVES

Sec. 501. Work opportunity credit and welfare-to-work credit.
Sec. 502. Electricity produced from certain nonrenewable resources 
              credit.
Sec. 503. Subpart F exemption for active financing income.
Sec. 504. Extension of expensing of environmental remediation costs.
Sec. 505. Virgin Islands and Puerto Rico rum cover over.
Sec. 506. Modifications of Puerto Rican economic activity credit.

                TITLE VI--QUALITY EDUCATION INITIATIVES

Sec. 601. Expansion of incentives for public schools.
Sec. 602. Modifications to qualified tuition programs.
Sec. 603. Elimination of 60-month limit on student loan interest 
              deduction.
Sec. 604. Additional increase in arbitrage rebate exception for 
              governmental bonds used to finance educational 
              facilities.
Sec. 605. Treatment of qualified public educational facility bonds as 
              exempt facility bonds.
Sec. 606. Permanent extension of exclusion for employer-provided 
              educational assistance.
Sec. 607. Expansion of deduction for computer donations to schools.
Sec. 608. Credit for information technology training program expenses.
Sec. 609. Charitable contributions to certain low income schools may be 
              made in next taxable year.
Sec. 610. Exclusion of National Service Educational Awards.

          TITLE VII--ENVIRONMENTAL CONSERVATION AND PROTECTION

                    Subtitle A--Better America Bonds

Sec. 701. Credit for holders of Better America bonds.
Sec. 702. Better America Bonds Board.

                  Subtitle B--Conservation Incentives

Sec. 711. Tax exclusion for cost-sharing payments under Partners for 
              Wildlife Program.
Sec. 712. Enhanced deduction for the donation of a conservation 
              easement.
Sec. 713. National wildlife refuge conservation easements.
Sec. 714. Exclusion of 50 percent of gain on sales of land or interests 
              in land or water to eligible entities for conservation 
              purposes.

                Subtitle C--Alternative Fuels Incentives

Sec. 721. Extension and expansion of credit for purchase of electric 
              vehicles.
Sec. 722. Additional deduction for cost of installation of alternative 
              fueling stations.
Sec. 723. Credit for retail sale of clean burning fuels as motor 
              vehicle fuel.

                      Subtitle C--Other Provisions

Sec. 731. Expansion of section 29 tax credit.
Sec. 732. Uniform dollar limitation for all types of transportation 
              fringe benefits.

               TITLE VIII--SAVINGS AND PENSION PROVISIONS

           Subtitle A--Expanding Coverage for Small Business

Sec. 801. Plan loans for subchapter S owners, partners, and sole 
              proprietors.
Sec. 802. Contributions to IRAs through payroll deductions.
Sec. 803. Modification of top-heavy rules.
Sec. 804. Credit for small employer pension plan contributions and 
              start-up costs.
Sec. 805. Increasing limits for deferrals to simple plans.
Sec. 806. Elective deferrals not taken into account for purposes of 
              limits.

      Subtitle B--Increasing Pension Access and Fairness for Women

Sec. 811. Equitable treatment for contributions of employees to defined 
              contribution plans.
Sec. 812. Faster vesting of certain employer matching contributions.
Sec. 813. Deferred annuities for surviving spouses of Federal 
              employees.
Sec. 814. Clarification of tax treatment of division of section 457 
              plan benefits upon divorce.
Sec. 815. Spouses' right to know proposal.

          Subtitle C--Increasing Portability of Pension Plans

Sec. 821. Rollovers allowed among various types of plans.
Sec. 822. Rollovers of IRAs into workplace retirement plans.
Sec. 823. Rollovers of after-tax contributions.
Sec. 824. Hardship exception to 60-day rule.
Sec. 825. Treatment of forms of distribution.
Sec. 826. Rationalization of restrictions on distributions.
Sec. 827. Purchase of service credit in governmental defined benefit 
              plans.
Sec. 828. Employers may disregard rollovers for purposes of cash-out 
              amounts.

       Subtitle D--Strengthening Pension Security and Enforcement

Sec. 831. Treatment of multiemployer plans under section 415.
Sec. 832. Extension of missing participants program to multiemployer 
              plans.
Sec. 833. Civil penalties for breach of fiduciary responsibility.
Sec. 834. Failure to provide notice by defined benefit plans 
              significantly reducing future benefit accruals.

              Subtitle E--Encouraging Retirement Education

Sec. 841. Periodic pension benefits Statements.
Sec. 842. Clarification of treatment of employer-provided retirement 
              advice.

                     Subtitle F--Reducing Red Tape

Sec. 851. ESOP dividends may be reinvested without loss of dividend 
              deduction.
Sec. 852. Reduced PBGC premium for new plans of small employers.
Sec. 853. Reduction of additional PBGC premium for new plans.
Sec. 854. Elimination of user fee for requests to IRS regarding new 
              pension plans.
Sec. 855. Distributional analysis of pension tax benefits.

                      Subtitle G--Other Provisions

Sec. 303. Tax credit for matching contributions to Individual 
              Development Accounts.
Sec. 862. Federal employee retirement contributions.
Sec. 863. Exclusion from income of severance payment amounts

                      Subtitle H--Plan Amendments

Sec. 871. Provisions relating to plan amendments.

             TITLE IX--FARM RELIEF AND ECONOMIC DEVELOPMENT

Sec. 901. Farm and ranch risk management accounts.

[[Page 18261]]

Sec. 902. Lease agreement relating to exclusion of certain farm rental 
              income from net earnings from self-employment.
Sec. 903. Exclusion of gain from sale of certain farmland.
Sec. 904. Exemption of small issue agriculture bonds from State volume 
              cap.
Sec. 905. Capital gain realized from transfer of farm property in 
              complete or partial satisfaction of qualified farm 
              indebtedness excluded from gross income.
Sec. 906. Exclusion of discharge of qualified farm indebtedness from 
              gross income increased for certain solvent farmers.
Sec. 907. Net operating loss of farmers.
Sec. 908. Certain cash rentals of farmland not to cause recapture of 
              special estate tax valuation.
Sec. 909. Declaratory judgment remedy relating to status and 
              classification of farmers' cooperatives.

              TITLE X--TECHNOLOGY AND ECONOMIC DEVELOPMENT

Sec. 1001. Permanent extension and modification of research credit.
Sec. 1002. New markets tax credit.
Sec. 1003. Increase in State ceiling on low-income housing credit.
Sec. 1004. Increase in volume cap on private activity bonds.
Sec. 1005. Spaceports treated like airports under exempt facility bond 
              rules.
Sec. 1006. Increase in expense treatment for small businesses.

                   TITLE XI--MISCELLANEOUS INCENTIVES

                  Subtitle A--Miscellaneous Provisions

Sec. 1101. Oil and gas incentives.
Sec. 1102. Treatment of certain revenues of electric cooperatives.
Sec. 1103. Tax-exempt bond financing of certain electric facilities.
Sec. 1104. Modifications to special rules for nuclear decommissioning 
              costs.
Sec. 1105. Modification of dependent care credit.
Sec. 1106. Allowance of credit for employer expenses for child care 
              assistance.
Sec. 1107. Recovery period for depreciation of certain leasehold 
              improvements.
Sec. 1108. Exemption from income tax for State-created organizations 
              providing property and casualty insurance for property 
              for which such coverage is otherwise unavailable.
Sec. 1109. Disclosure of tax information to facilitate combined 
              employment tax reporting.
Sec. 1110. Increase in limit on certain charitable contributions as 
              percentage of AGI.
Sec. 1111. Low-income second mortgage tax credit.
Sec. 1112. Coordination of child tax credit and earned income credit 
              with certain means-tested programs.
Sec. 1113. No Federal income tax on amounts received by Holocaust 
              victims or their heirs.
Sec. 1114. Tax treatment of special pay for members of the Armed 
              Forces.

    Subtitle B--Provisions Relating to Real Estate Investment Trusts

   Part I--Treatment of Income and Services Provided by Taxable REIT 
                              Subsidiaries

Sec. 1121. Modifications to asset diversification test.
Sec. 1122. Treatment of income and services provided by taxable REIT 
              subsidiaries.
Sec. 1123. Taxable REIT subsidiary.
Sec. 1124. Limitation on earnings stripping.
Sec. 1125. 100 percent tax on improperly allocated amounts.
Sec. 1126. Effective date.

                       Part II--Health Care REITs

Sec. 1131. Health care REITs.

      Part III--Conformity With Regulated Investment Company Rules

Sec. 1141. Conformity with regulated investment company rules.

 Part IV--Clarification of Exception From Impermissible Tenant Service 
                                 Income

Sec. 1151. Clarification of exception for independent operators.

           Part V--Modification of Earnings and Profits Rules

Sec. 1161. Modification of earnings and profits rules.

                       TITLE XII--REVENUE OFFSETS

                     Subtitle A--General Provisions

Sec. 1201. Modification to foreign tax credit carryback and carryover 
              periods.
Sec. 1202. Limitation on use of non-accrual experience method of 
              accounting.
Sec. 1203. Returns relating to cancellations of indebtedness by 
              organizations lending money.

Sec. 1204. Extension of Internal Revenue Service user fees.

Sec. 1205. Charitable split-dollar life insurance, annuity, and 
              endowment contracts.

Sec. 1206. Transfer of excess defined benefit plan assets for retiree 
              health benefits.

Sec. 1207. Limitations on welfare benefit funds of 10 or more employer 
              plans.

Sec. 1208. Modification of installment method and repeal of installment 
              method for accrual method taxpayers.

Sec. 1209. Inclusion of certain vaccines against streptococcus 
              pneumoniae to list of taxable vaccines.

Sec. 1210. Restoration of phase-out of unified credit.

Sec. 1211. Repeal of lower-of-cost-or-market method of accounting for 
              inventories.

Sec. 1212. Consistent amortization periods for intangibles.

Sec. 1213. Extension of hazardous substance Superfund taxes.

Sec. 1214. Controlled entities ineligible for REIT status.

Sec. 1215. Increase in elective withholding rate for nonperiodic 
              distributions from deferred compensation plans.

Sec. 1216. Treatment of gain from constructive ownership transactions.

Sec. 1217. Restriction on use of real estate investment trusts to avoid 
              estimated tax payment requirements.

Sec. 1218. Prohibited allocations of S corporation stock held by an 
              ESOP.

Sec. 1219. Modification of anti-abuse rules related to assumption of 
              liability.

Sec. 1220. Allocation of basis on transfers of intangibles in certain 
              nonrecognition transactions.

Sec. 1221. Distributions to a corporate partner of stock in another 
              corporation.

                TITLE I--TAX RELIEF FOR WORKING FAMILIES

     SEC. 101. INCREASE IN STANDARD DEDUCTION.

       Subsection (c) of section 63 (relating to standard 
     deduction) is amended by adding at the end the following new 
     paragraph:
       ``(7) Increase in amount.--
       ``(A) In general.--In the case of taxable years beginning 
     in any calendar year beginning after 2000, the dollar amounts 
     determined under paragraph (2) (after any increase under 
     paragraph (4)) shall be increased by the applicable dollar 
     amount for such calendar year.
       ``(B) Applicable dollar amount.--
       ``(i) Amount.--The applicable dollar amount for any 
     calendar year shall be determined as follows:

       ``(I) Joint returns and surviving spouses.--In the case of 
     the $5,000 amount under paragraph (2)(A)--

                                                             Applicable
``Calendar year:                                         dollar amount:
  2001 or 2002..............................................$1,000 ....

  2003 or 2004..............................................$2,000 ....

  2005 or 2006..............................................$3,000 ....

  2007 and thereafter.......................................$4,350.....

       ``(II) Head of household.--In the case of the $4,400 amount 
     under paragraph (2)(B)--

                                                             Applicable
``Calendar year:                                         dollar amount:
  2001 or 2002................................................$500 ....

  2003 or 2004..............................................$1,000 ....

  2005 or 2006..............................................$1,500 ....

  2007 and thereafter.......................................$2,150.....

       ``(III) Individual.--In the case of the $3,000 amount under 
     paragraph (2)(C)--

                                                             Applicable
``Calendar year:                                         dollar amount:
  2001 or 2002................................................$300 ....

  2003 or 2004................................................$600 ....

  2005 or 2006................................................$900 ....

  2007 and thereafter.......................................$1,300.....

       ``(IV) Married filing separately.--In the case of the 
     $2,500 amount under paragraph (2)(D)--

                                                             Applicable
``Calendar year:                                         dollar amount:
  2001 or 2002................................................$500 ....

  2003 or 2004..............................................$1,000 ....

  2005 or 2006..............................................$1,500 ....

  2007 and thereafter.......................................$2,175.....

       ``(ii) Cost-of-living adjustment.--In the case of any 
     taxable year beginning in a calendar year after 2007, the 
     applicable dollar amount under clause (i) shall be increased 
     by an amount equal to such dollar amount multiplied by the 
     cost-of-living adjustment determined under section 1(f)(3) 
     for the calendar year in which the taxable year begins, 
     except that subparagraph (B) thereof shall be applied by 
     substituting `calendar year 2006' for `calendar year 1992'. 
     If any amount as adjusted under this subparagraph is not a 
     multiple of $50, such amount shall be rounded to the next 
     lowest multiple of $50.''

     SEC. 102. DEDUCTION FOR TWO-EARNER MARRIED COUPLES.

       (a) In General.--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. DEDUCTION FOR MARRIED COUPLES TO ELIMINATE THE 
                   MARRIAGE PENALTY.

       ``(a) In General.--In the case of a joint return under 
     section 6013 for the taxable year, there shall be allowed as 
     a deduction an amount equal to the lesser of--

[[Page 18262]]

       ``(1) the applicable dollar amount, or
       ``(2) the applicable percentage of the qualified earned 
     income of the spouse with the lower qualified earned income 
     for the taxable year.
       ``(b) Applicable Percentage.--For purposes of this 
     section--
       ``(1) In general.--The term `applicable percentage' means 
     20 percent, reduced (but not below zero) by 1 percentage 
     point for each $1,000 (or fraction thereof) by which the 
     taxpayer's modified adjusted gross income for the taxable 
     year exceeds $75,000.
       ``(2) Modified adjusted gross income.--For purposes of this 
     subsection, the term `modified adjusted gross income' means 
     adjusted gross income determined--
       ``(A) after application of sections 86, 219, and 469, and
       ``(B) without regard to sections 135, 137, 221, and 911 or 
     the deduction allowable under this section.
       ``(c) Applicable Dollar Amount.--For purposes of this 
     section--
       ``(1) In general.--The applicable dollar amount shall be 
     determined in accordance with the following table:

``Taxable year begin-
  ning in calendar                                           Applicable
  year:                                                  dollar amount:
  2001 or 2002..............................................$1,000 ....

  2003 or 2004..............................................$2,000 ....

  2005 or 2006..............................................$3,000 ....

  2007 and thereafter......................................$4,350. ....

       ``(2) Cost-of-living adjustment.--In the case of any 
     taxable year beginning in a calendar year after 2007, the 
     applicable dollar amount under paragraph (1) shall be 
     increased by an amount equal to such dollar amount multiplied 
     by the cost-of-living adjustment determined under section 
     1(f)(3) for the calendar year in which the taxable year 
     begins, except that subparagraph (B) thereof shall be applied 
     by substituting `calendar year 2006' for `calendar year 
     1992'. If any amount as adjusted under this paragraph is not 
     a multiple of $50, such amount shall be rounded to the next 
     lowest multiple of $50.
       ``(d) Qualified Earned Income Defined.--
       ``(1) In general.--For purposes of this section, the term 
     `qualified earned income' means an amount equal to the excess 
     of--
       ``(A) the earned income of the spouse for the taxable year, 
     over
       ``(B) an amount equal to the sum of the deductions 
     described in paragraphs (1), (2), (7), and (15) of section 
     62(a) to the extent such deductions are properly allocable to 
     or chargeable against earned income described in subparagraph 
     (A).

     The amount of qualified earned income shall be determined 
     without regard to any community property laws.
       ``(2) Earned income.--For purposes of paragraph (1), the 
     term `earned income' means income which is earned income 
     within the meaning of section 911(d)(2) or 401(c)(2)(C), 
     except that--
       ``(A) such term shall not include any amount--
       ``(i) not includible in gross income,
       ``(ii) received as a pension or annuity,
       ``(iii) paid or distributed out of an individual retirement 
     plan (within the meaning of section 7701(a)(37)),
       ``(iv) received as deferred compensation, or
       ``(v) received for services performed by an individual in 
     the employ of his spouse (within the meaning of section 
     3121(b)(3)(A)), and
       ``(B) section 911(d)(2)(B) shall be applied without regard 
     to the phrase `not in excess of 30 percent of his share of 
     net profits of such trade or business'.''
       (b) Deduction To Be Above-the-Line.--Section 62(a) 
     (defining adjusted gross income) is amended by adding after 
     paragraph (17) the following:
       ``(18) Deduction for two-earner married couples.--The 
     deduction allowed by section 222.''
       (c) Earned Income Credit Phaseout To Reflect Deduction.--
     Section 32(c)(2) (defining earned income) is amended by 
     adding at the end the following:
       ``(C) Marriage penalty reduction.--Solely for purposes of 
     applying subsection (a)(2)(B), earned income for any taxable 
     year shall be reduced by an amount equal to the amount of the 
     deduction allowed to the taxpayer for such taxable year under 
     section 222.''
       (d) Clerical Amendment.--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. Deduction for married couples to eliminate the marriage 
              penalty.
``Sec. 223. Cross reference.''
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

         TITLE II--HEALTH CARE AFFORDABILITY AND ACCESSIBILITY

     SEC. 201. DEDUCTION FOR 100 PERCENT OF HEALTH INSURANCE COSTS 
                   OF SELF-EMPLOYED INDIVIDUALS.

       (a) In General.--Paragraph (1) of section 162(l) is amended 
     to read as follows:
       ``(1) Allowance of deduction.--In the case of an individual 
     who is an employee within the meaning of section 401(c)(1), 
     there shall be allowed as a deduction under this section an 
     amount equal to 100 percent of the amount paid during the 
     taxable year for insurance which constitutes medical care for 
     the taxpayer and the taxpayer's spouse and dependents.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 202. REFUNDABLE CREDIT FOR HEALTH INSURANCE COSTS OF 
                   EMPLOYEES.

       (a) In General.--Subpart C of part IV of subchapter A of 
     chapter 1 (relating to refundable personal credits) is 
     amended by redesignating section 35 as section 36 and by 
     inserting after section 34 the following new section:

     ``SEC. 35. HEALTH INSURANCE COSTS OF EMPLOYEES.

       ``(a) In General.--In the case of an individual, there 
     shall be allowed as a credit against the tax imposed by this 
     subtitle an amount equal to 30 percent of the amount paid 
     during the taxable year for qualified health insurance.
       ``(b) Qualified Health Insurance.--
       ``(1) In general.--For purposes of this section, the term 
     `qualified health insurance' means health insurance which 
     constitutes medical care for the taxpayer, his spouse, and 
     dependents, and which meet the requirements of paragraphs 
     (2), (3), and (4).
       ``(2) Benefits package.--Health insurance meets the 
     requirement of this paragraph if such insurance provides 
     coverage equivalent to the standard Blue Cross/Blue Shield 
     preferred provider option service benefit plan, described in 
     and offered under section 8903(1) of title 5, United States 
     Code.
       ``(3) Hipaa standards.--Health insurance meets the 
     requirement of this paragraph if such insurance meets 
     standards similar to the standards under chapter 100.
       ``(4) Premium standards.--Health insurance meets the 
     requirement of this paragraph if the premium rate for such 
     insurance for any calendar year does not exceed by more than 
     100 percent the average base premium rate for the same or 
     similar health insurance offered by the 5 insurers with the 
     highest premium volume during the preceding calendar year.
       ``(c) Limitations.--
       ``(1) Policy limitations.--The amount which may be taken 
     into account under subsection (a) shall not exceed--
       ``(A) in the case of self-only coverage, $1,000, and
       ``(B) in the case of family coverage, $2,000.
       ``(2) Limitation based on employee compensation.--The 
     payments taken into account under subsection (a) for any 
     taxable year shall not exceed the taxpayer's wages, salaries, 
     tips, and other employee compensation includible in gross 
     income for such taxable year.
       ``(3) Limitation based on other coverage.--Subsection (a) 
     shall not apply to--
       ``(A) any taxpayer for any calendar month for which the 
     taxpayer is eligible to participate in any subsidized health 
     plan maintained by any employer of the taxpayer or of the 
     spouse of the taxpayer, or
       ``(B) amounts paid for coverage under any medical care 
     program described in--
       ``(i) title XVIII, XIX, or XXI of the Social Security Act,
       ``(ii) chapter 55 of title 10, United States Code,
       ``(iii) chapter 17 of title 38, United States Code,
       ``(iv) chapter 89 of title 5, United States Code, or
       ``(v) the Indian Health Care Improvement Act.
       Subparagraph (B)(iv) shall not apply to coverage which is 
     comparable to continuation coverage under section 4980B.
       ``(d) Limitation Based on Adjusted Gross Income.--
       ``(1) In general.--No credit shall be allowed under 
     subsection (a) for any taxable year for which the taxpayer's 
     adjusted gross income exceeds the applicable dollar amount.
       ``(2) Applicable dollar amount.--The term `applicable 
     dollar amount' means--
       ``(A) in the case of a taxpayer filing a joint return, 
     $40,000,
       ``(B) in the case of any other taxpayer, $20,000.
       ``(3) Cost-of-living adjustment.--
       ``(A) In general.--In the case of a taxable year beginning 
     after 2003, each dollar amount under paragraph (2) 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 2002' 
     for `calendar year 1992' in subparagraph (B) thereof.
       ``(B) Rounding rules.--If any amount after adjustment under 
     subparagraph (A) is not a multiple of $50, such amount shall 
     be rounded to the next lower multiple of $50.
       ``(4) Special rule for married individuals filing 
     separately and living apart.--A husband and wife who--
       ``(A) file separate returns for any taxable year, and
       ``(B) live apart at all times during such taxable year,
     shall not be treated as married individuals for purposes of 
     this paragraph.
       ``(e) Limitation Based on Amount of Tax.--

[[Page 18263]]

       ``(1) In general.--The credit allowed by subsection (a) for 
     the taxable year (determined after the application of 
     subsections (c) and (d)) shall not exceed the sum of--
       ``(A) the tax imposed by this chapter for the taxable year 
     (reduced by the credits allowable against such tax other than 
     the credits allowable under this subpart), and
       ``(B) the taxpayer's social security taxes for such taxable 
     year.
       ``(2) Social security taxes.--For purposes of paragraph 
     (1)--
       ``(A) In general.--The term `social security taxes' means, 
     with respect to any taxpayer for any taxable year--
       ``(i) the amount of the taxes imposed by sections 3101, 
     3111, 3201(a), and 3221(a) on amounts received by the 
     taxpayer during the calendar year in which the taxable year 
     begins,
       ``(ii) the taxes imposed by section 1401 on the self-
     employment income of the taxpayer for the taxable year, and
       ``(iii) the taxes imposed by section 3211(a)(1) on amounts 
     received by the taxpayer during the calendar year in which 
     the taxable year begins.
       ``(B) Coordination with special refund of social security 
     taxes.--The term `social security taxes' shall not include 
     any taxes to the extent the taxpayer is entitled to a special 
     refund of such taxes under section 6413(c).
       ``(C) Special rule.--Any amounts paid pursuant to an 
     agreement under section 3121(l) (relating to agreements 
     entered into by American employers with respect to foreign 
     affiliates) which are equivalent to the taxes referred to in 
     subparagraph (A)(i) shall be treated as taxes referred to in 
     such subparagraph.
       ``(f) Coordination With Other Provisions.--
       ``(1) Deduction for medical expenses.--The amount taken 
     into account in computing the credit under subsection (a) 
     shall not be taken into account in computing the amount 
     allowable to the taxpayer as a deduction under section 
     213(a).
       ``(2) Deduction for health insurance costs of self-employed 
     individuals.--No amount taken into account under section 
     162(l) may be taken into account under this section.
       ``(g) Expenses Must Be Substantiated.--A payment for 
     insurance to which subsection (a) applies may be taken into 
     account under this section only if the taxpayer substantiates 
     such payment in such form as the Secretary may prescribe.
       ``(h) Section Not To Apply to Long-Term Care Insurance.--
     This section shall not apply to insurance which constitutes 
     medical care by reason of section 213(d)(1)(C).''
       (b) Clerical Amendment.--The table of sections for subpart 
     C of part IV of subchapter A of chapter 1 is amended by 
     striking the last item and inserting the following new items:

``Sec. 35. Health insurance costs of employees.
``Sec. 36. Overpayments of tax.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.

     SEC. 203. DEDUCTION FOR PREMIUMS FOR LONG-TERM CARE 
                   INSURANCE.

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

     ``SEC. 222. PREMIUMS FOR LONG-TERM CARE INSURANCE.

       ``(a) In General.--In the case of an individual, there 
     shall be allowed as a deduction an amount equal to the 
     applicable percentage of the amount paid during the taxable 
     year for any qualified long-term care insurance contract (as 
     defined in section 7702B(b)) which constitutes medical care 
     for the taxpayer, his spouse, and dependents.
       ``(b) Applicable Percentage.--For purposes of subsection 
     (a), the applicable percentage shall be determined in 
     accordance with the following table:

``For taxable years beginning                            The applicable
  in calendar year--                                    percentage is--
  2001 and 2002.....................................................10 
  2003 and 2004.....................................................25 
  2005 and 2006.....................................................35 
  2007 and thereafter...............................................50.
       ``(c) Limitation Based on Coverage Under Certain Subsidized 
     Employer Plans.--
       ``(1) In general.--Subsection (a) shall not apply to any 
     taxpayer for any calendar month for which the taxpayer 
     participates in any plan which includes coverage for 
     qualified long-term care services (as so defined) or is a 
     qualified long-term care insurance contract (as so defined) 
     maintained by any employer of the taxpayer or of the spouse 
     of the taxpayer if 50 percent or more of the cost of coverage 
     under such plan (determined under section 4980B) is paid or 
     incurred by the employer.
       ``(2) Employer contributions to cafeteria plans or flexible 
     spending arrangements.--Employer contributions to a cafeteria 
     plan or a flexible spending or similar arrangement which are 
     excluded from gross income under section 106 shall be treated 
     for purposes of paragraph (1) as paid by the employer.
       ``(3) Aggregation of plans of employer.--A plan which is 
     not otherwise described in paragraph (1) shall be treated as 
     described in such paragraph if such plan would be so 
     described if all such plans of persons treated as a single 
     employer under subsections (b), (c), (m), or (o) of section 
     414 were treated as one plan.
       ``(d) Deduction Limited to Qualified Long-Term Care 
     Insurance Contracts.--In the case of a qualified long-term 
     care insurance contract (as so defined), only eligible long-
     term care premiums (as defined in section 213(d)(10)) may be 
     taken into account under subsection (a).
       ``(e) Special Rules.--For purposes of this section--
       ``(1) Coordination with deduction for health insurance 
     costs of self-employed individuals.--The amount taken into 
     account by the taxpayer in computing the deduction under 
     section 162(l) shall not be taken into account under this 
     section.
       ``(2) Coordination with medical expense deduction.--The 
     amount taken into account by the taxpayer in computing the 
     deduction under this section shall not be taken into account 
     under section 213.
       ``(f) Regulations.--The Secretary shall prescribe such 
     regulations as may be appropriate to carry out this section, 
     including regulations requiring employers to report to their 
     employees and the Secretary such information as the Secretary 
     determines to be appropriate.''
       (b) Deduction Allowed Whether or Not Taxpayer Itemizes 
     Other Deductions.--Subsection (a) of section 62 is amended by 
     inserting after paragraph (17) the following new item:
       ``(18) Long-term care insurance costs.--The deduction 
     allowed by section 222.''
       (c) Clerical Amendment.--The table of sections for part VII 
     of subchapter B of chapter 1 is amended by striking the last 
     item and inserting the following new items:

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

     SEC. 204. LONG-TERM CARE TAX CREDIT.

       (a) Allowance of Credit.--
       (1) In general.--Section 24(a) (relating to allowance of 
     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 
     an amount equal to the sum of--
       ``(A) $500 multiplied by the number of qualifying children 
     of the taxpayer, plus
       ``(B) the applicable dollar amount multiplied by the number 
     of applicable individuals with respect to whom the taxpayer 
     is an eligible caregiver for the taxable year.''
       ``(2) Applicable dollar amount.--For purposes of paragraph 
     (1)(B), the applicable dollar amount for taxable years 
     beginning in any calendar year shall be determined in 
     accordance with the following table:

                                                             Applicable
``Calendar year:                                         dollar amount:
  2003, 2004, or 2005.........................................$250 ....

  2006 or 2007................................................$500 ....

  2008 and thereafter.....................................$1,000.''....

       (2) Additional credit for taxpayer with 3 or more separate 
     credit amounts.--So much of section 24(d) as precedes 
     paragraph (1)(A) thereof is amended to read as follows:
       ``(d) Additional Credit for Taxpayers With 3 or More 
     Separate Credit Amounts.--
       ``(1) In general.--If the sum of the number of qualifying 
     children of the taxpayer and the number of applicable 
     individuals with respect to which the taxpayer is an eligible 
     caregiver is 3 or more for any taxable year, the aggregate 
     credits allowed under subpart C shall be increased by the 
     lesser of--''.
       (3) Conforming amendments.--
       (A) The heading for section 32(n) is amended by striking 
     ``Child'' and inserting ``Family Care''.
       (B) The heading for section 24 is amended to read as 
     follows:

     ``SEC. 24. FAMILY CARE CREDIT.''

       (C) The table of sections for subpart A of part IV of 
     subchapter A of chapter 1 is amended by striking the item 
     relating to section 24 and inserting the following new item:

``Sec. 24. Family care credit.''.
       (b) Definitions.--Section 24(c) (defining qualifying child) 
     is amended to read as follows:
       ``(c) Definitions.--For purposes of this section--
       ``(1) Qualifying child.--
       ``(A) In general.--The term `qualifying child' means any 
     individual if--
       ``(i) the taxpayer is allowed a deduction under section 151 
     with respect to such individual for the taxable year,
       ``(ii) such individual has not attained the age of 17 as of 
     the close of the calendar year in which the taxable year of 
     the taxpayer begins, and
       ``(iii) such individual bears a relationship to the 
     taxpayer described in section 32(c)(3)(B).
       ``(B) Exception for certain noncitizens.--The term 
     `qualifying child' shall not include any individual who would 
     not be a dependent if the first sentence of section 152(b)(3) 
     were applied without regard to all that follows `resident of 
     the United States'.
       ``(2) Applicable individual.--

[[Page 18264]]

       ``(A) In general.--The term `applicable individual' means, 
     with respect to any taxable year, any individual who has been 
     certified, before the due date for filing the return of tax 
     for the taxable year (without extensions), by a physician (as 
     defined in section 1861(r)(1) of the Social Security Act) as 
     being an individual with long-term care needs described in 
     subparagraph (B) for a period--
       ``(i) which is at least 180 consecutive days, and
       ``(ii) a portion of which occurs within the taxable year.
     Such term shall not include any individual otherwise meeting 
     the requirements of the preceding sentence unless within the 
     39\1/2\-month period ending on such due date (or such other 
     period as the Secretary prescribes) a physician (as so 
     defined) has certified that such individual meets such 
     requirements.
       ``(B) Individuals with long-term care needs.--An individual 
     is described in this subparagraph if the individual meets any 
     of the following requirements:
       ``(i) The individual is at least 6 years of age and--

       ``(I) is unable to perform (without substantial assistance 
     from another individual) at least 3 activities of daily 
     living (as defined in section 7702B(c)(2)(B)) due to a loss 
     of functional capacity, or
       ``(II) requires substantial supervision to protect such 
     individual from threats to health and safety due to severe 
     cognitive impairment and is unable to perform at least 1 
     activity of daily living (as so defined) or to the extent 
     provided in regulations prescribed by the Secretary (in 
     consultation with the Secretary of Health and Human 
     Services), is unable to engage in age appropriate activities.

       ``(ii) The individual is at least 2 but not 6 years of age 
     and is unable due to a loss of functional capacity to perform 
     (without substantial assistance from another individual) at 
     least 2 of the following activities: eating, transferring, or 
     mobility.
       ``(iii) The individual is under 2 years of age and requires 
     specific durable medical equipment by reason of a severe 
     health condition or requires a skilled practitioner trained 
     to address the individual's condition to be available if the 
     individual's parents or guardians are absent.
       ``(3) Eligible caregiver.--
       ``(A) In general.--A taxpayer shall be treated as an 
     eligible caregiver for any taxable year with respect to the 
     following individuals:
       ``(i) The taxpayer.
       ``(ii) The taxpayer's spouse.
       ``(iii) An individual with respect to whom the taxpayer is 
     allowed a deduction under section 151 for the taxable year.
       ``(iv) An individual who would be described in clause (iii) 
     for the taxable year if section 151(c)(1)(A) were applied by 
     substituting for the exemption amount an amount equal to the 
     sum of the exemption amount, the standard deduction under 
     section 63(c)(2)(C), and any additional standard deduction 
     under section 63(c)(3) which would be applicable to the 
     individual if clause (iii) applied.
       ``(v) An individual who would be described in clause (iii) 
     for the taxable year if--

       ``(I) the requirements of clause (iv) are met with respect 
     to the individual, and
       ``(II) the requirements of subparagraph (B) are met with 
     respect to the individual in lieu of the support test of 
     section 152(a).

       ``(B) Residency test.--The requirements of this 
     subparagraph are met if an individual has as his principal 
     place of abode the home of the taxpayer and--
       ``(i) in the case of an individual who is an ancestor or 
     descendant of the taxpayer or the taxpayer's spouse, is a 
     member of the taxpayer's household for over half the taxable 
     year, or
       ``(ii) in the case of any other individual, is a member of 
     the taxpayer's household for the entire taxable year.
       ``(C) Special rules where more than 1 eligible caregiver.--
       ``(i) In general.--If more than 1 individual is an eligible 
     caregiver with respect to the same applicable individual for 
     taxable years ending with or within the same calendar year, a 
     taxpayer shall be treated as the eligible caregiver if each 
     such individual (other than the taxpayer) files a written 
     declaration (in such form and manner as the Secretary may 
     prescribe) that such individual will not claim such 
     applicable individual for the credit under this section.
       ``(ii) No agreement.--If each individual required under 
     clause (i) to file a written declaration under clause (i) 
     does not do so, the individual with the highest modified 
     adjusted gross income (as defined in section 32(c)(5)) shall 
     be treated as the eligible caregiver.
       ``(iii) Married individuals filing separately.--In the case 
     of married individuals filing separately, the determination 
     under this subparagraph as to whether the husband or wife is 
     the eligible caregiver shall be made under the rules of 
     clause (ii) (whether or not one of them has filed a written 
     declaration under clause (i)).''
       (c) Identification Requirements.--
       (1) In general.--Section 24(e) is amended by adding at the 
     end the following new sentence: ``No credit shall be allowed 
     under this section to a taxpayer with respect to any 
     applicable individual unless the taxpayer includes the name 
     and taxpayer identification number of such individual, and 
     the identification number of the physician certifying such 
     individual, on the return of tax for the taxable year.''
       (2) Assessment.--Section 6213(g)(2)(I) is amended--
       (A) by inserting ``or physician identification'' after 
     ``correct TIN'', and
       (B) by striking ``child'' and inserting ``family care''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.

     SEC. 205. CREDIT FOR CLINICAL TESTING RESEARCH EXPENSES 
                   ATTRIBUTABLE TO CERTAIN QUALIFIED ACADEMIC 
                   INSTITUTIONS INCLUDING TEACHING HOSPITALS.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits) is amended 
     by inserting after section 41 the following:

     ``SEC. 41A. CREDIT FOR MEDICAL INNOVATION EXPENSES.

       ``(a) General Rule.--For purposes of section 38, the 
     medical innovation credit determined under this section for 
     the taxable year shall be an amount equal to 40 percent of 
     the excess (if any) of--
       ``(1) the qualified medical innovation expenses for the 
     taxable year, over
       ``(2) the medical innovation base period amount.
       ``(b) Qualified Medical Innovation Expenses.--For purposes 
     of this section--
       ``(1) In general.--The term `qualified medical innovation 
     expenses' means the amounts which are paid or incurred by the 
     taxpayer during the taxable year directly or indirectly to 
     any qualified academic institution for clinical testing 
     research activities.
       ``(2) Clinical testing research activities.--
       ``(A) In general.--The term `clinical testing research 
     activities' means human clinical testing conducted at any 
     qualified academic institution in the development of any 
     product, which occurs before--
       ``(i) the date on which an application with respect to such 
     product is approved under section 505(b), 506, or 507 of the 
     Federal Food, Drug, and Cosmetic Act,
       ``(ii) the date on which a license for such product is 
     issued under section 351 of the Public Health Service Act, or
       ``(iii) the date classification or approval of such product 
     which is a device intended for human use is given under 
     section 513, 514, or 515 of the Federal Food, Drug, and 
     Cosmetic Act.
       ``(B) Product.--The term `product' means any drug, 
     biologic, or medical device.
       ``(3) Qualified academic institution.--The term `qualified 
     academic institution' means any of the following 
     institutions:
       ``(A) Educational institution.--A qualified organization 
     described in section 170(b)(1)(A)(iii) which is owned or 
     affiliated with an institution of higher education as 
     described in section 3304(f).
       ``(B) Teaching hospital.--A teaching hospital which--
       ``(i) is publicly supported or owned by an organization 
     described in section 501(c)(3), and
       ``(ii) is affiliated with an organization meeting the 
     requirements of subparagraph (A).
       ``(C) Foundation.--A medical research organization 
     described in section 501(c)(3) (other than a private 
     foundation) which is affiliated with, or owned by--
       ``(i) an organization meeting the requirements of 
     subparagraph (A), or
       ``(ii) a teaching hospital meeting the requirements of 
     subparagraph (B).
       ``(D) Charitable research hospital.--A hospital that is 
     designated as a cancer center by the National Cancer 
     Institute.
       ``(4) Exclusion for amounts funded by grants, etc.--The 
     term `qualified medical innovation 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).
       ``(c) Medical Innovation Base Period Amount.--For purposes 
     of this section, the term `medical innovation base period 
     amount' means the average annual qualified medical innovation 
     expenses paid by the taxpayer during the 3-taxable year 
     period ending with the taxable year immediately preceding the 
     first taxable year of the taxpayer beginning after December 
     31, 2000.
       ``(d) Special Rules.--
       ``(1) Limitation on foreign testing.--No credit shall be 
     allowed under this section with respect to any clinical 
     testing research activities conducted outside the United 
     States.
       ``(2) Certain rules made applicable.--Rules similar to the 
     rules of subsections (f) and (g) of section 41 shall apply 
     for purposes of this section.
       ``(3) Election.--This section shall apply to any taxpayer 
     for any taxable year only if such taxpayer elects to have 
     this section apply for such taxable year.
       ``(4) Coordination with credit for increasing research 
     expenditures and with credit for clinical testing expenses 
     for certain drugs for rare diseases.--Any qualified medical 
     innovation expense for a taxable year to which an election 
     under this section applies shall not be taken into account 
     for purposes of determining the credit

[[Page 18265]]

     allowable under section 41 or 45C for such taxable year.
       ``(e) Termination.--This section shall not apply to any 
     expense paid or incurred after the date specified in section 
     41(h)(1)(B).''
       (b) Credit To Be Part of General Business Credit.--
       (1) In general.--Section 38(b) (relating to current year 
     business credits) is amended by striking ``plus'' at the end 
     of paragraph (11), by striking the period at the end of 
     paragraph (12) and inserting ``, plus'', and by adding at the 
     end the following:
       ``(13) the medical innovation expenses credit determined 
     under section 41A(a).''
       (2) Transition rule.--Section 39(d) is amended by adding at 
     the end the following new paragraph:
       ``(9) No carryback of section 41a credit before 
     enactment.--No portion of the unused business credit for any 
     taxable year which is attributable to the medical innovation 
     credit determined under section 41A may be carried back to a 
     taxable year beginning before January 1, 1999.''
       (c) Denial of Double Benefit.--Section 280C is amended by 
     adding at the end the following new subsection:
       ``(d) Credit for Increasing Medical Innovation Expenses.--
       ``(1) In general.--No deduction shall be allowed for that 
     portion of the qualified medical innovation expenses (as 
     defined in section 41A(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 41A(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 
     redesignating paragraphs (5) through (8) as paragraphs (6) 
     through (9), respectively, and by inserting after paragraph 
     (4) the following new paragraph:
       ``(5) the medical innovation expenses credit determined 
     under section 41A(a) (other than such credit determined under 
     the rules of section 280C(d)(2)),''.
       (e) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1 is amended by 
     adding after the item relating to section 41 the following:

``Sec. 41A. Credit for medical innovation expenses.''
       (f) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 206. 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) 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 
     indebtedness, a support organization (as defined in section 
     509(a)(3)) which supports a hospital described in section 
     170(b)(1)(A)(iii) 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,

       ``(ii) the fair market value of the organization's 
     unimproved 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 indebtedness was incurred, and
       ``(iii) no member of the organization's governing body was 
     a disqualified person (as defined in section 4946 but not 
     including any foundation manager) at any time during the 
     taxable year in which the indebtedness was incurred.

     In the case of any refinancing not in excess of the 
     indebtedness being refinanced, the determinations under 
     clauses (ii) and (iii) shall be made by reference to the 
     earliest date indebtedness meeting the requirements of this 
     subparagraph (and involved in the chain of indebtedness being 
     refinanced) was incurred.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to indebtedness incurred in taxable years 
     beginning after December 31, 2000.

     SECTION 207. TECHNICAL AMENDMENTS RELATED TO VACCINE INJURY 
                   COMPENSATION TRUST FUND.

       (a) Repeal of Mutually Conflicting Amendments.--
       (1) In general.--Section 1504 of Division C of the Omnibus 
     Consolidated and Emergency Supplemental Appropriations Act, 
     1999 (relating to Vaccine Injury Compensation Trust Fund) is 
     repealed.
       (2) Effect of repeal.--The Internal Revenue Code of 1986 
     shall be applied and administered as if the section repealed 
     by paragraph (1) had never been enacted.
       (b) Conforming Amendments.--Section 9510(c)(1) (relating to 
     expenditures from Trust Fund) is amended--
       (1) by striking ``August 5, 1997'' in subparagraph (A) and 
     inserting ``October 21, 1998'', and
       (2) by striking ``$9,500,000'' in subparagraph (B) and 
     inserting ``$10,000,000''.
       (c) Effective Date.--The amendments made by subsection (b) 
     shall take effect as if included in the Omnibus Consolidated 
     and Emergency Supplemental Appropriations Act, 1999.

                    TITLE III--ESTATE TAX PROVISIONS

     SEC. 301. INCREASE IN UNIFIED ESTATE AND GIFT TAX CREDIT.

       (a) In General.--The table in section 2010(c) of the 
     Internal Revenue Code (relating to applicable credit amount) 
     is amended to read as follows:

                                            ``In the case of estates of
                                                         The applicable
                                                 dying,exclusion amount
                                                                duriis:
      2000 and 2001...........................................$675,000 
      2002....................................................$700,000 
      2003....................................................$740,000 
      2004 and thereafter.................................$1,000,000.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to the estates of decedents dying, and gifts 
     made, after December 31, 1999.

     SEC. 302. INCREASE IN ESTATE TAX DEDUCTION FOR FAMILY-OWNED 
                   BUSINESS INTEREST.

       (a) In General.--Section 2057(a)(2) (relating to maximum 
     deduction) is amended by striking ``$675,000'' and inserting 
     ``$1,125,000''.
       (b) Conforming Amendments.--Section 2057(a)(3)(B) (relating 
     to coordination with unified credit) is amended by striking 
     ``$675,000'' each place it appears in the text and heading 
     and inserting ``$1,125,000''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to estates of decedents dying after December 31, 
     2002.

               TITLE IV--ALTERNATIVE MINIMUM TAX REFORMS

     SEC. 401. ALLOWANCE OF NONREFUNDABLE PERSONAL CREDITS FULLY 
                   AGAINST REGULAR TAX LIABILITY.

       The second sentence of section 26(a) (relating to 
     limitations based on amount of tax) is amended by striking 
     ``1998'' and inserting ``calendar years 1998 through 2003''.

     SEC. 402. REPEAL OF FOREIGN TAX CREDIT LIMITATION UNDER 
                   ALTERNATIVE MINIMUM TAX.

       (a) In General.--Section 59(a) (relating to alternative 
     minimum tax foreign tax credit) is amended by striking 
     paragraph (2) and by redesignating paragraphs (3) and (4) as 
     paragraphs (2) and (3), respectively.
       (b) Conforming Amendment.--Section 53(d)(1)(B)(i)(II) is 
     amended by striking ``and if section 59(a)(2) did not 
     apply''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 403. INCOME AVERAGING FOR FARMERS NOT TO INCREASE 
                   ALTERNATIVE MINIMUM TAX LIABILITY.

       (a) In General.--Section 55(c) of the Internal Revenue Code 
     of 1986 (defining regular tax) is amended by redesignating 
     paragraph (2) as paragraph (3) and by inserting after 
     paragraph (1) the following:
       ``(2) Coordination with income averaging for farmers.--
     Solely for purposes of this section, section 1301 (relating 
     to averaging of farm income) shall not apply in computing the 
     regular tax.''
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 404. LONG-TERM UNUSED CREDITS ALLOWED AGAINST MINIMUM 
                   TAX.

       (a) In General.--Subsection (c) of section 53 (relating to 
     limitation) is amended by adding at the end the following:
       ``(2) Special rule for corporations with long-term unused 
     credits.--
       ``(A) In general.--If--
       ``(i) a corporation to which section 56(g) applies has a 
     long-term unused minimum tax credit for a taxable year, and
       ``(ii) no credit would be allowable under this section for 
     the taxable year by reason of paragraph (1),
     then there shall be allowed a credit under subsection (a) for 
     the taxable year in the amount determined under subparagraph 
     (B).
       ``(B) Amount of credit.--For purposes of subparagraph (A), 
     the amount of the credit shall be equal to the least of the 
     following for the taxable year:
       ``(i) The long-term unused minimum tax credit.
       ``(ii) 20 percent of the taxpayer's tentative minimum tax.
       ``(iii) The excess (if any) of the amount under paragraph 
     (1)(B) over the amount under paragraph (1)(A).
       ``(C) Long-term unused minimum tax credit.--For purposes of 
     this paragraph--
       ``(i) In general.--The long-term unused minimum tax credit 
     for any taxable year is the portion of the minimum tax credit 
     determined under subsection (b) attributable to the adjusted 
     net minimum tax for taxable years beginning after 1986 and 
     before 2000 and which ended before the 5th taxable year 
     immediately preceding the taxable year for which the 
     determination is being made.

[[Page 18266]]

       ``(ii) First-in, first-out ordering rule.--For purposes of 
     clause (i), credits shall be treated as allowed under 
     subsection (a) on a first-in, first-out basis.''
       (b) Conforming Amendments.--Section 53(c) (as in effect 
     before the amendment made by subsection (a)) is amended--
       (1) by striking ``The'' and inserting the following:
       ``(1) In general.--The''; and
       (2) by redesignating paragraphs (1) and (2) as 
     subparagraphs (A) and (B), respectively.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

               TITLE V--EXTENSION OF EXPIRING INCENTIVES

     SEC. 501. WORK OPPORTUNITY CREDIT AND WELFARE-TO-WORK CREDIT.

       (a) Temporary Extension.--Sections 51(c)(4)(B) and 51A(f) 
     (relating to termination) are each amended by striking ``June 
     30, 1999'' and inserting ``June 30, 2001''.
       (b) Clarification of First Year of Employment.--Paragraph 
     (2) of section 51(i) is amended by striking ``during which he 
     was not a member of a targeted group''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to individuals who begin work for the employer 
     after June 30, 1999.

     SEC. 502. ELECTRICITY PRODUCED FROM CERTAIN NONRENEWABLE 
                   RESOURCES CREDIT.

       (a) Temporary Extension.--Section 45(c)(3) (relating to 
     qualified facility) is amended by striking ``1999'' and 
     inserting ``2001''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to facilities placed in service after June 30, 
     1999.

     SEC. 503. SUBPART F EXEMPTION FOR ACTIVE FINANCING INCOME.

       (a) In General.--Sections 953(e)(10) and 954(h)(9) are each 
     amended--
       (1) by striking ``the first taxable year'' and inserting 
     ``taxable years'', and
       (2) by striking ``January 1, 2000'' and inserting ``January 
     1, 2002''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.

     SEC. 504. EXTENSION OF EXPENSING OF ENVIRONMENTAL REMEDIATION 
                   COSTS.

       Section 198(h) (relating to termination) is amended by 
     striking ``December 31, 2000'' and inserting ``June 30, 
     2001''.

     SEC. 505. VIRGIN ISLANDS AND PUERTO RICO RUM COVER OVER.

       (a) In General.--Section 7652(f)(1) (relating to limitation 
     on cover over of tax on distilled spirits) is amended to read 
     as follows:
       ``(1) $10.50 ($13.50 in the case of distilled spirits 
     brought into the United States after June 30, 1999, and 
     before July 1, 2001), or''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on July 1, 1999.

     SEC. 506. MODIFICATIONS OF PUERTO RICAN ECONOMIC ACTIVITY 
                   CREDIT.

       (a) Taxpayers Other Than Existing Claimants Eligible for 
     Credit.--Section 30A(a)(2) (defining qualified domestic 
     corporation) is amended to read as follows:
       ``(2) Qualified domestic corporation.--For purposes of 
     paragraph (1), the term `qualified domestic corporation' 
     means a domestic corporation with respect to which section 
     936(a)(4)(B) does not apply for the taxable year.''
       (b) Repeal of Base Period Cap.--Section 30A(a)(1) is 
     amended by striking the last sentence.
       (c) Conforming Amendments.--
       (1) Section 30A(a)(3) is amended to read as follows:
       ``(3) Separate application.--For purposes of determining 
     the amount of the credit allowed under this section, this 
     section (and so much of section 936 as relates to this 
     section) shall be applied separately with respect to Puerto 
     Rico.''
       (2) Section 30A(e)(1) is amended by inserting ``but not 
     including subsection (j) thereof'' after ``thereunder''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1999, and before January 1, 2003.

                TITLE VI--QUALITY EDUCATION INITIATIVES

     SEC. 601. EXPANSION OF INCENTIVES FOR PUBLIC SCHOOLS.

       (a) In General.--Chapter 1 is amended by adding at the end 
     the following new subchapter:

         ``Subchapter X--Public School Modernization Provisions

``Part I. Credit to holders of qualified public school modernization 
              bonds.
``Part II. Qualified school construction bonds.
``Part III. Incentives for education zones.

 ``PART I--CREDIT TO HOLDERS OF QUALIFIED PUBLIC SCHOOL MODERNIZATION 
                                 BONDS

``Sec. 1400F. Credit to holders of qualified public school 
              modernization bonds.

     ``SEC. 1400F. CREDIT TO HOLDERS OF QUALIFIED PUBLIC SCHOOL 
                   MODERNIZATION BONDS.

       ``(a) Allowance of Credit.--In the case of a taxpayer who 
     holds a qualified public school modernization bond on a 
     credit allowance date of such bond which occurs during the 
     taxable year, there shall be allowed as a credit against the 
     tax imposed by this chapter for such taxable year an amount 
     equal to the sum of the credits determined under subsection 
     (b) with respect to credit allowance dates during such year 
     on which the taxpayer holds such bond.
       ``(b) Amount of Credit.--
       ``(1) In general.--The amount of the credit determined 
     under this subsection with respect to any credit allowance 
     date for a qualified public school modernization bond is 25 
     percent of the annual credit determined with respect to such 
     bond.
       ``(2) Annual credit.--The annual credit determined with 
     respect to any qualified public school modernization bond is 
     the product of--
       ``(A) the applicable credit rate, multiplied by
       ``(B) the outstanding face amount of the bond.
       ``(3) Applicable credit rate.--For purposes of paragraph 
     (1), the applicable credit rate with respect to an issue is 
     the rate equal to an average market yield (as of the day 
     before the date of issuance of the issue) on outstanding 
     long-term corporate debt obligations (determined under 
     regulations prescribed by the Secretary).
       ``(4) Special rule for issuance and redemption.--In the 
     case of a bond which is issued during the 3-month period 
     ending on a credit allowance date, the amount of the credit 
     determined under this subsection with respect to such credit 
     allowance date shall be a ratable portion of the credit 
     otherwise determined based on the portion of the 3-month 
     period during which the bond is outstanding. A similar rule 
     shall apply when the bond is redeemed.
       ``(c) Limitation Based on Amount of Tax.--
       ``(1) In general.--The credit allowed under subsection (a) 
     for any taxable year shall not exceed the excess of--
       ``(A) the sum of the regular tax liability (as defined in 
     section 26(b)) plus the tax imposed by section 55, over
       ``(B) the sum of the credits allowable under part IV of 
     subchapter A (other than subpart C thereof, relating to 
     refundable credits).
       ``(2) Carryover of unused credit.--If the credit allowable 
     under subsection (a) exceeds the limitation imposed by 
     paragraph (1) for such taxable year, such excess shall be 
     carried to the succeeding taxable year and added to the 
     credit allowable under subsection (a) for such taxable year.
       ``(d) Qualified Public School Modernization Bond; Credit 
     Allowance Date.--For purposes of this section--
       ``(1) Qualified public school modernization bond.--The term 
     `qualified public school modernization bond' means--
       ``(A) a qualified school construction bond, and
       ``(B) a qualified zone academy bond.
       ``(2) Credit allowance date.--The term `credit allowance 
     date' means--
       ``(A) March 15,
       ``(B) June 15,
       ``(C) September 15, and
       ``(D) December 15.
     Such term includes the last day on which the bond is 
     outstanding.
       ``(e) Other Definitions.--For purposes of this subchapter--
       ``(1) Local educational agency.--The term `local 
     educational agency' has the meaning given to such term by 
     section 14101 of the Elementary and Secondary Education Act 
     of 1965. Such term includes the local educational agency that 
     serves the District of Columbia but does not include any 
     other State agency.
       ``(2) Bond.--The term `bond' includes any obligation.
       ``(3) State.--The term `State' includes the District of 
     Columbia and any possession of the United States.
       ``(4) Public school facility.--The term `public school 
     facility' shall not include any facility which is not owned 
     by a State or local government or any agency or 
     instrumentality of a State or local government.
       ``(f) Credit Included in Gross Income.--Gross income 
     includes the amount of the credit allowed to the taxpayer 
     under this section (determined without regard to subsection 
     (c)) and the amount so included shall be treated as interest 
     income.
       ``(g) Bonds Held by Regulated Investment Companies.--If any 
     qualified public school modernization bond is held by a 
     regulated investment company, the credit determined under 
     subsection (a) shall be allowed to shareholders of such 
     company under procedures prescribed by the Secretary.
       ``(h) Credits May Be Stripped.--Under regulations 
     prescribed by the Secretary--
       ``(1) In general.--There may be a separation (including at 
     issuance) of the ownership of a qualified public school 
     modernization bond and the entitlement to the credit under 
     this section with respect to such bond. In case of any such 
     separation, the credit under this section shall be allowed to 
     the person who on the credit allowance date holds the 
     instrument evidencing the entitlement to the credit and not 
     to the holder of the bond.
       ``(2) Certain rules to apply.--In the case of a separation 
     described in paragraph (1),

[[Page 18267]]

     the rules of section 1286 shall apply to the qualified public 
     school modernization bond as if it were a stripped bond and 
     to the credit under this section as if it were a stripped 
     coupon.
       ``(i) Treatment for Estimated Tax Purposes.--Solely for 
     purposes of sections 6654 and 6655, the credit allowed by 
     this section to a taxpayer by reason of holding a qualified 
     public school modernization bonds on a credit allowance date 
     shall be treated as if it were a payment of estimated tax 
     made by the taxpayer on such date.
       ``(j) Credit May Be Transferred.--Nothing in any law or 
     rule of law shall be construed to limit the transferability 
     of the credit allowed by this section through sale and 
     repurchase agreements.
       ``(k) Reporting.--Issuers of qualified public school 
     modernization bonds shall submit reports similar to the 
     reports required under section 149(e).

             ``PART II--QUALIFIED SCHOOL CONSTRUCTION BONDS

``Sec. 1400G. Qualified school construction bonds.

     ``SEC. 1400G. QUALIFIED SCHOOL CONSTRUCTION BONDS.

       ``(a) Qualified School Construction Bond.--For purposes of 
     this subchapter, the term `qualified school construction 
     bond' means any bond issued as part of an issue if--
       ``(1) 95 percent or more of the proceeds of such issue are 
     to be used for the construction, rehabilitation, or repair of 
     a public school facility or for the acquisition of land on 
     which such a facility is to be constructed with part of the 
     proceeds of such issue,
       ``(2) the bond is issued by a State or local government 
     within the jurisdiction of which such school is located,
       ``(3) the issuer designates such bond for purposes of this 
     section, and
       ``(4) the term of each bond which is part of such issue 
     does not exceed 15 years.
       ``(b) Limitation on Amount of Bonds Designated.--The 
     maximum aggregate face amount of bonds issued during any 
     calendar year which may be designated under subsection (a) by 
     any issuer shall not exceed the sum of--
       ``(1) the limitation amount allocated under subsection (d) 
     for such calendar year to such issuer, and
       ``(2) if such issuer is a large local educational agency 
     (as defined in subsection (e)(4)) or is issuing on behalf of 
     such an agency, the limitation amount allocated under 
     subsection (e) for such calendar year to such agency.
       ``(c) National Limitation on Amount of Bonds Designated.--
     There is a national qualified school construction bond 
     limitation for each calendar year. Such limitation is--
       ``(1) $11,800,000,000 for 2001,
       ``(2) $11,800,000,000 for 2005, and
       ``(3) except as provided in subsection (f), zero after 2001 
     and before 2005, and after 2005.
       ``(d) Sixty-Five Percent of Limitation Allocated Among 
     States.--
       ``(1) In general.--Sixty-five percent of the limitation 
     applicable under subsection (c) for any calendar year shall 
     be allocated among the States under paragraph (2) by the 
     Secretary. The limitation amount allocated to a State under 
     the preceding sentence shall be allocated by the State to 
     issuers within such State and such allocations may be made 
     only if there is an approved State application.
       ``(2) Allocation formula.--The amount to be allocated under 
     paragraph (1) for any calendar year shall be allocated among 
     the States in proportion to the respective amounts each such 
     State received for Basic Grants under subpart 2 of part A of 
     title I of the Elementary and Secondary Education Act of 1965 
     (20 U.S.C. 6331 et seq.) for the most recent fiscal year 
     ending before such calendar year. For purposes of the 
     preceding sentence, Basic Grants attributable to large local 
     educational agencies (as defined in subsection (e)) shall be 
     disregarded.
       ``(3) Minimum allocations to states.--
       ``(A) In general.--The Secretary shall adjust the 
     allocations under this subsection for any calendar year for 
     each State to the extent necessary to ensure that the sum 
     of--
       ``(i) the amount allocated to such State under this 
     subsection for such year, and
       ``(ii) the aggregate amounts allocated under subsection (e) 
     to large local educational agencies in such State for such 
     year,

     is not less than an amount equal to such State's minimum 
     percentage of the amount to be allocated under paragraph (1) 
     for the calendar year.
       ``(B) Minimum percentage.--A State's minimum percentage for 
     any calendar year is the minimum percentage described in 
     section 1124(d) of the Elementary and Secondary Education Act 
     of 1965 (20 U.S.C. 6334(d)) for such State for the most 
     recent fiscal year ending before such calendar year.
       ``(4) Allocations to certain possessions.--The amount to be 
     allocated under paragraph (1) to any possession of the United 
     States other than Puerto Rico shall be the amount which would 
     have been allocated if all allocations under paragraph (1) 
     were made on the basis of respective populations of 
     individuals below the poverty line (as defined by the Office 
     of Management and Budget). In making other allocations, the 
     amount to be allocated under paragraph (1) shall be reduced 
     by the aggregate amount allocated under this paragraph to 
     possessions of the United States.
       ``(5) Allocations for indian schools.--In addition to the 
     amounts otherwise allocated under this subsection, 
     $200,000,000 for calendar year 2001, and $200,000,000 for 
     calendar year 2005, shall be allocated by the Secretary of 
     the Interior for purposes of the construction, 
     rehabilitation, and repair of schools funded by the Bureau of 
     Indian Affairs. In the case of amounts allocated under the 
     preceding sentence, Indian tribal governments (as defined in 
     section 7871) shall be treated as qualified issuers for 
     purposes of this subchapter.
       ``(6) Approved state application.--For purposes of 
     paragraph (1), the term `approved State application' means an 
     application which is approved by the Secretary of Education 
     and which includes--
       ``(A) the results of a recent publicly-available survey 
     (undertaken by the State with the involvement of local 
     education officials, members of the public, and experts in 
     school construction and management) of such State's needs for 
     public school facilities, including descriptions of--
       ``(i) health and safety problems at such facilities,
       ``(ii) the capacity of public schools in the State to house 
     projected enrollments, and
       ``(iii) the extent to which the public schools in the State 
     offer the physical infrastructure needed to provide a high-
     quality education to all students, and
       ``(B) a description of how the State will allocate to local 
     educational agencies, or otherwise use, its allocation under 
     this subsection to address the needs identified under 
     subparagraph (A), including a description of how it will--
       ``(i) give highest priority to localities with the greatest 
     needs, as demonstrated by inadequate school facilities 
     coupled with a low level of resources to meet those needs,
       ``(ii) use its allocation under this subsection to assist 
     localities that lack the fiscal capacity to issue bonds on 
     their own, and
       ``(iii) ensure that its allocation under this subsection is 
     used only to supplement, and not supplant, the amount of 
     school construction, rehabilitation, and repair in the State 
     that would have occurred in the absence of such allocation.

     Any allocation under paragraph (1) by a State shall be 
     binding if such State reasonably determined that the 
     allocation was in accordance with the plan approved under 
     this paragraph.
       ``(e) Thirty-Five Percent of Limitation Allocated Among 
     Largest School Districts.--
       ``(1) In general.--Thirty-five percent of the limitation 
     applicable under subsection (c) for any calendar year shall 
     be allocated under paragraph (2) by the Secretary among local 
     educational agencies which are large local educational 
     agencies for such year. No qualified school construction bond 
     may be issued by reason of an allocation to a large local 
     educational agency under the preceding sentence unless such 
     agency has an approved local application.
       ``(2) Allocation formula.--The amount to be allocated under 
     paragraph (1) for any calendar year shall be allocated among 
     large local educational agencies in proportion to the 
     respective amounts each such agency received for Basic Grants 
     under subpart 2 of part A of title I of the Elementary and 
     Secondary Education Act of 1965 (20 U.S.C. 6331 et seq.) for 
     the most recent fiscal year ending before such calendar year.
       ``(3) Allocation of unused limitation to state.--The amount 
     allocated under this subsection to a large local educational 
     agency for any calendar year may be reallocated by such 
     agency to the State in which such agency is located for such 
     calendar year. Any amount reallocated to a State under the 
     preceding sentence may be allocated as provided in subsection 
     (d)(1).
       ``(4) Large local educational agency.--For purposes of this 
     section, the term `large local educational agency' means, 
     with respect to a calendar year, any local educational agency 
     if such agency is--
       ``(A) among the 100 local educational agencies with the 
     largest numbers of children aged 5 through 17 from families 
     living below the poverty level, as determined by the 
     Secretary using the most recent data available from the 
     Department of Commerce that are satisfactory to the 
     Secretary, or
       ``(B) 1 of not more than 25 local educational agencies 
     (other than those described in subparagraph (A)) that the 
     Secretary of Education determines (based on the most recent 
     data available satisfactory to the Secretary) are in 
     particular need of assistance, based on a low level of 
     resources for school construction, a high level of enrollment 
     growth, or such other factors as the Secretary deems 
     appropriate.
       ``(5) Approved local application.--For purposes of 
     paragraph (1), the term `approved local application' means an 
     application which is approved by the Secretary of Education 
     and which includes--
       ``(A) the results of a recent publicly-available survey 
     (undertaken by the local educational agency or the State with 
     the involvement of school officials, members of the

[[Page 18268]]

     public, and experts in school construction and management) of 
     such agency's needs for public school facilities, including 
     descriptions of--
       ``(i) the overall condition of the local educational 
     agency's school facilities, including health and safety 
     problems,
       ``(ii) the overcrowded conditions of the agency's schools 
     and the capacity of such schools to house projected 
     enrollments, and
       ``(iii) the extent to which the agency's schools offer the 
     physical infrastructure needed to provide a high-quality 
     education to all students,
       ``(B) a description of how the local educational agency 
     will use its allocation under this subsection to address the 
     needs identified under subparagraph (A), including a 
     description of how the agency will--
       ``(i) give high priority to localities with the greatest 
     needs, as demonstrated by inadequate school facilities 
     coupled with a low level of resources to meet those needs,
       ``(ii) use its allocation under this subsection to assist 
     localities that lack the fiscal capacity to issue bonds on 
     their own,
       ``(iii) ensure that its allocation under this subsection is 
     used only to supplement, and not supplant, the amount of 
     school construction, rehabilitation, and repair in the State 
     that would have occurred in the absence of such allocation, 
     and
       ``(iv) ensure that the needs of both rural and urban areas 
     are recognized, and
       ``(C) a description of how the local educational agency 
     will ensure that its allocation under this subsection is used 
     only to supplement, and not supplant, the amount of school 
     construction, rehabilitation, or repair in the locality that 
     would have occurred in the absence of such allocation.

     A rule similar to the rule of the last sentence of subsection 
     (d)(6) shall apply for purposes of this paragraph.
       ``(f) Carryover of Unused Limitation.--If for any calendar 
     year--
       ``(1) the amount allocated under subsection (d) to any 
     State, exceeds
       ``(2) the amount of bonds issued during such year which are 
     designated under subsection (a) pursuant to such allocation,

     the limitation amount under such subsection for such State 
     for the following calendar year shall be increased by the 
     amount of such excess. A similar rule shall apply to the 
     amounts allocated under subsection (d)(5) or (e).
       ``(g) Special Rules Relating to Arbitrage.--
       ``(1) In general.--A bond shall not be treated as failing 
     to meet the requirement of subsection (a)(1) solely by reason 
     of the fact that the proceeds of the issue of which such bond 
     is a part are invested for a temporary period (but not more 
     than 36 months) until such proceeds are needed for the 
     purpose for which such issue was issued.
       ``(2) Binding commitment requirement.--Paragraph (1) shall 
     apply to an issue only if, as of the date of issuance, there 
     is a reasonable expectation that--
       ``(A) at least 10 percent of the proceeds of the issue will 
     be spent within the 6-month period beginning on such date for 
     the purpose for which such issue was issued, and
       ``(B) the remaining proceeds of the issue will be spent 
     with due diligence for such purpose.
       ``(3) Earnings on proceeds.--Any earnings on proceeds 
     during the temporary period shall be treated as proceeds of 
     the issue for purposes of applying subsection (a)(1) and 
     paragraph (1) of this subsection.

               ``PART III--INCENTIVES FOR EDUCATION ZONES

``Sec. 1400H. Qualified zone academy bonds.

     ``SEC. 1400H. QUALIFIED ZONE ACADEMY BONDS.

       ``(a) Qualified Zone Academy Bond.--For purposes of this 
     subchapter--
       ``(1) In general.--The term `qualified zone academy bond' 
     means any bond issued as part of an issue if--
       ``(A) 95 percent or more of the proceeds of such issue are 
     to be used for a qualified purpose with respect to a 
     qualified zone academy established by a local educational 
     agency,
       ``(B) the bond is issued by a State or local government 
     within the jurisdiction of which such academy is located,
       ``(C) the issuer--
       ``(i) designates such bond for purposes of this section,
       ``(ii) certifies that it has written assurances that the 
     private business contribution requirement of paragraph (2) 
     will be met with respect to such academy, and
       ``(iii) certifies that it has the written approval of the 
     local educational agency for such bond issuance, and
       ``(D) the term of each bond which is part of such issue 
     does not exceed 15 years.
     Rules similar to the rules of section 1400G(g) shall apply 
     for purposes of paragraph (1).
       ``(2) Private business contribution requirement.--
       ``(A) In general.--For purposes of paragraph (1), the 
     private business contribution requirement of this paragraph 
     is met with respect to any issue if the local educational 
     agency that established the qualified zone academy has 
     written commitments from private entities to make qualified 
     contributions having a present value (as of the date of 
     issuance of the issue) of not less than 10 percent of the 
     proceeds of the issue.
       ``(B) Qualified contributions.--For purposes of 
     subparagraph (A), the term `qualified contribution' means any 
     contribution (of a type and quality acceptable to the local 
     educational agency) of--
       ``(i) equipment for use in the qualified zone academy 
     (including state-of-the-art technology and vocational 
     equipment),
       ``(ii) technical assistance in developing curriculum or in 
     training teachers in order to promote appropriate market 
     driven technology in the classroom,
       ``(iii) services of employees as volunteer mentors,
       ``(iv) internships, field trips, or other educational 
     opportunities outside the academy for students, or
       ``(v) any other property or service specified by the local 
     educational agency.
       ``(3) Qualified zone academy.--The term `qualified zone 
     academy' means any public school (or academic program within 
     a public school) which is established by and operated under 
     the supervision of a local educational agency to provide 
     education or training below the postsecondary level if--
       ``(A) such public school or program (as the case may be) is 
     designed in cooperation with business to enhance the academic 
     curriculum, increase graduation and employment rates, and 
     better prepare students for the rigors of college and the 
     increasingly complex workforce,
       ``(B) students in such public school or program (as the 
     case may be) will be subject to the same academic standards 
     and assessments as other students educated by the local 
     educational agency,
       ``(C) the comprehensive education plan of such public 
     school or program is approved by the local educational 
     agency, and
       ``(D)(i) such public school is located in an empowerment 
     zone or enterprise community (including any such zone or 
     community designated after the date of the enactment of this 
     section), or
       ``(ii) there is a reasonable expectation (as of the date of 
     issuance of the bonds) that at least 35 percent of the 
     students attending such school or participating in such 
     program (as the case may be) will be eligible for free or 
     reduced-cost lunches under the school lunch program 
     established under the National School Lunch Act.
       ``(4) Qualified purpose.--The term `qualified purpose' 
     means, with respect to any qualified zone academy--
       ``(A) constructing, rehabilitating, or repairing the public 
     school facility in which the academy is established,
       ``(B) acquiring the land on which such facility is to be 
     constructed with part of the proceeds of such issue,
       ``(C) providing equipment for use at such academy,
       ``(D) developing course materials for education to be 
     provided at such academy, and
       ``(E) training teachers and other school personnel in such 
     academy.
       ``(b) Limitations on Amount of Bonds Designated.--
       ``(1) In general.--There is a national zone academy bond 
     limitation for each calendar year. Such limitation is--
       ``(A) $400,000,000 for 1998,
       ``(B) $400,000,000 for 1999,
       ``(C) $400,000,000 for 2001,
       ``(D) $400,000,000 for 2005, and
       ``(E) except as provided in paragraph (3), zero after 1999 
     and before 2001, zero after 2001 and before 2005, and zero 
     after 2005.
       ``(2) Allocation of limitation.--
       ``(A) Allocation among states.--
       ``(i) 1998 and 1999 limitations.--The national zone academy 
     bond limitations for calendar years 1998 and 1999 shall be 
     allocated by the Secretary among the States on the basis of 
     their respective populations of individuals below the poverty 
     line (as defined by the Office of Management and Budget).
       ``(ii) Limitation after 1999.--The national zone academy 
     bond limitation for any calendar year after 1999 shall be 
     allocated by the Secretary among the States in the manner 
     prescribed by section 1400G(d); except that in making the 
     allocation under this clause, the Secretary shall take into 
     account--

       ``(I) Basic Grants attributable to large local educational 
     agencies (as defined in section 1400G(e)(4)).
       ``(II) the national zone academy bond limitation.

       ``(B) Allocation to local educational agencies.--The 
     limitation amount allocated to a State under subparagraph (A) 
     shall be allocated by the State education agency to qualified 
     zone academies within such State.
       ``(C) Designation subject to limitation amount.--The 
     maximum aggregate face amount of bonds issued during any 
     calendar year which may be designated under subsection (a) 
     with respect to any qualified zone academy shall not exceed 
     the limitation amount allocated to such academy under 
     subparagraph (B) for such calendar year.
       ``(3) Carryover of unused limitation.--If for any calendar 
     year--
       ``(A) the limitation amount under this subsection for any 
     State, exceeds
       ``(B) the amount of bonds issued during such year which are 
     designated under subsection (a) (or the corresponding 
     provisions of prior law) with respect to qualified zone 
     academies within such State,

[[Page 18269]]

     the limitation amount under this subsection for such State 
     for the following calendar year shall be increased by the 
     amount of such excess.''
       (b) Reporting.--Subsection (d) of section 6049 of the 
     Internal Revenue Code of 1986 (relating to returns regarding 
     payments of interest) is amended by adding at the end the 
     following new paragraph:
       ``(8) Reporting of credit on qualified public school 
     modernization bonds.--
       ``(A) In general.--For purposes of subsection (a), the term 
     `interest' includes amounts includible in gross income under 
     section 1400F(f) and such amounts shall be treated as paid on 
     the credit allowance date (as defined in section 
     1400F(d)(2)).
       ``(B) Reporting to corporations, etc.--Except as otherwise 
     provided in regulations, in the case of any interest 
     described in subparagraph (A) of this paragraph, subsection 
     (b)(4) of this section shall be applied without regard to 
     subparagraphs (A), (H), (I), (J), (K), and (L)(i).
       ``(C) Regulatory authority.--The Secretary may prescribe 
     such regulations as are necessary or appropriate to carry out 
     the purposes of this paragraph, including regulations which 
     require more frequent or more detailed reporting.''
       (c) Conforming Amendments.--
       (1) Subchapter U of chapter 1 of the Internal Revenue Code 
     of 1986 is amended by striking part IV, by redesignating part 
     V as part IV, and by redesignating section 1397F as section 
     1397E.
       (2) The table of subchapters for chapter 1 of such Code is 
     amended by adding at the end the following new item:

``Subchapter X. Public school modernization provisions.''
       (3) The table of parts of subchapter U of chapter 1 of such 
     Code is amended by striking the last 2 items and inserting 
     the following item:

``Part IV. Regulations.''
       (d) Use of net proceeds.--Notwithstanding any other 
     provision of law--
       (1) section 439(a) of the General Education Provisions Act 
     shall apply with respect to the construction, reconstruction, 
     rehabilitation, or repair of any school facility to the 
     extent funded by net proceeds obtained through any provision 
     enacted or amended by this Act, and
       (2) such net proceeds may not be used to fund the 
     construction, reconstruction, rehabilitation, or repair of 
     any stadium or other facility primarily used for athletic or 
     non-academic events.
       (e) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to obligations 
     issued after December 31, 1999.
       (2) Repeal of restriction on zone academy bond holders.--In 
     the case of bonds to which section 1397E of the Internal 
     Revenue Code of 1986 (as in effect before the date of the 
     enactment of this Act) applies, the limitation of such 
     section to eligible taxpayers (as defined in subsection 
     (d)(6) of such section) shall not apply after the date of the 
     enactment of this Act.

     SEC. 602. MODIFICATIONS TO QUALIFIED TUITION PROGRAMS.

       (a) Eligible Educational Institutions Permitted To Maintain 
     Qualified Tuition Programs.--
       (1) In general.--Section 529(b)(1) (defining qualified 
     State tuition program) is amended by inserting ``or by 1 or 
     more eligible educational institutions'' after ``maintained 
     by a State or agency or instrumentality thereof ''.
       (2) Private qualified tuition programs limited to benefit 
     plans.--Clause (ii) of section 529(b)(1)(A) is amended by 
     inserting ``in the case of a program established and 
     maintained by a State or agency or instrumentality thereof,'' 
     before ``may make''.
       (3) Conforming amendments.--
       (A) Sections 72(e)(9), 135(c)(2)(C), 135(d)(1)(D), 529, 
     530(b)(2)(B), 4973(e), and 6693(a)(2)(C) are each amended by 
     striking ``qualified State tuition'' each place it appears 
     and inserting ``qualified tuition''.
       (B) The headings for sections 72(e)(9) and 135(c)(2)(C) are 
     each amended by striking ``qualified state tuition'' and 
     inserting ``qualified tuition''.
       (C) The headings for sections 529(b) and 530(b)(2)(B) are 
     each amended by striking ``Qualified state tuition'' and 
     inserting ``Qualified tuition''.
       (D) The heading for section 529 is amended by striking 
     ``state''.
       (E) The item relating to section 529 in the table of 
     sections for part VIII of subchapter F of chapter 1 is 
     amended by striking ``State''.
       (b) Exclusion From Gross Income of Education Distributions 
     From Qualified Tuition Programs.--
       (1) In general.--Section 529(c)(3)(B) (relating to 
     distributions) is amended to read as follows:
       ``(B) Distributions for qualified higher education 
     expenses.--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)(i) and 530(d)(2)''.
       (B) Section 221(e)(2)(A) is amended by inserting ``529,'' 
     after ``135,''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.

     SEC. 603. ELIMINATION OF 60-MONTH LIMIT ON STUDENT LOAN 
                   INTEREST DEDUCTION.

       (a) Elimination of 60-Month Limit.--Section 221 (relating 
     to interest on education loans) is amended by striking 
     subsection (d) and by redesignating subsections (e), (f), and 
     (g) as subsections (d), (e), and (f), respectively.
       (b) Conforming Amendment.--Section 6050S(e) is amended by 
     striking ``section 221(e)(1)'' and inserting ``section 
     221(d)(1)''.
       (c) Effective Date.--The amendments made by this subsection 
     shall apply with respect to any loan interest paid after 
     December 31, 1999, in taxable years ending after such date.

     SEC. 604. 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, 2000.

     SEC. 605. 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

[[Page 18270]]

       ``(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 last maturity 
     date of any bond which is a part of the issue to be used to 
     finance the activities described in subparagraph (A)(i).
       ``(3) School facility.--For purposes of this subsection, 
     the term `school facility' means--
       ``(A) school buildings,
       ``(B) functionally related and subordinate facilities and 
     land with respect to such buildings, including any stadium or 
     other facility primarily used for school events, and
       ``(C) any property, to which section 168 applies (or would 
     apply but for section 179), for use in the facility.
       ``(4) Public schools.--For purposes of this subsection, the 
     terms `elementary school' and `secondary school' have the 
     meanings given such terms by section 14101 of the Elementary 
     and Secondary Education Act of 1965 (20 U.S.C. 8801), as in 
     effect on the date of the enactment of this subsection.
       ``(5) Annual aggregate face amount of tax-exempt 
     financing.--
       ``(A) In general.--An issue shall not be treated as an 
     issue described in subsection (a)(13) if the aggregate face 
     amount of bonds issued by the State pursuant thereto (when 
     added to the aggregate face amount of bonds previously so 
     issued during the calendar year) exceeds an amount equal to 
     the greater of--
       ``(i) $10 multiplied by the State population, or
       ``(ii) $5,000,000.
       ``(B) Allocation rules.--
       ``(i) In general.--Except as otherwise provided in this 
     subparagraph, the State may allocate the amount described in 
     subparagraph (A) for any calendar year in such manner as the 
     State determines appropriate.
       ``(ii) Rules for carryforward of unused limitation.--A 
     State may elect to carry forward an unused limitation for any 
     calendar year for 3 calendar years following the calendar 
     year in which the unused limitation arose under rules similar 
     to the rules of section 146(f), except that the only purpose 
     for which the carryforward may be elected is the issuance of 
     exempt facility bonds described in subsection (a)(13).''
       (c) Exemption From General State Volume Caps.--Paragraph 
     (3) of section 146(g) (relating to exception for certain 
     bonds) is amended--
       (1) by striking ``or (12)'' and inserting ``(12), or 
     (13)'', and
       (2) by striking ``and environmental enhancements of 
     hydroelectric generating facilities'' and inserting 
     ``environmental enhancements of hydroelectric generating 
     facilities, and qualified public educational facilities''.
       (d) Exemption From Limitation on Use for Land 
     Acquisition.--Section 147(h) (relating to certain rules not 
     to apply to mortgage revenue bonds, qualified student loan 
     bonds, and qualified 501(c)(3) bonds) is amended by adding at 
     the end the following new paragraph:
       ``(3) Exempt facility bonds for qualified public-private 
     schools.--Subsection (c) shall not apply to any exempt 
     facility bond issued as part of an issue described in section 
     142(a)(13) (relating to qualified public educational 
     facilities).''
       (e) Conforming Amendment.--The heading for section 147(h) 
     is amended by striking ``Mortgage Revenue Bonds, Qualified 
     Student Loan Bonds, and Qualified 501(c)(3) Bonds'' and 
     inserting ``Certain Bonds''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to bonds issued after December 31, 2000.

     SEC. 606. 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).
       (b) Repeal of Limitation on Graduate Education.--
       (1) In general.--The last sentence of section 127(c)(1) is 
     amended by striking ``, and such term also does not include 
     any payment for, or the provision of any benefits with 
     respect to, any graduate level course of a kind normally 
     taken by an individual pursuing a program leading to a law, 
     business, medical, or other advanced academic or professional 
     degree''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply with respect to expenses relating to courses 
     beginning after December 31, 1999.

     SEC. 607. EXPANSION OF DEDUCTION FOR COMPUTER DONATIONS TO 
                   SCHOOLS.

       (a) In General.--Section 170(e)(6)(A) (relating to limit on 
     reduction) is amended by inserting ``(determined by 
     substituting `90 percent' for `one-half'' in clause (i) and 
     without regard to clause (ii) thereof)'' after ``paragraph 
     (3)(B)''.
       (b) Reacquired Computers Eligible for Donation.--
       (1) In general.--Section 170(e)(6)(B)(iii) (defining 
     qualified elementary or secondary educational contribution) 
     is amended by inserting ``, the person from whom the donor 
     reacquires the property,'' after ``the donor''.
       (2) Reacquired computer equivalent to new computer.--
     Section 170(e)(6)(B) is amended by striking ``and'' at the 
     end of clause (vi), by redesignating clause (vii) as clause 
     (viii), and by inserting after clause (vi) the following:
       ``(vii) the contribution of any reacquired computer 
     technology or equipment is made only after such computer 
     technology or equipment is refurbished to a standard 
     equivalent to newly constructed computer technology or 
     equipment, and''.
       (3) Conforming amendment.--Section 170(e)(6)(B)(ii) is 
     amended by inserting ``or reaquired'' after ``acquired''.
       (c) Extension of Deduction.--Section 170(e)(6)(F) (relating 
     to termination) is amended by striking ``2000'' and inserting 
     ``2001''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to contributions made after December 31, 1999.

     SEC. 608. CREDIT FOR INFORMATION TECHNOLOGY TRAINING PROGRAM 
                   EXPENSES.

       (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:

     ``SEC. 45D. INFORMATION TECHNOLOGY TRAINING PROGRAM EXPENSES.

       ``(a) General Rule.--For purposes of section 38, in the 
     case of an employer, the information technology training 
     program credit determined under this section is an amount 
     equal to 20 percent of information technology training 
     program expenses paid or incurred by the taxpayer during the 
     taxable year.
       ``(b) Additional Credit Percentage for Certain Programs.--
     The percentage under subsection (a) shall be increased by 5 
     percentage points for information technology training program 
     expenses paid or incurred--
       ``(1) by the taxpayer with respect to a program operated 
     in--
       ``(A) an empowerment zone or enterprise community 
     designated under part I of subchapter U,
       ``(B) a school district in which at least 50 percent of the 
     students attending schools in such district are eligible for 
     free or reduced-cost lunches under the school lunch program 
     established under the National School Lunch Act,
       ``(C) an area designated as a disaster area by the 
     Secretary of Agriculture or by the President under the 
     Disaster Relief and Emergency Assistance Act in the taxable 
     year or the 4 preceding taxable years,
       ``(D) a rural enterprise community designated under section 
     766 of the Agriculture, Rural Development, Food and Drug 
     Administration, and Related Agencies Appropriations Act, 
     1999,
       ``(E) an area designated by the Secretary of Agriculture as 
     a Rural Economic Area Partnership Zone, or
       ``(F) an area designated by the Secretary of Agriculture as 
     a Champion Community, or
       ``(2) by a small employer.
       ``(c) Limitation.--The amount of information technology 
     training program expenses with respect to an individual which 
     may be taken into account under subsection (a) for the 
     taxable year shall not exceed $6,000.
       ``(d) Information Technology Training Program Expenses.--
     For purposes of this section--
       ``(1) In general.--The term `information technology 
     training program expenses' means expenses paid or incurred by 
     reason of the participation of the employer in any 
     information technology training program.
       ``(2) Information technology training program.--The term 
     `information technology training program' means a program--
       ``(A) for the training of--
       ``(i) computer programmers, systems analysts, and computer 
     scientists or engineers (as such occupations are defined by 
     the Bureau of Labor Statistics), and
       ``(ii) such other occupations as determined by the 
     Secretary, after consultation with a working group broadly 
     solicited by the Secretary and open to all interested 
     information technology entities and trade and professional 
     associations,
       ``(B) involving a partnership of--
       ``(i) employers, and
       ``(ii) State training programs, school districts, 
     university systems, tribal colleges, or certified commercial 
     information technology training providers, and
       ``(C) at least 50 percent of the costs of which is paid or 
     incurred by the employers.
       ``(3) Certified commercial information technology training 
     provider.--The term `certified commercial information 
     technology training providers' means a private sector 
     provider of educational products and services utilized for 
     training in information technology which is certified with 
     respect to--
       ``(A) the curriculum that is used for the training, or
       ``(B) the technical knowledge of the instructors of such 
     provider,
     by 1 or more software publishers or hardware manufacturers 
     the products of which are a subject of the training.
       ``(e) Small Employer.--For purposes of this section, the 
     term `small employer' means, with respect to any calendar 
     year, any employer if such employer employed 200 or fewer 
     employees on each business day in each of 20 or more calendar 
     weeks in such year or the preceding calendar year.

[[Page 18271]]

       ``(f) Denial of Double Benefit.--No deduction or credit 
     under any other provision of this chapter shall be allowed 
     with respect to information technology training program 
     expenses (determined without regard to the limitation under 
     subsection (c)).
       ``(g) Certain rules made applicable.--For purposes of this 
     section, rules similar to the rules of section 45A(e)(2) and 
     subsections (c), (d), and (e) of section 52 shall apply.''
       (b) Credit To Be Part of General Business Credit.--Section 
     38(b) (relating to current year business credit), as amended 
     by section 205(b)(1), 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:
       ``(14) the information technology training program credit 
     determined under section 45D.''
       (c) No Carrybacks.--Subsection (d) of section 39 (relating 
     to carryback and carryforward of unused credits), as amended 
     by section 205(c), is amended by adding at the end the 
     following:
       ``(10) No carryback of section 45D credit before effective 
     date.--No portion of the unused business credit for any 
     taxable year which is attributable to the information 
     technology training program credit determined under section 
     45D may be carried back to a taxable year ending before the 
     date of the enactment of section 45D.''
       (d) Clerical Amendment.--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:

``Sec. 45D. Information technology training program expenses.''
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 609. CHARITABLE CONTRIBUTIONS TO CERTAIN LOW INCOME 
                   SCHOOLS MAY BE MADE IN NEXT TAXABLE YEAR.

       (a) In General.--Section 170(f) (relating to disallowance 
     of deduction in certain cases and special rules) is amended 
     by adding at the end the following new paragraph:
       ``(10) Time when certain contributions deemed made.--
       ``(A) In general.--At the election of the taxpayer, a 
     qualified low-income school contribution shall be deemed to 
     be made 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). The election may be made at the time of the filing 
     of the return for such table year, and shall be made and 
     substantiated in such manner as the Secretary shall by 
     regulations prescribe.
       ``(B) Qualified low-income school contribution.--For 
     purposes of subparagraph (A), the term `qualified low-income 
     school contribution' means a charitable contribution to an 
     educational organization described in subsection 
     (b)(1)(A)(ii)--
       ``(i) which is a public, private, or sectarian school which 
     provides elementary or secondary education (through grade 
     12), as determined under State law, and
       ``(ii) with respect to which at least 50 percent of the 
     students attending such school are eligible for free or 
     reduced-cost lunches under the school lunch program 
     established under the National School Lunch Act.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 610. EXCLUSION OF NATIONAL SERVICE EDUCATIONAL AWARDS.

       (a) In General.--Section 117 (relating to qualified 
     scholarships) is amended by adding at the end the following:
       ``(e) Qualified National Service Educational Awards.--
       ``(1) In general.--Gross income for any taxable year shall 
     not include any qualified national service educational award.
       ``(2) Qualified national service educational award.--For 
     purposes of this subsection--
       ``(A) In general.--The term `qualified national service 
     educational award' means any amount received by an individual 
     in a taxable year as a national service educational award or 
     other amount under section 148 of the National and Community 
     Service Act of 1990 (42 U.S.C. 12604) to the extent the 
     individual establishes that, in accordance with the 
     conditions of such award or other amount, such award or other 
     amount was used for qualified tuition and related expenses 
     (as defined in subsection (b)(2)) of the individual.
       ``(B) Limitation.--The total amount of the qualified 
     tuition and related expenses (as so defined) which may be 
     taken into account under subparagraph (A) with respect to an 
     individual shall be reduced by the amount of such expenses 
     which were taken into account in determining the credit 
     allowed to the taxpayer or any other person under section 25A 
     with respect to such expenses in any taxable year.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to amounts received in taxable years beginning 
     after December 31, 1999.

          TITLE VII--ENVIRONMENTAL CONSERVATION AND PROTECTION

                    Subtitle A--Better America Bonds

     SEC. 701. CREDIT FOR HOLDERS OF BETTER AMERICA BONDS.

       (a) In General.--Part IV of subchapter A of chapter 1 of 
     the Internal Revenue Code of 1986 (relating to credits 
     against tax) is amended by adding at the end the following 
     new subpart:

 ``Subpart H--Nonrefundable Credit for Holders of Better America Bonds

``Sec. 54. Credit to holders of Better America bonds.

     ``SEC. 54. CREDIT TO HOLDERS OF BETTER AMERICA BONDS.

       ``(a) Allowance of Credit.--In the case of a taxpayer who 
     holds a Better America bond on a credit allowance date 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 bonds.
       ``(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 Better America bond is an amount equal to the 
     product of--
       ``(A) the credit rate determined by the Secretary under 
     paragraph (2), multiplied by
       ``(B) the face amount of the bond held by the taxpayer on 
     the credit allowance date.
       ``(2) Determination.--During each calendar month, the 
     Secretary shall determine a credit rate which shall apply to 
     bonds issued during the following calendar month. The credit 
     rate for any 3-month period ending on a credit allowance date 
     is the percentage which the Secretary estimates will on 
     average equal the yield on corporate bonds outstanding on the 
     day before the date of such determination.
       ``(3) 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) Carryforward 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 each of the 5 taxable years following the unused 
     credit year and added to the credit allowable under 
     subsection (a) for each such taxable year, subject to the 
     application of paragraph (1) to such taxable year.
       ``(d) Better America Bond.--For purposes of this section--
       ``(1) In general.--The term `Better America bond' means any 
     bond issued as part of an issue if--
       ``(A) 95 percent or more of the proceeds of such issue are 
     to be used for a qualified environmental infrastructure 
     project,
       ``(B) the bond is issued by a State or local government,
       ``(C) the issuer--
       ``(i) designates such bond for purposes of this section,
       ``(ii) has a reasonable expectation that at least 10 
     percent of the proceeds of such issue will be spent for 
     qualifying environmental infrastructure projects within 6 
     months of the date such bonds are issued,
       ``(iii) certifies such proceeds will be used with due 
     diligence for qualified environmental infrastructure 
     projects, and
       ``(iv) has a reasonable expectation that any property 
     acquired or improved in connection with the proceeds of such 
     issue, other than property improved in connection with a 
     qualified environmental infrastructure project described in 
     paragraph (2)(A)(v), shall continue to be dedicated to a 
     qualified use for a period of not less than 15 years from the 
     date of such issue,
       ``(D) such bond satisfies public approval requirements 
     similar to the requirements of section 147(f)(2),
       ``(E) except as provided in paragraph (4)(B), the payment 
     of the principal of such issue is secured by taxes of general 
     applicability imposed by a general purpose governmental unit, 
     and
       ``(F) the term of each bond which is part of such issue 
     does not exceed 15 years.
       ``(2) Qualified environmental infrastructure project.--
       ``(A) In general.--The term `qualified environmental 
     infrastructure project' means--
       ``(i) acquisition of qualified property for use as open 
     space, wetlands, public parks, or greenways, or to improve 
     access to public lands by non-motorized means,

[[Page 18272]]

       ``(ii) construction, rehabilitation, or repair of a visitor 
     facility in connection with qualified property, including 
     nature centers, campgrounds, and hiking or biking trails,
       ``(iii) remediation of qualified property to enhance water 
     quality by--

       ``(I) restoring natural hydrology or planting trees and 
     streamside vegetation,
       ``(II) controlling erosion,
       ``(III) restoring wetlands, or
       ``(IV) treating conditions caused by the prior disposal of 
     toxic or other waste,

       ``(iv) acquisition of a qualified easement in order to 
     maintain the use and character of the property in connection 
     to which such easement is granted as open space, including an 
     easement to allow access to public land by non-motorized 
     means, and
       ``(v) environmental assessment and remediation of real 
     property and public infrastructure owned by a governmental 
     unit and located in an area where or on which there has been 
     a release (or threat of release) or disposal of any hazardous 
     substance (within the meaning of section 198), not including 
     any property described in subparagraph (D).
       ``(B) Qualified property.--The term `qualified property' 
     means real property--
       ``(i) which is, or is to be, owned by--

       ``(I) a governmental unit, or
       ``(II) an organization described in section 501(c)(3) and 
     exempt from taxation under section 501(a) and which has as 
     one if its purposes environmental preservation, and

       ``(ii) which is reasonably anticipated to be available for 
     use by members of the general public, unless such use would 
     change the character of the property and be contrary to the 
     qualified use of the property.
       ``(C) Safe harbor for management contracts.--For purposes 
     of subparagraph (B), property shall not be treated as 
     qualified property if any rights or benefits of such property 
     inure to a private person other than rights or benefits under 
     a management contract or similar type of operating agreement 
     to which rules similar to the rules applicable to tax-exempt 
     bonds apply.
       ``(D) Cercla property.--Property is described in this 
     subparagraph if any portion of such property is included, or 
     proposed to be included, in the national priorities list 
     under section 105(a)(8)(B) of the Comprehensive Environmental 
     Response, Compensation, and Liability Act of 1980 (42 U.S.C. 
     9605(a)(8)(B)).
       ``(E) Limit on disposition of property.--Any disposition of 
     any interest in property acquired or improved in connection 
     with a qualified environmental project described in this 
     paragraph (except a project described in subparagraph (A)(v)) 
     shall contain an option (recorded pursuant to applicable 
     State or local law) to purchase such property for an amount 
     equal to the original acquisition price of such property for 
     any interested organizations described in subparagraph 
     (B)(i)(II) if such organization purchases such property 
     subject to a restrictive covenant requiring a continued 
     qualified use of such property.
       ``(3) Temporary period exception.--
       ``(A) In general.--A bond shall not be treated as failing 
     to meet the requirement of paragraph (1)(A) solely by reason 
     of the fact that the proceeds of the issue of which such bond 
     is a part--
       ``(i) are invested for a reasonable temporary period (but 
     not more than 36 months) until such proceeds are needed for 
     the purpose for which such issue was issued, or
       ``(ii) are used within 90 days of the close of such 
     temporary period to redeem bonds which are a part of such 
     issue.

     Any earnings on such proceeds during the period under clause 
     (i) shall be treated as proceeds of the issue for purposes of 
     applying paragraph (1)(A).
       ``(B) Investment of proceeds.--For purposes of subparagraph 
     (A), proceeds shall only be invested in--
       ``(i) Government securities, and
       ``(ii) in the case of a sinking fund established by the 
     issuer, State and local government securities issued by the 
     Treasury.
       ``(4) Special rules for projects described in paragraph 
     (2)(A)(v).--
       ``(A) Limit on use of proceeds for project.--This 
     subsection shall not apply to any bond issued as part of an 
     issue if an amount of the proceeds from such issue are used 
     for a qualified environmental infrastructure project 
     described in paragraph (2)(A)(v) and involving public 
     infrastructure in excess of an amount equal to 5 percent of 
     the total amount of such proceeds used for all projects 
     described in such paragraph (2)(A)(v).
       ``(B) Private use and repayment of proceeds.--In the case 
     of proceeds of an issue which are used for a qualified 
     environmental infrastructure project described in paragraph 
     (2)(A)(v), the issue of which such bonds are a part shall not 
     fail to meet the requirements of this subsection solely 
     because the proceeds of a disposition of any interest in such 
     property are used to redeem such bonds as long as the 
     purchaser of such property makes an irrevocable election not 
     to claim any deduction with respect to such project under 
     section 198.
       ``(5) Recapture of credit amount.--
       ``(A) In general.--If, during the taxable year, any bond 
     that is part of an issue under this section fails to meet the 
     requirements of this subsection--
       ``(i) such bond shall not be treated as a Better America 
     bond for such taxable year and any succeeding taxable year, 
     and
       ``(ii) the issuer of such bond shall be liable for payment 
     to the United States of the credit recapture amount.

     Such payment shall be made at such time and in such manner as 
     determined by the Secretary.
       ``(B) Credit recapture amount.--For purposes of 
     subparagraph (A), the credit recapture amount is an amount 
     equal to the sum of--
       ``(i) the aggregate amount of credit allowed with respect 
     to such bond for the 3 preceding taxable years, plus
       ``(ii) interest (at the underpayment rate established under 
     section 6621) on the credit amount from the date such credit 
     was allowed to the payment date under subparagraph (A).
       ``(e) Limitations on Amount of Bonds Designated.--
       ``(1) In general.--There is a Better America bond 
     limitation for each calendar year equal to--
       ``(A) $1,900,000,000 for each of years 2001 through 2005, 
     and
       ``(B) except as provided in paragraph (3), zero after 2005.
       ``(2) Allocation of limitation among states and local 
     governments.--
       ``(A) In general.--The limitation amount to be allocated 
     under paragraph (1) for any calendar year shall be allocated 
     among States and local governments with an approved 
     application on a competitive basis by the Better America 
     Bonds Board (referred to in this subsection as the `Board') 
     established under section 702 of the Tax and Public Debt 
     Reduction Act of 1999.
       ``(B) Approved application.--For purposes of subparagraph 
     (A), the term `approved application' means an application 
     which is approved by the Board, and which includes such 
     information as the Board requires.
       ``(3) Carryover of unused limitation.--If for any calendar 
     year--
       ``(A) the limitation amount under paragraph (1), exceeds
       ``(B) the aggregate limitation amount allocated to States 
     and local governments under this section,

     the limitation amount under paragraph (1) for the following 
     calendar year shall be increased by the amount of such 
     excess. No limitation amount shall be carried forward under 
     this paragraph more than 3 years.
       ``(f) Other Definitions; Special Rules.--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) Qualified easement.--The term `qualified easement' 
     means a perpetual easement--
       ``(A) which would be a qualified conservation contribution 
     under section 170(h) if such easement were a contribution 
     under such section, and
       ``(B) which is to be held by an entity described in 
     subclause (I) or (II) of subsection (d)(2)(B)(i).
       ``(4) Qualified use.--The term `qualified use' means, with 
     respect to property, a use which is consistent with the 
     purpose of the qualified environmental infrastructure project 
     related to such property.
       ``(5) State.--The term `State' includes the District of 
     Columbia, any possession of the United States, and any Indian 
     tribe (as defined in section 45A(c)(6)).
       ``(6) 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).
       ``(g) Credit Included in Gross Income.--Gross income 
     includes the amount of the credit allowed to the taxpayer 
     under this section and the amount so included shall be 
     treated as interest income.
       ``(h) Bonds Held By Regulated Investment Companies.--If any 
     Better America 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.
       ``(i) Credits May Be Stripped.--Under regulations 
     prescribed by the Secretary--
       ``(1) In general.--There may be a separation (including at 
     issuance) of the ownership of a Better America 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 which, on the 
     credit allowance date, holds the instrument evidencing the 
     entitlement to the credit and not to the holder of the bond.
       ``(2) Certain rules to apply.--In the case of a separation 
     described in paragraph (1), the rules of section 1286 shall 
     apply to the Better America bond as if it were a stripped 
     bond and to the credit under this section as if it were a 
     stripped coupon.

[[Page 18273]]

       ``(j) 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 Better 
     America 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.
       ``(k) 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.
       ``(l) Reporting.--Issuers of Better America bonds shall 
     submit reports similar to the reports required under section 
     149(e).''
       (b) Reporting.--Subsection (d) of section 6049 of the 
     Internal Revenue Code of 1986 (relating to returns regarding 
     payments of interest) is amended by adding at the end the 
     following:
       ``(8) Reporting of Credit on Better America Bonds.--
       ``(A) In general.--For purposes of subsection (a), the term 
     `interest' includes amounts includible in gross income under 
     section 54(f) and such amounts shall be 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 of the Internal Revenue Code of 1986 is amended by 
     adding at the end the following:

``Subpart H. Nonrefundable Credit for Holders of Better America 
              Bonds.''
       (2) Section 6401(b)(1) of such Code 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 December 31, 2000.

     SEC. 702. BETTER AMERICA BONDS BOARD.

       (a) Establishment.--There is established a board to be 
     known as the Better America Bonds Board (in this section 
     referred to as the ``Board'').
       (b) Membership.--
       (1) Composition.--The Board shall be composed of 12 
     members, as follows:
       (A) 3 members shall be individuals who are not otherwise 
     Federal officers or employees and who are appointed by the 
     President, by and with the advice and consent of the Senate.
       (B) 2 members, not be affiliated with the same political 
     party, shall be individuals who represent Governors, or other 
     chief executive officers, of a State, mayors, and county 
     commissioners and who are appointed by the President, by and 
     with the advice and consent of the Senate.
       (C) 1 member shall be the Administrator of the 
     Environmental Protection Agency or the Administrator's 
     designee.
       (D) 1 member shall be the Secretary of Agriculture or the 
     Secretary's designee.
       (E) 1 member shall be the Secretary of Housing and Urban 
     Development or the Secretary's designee.
       (F) 1 member shall be the Secretary of Interior or the 
     Secretary's designee.
       (G) 1 member shall be the Secretary of Transportation or 
     the Secretary's designee.
       (H) 1 member shall be the Secretary of the Treasury or the 
     Secretary's designee.
       (I) 1 member shall be the Director of the Federal Emergency 
     Management Agency or the Director's designee.
       (2) Qualifications and terms.--
       (A) Qualifications.--Members of the Board described in 
     paragraph (1)(A) shall be appointed without regard to 
     political affiliation and solely on the basis of their 
     professional experience and expertise in 1 or more of the 
     following areas:
       (i) Tax-exempt organizations which have as a principal 
     purpose environmental protection and land conservation.
       (ii) Community planning.
       (iii) Real estate investment and bond financing.

     In the aggregate, the members of the Board described in 
     paragraph (1)(A) should collectively bring to bear expertise 
     in all of the areas described in the preceding sentence.
       (B) Terms.--Each member who is described in subparagraph 
     (A) or (B) of paragraph (1) shall be appointed for a term of 
     3 years, except that of the members first appointed--
       (i) 1 member shall be appointed for a term of 1 year,
       (ii) 2 members shall be appointed for a term of 2 years, 
     and
       (iii) 2 members shall be appointed for a term of 3 years.
       (C) Reappointment.--An individual who is described in 
     subparagraph (A) or (B) of paragraph (1) may be appointed to 
     no more than one 3-year term on the Board.
       (D) Vacancy.--Any vacancy on the Board shall be filled in 
     the same manner as the original appointment. Any member 
     appointed to fill a vacancy occurring before the expiration 
     of the term for which the member's predecessor was appointed 
     shall be appointed for the remainder of that term.
       (3) Initial meeting.--Not later than 30 days after the date 
     on which all members of the Board have been appointed, the 
     Board shall hold its first meeting. Subsequent meetings shall 
     be determined by the Board by majority vote.
       (4) Quorum.--A majority of the members of the Board shall 
     constitute a quorum, but a lesser number of members may hold 
     hearings.
       (5) Chairperson.--The member described in paragraph (1)(C) 
     shall serve as the Chairperson of the Board and shall have 
     the sole power to call a meeting of the Board.
       (6) Removal.--
       (A) In general.--Any member of the Board appointed under 
     subparagraph (A) or (B) of paragraph (1) may be removed at 
     the will of the President.
       (B) Secretaries; director; administrator.--An individual 
     described in subparagraphs (C) through (I) of paragraph (1) 
     shall be removed upon termination of service in the office 
     described in each such subparagraph.
       (c) Duties of the Board.--
       (1) In general.--The Board shall review applications for 
     allocation of the Better America bond limitation amounts 
     under section 54(e)(2) of the Internal Revenue Code of 1986 
     and approve applications in accordance with published 
     criteria.
       (2) Criteria for approval.--The Board shall consider the 
     following criteria in approving an application under 
     paragraph (1):
       (A) A distribution pattern of the overall limitation amount 
     available for the year which results in the financing of each 
     category of qualified environmental infrastructure project 
     and results in an even distribution among different regions 
     of the country and sizes of communities.
       (B) State or local government support of proposed projects.
       (C) Proposed projects which meet local and regional 
     environmental protection or planning goals and leverage or 
     make more efficient or innovative the use of other public or 
     private resources.
       (D) Proposed projects which are intended to maintain the 
     viability of existing central business districts, preserve 
     the community's distinct character and values, and encourage 
     the reuse of property already served by public 
     infrastructure.
       (E) The extent of expected improvement in environmental 
     quality, outdoor recreation opportunities, and access to 
     public lands.
       (3) Annual report.--The Board shall annually report with 
     respect to the conduct of its responsibilities under this 
     section to the President and Congress and such report shall 
     include--
       (A) the overall progress of the Better America bond 
     program, and
       (B) the overall limitation amount allocated during the year 
     and a description of the amount, region, and qualified 
     environmental infrastructure project financed by each 
     allocation.
       (4) Conflict of interest.--The Board shall carry out its 
     duties under this subsection in such a way to ensure that all 
     conflicts of interest of its members are avoided.
       (d) Powers of the Board.--
       (1) Hearings.--The Board may hold such hearings, sit and 
     act at such times and places, take such testimony, and 
     receive such evidence as the Board considers advisable to 
     carry out the purposes of this section.
       (2) Information from federal agencies.--The Board may 
     secure directly from any Federal department or agency such 
     information as the Board considers necessary to carry out the 
     provisions of this section, including the published and 
     unpublished data and analytical products of the Bureau of 
     Labor Statistics. Upon request of the Chairperson of the 
     Board, the head of such department or agency shall furnish 
     such information to the Board.
       (3) Postal services.--The Board may use the United States 
     mails in the same manner and under the same conditions as 
     other departments and agencies of the Federal Government.
       (e) Board Personnel Matters.--
       (1) Compensation of members.--Each member of the Board who 
     is not otherwise an officer or employee of the Federal 
     Government shall be compensated at a rate equal to the daily 
     equivalent of the annual rate of basic pay prescribed for 
     level III of the Executive Schedule under section 5315 of 
     title 5, United States Code, for each day (including travel 
     time) during which such member is engaged in the performance 
     of the duties of the Board. All members of the Board who 
     otherwise are officers or employees of the United States 
     shall serve without compensation in addition to that received 
     for their services as officers or employees of the United 
     States.
       (2) Travel expenses.--The members of the Board shall be 
     allowed travel expenses, including per diem in lieu of 
     subsistence, at rates authorized for employees of agencies 
     under subchapter I of chapter 57 of title 5, United States 
     Code, while away from their homes or regular places of 
     business in the performance of services for the Board.
       (3) Staff.--

[[Page 18274]]

       (A) In general.--The Chairperson of the Board may, without 
     regard to the civil service laws and regulations, appoint and 
     terminate an executive director and such other additional 
     personnel as may be necessary to enable the Board to perform 
     its duties. The employment of an executive director shall be 
     subject to confirmation by the Board.
       (B) Compensation.--The Chairperson of the Board may fix the 
     compensation of the executive director and other personnel 
     without regard to the provisions of chapter 51 and subchapter 
     III of chapter 53 of title 5, United States Code, relating to 
     classification of positions and General Schedule pay rates, 
     except that the rate of pay for the executive director and 
     other personnel may not exceed the rate payable for level IV 
     of the Executive Schedule under section 5316 of such title.
       (4) Detail of government employees.--Any Federal Government 
     employee may be detailed to the Board without additional 
     reimbursement (other than the employee's regular 
     compensation), and such detail shall be without interruption 
     or loss of civil service status or privilege.
       (5) Procurement of temporary and intermittent services.--
     The Chairperson of the Board may procure temporary and 
     intermittent services under section 3109(b) of title 5, 
     United States Code, at rates for individuals which do not 
     exceed the daily equivalent of the annual rate of basic pay 
     prescribed for level V of the Executive Schedule under 
     section 5316 of such title.
       (f) Definitions.--For purposes of this section--
       (1) State.--The term `State' includes the District of 
     Columbia, any possession of the United States, and any Indian 
     tribe (as defined in section 45A(c)(6)).
       (2) Qualified environmental infrastructure project.--The 
     term `qualified environmental infrastructure project' has the 
     same meaning given that term in section 54(d)(2) of the 
     Internal Revenue Code of 1986.
       (g) Authorization of Appropriations.--There are authorized 
     to be appropriated to the Board such sums as are necessary to 
     carry out the purposes of this section.
       (h) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     take effect on the date of the enactment of this Act.
       (2) Initial nominations.--The President shall submit the 
     initial nominations under subparagraphs (A) and (B) of 
     subsection (b)(1) to the Senate not later than 90 days after 
     the date of the enactment of this Act.
       (3) Regulations.--Not later than January 1, 2001, the Board 
     shall publish in the Federal Register the guidelines and 
     criteria for submission and approval of applications under 
     subsection (c).

                  Subtitle B--Conservation Incentives

     SEC. 711. TAX EXCLUSION FOR COST-SHARING PAYMENTS UNDER 
                   PARTNERS FOR WILDLIFE PROGRAM.

       (a) In General.--Section 126(a) (relating to certain cost-
     sharing payments) is amended by redesignating paragraph (10) 
     as paragraph (11) and by inserting after paragraph (9) the 
     following:
       ``(10) The Partners for Wildlife Program authorized by the 
     Fish and Wildlife Act of 1956 (16 U.S.C. 742a et seq.).''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 712. ENHANCED DEDUCTION FOR THE DONATION OF A 
                   CONSERVATION EASEMENT.

       (a) In General.--Paragraph (1) of section 170(b) of the 
     Internal Revenue Code of 1986 (relating to percentage 
     limitations) is amended by adding at the end the following:
       ``(G) Special rules for qualified conservation 
     contributions.--In the case of a qualified conservation 
     contribution by an individual (as defined in subsection 
     (h)(1), except that the phrase `or a certified historic 
     structure' in clause (iv) of subsection (h)(4)(A) shall not 
     apply):
       ``(i) 50 percent limitation to apply.--Such a contribution 
     shall be treated for purposes of this section as described in 
     subparagraph (A).
       ``(ii) 20 -year carry forward.--Subsection (d)(1) shall be 
     applied by substituting `20 years' for `5 years' each place 
     it appears and with appropriate adjustments in the 
     application of subparagraph (A)(ii) thereof.
       ``(iii) Unused deduction carryover allowed on taxpayer's 
     last return.--If the taxpayer dies before the close of the 
     last taxable year for which a deduction could have been 
     allowed under subsection (d)(1), any portion of the deduction 
     for such contribution which has not been allowed shall be 
     allowed as a deduction under subsection (a) (without regard 
     to this subsection) for the taxable year in which such death 
     occurs or such portion may be used as a deduction against the 
     gross estate of the taxpayer.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 713. NATIONAL WILDLIFE REFUGE CONSERVATION EASEMENTS.

       (a) Land Subject To a Qualified Conservation Easement To 
     Include Land Near a National Wildlife Refuge.--Section 
     2031(c)(8)(A)(i)(II) (defining land subject to a qualified 
     conservation easement) is amended--
       (1) by inserting ``, national wildlife refuge,'' after 
     ``national park'', and
       (2) by inserting ``, refuge,'' after ``such a park''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to estates of decedents dying after December 31, 
     2000.

     SEC. 714. EXCLUSION OF 50 PERCENT OF GAIN ON SALES OF LAND OR 
                   INTERESTS IN LAND OR WATER TO ELIGIBLE ENTITIES 
                   FOR CONSERVATION PURPOSES.

       (a) In General.--Part I of subchapter P of chapter 1 
     (relating to treatment of capital gains) is amended by adding 
     at the end the following new section:

     ``SEC. 1203. 50-PERCENT EXCLUSION OF GAIN ON SALES OF LAND OR 
                   INTERESTS IN LAND OR WATER TO ELIGIBLE ENTITIES 
                   FOR CONSERVATION PURPOSES.

       ``(a) Exclusion.--Gross income shall not include 50 percent 
     of any gain from the sale of land or an interest in land or 
     water (determined without regard to any improvements) to an 
     eligible entity if--
       ``(1) such land or interest in land or water was owned by 
     the taxpayer or a member of the taxpayer's family (as defined 
     in section 2032A(e)(2)) at all times during the 3-year period 
     ending on the date of the sale, and
       ``(2) such land or interest in land or water is being 
     acquired by an eligible entity which provides the taxpayer, 
     at the time of acquisition, a written letter of intent which 
     shall include the following statement: `The purchaser's 
     intent is that this acquisition will serve 1 or more of the 
     conservation purposes specified in clause (i), (ii), or (iii) 
     of section 170(h)(4)(A).'
       ``(b) Eligible Entity.--For purposes of this section, the 
     term `eligible entity' means--
       ``(1) any agency of the United States or of any State or 
     local government, or
       ``(2) any other organization that--
       ``(A) is organized and at all times operated principally 
     for 1 or more of the conservation purposes specified in 
     clause (i), (ii), or (iii) of section 170(h)(4)(A),
       ``(B) is described in section 501(c)(3) and exempt from tax 
     under section 501(a), and
       ``(C)(i) meets the requirements of section 509(a)(2), or
       ``(ii) meets the requirements of section 509(a)(3) and is 
     controlled by an organization described in section 509(a)(2).
       ``(c) Stock in Holding Corporations.--For purposes of this 
     section, the term `land or an interest in land or water' 
     shall include stock in any corporation, if the fair market 
     value of the corporation's land or interests in land or water 
     equals or exceeds 90 percent of the fair market value of all 
     of such corporation's assets at all times during the 3-year 
     period ending on the date of the sale.''
       (b) Clerical Amendment.--The table of sections for part I 
     of subchapter P of chapter 1 of the Internal Revenue Code of 
     1986 is amended by adding at the end the following new item:

``Sec. 1203. 50-percent exclusion of gain on sales of land or interests 
              in land or water to eligible entities for conservation 
              purposes.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to sales occurring in taxable years beginning 
     after December 31, 2000.

                Subtitle C--Alternative Fuels Incentives

     SEC. 721. EXTENSION AND EXPANSION OF CREDIT FOR PURCHASE OF 
                   ELECTRIC VEHICLES.

       (a) Modified Credit for Vehicles Which Meet Certain Range 
     Requirements.--Section 30(a) (relating to allowance of 
     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 
     an amount equal to the sum of--
       ``(A) 10 percent of the cost of any qualified electric 
     vehicle placed in service by the taxpayer during the taxable 
     year, plus
       ``(B) in the case of any such vehicle also meeting the 
     requirement described in paragraph (2), $5,000.
       ``(2) Range requirement.--The requirement described in this 
     paragraph is a driving range of at least 100 miles--
       ``(A) on a single charge of the vehicle's rechargeable 
     batteries, fuel cells, or other portable source of electrical 
     current, and
       ``(B) measured pursuant to the urban dynamometer schedules 
     under appendix I to part 86 of title 40, Code of Federal 
     Regulations.''
       (b) Credit Extended Through 2010.--
       (1) In general.--Section 30(e) (relating to termination) is 
     amended to read as follows:
       ``(e) Termination.--This section shall not apply to any 
     property placed in service after December 31, 2010.''
       (2) Conforming amendments.--Section 30(b)(2) (relating to 
     phaseout) is amended--
       (A) by striking ``2002'' in subparagraph (A) and inserting 
     ``2008'',
       (B) by striking ``2003'' in subparagraph (B) and inserting 
     ``2009'', and
       (C) by striking ``2004'' in subparagraph (C) and inserting 
     ``2010''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to property placed in service in taxable years 
     beginning after December 31, 2000.

     SEC. 722. ADDITIONAL DEDUCTION FOR COST OF INSTALLATION OF 
                   ALTERNATIVE FUELING STATIONS.

       (a) In General.--Subparagraph (A) of section 179A(b)(2) 
     (relating to qualified clean-

[[Page 18275]]

     fuel vehicle refueling property) is amended to read as 
     follows:
       ``(A) In general.--The aggregate cost which may be taken 
     into account under subsection (a)(1)(B) with respect to 
     qualified clean-fuel vehicle refueling property placed in 
     service during the taxable year at a location shall not 
     exceed the sum of--
       ``(i) with respect to costs not described in clause (ii), 
     the excess (if any) of--

       ``(I) $100,000, over
       ``(II) the aggregate amount of such costs taken into 
     account under subsection (a)(1)(B) by the taxpayer (or any 
     related person or predecessor) with respect to property 
     placed in service at such location for all preceding taxable 
     years, plus

       ``(ii) the lesser of--

       ``(I) the cost of the installation of such property, or
       ``(II) $30,000.''.

       (b) Effective Date.--The amendment made by this section 
     shall apply to property placed in service in taxable years 
     beginning after December 31, 2000.

     SEC. 723. CREDIT FOR RETAIL SALE OF CLEAN BURNING FUELS AS 
                   MOTOR VEHICLE FUEL.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits) is amended 
     by inserting after section 40 the following:

     ``SEC. 40A. CREDIT FOR RETAIL SALE OF CLEAN BURNING FUELS AS 
                   MOTOR VEHICLE FUEL.

       ``(a) General Rule.--For purposes of section 38, the clean 
     burning fuel retail sales credit of any taxpayer for any 
     taxable year is 15 cents for each gasoline gallon equivalent 
     of clean burning fuel sold at retail by the taxpayer during 
     such year as a fuel to propel any qualified motor vehicle.
       ``(b) Definitions.--For purposes of this section--
       ``(1) Clean burning fuel.--The term `clean burning fuel' 
     means natural gas, compressed natural gas, liquefied natural 
     gas, liquefied petroleum gas, hydrogen, and any liquid at 
     least 85 percent of which consists of methanol.
       ``(2) Gasoline gallon equivalent.--The term `gasoline 
     gallon equivalent' means, with respect to any clean burning 
     fuel, the amount (determined by the Secretary) of such fuel 
     having a Btu content of 114,000.
       ``(3) Qualified motor vehicle.--The term `qualified motor 
     vehicle' means any motor vehicle (as defined in section 
     179A(e)) which meets any applicable Federal or State 
     emissions standards with respect to each fuel by which such 
     vehicle is designed to be propelled.
       ``(4) Sold at retail.--
       ``(A) In general.--The term `sold at retail' means the 
     sale, for a purpose other than resale, after manufacture, 
     production, or importation.
       ``(B) Use treated as sale.--If any person uses clean 
     burning fuel as a fuel to propel any qualified motor vehicle 
     (including any use after importation) before such fuel is 
     sold at retail, then such use shall be treated in the same 
     manner as if such fuel were sold at retail as a fuel to 
     propel such a vehicle by such person.
       ``(c) No Double Benefit.--The amount of the credit 
     determined under subsection (a) shall be reduced by the 
     amount of any deduction or credit allowable under this 
     chapter for fuel taken into account in computing the amount 
     of such credit.
       ``(d) Termination.--This section shall not apply to any 
     fuel sold at retail after December 31, 2007.''.
       (b) Credit Treated as Business Credit.--Section 38(b) 
     (relating to current year business credit) is amended by 
     striking ``plus'' at the end of paragraph (11), by striking 
     the period at the end of paragraph (12) and inserting ``, 
     plus'', and by adding at the end the following:
       ``(13) the clean burning fuel retail sales credit 
     determined under section 40A(a).''.
       (c) Transitional Rule.--Section 39(d) (relating to 
     transitional rules) is amended by adding at the end the 
     following:
       ``(9) No carryback of section 40A credit before effective 
     date.--No portion of the unused business credit for any 
     taxable year which is attributable to the clean burning fuel 
     retail sales credit determined under section 40A(a) may be 
     carried back to a taxable year ending before January 1, 
     1999.''.
       (d) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1 is amended by 
     inserting after the item relating to section 40 the 
     following:

``Sec. 40A. Credit for retail sale of clean burning fuels as motor 
              vehicle fuel.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to fuel sold at retail in taxable years beginning 
     after December 31, 2000.

                      Subtitle C--Other Provisions

     SEC. 731. EXPANSION OF SECTION 29 TAX CREDIT.

       (a) Placed-in-Service Date.--Section 29(g)(1)(A) is amended 
     by striking ``July 1, 1998'' and inserting ``the date which 
     is 8 months after the date of the enactment of the Tax and 
     Public Debt Reduction Act of 1999''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to production after the date of the enactment of 
     this Act.

     SEC. 732. UNIFORM DOLLAR LIMITATION FOR ALL TYPES OF 
                   TRANSPORTATION FRINGE BENEFITS.

       (a) In General.--Paragraph (2) of section 132(f) (relating 
     to qualified transportation fringe) is amended to read as 
     follows:
       ``(2) Limitation on exclusion.--The aggregate amount of the 
     fringe benefits which are provided by an employer to any 
     employee and which may be excluded from gross income under 
     subsection (a)(5) shall not exceed $175 per month.''
       (b) Conforming Amendment to Inflation Adjustment.--Section 
     132(f)(6)(A) (relating to inflation adjustment) is amended by 
     striking ``the dollar amounts contained in subparagraphs (A) 
     and (B) of paragraph (2)'' and inserting ``the dollar amount 
     contained in paragraph (2)''.
       (c) Additional Conforming Amendment.--Section 9010 of the 
     Transportation Equity Act for the 21st Century is amended by 
     striking subsection (c).
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.

               TITLE VIII--SAVINGS AND PENSION PROVISIONS

           Subtitle A--Expanding Coverage for Small Business

     SEC. 801. PLAN LOANS FOR SUBCHAPTER S OWNERS, PARTNERS, AND 
                   SOLE PROPRIETORS.

       (a) Amendment to 1986 Code.--Subparagraph (B) of section 
     4975(f)(6) (relating to exemptions not to apply to certain 
     transactions) is amended by adding at the end the following 
     new clause:
       ``(iii) Loan exception.--For purposes of subparagraph 
     (A)(i), the term `owner-employee' shall only include a person 
     described in subclause (II) or (III) of clause (i).''
       (b) Amendment to ERISA.--Section 408(d)(2) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1108(d)(2)) 
     is amended by adding at the end the following new 
     subparagraph:
       ``(C) For purposes of paragraph (1)(A), the term `owner-
     employee' shall only include a person described in clause 
     (ii) or (iii) of subparagraph (A).''
       (c) Effective Date.--The amendments made by this section 
     shall apply to loans made after December 31, 2000.

     SEC. 802. CONTRIBUTIONS TO IRAS THROUGH PAYROLL DEDUCTIONS.

       (a) Definitions.--For purposes of this section--
       (1) Contribution certificate.--The term ``contribution 
     certificate'' means a certificate submitted by an employee to 
     the employee's employer which--
       (A) identifies the employee by name, address, and social 
     security number,
       (B) identifies the individual retirement plan to which the 
     employee wishes to make contributions through payroll 
     deductions, and
       (C) identifies the amount of such contributions, not to 
     exceed the amount allowed under section 408 of the Internal 
     Revenue Code of 1986 to an individual retirement plan for 
     such year.
       (2) Employee.--The term ``employee'' does not include an 
     employee as defined in section 401(c)(1) of such Code.
       (3) Individual retirement plans.--The term ``individual 
     retirement plan'' has the meaning given the term by section 
     7701(a)(37) of the Internal Revenue Code of 1986.
       (4) Secretary.--The term ``Secretary'' means the Secretary 
     of the Treasury.
       (b) Establishment of Payroll Deduction System.--An employer 
     may establish a system under which employees, through 
     employer payroll deductions, may make contributions to 
     individual retirement plans. An employer shall not incur any 
     liability under title I of the Employee Retirement Income 
     Security Act of 1974 in providing for such a system.
       (c) Contributions to Individual Retirement Plans.--
       (1) In general.--The system established under subsection 
     (b) shall provide that contributions made to an individual 
     retirement plan for any taxable year are--
       (A) contributions through employer payroll deductions, and
       (B) if the employer so elects, additional contributions by 
     the employee which, when added to contributions under 
     subparagraph (A), do not exceed the amount allowed under 
     section 408 of the Internal Revenue Code of 1986 for the 
     taxable year.
       (2) Employer payroll deductions.--
       (A) In general.--The system established under subsection 
     (b) shall provide that an employee may establish and maintain 
     an individual retirement plan simply by--
       (i) completing a contribution certificate, and
       (ii) submitting such certificate to the employee's employer 
     in the manner provided under subparagraph (D).
       (B) Change of amounts.--An employee establishing and 
     maintaining an individual retirement plan under subparagraph 
     (A) may change the amount of an employer payroll deduction in 
     the same manner as under subparagraph (A).
       (C) Simplified forms.--
       (i) Contribution certificate.--The Secretary shall develop 
     a model contribution certificate for purposes of this 
     paragraph--

[[Page 18276]]

       (I) which is written in a clear and easily understandable 
     manner, and
       (II) the completion of which by an employee will constitute 
     the establishment of an individual retirement plan and the 
     request for employer payroll deductions or changes in such 
     deductions.

       (ii) Availability.--The Secretary shall make available to 
     all employees and employers the forms developed under this 
     subparagraph, and shall include with such forms easy to 
     understand explanatory materials.
       (D) Use of certificate.--Each employer electing to adopt a 
     system under subsection (b) shall, upon receipt of a 
     contribution certificate from an employee, deduct the 
     appropriate contribution as determined by such certificate 
     from the employee's wages in equal amounts during the 
     remaining payroll periods for the taxable year and shall 
     remit such amounts for investment in the employee's 
     individual retirement plan not later than the close of the 
     30-day period following the last day of the month in which 
     such payroll period occurs.
       (E) Failure to remit payroll deductions.--For purposes of 
     the Internal Revenue Code of 1986, any amount which an 
     employer fails to remit on behalf of an employee pursuant to 
     a contribution certificate of such employee shall not be 
     allowed as a deduction to the employer under such Code.
       (d) Additional Information.--
       (1) In general.--The system established under subsection 
     (b) shall provide for the furnishing of information to 
     employees of the opportunity of establishing individual 
     retirement plans and of transferring amounts to such plans.
       (2) Investment information.--The employer shall also make 
     available to employees information on how to make informed 
     investment decisions and how to achieve retirement 
     objectives.
       (3) Information not investment advice.--Information 
     provided under this subsection shall not be treated as 
     investment advice for purposes of any Federal or State law.

     SEC. 803. MODIFICATION OF TOP-HEAVY RULES.

       (a) Distributions During Last Year Before Determination 
     Date Taken Into Account.--Section 416(g) is amended--
       (1) in paragraph (3)--
       (A) by striking ``last 5 years'' in the heading and 
     inserting ``last year before determination date'', and
       (B) in the matter following subparagraph (B), by striking 
     ``5-year period'' and inserting ``1-year period'', and
       (2) in paragraph (4)(E)--
       (b) Requirements for Qualification.--Clause (ii) of section 
     401(a)(10)(B) (relating to requirements for qualifications 
     for top-heavy plans) is amended by adding at the end the 
     following new flush sentence:

     ``The preceding sentence shall not apply to a plan if the 
     plan is not top-heavy and if it is not reasonable to expect 
     that the plan will become a top-heavy plan.''
       (c) Frozen Plan Exempt From Minimum Benefit Requirement.--
       (1) In general.--Subparagraph (C) of section 416(c)(1) 
     (relating to defined benefit plans) is amended--
       (A) in clause (i), by striking ``clause (ii)'' and 
     inserting ``clause (ii) or (iii)'', and
       (B) by adding at the end the following:
       ``(iii) Exception for frozen plan.--For purposes of 
     determining an employee's years of service with the employer, 
     any service with the employer shall be disregarded to the 
     extent that such service occurs during a plan year when the 
     plan benefits (within the meaning of section 410(b)) no 
     employee or former employee.''
       (2) Conforming amendment.--Subparagraph (A) of section 
     415(b)(5) is amended by adding at the end the following: ``An 
     employee shall not be credited with a year of participation 
     in a defined benefit plan for any year in which the plan does 
     not benefit (within the meaning of section 410(b)) such 
     employee.''

     SEC. 804. CREDIT FOR SMALL EMPLOYER PENSION PLAN 
                   CONTRIBUTIONS AND START-UP COSTS.

       (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. 45D. SMALL EMPLOYER PENSION PLAN CREDIT.

       ``(a) General Rule.--For purposes of section 38, in the 
     case of an eligible employer, the small employer pension plan 
     credit determined under this section for any taxable year is 
     an amount equal to the sum of--
       ``(1) 25 percent of the qualified employer contributions of 
     the taxpayer for the taxable year, and
       ``(2) 50 percent of the qualified start-up costs paid or 
     incurred by the taxpayer during the taxable year.
       ``(b) Limitations.--
       ``(1) Limits on contributions.--For purposes of subsection 
     (a)(1)--
       ``(A) qualified employer contributions may only be taken 
     into account for each of the first 3 taxable years ending 
     after the date the employer establishes the qualified 
     employer plan to which the contribution is made, and
       ``(B) the amount of the qualified employer contributions 
     taken into account with respect to any qualified employee for 
     any such taxable year shall not exceed 3 percent of the 
     compensation (as defined in section 414(s)) of the qualified 
     employee for such taxable year.
       ``(2) Limits on start-up costs.--The amount of the credit 
     determined under subsection (a)(2) for any taxable year shall 
     not exceed--
       ``(A) $2,000 for the first taxable year ending after the 
     date the employer established the qualified employer plan to 
     which such costs relate,
       ``(B) $1,000 for each of the second and third such taxable 
     years, and
       ``(C) zero for each taxable year thereafter.
       ``(c) 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--
       ``(i) for purposes of subsection (a)(1), 25 employees, and
       ``(ii) for purposes of subsection (a)(2), 100 employees,

     who received at least $5,000 of compensation from the 
     employer for the preceding year.
       ``(B) 2-year grace period.--An eligible employer who 
     establishes and maintains a qualified employer plan for 1 or 
     more years and who fails to be an eligible employer for any 
     subsequent year shall be treated as an eligible employer for 
     the 2 years following the last year the employer was an 
     eligible employer.
       ``(C) 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 
     and each 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) Qualified employer contributions.--
       ``(A) In general.--The term `qualified employer 
     contributions' means, with respect to any taxable year, any 
     employer contributions made on behalf of a qualified employee 
     to a qualified employer plan for a plan year ending with or 
     within the taxable year.
       ``(B) Employer contributions.--The term `employer 
     contributions' shall not include any elective deferral 
     (within the meaning of section 402(g)(3)).
       ``(3) Qualified employee.--The term `qualified employee' 
     means an individual who--
       ``(A) is eligible to participate in the qualified employer 
     plan to which the employer contributions are made, and
       ``(B) is not a highly compensated employee (within the 
     meaning of section 414(q)) for the year for which the 
     contribution is made.
       ``(4) Qualified start-up costs.--The term `qualified start-
     up costs' means any ordinary and necessary expenses of an 
     eligible employer which are paid or incurred in connection 
     with--
       ``(A) the establishment or maintenance of a qualified 
     employer plan in which qualified employees are eligible to 
     participate, and
       ``(B) providing educational information to employees 
     regarding participation in such plan and the benefits of 
     establishing an investment plan.
       ``(5) Qualified employer plan.--The term `qualified 
     employer plan' has the meaning given such term in section 
     4972(d).
       ``(d) Special Rules.--
       ``(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 qualified employer plans of an employer shall be 
     treated as a single qualified employer plan.
       ``(2) Disallowance of deduction.--No deduction shall be 
     allowable under this chapter for any qualified start-up costs 
     or qualified contributions for which a credit is 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) is 
     amended by striking ``plus'' at the end of paragraph (11), by 
     striking the period at the end of paragraph (12) and 
     inserting ``, plus'', and by adding at the end the following 
     new paragraph:
       ``(13) in the case of an eligible employer (as defined in 
     section 45D(c)), the small employer pension plan credit 
     determined under section 45D(a).''
       (c) Portion of Credit Refundable.--Section 38(c) (relating 
     to limitation based on amount of tax) is amended by adding at 
     the end the following new paragraph:
       ``(4) Portion of small employer pension plan credit 
     refundable.--
       ``(A) In general.--In the case of the small employer 
     pension plan credit under subsection (b)(13), the aggregate 
     credits allowed under subpart C shall be increased by the 
     lesser of--
       ``(i) the credit which would be allowed without regard to 
     this paragraph and the limitation under paragraph (1), or
       ``(ii) the amount by which the aggregate amount of credits 
     allowed by this section

[[Page 18277]]

     (without regard to this paragraph) would increase if the 
     limitation under paragraph (1) were increased by the 
     taxpayer's applicable payroll taxes for the taxable year.
       ``(B) Treatment of credit.--The amount of the credit 
     allowed under this paragraph shall not be treated as a credit 
     allowed under this subpart and shall reduce the amount of the 
     credit allowed under this section for the taxable year.
       ``(C) Applicable payroll taxes.--For purposes of this 
     paragraph--
       ``(i) In general.--The term `applicable payroll taxes' 
     means, with respect to any taxpayer for any taxable year--

       ``(I) the amount of the taxes imposed by sections 3111 and 
     3221(a) on compensation paid by the taxpayer during the 
     taxable year,
       ``(II) 50 percent of the taxes imposed by section 1401 on 
     the self-employment income of the taxpayer during the taxable 
     year, and
       ``(III) 50 percent of the taxes imposed by section 
     3211(a)(1) on amounts received by the taxpayer during the 
     calendar year in which the taxable year begins.

       ``(ii) Agreements regarding foreign affiliates.--Section 
     24(d)(5)(C) shall apply for purposes of clause (i).''
       (d) Conforming Amendment.--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. 45D. Small employer pension plan credit.''
       (e) Effective Date.--The amendments made by this section 
     shall apply to costs paid or incurred or contributions made 
     in connection with qualified employer plans established after 
     December 31, 2000.

     SEC. 805. INCREASING LIMITS FOR DEFERRALS TO SIMPLE PLANS.

       (a) Simple Retirement Accounts.--Paragraph (2)(A)(ii) of 
     section 408(p) (relating to simple retirement accounts) is 
     amended by striking ``$6,000'' and inserting ``$8,000''.
       (b) Nondiscrimination Tests.--Section 401(k)(11)(B)(i)(I) 
     is amended by striking ``$6,000'' and inserting ``$8,000''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2000.

     SEC. 806. ELECTIVE DEFERRALS NOT TAKEN INTO ACCOUNT FOR 
                   PURPOSES OF LIMITS.

       (a) In General.--Section 404, as amended by section 803, is 
     amended by adding at the end the following new subsection:
       ``(o) Elective Deferrals Not Taken Into Account for 
     Purposes of Limits.--Elective deferrals (as defined in 
     section 402(g)(3)) shall not be subject to any limitations 
     described in this section (other than subsection (a)), and 
     such elective deferrals shall not be taken into account in 
     applying such limitations to any other contributions.''
       (c) Effective Date.--The amendment made by this section 
     shall apply to years beginning after December 31, 2000.

      Subtitle B--Increasing Pension Access and Fairness for Women

     SEC. 811. 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 to read as follows:
       ``(B) the greater of 50 percent of the participant's 
     compensation or $10,000.''
       (2) Application to section 403(b).--Section 403(b) is 
     amended--
       (A) by striking ``the exclusion allowance for such taxable 
     year'' in paragraph (1) and inserting ``the applicable limit 
     under section 415'', and
       (B) by striking paragraph (2).
       (3) Nondiscrimination testing.--
       (A) Section 401(k)(3)(A) is amended by adding at the end 
     the following: ``The actual deferral percentage of eligible 
     employees other than highly compensated employees shall be 
     computed without regard to contributions in excess of 25 
     percent of compensation.''
       (B) Section 401(m)(3) is amended by adding at the end the 
     following: ``The contribution percentage of eligible 
     employees other than highly compensated employees shall be 
     computed without regard to contributions in excess of 25 
     percent of compensation.''
       (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 on December 31, 2000)''.
       (B) Section 403(b)(3) is amended by inserting ``or any 
     amount received by a former employee after the 5th taxable 
     year following the taxable year in which such employee was 
     terminated'' before the period at the end of the second 
     sentence.
       (C) Section 404(a)(10)(B) is amended by striking ``, the 
     exclusion allowance under section 403(b)(2),''.
       (D) 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)''.
       (E) 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).''
       (F) Section 415(c) is amended by striking paragraph (4) and 
     by redesignating paragraph (6) as paragraph (4).
       (G) Section 415(c) is amended by striking paragraph (7) and 
     inserting the following new paragraph:
       ``(5) 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, 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).''
       (H) Section 415(e)(3)(B) is amended--
       (i) by striking ``subsection (c)(6)'' in clause (i) and 
     inserting ``subsection (c)(4)'', and
       (ii) by striking ``subsection (c)(7)'' in clause (ii)(II) 
     and inserting ``subsection (c)(5)''.
       (I) Section 415(e)(5) is amended--
       (i) by striking ``(except in the case of a participant who 
     has elected under subsection (c)(4)(D) to have the provisions 
     of subsection (c)(4)(C) apply)'', and
       (ii) by striking the last sentence.
       (J) Section 415(n)(2)(B) is amended by striking 
     ``percentage''.
       (K) Subparagraph (B) of section 402(g)(7) is amended by 
     inserting before the period at the end the following: ``(as 
     in effect on the date of the enactment of the Pension 
     Coverage and Portability Act)''.
       (b) Special Rules for Sections 403(b) and 408.--Subsection 
     (k) of section 415 is amended by adding at the end the 
     following new paragraph:
       ``(4) Special rules for annuity contracts and simplified 
     pensions.--For purposes of this section--
       ``(A) Annuity contracts.--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)).
       ``(B) Simplified plans.--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.''
       (c) Deferred Compensation Plans of State and Local 
     Governments and Tax-Exempt Organizations.--Subparagraph (B) 
     of section 457(b)(2) (relating to salary limitation on 
     eligible deferred compensation plans) is amended by striking 
     ``33\1/3\ percent'' and inserting ``100 percent''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2000.

     SEC. 812. FASTER VESTING OF CERTAIN EMPLOYER MATCHING 
                   CONTRIBUTIONS.

       (a) Amendments to 1986 Code.--Section 411(a) (relating to 
     minimum vesting standards) is amended--
       (1) in paragraph (2), by striking ``A plan'' and inserting 
     ``Except as provided in paragraph (12), a plan'', and
       (2) by adding at the end the following:
       ``(12) Faster vesting for matching contributions.--In the 
     case of matching contributions (as defined in section 
     401(m)(4)(A)), paragraph (2) shall be applied--
       ``(A) by substituting `3 years' for `5 years' in 
     subparagraph (A), and
       ``(B) by substituting the following table for the table 
     contained in subparagraph (B):

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

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

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

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

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

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

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

[[Page 18278]]

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

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

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

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

       (c) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to contributions 
     for plan years beginning after December 31, 2000.
       (2) Collective bargaining agreements.--In the case of a 
     plan maintained pursuant to 1 or more collective bargaining 
     agreements between employee representatives and 1 or more 
     employers ratified by the date of enactment of this Act, the 
     amendments made by this section shall not apply to 
     contributions on behalf of employees covered by any such 
     agreement for plan years beginning before the earlier of--
       (A) the later of--
       (i) the date on which the last of such collective 
     bargaining agreements terminates (determined without regard 
     to any extension thereof on or after such date of enactment), 
     or
       (ii) January 1, 2001, or
       (B) January 1, 2005.
       (3) Service required.--With respect to any plan, the 
     amendments made by this section shall not apply to any 
     employee before the date that such employee has 1 hour of 
     service under such plan in any plan year to which the 
     amendments made by this section apply.

     SEC. 813. DEFERRED ANNUITIES FOR SURVIVING SPOUSES OF FEDERAL 
                   EMPLOYEES.

       (a) In General.--Section 8341 of title 5, United States 
     Code, is amended--
       (1) in subsection (h)(1), by striking ``section 8338(b) of 
     this title'' and inserting ``section 8338(b), and a former 
     spouse of a deceased former employee who separated from the 
     service with title to a deferred annuity under section 8338 
     (if they were married to one another prior to the date of 
     separation),''; and
       (2) by adding at the end the following:
       ``(j)(1) If a former employee dies after having separated 
     from the service with title to a deferred annuity under 
     section 8338 but before having established a valid claim for 
     annuity, and is survived by a spouse to whom married on the 
     date of separation, the surviving spouse may elect to 
     receive--
       ``(A) an annuity, commencing on what would have been the 
     former employee's 62d birthday, equal to 55 percent of the 
     former employee's deferred annuity;
       ``(B) an annuity, commencing on the day after the date of 
     death of the former employee, such that, to the extent 
     practicable, the present value of the future payments of the 
     annuity would be actuarially equivalent to the present value 
     of the future payments under subparagraph (A) as of the day 
     after the former employee's death; or
       ``(C) the lump-sum credit, if the surviving spouse is the 
     individual who would be entitled to the lump-sum credit and 
     if such surviving spouse files application therefor.
       ``(2) An annuity under this subsection and the right 
     thereto terminate on the last day of the month before the 
     surviving spouse remarries before becoming 55 years of age, 
     or dies.''
       (b) Corresponding Amendment for FERS.--Section 8445(a) of 
     title 5, United States Code, is amended--
       (1) by striking ``(or of a former employee or'' and 
     inserting ``(or of a former''; and
       (2) by striking ``annuity)'' and inserting ``annuity, or of 
     a former employee who dies after having separated from the 
     service with title to a deferred annuity under section 8413 
     but before having established a valid claim for annuity (if 
     such former spouse was married to such former employee prior 
     to the date of separation))''.
       (c) Effective Date.--The amendments made by this section 
     shall apply with respect to surviving spouses and former 
     spouses (whose marriage, in the case of the amendments made 
     by subsection (a), terminated after May 6, 1985) of former 
     employees who die after December 31, 2000.

     SEC. 814. CLARIFICATION OF TAX TREATMENT OF DIVISION OF 
                   SECTION 457 PLAN BENEFITS UPON DIVORCE.

       (a) In General.--Section 414(p)(11) (relating to 
     application of rules to governmental and church plans) is 
     amended--
       (1) by inserting ``or an eligible deferred compensation 
     plan (within the meaning of section 457(b))'' after 
     ``subsection (e))'', and
       (2) in the heading, by striking ``governmental and church 
     plans'' and inserting ``certain other plans''.
       (b) Waiver of Certain Distribution Requirements.--Paragraph 
     (10) of section 414(p) is amended by striking ``and section 
     409(d)'' and inserting ``section 409(d), and section 
     457(d)''.
       (c) Tax Treatment of Payments From a Section 457 Plan.--
     Subsection (p) of section 414 is amended by redesignating 
     paragraph (12) as paragraph (13) and inserting after 
     paragraph (11) the following new paragraph:
       ``(12) Tax treatment of payments from a section 457 plan.--
     If a distribution or payment from an eligible deferred 
     compensation plan described in section 457(b) is made 
     pursuant to a qualified domestic relations order, rules 
     similar to the rules of section 402(e)(1)(A) shall apply to 
     such distribution or payment.''
       (d) Effective Date.--The amendments made by this section 
     shall apply to transfers, distributions, and payments made 
     after December 31, 2000.

     SEC. 815. SPOUSES' RIGHT TO KNOW PROPOSAL.

       (a) Spouse's Right To Know Distribution Information.--
       (1) Amendment of internal revenue code.--Section 417(a)(3) 
     (relating to plan to provide written explanations) is amended 
     by adding at the end the following new subparagraph:
       ``(C) Explanation to spouse.--At the time a plan provides a 
     participant with a written explanation under subparagraph (A) 
     or (B), such plan shall provide a copy of such explanation to 
     such participant's spouse. If the last known address of the 
     spouse is the same as the last known address of the 
     participant, the requirement of the preceding sentence shall 
     be treated as met if the copy referred to in the preceding 
     sentence is included in a single mailing made to such address 
     and addressed to both such participant and spouse.''
       (2) Amendment of erisa.--Paragraph (3) of section 205(c) of 
     Employee Retirement Income Security Act of 1974 is amended by 
     adding at the end the following new subparagraph:
       ``(C) Explanation to spouse.--At the time a plan provides a 
     participant with a written explanation under subparagraph (A) 
     or (B), such plan shall provide a copy of such explanation to 
     such participant's spouse. If the last known address of the 
     spouse is the same as the last known address of the 
     participant, the requirement of the preceding sentence shall 
     be treated as met if the copy referred to in the preceding 
     sentence is included in a single mailing made to such address 
     and addressed to both such participant and spouse.''
       (b) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2000.

          Subtitle C--Increasing Portability of Pension Plans

     SEC. 821. ROLLOVERS ALLOWED AMONG VARIOUS TYPES OF PLANS.

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

     Any amount transferred in a direct trustee-to-trustee 
     transfer in accordance with section 401(a)(31) shall not be 
     includible in gross income for the taxable year of 
     transfer.''
       (D) Withholding.--
       (i) Paragraph (12) of section 3401(a) is amended by adding 
     at the end the following:
       ``(E) under or to an eligible deferred compensation plan 
     which, at the time of such payment, is a plan described in 
     section 457(b) maintained by an employer described in section 
     457(e)(1)(A); or''.
       (ii) Paragraph (3) of section 3405(c) is amended to read as 
     follows:
       ``(3) Eligible rollover distribution.--For purposes of this 
     subsection, the term `eligible rollover distribution' has the 
     meaning given such term by section 402(f)(2)(A).''
       (iii) Liability for withholding.--Subparagraph (B) of 
     section 3405(d)(2) is amended by striking ``or'' at the end 
     of clause (ii), by striking the period at the end of clause 
     (iii)

[[Page 18279]]

     and inserting ``, or'', and by adding at the end the 
     following:
       ``(iv) section 457(b).''
       (2) Rollovers to section 457 plans.--
       (A) In general.--Section 402(c)(8)(B) (defining eligible 
     retirement plan) is amended by striking ``and'' at the end of 
     clause (iii), by striking the period at the end of clause 
     (iv) and inserting ``, and'', and by inserting after clause 
     (iv) the following new clause:
       ``(v) an eligible deferred compensation plan described in 
     section 457(b) of an employer described in section 
     457(e)(1)(A).''
       (B) Separate accounting.--Section 402(c) is amended by 
     adding at the end the following new paragraph:
       ``(11) Separate accounting.--Unless a plan described in 
     clause (v) of paragraph (8)(B) agrees to separately account 
     for amounts rolled into such plan from eligible retirement 
     plans not described in such clause, the plan described in 
     such clause may not accept transfers or rollovers from such 
     retirement plans.''
       (C) 10 percent additional tax.--Subsection (t) of section 
     72 (relating to 10-percent additional tax on early 
     distributions from qualified retirement plans) is amended by 
     adding at the end the following new paragraph:
       ``(9) Special rule for rollovers to section 457 plans.--For 
     purposes of this subsection, a distribution from an eligible 
     deferred compensation plan (as defined in section 457(b)) of 
     an employer described in section 457(e)(1)(A) shall be 
     treated as a distribution from a qualified retirement plan 
     described in 4974(c)(1) to the extent that such distribution 
     is attributable to an amount transferred to an eligible 
     deferred compensation plan from a qualified retirement plan 
     (as defined in section 4974(c)).''
       (b) Allowance of Rollovers From and to 403(b) Plans.--
       (1) Rollovers from section 403(b) plans.--Section 
     403(b)(8)(A)(ii) (relating to rollover amounts) is amended by 
     striking ``such distribution'' and all that follows and 
     inserting ``such distribution to an eligible retirement plan 
     described in section 402(c)(8)(B), and''.
       (2) Rollovers to section 403(b) plans.--Section 
     402(c)(8)(B) (defining eligible retirement plan), as amended 
     by subsection (a), is amended by striking ``and'' at the end 
     of clause (iv), by striking the period at the end of clause 
     (v) and inserting 
     ``, and'', and by inserting after clause (v) the following 
     new clause:
       ``(vi) an annuity contract described in section 403(b).''
       (c) Expanded Explanation to Recipients of Rollover 
     Distributions.--Paragraph (1) of section 402(f) (relating to 
     written explanation to recipients of distributions eligible 
     for rollover treatment) is amended by striking ``and'' at the 
     end of subparagraph (C), by striking the period at the end of 
     subparagraph (D) and inserting ``, and'', and by adding at 
     the end the following new subparagraph:
       ``(E) of the provisions under which distributions from the 
     eligible retirement plan receiving the distribution may be 
     subject to restrictions and tax consequences which are 
     different from those applicable to distributions from the 
     plan making such distribution.''
       (d) Spousal Rollovers.--Section 402(c)(9) (relating to 
     rollover where spouse receives distribution after death of 
     employee) is amended by striking ``; except that'' and all 
     that follows up to the end period.
       (e) Conforming Amendments.--
       (1) Section 72(o)(4) is amended by striking ``and 
     408(d)(3)'' and inserting ``403(b)(8), 408(d)(3), and 
     457(e)(16)''.
       (2) Section 219(d)(2) is amended by striking ``or 
     408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
       (3) Section 401(a)(31)(B) is amended by striking ``and 
     403(a)(4)'' and inserting ``, 403(a)(4), 403(b)(8), and 
     457(e)(16)''.
       (4) Subparagraph (A) of section 402(f)(2) is amended by 
     striking ``or paragraph (4) of section 403(a)'' and inserting 
     ``, paragraph (4) of section 403(a), subparagraph (A) of 
     section 403(b)(8), or subparagraph (A) of section 
     457(e)(16)''.
       (5) Paragraph (1) of section 402(f) is amended by striking 
     ``from an eligible retirement plan''.
       (6) Subparagraphs (A) and (B) of section 402(f)(1) are 
     amended by striking ``another eligible retirement plan'' and 
     inserting ``an eligible retirement plan''.
       (7) Subparagraph (B) of section 403(b)(8) is amended to 
     read as follows:
       ``(B) Certain rules made applicable.--The rules of 
     paragraphs (2) through (7) and (9) of section 402(c) and 
     section 402(f) shall apply for purposes of subparagraph (A), 
     except that section 402(f) shall be applied to the payor in 
     lieu of the plan administrator.''
       (8) Section 408(a)(1) is amended by striking ``or 
     403(b)(8)'' and inserting ``, 403(b)(8), or 457(e)(16)''.
       (9) Subparagraphs (A) and (B) of section 415(b)(2) are each 
     amended by striking ``and 408(d)(3)'' and inserting 
     ``403(b)(8), 408(d)(3), and 457(e)(16)''.
       (10) Section 415(c)(2) is amended by striking ``and 
     408(d)(3)'' and inserting ``408(d)(3), and 457(e)(16)''.
       (11) Section 4973(b)(1)(A) is amended by striking ``or 
     408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
       (f) Effective Date; Special Rule.--
       (1) Effective date.--The amendments made by this section 
     shall apply to distributions after December 31, 2000.
       (2) Special rule.--Notwithstanding any other provision of 
     law, subsections (h)(3) and (h)(5) of section 1122 of the Tax 
     Reform Act of 1986 shall not apply to any distribution from 
     an eligible retirement plan (as defined in clause (iii) or 
     (iv) of section 402(c)(8)(B) of the Internal Revenue Code of 
     1986) on behalf of an individual if there was a rollover to 
     such plan on behalf of such individual which is permitted 
     solely by reason of any amendment made by this section.

     SEC. 822. 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) the trustee 
     of which is a person which may be a trustee of an individual 
     retirement plan under section 408.''
       (b) Conforming Amendments.--
       (1) Paragraph (1) of section 403(b) is amended by striking 
     ``section 408(d)(3)(A)(iii)'' and inserting ``section 
     408(d)(3)(A)(ii)''.
       (2) Clause (i) of section 408(d)(3)(D) is amended by 
     striking ``(i), (ii), or (iii)'' and inserting ``(i) or 
     (ii)''.
       (3) Subparagraph (G) of section 408(d)(3) is amended to 
     read as follows:
       ``(G) Simple retirement accounts.--In the case of any 
     payment or distribution out of a simple retirement account 
     (as defined in subsection (p)) to which section 72(t)(6) 
     applies, this paragraph shall not apply unless such payment 
     or distribution is paid into another simple retirement 
     account.''
       (c) Effective Date; Special Rule.--
       (1) Effective date.--The amendments made by this section 
     shall apply to distributions after December 31, 2000.
       (2) Special rule.--Notwithstanding any other provision of 
     law, subsections (h)(3) and (h)(5) of section 1122 of the Tax 
     Reform Act of 1986 shall not apply to any distribution from 
     an eligible retirement plan (as defined in clause (iii) or 
     (iv) of section 402(c)(8)(B) of the Internal Revenue Code of 
     1986) on behalf of an individual if there was a rollover to 
     such plan on behalf of such individual which is permitted 
     solely by reason of the amendments made by this section.

     SEC. 823. 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)--

[[Page 18280]]

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

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

     SEC. 824. 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 333, is 
     amended by adding after subparagraph (H) the following new 
     subparagraph:
       ``(I) Waiver of 60-day requirement.--The Secretary may 
     waive the 60-day requirement under subparagraphs (A) and (D) 
     where the failure to waive such requirement would be against 
     equity or good conscience, including casualty, disaster, or 
     other events beyond the reasonable control of the individual 
     subject to such requirement.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to distributions after December 31, 2000.

     SEC. 825. TREATMENT OF FORMS OF DISTRIBUTION.

       (a) Plan Transfers.--
       (1) Amendment to internal revenue code of 1986.--Paragraph 
     (6) of section 411(d) (relating to accrued benefit not to be 
     decreased by amendment) is amended by adding at the end the 
     following:
       ``(D) Plan transfers.--
       ``(i) A defined contribution plan (in this subparagraph 
     referred to as the `transferee plan') shall not be treated as 
     failing to meet the requirements of this subsection merely 
     because the transferee plan does not provide some or all of 
     the forms of distribution previously available under another 
     defined contribution plan (in this subparagraph referred to 
     as the `transferor plan') to the extent that--

       ``(I) the forms of distribution previously available under 
     the transferor plan applied to the account of a participant 
     or beneficiary under the transferor plan that was transferred 
     from the transferor plan to the transferee plan pursuant to a 
     direct transfer rather than pursuant to a distribution from 
     the transferor plan,
       ``(II) the terms of both the transferor plan and the 
     transferee plan authorize the transfer described in subclause 
     (I),
       ``(III) the transfer described in subclause (I) was made 
     pursuant to a voluntary election by the participant or 
     beneficiary whose account was transferred to the transferee 
     plan,
       ``(IV) the election described in subclause (III) was made 
     after the participant or beneficiary received a notice 
     describing the consequences of making the election,
       ``(V) if the transferor plan provides for an annuity as the 
     normal form of distribution under the plan in accordance with 
     section 417, the transfer is made with the consent of the 
     participant's spouse (if any), and such consent meets 
     requirements similar to the requirements imposed by section 
     417(a)(2), and
       ``(VI) the transferee plan allows the participant or 
     beneficiary described in 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) 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.
       ``(iii) Clause (i) shall not apply to a transfer unless it 
     is in connection with a bona fide transaction or change in 
     employer.
       ``(E) Elimination of form of distribution.--Except to the 
     extent provided in regulations, a defined contribution plan 
     shall not be treated as failing to meet the requirements of 
     this section merely because of the elimination of a form of 
     distribution previously available thereunder. This 
     subparagraph shall not apply to the elimination of a form of 
     distribution with respect to any participant unless--
       ``(i) a single sum payment is available to such participant 
     at the same time or times as the form of distribution being 
     eliminated, and
       ``(ii) such single sum payment is based on the same or 
     greater portion of the participant's account as the form of 
     distribution being eliminated.''
       (2) Amendment to erisa.--Section 204(g) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1054(g)) is 
     amended by adding at the end the following:
       ``(4)(A) A defined contribution plan (in this subparagraph 
     referred to as the `transferee plan') shall not be treated as 
     failing to meet the requirements of this subsection merely 
     because the transferee plan does not provide some or all of 
     the forms of distribution previously available under another 
     defined contribution plan (in this paragraph referred to as 
     the `transferor plan') to the extent that--
       ``(i) the forms of distribution previously available under 
     the transferor plan applied to the account of a participant 
     or beneficiary under the transferor plan that was transferred 
     from the transferor plan to the transferee plan pursuant to a 
     direct transfer rather than pursuant to a distribution from 
     the transferor plan;
       ``(ii) the terms of both the transferor plan and the 
     transferee plan authorize the transfer described in clause 
     (i);
       ``(iii) the transfer described in clause (i) was made 
     pursuant to a voluntary election by the participant or 
     beneficiary whose account was transferred to the transferee 
     plan;
       ``(iv) the election described in clause (iii) was made 
     after the participant or beneficiary received a notice 
     describing the consequences of making the election;
       ``(v) if the transferor plan provides for an annuity as the 
     normal form of distribution under the plan in accordance with 
     section 417, the transfer is made with the consent of the 
     participant's spouse (if any), and such consent meets 
     requirements similar to the requirements imposed by section 
     417(a)(2); and
       ``(vi) the transferee plan allows the participant or 
     beneficiary described in 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.
       ``(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.
       ``(C) Subparagraph (A) shall not apply to a transfer unless 
     it is in connection with a bona fide transaction or change in 
     employer.
       ``(5) Except to the extent provided in regulations, a 
     defined contribution plan shall not be treated as failing to 
     meet the requirements of this section merely because of the 
     elimination of a form of distribution previously available 
     thereunder. This paragraph shall not apply to the elimination 
     of a form of distribution with respect to any participant 
     unless--
       ``(A) a single sum payment is available to such participant 
     at the same time or times as the form of distribution being 
     eliminated; and
       ``(B) such single sum payment is based on the same or 
     greater portion of the participant's account as the form of 
     distribution being eliminated.''
       (3) Effective date.--The amendments made by this subsection 
     shall apply to years beginning after December 31, 2000.
       (b) Regulations.--
       (1) Amendment to internal revenue code of 1986.--The last 
     sentence of paragraph (6)(B) of section 411(d) (relating to 
     accrued benefit not to be decreased by amendment) is amended 
     to read as follows: ``The Secretary may by regulations 
     provide that this subparagraph shall not apply to any plan 
     amendment that does not adversely affect the rights of 
     participants in a material manner.''
       (2) Amendment to erisa.--The last sentence of section 
     204(g)(2) of the Employee Retirement Income Security Act of 
     1974 (29 U.S.C. 1054(g)(2)) is amended to read as follows: 
     ``The Secretary of the Treasury may by regulations provide 
     that this paragraph shall not apply to any plan amendment 
     that does not adversely affect the rights of participants in 
     a material manner.''
       (3) Secretary directed.--Not later than December 31, 2001, 
     the Secretary of the Treasury is directed to issue final 
     regulations under section 411(d)(6) of the Internal Revenue 
     Code of 1986 and section 204(g)(2) of the Employee Retirement 
     Income Security Act of 1974. Such regulations shall apply to 
     plan years beginning after December 31, 2001, or such earlier 
     date as is specified by the Secretary of the Treasury.

     SEC. 826. 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

[[Page 18281]]

     plan without establishment or maintenance of another defined 
     contribution plan (other than an employee stock ownership 
     plan as defined in section 4975(e)(7)).''
       (C) Section 401(k)(10) is amended--
       (i) in subparagraph (B)--

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

       (ii) by striking subparagraph (C), and
       (iii) by striking ``or disposition of assets or 
     subsidiary'' in the heading.
       (2) Section 403(b).--
       (A) Paragraphs (7)(A)(ii) and (11)(A) of section 403(b) are 
     each amended by striking ``separates from service'' and 
     inserting ``has a severance from employment''.
       (B) The heading for paragraph (11) of section 403(b) is 
     amended by striking ``separation from service'' and inserting 
     ``severance from employment''.
       (3) Section 457.--Clause (ii) of section 457(d)(1)(A) is 
     amended by striking ``is separated from service'' and 
     inserting ``has a severance from employment''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to distributions after December 31, 2000.

     SEC. 827. PURCHASE OF SERVICE CREDIT IN GOVERNMENTAL DEFINED 
                   BENEFIT PLANS.

       (a) 403(b) Plans.--Subsection (b) of section 403 is amended 
     by adding at the end the following new paragraph:
       ``(13) Trustee-to-trustee transfers to purchase permissive 
     service credit.--No amount shall be includible in gross 
     income by reason of a direct trustee-to-trustee transfer to a 
     defined benefit governmental plan (as defined in section 
     414(d)) if such transfer is--
       ``(A) for the purchase of permissive service credit (as 
     defined in section 415(n)(3)(A)) under such plan, or
       ``(B) a repayment to which section 415 does not apply by 
     reason of subsection (k)(3) thereof.''
       (b) 457 Plans.--
       (1) Subsection (e) of section 457 is amended by adding 
     after paragraph (17) the following new paragraph:
       ``(18) Trustee-to-trustee transfers to purchase permissive 
     service credit.--No amount shall be includible in gross 
     income by reason of a direct trustee-to-trustee transfer to a 
     defined benefit governmental plan (as defined in section 
     414(d)) if such transfer is--
       ``(A) for the purchase of permissive service credit (as 
     defined in section 415(n)(3)(A)) under such plan, or
       ``(B) a repayment to which section 415 does not apply by 
     reason of subsection (k)(3) thereof.''
       (2) Section 457(b)(2) is amended by striking ``(other than 
     rollover amounts)'' and inserting ``(other than rollover 
     amounts and amounts received in a transfer referred to in 
     subsection (e)(16))''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to trustee-to-trustee transfers after December 
     31, 2000.

     SEC. 828. EMPLOYERS MAY DISREGARD ROLLOVERS FOR PURPOSES OF 
                   CASH-OUT AMOUNTS.

       (a) Qualified Plans.--
       (1) Amendment to internal revenue code of 1986.--Section 
     411(a)(11) (relating to restrictions on certain mandatory 
     distributions) is amended by adding at the end the following:
       ``(D) Special rule for rollover contributions.--A plan 
     shall not fail to meet the requirements of this paragraph if, 
     under the terms of the plan, the present value of the 
     nonforfeitable accrued benefit is determined without regard 
     to that portion of such benefit which is attributable to 
     rollover contributions (and earnings allocable thereto). For 
     purposes of this subparagraph, the term `rollover 
     contributions' means any rollover contribution under sections 
     402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and 
     457(e)(16).''
       (2) Amendment to erisa.--Section 203(e) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1053(c)) is 
     amended by adding at the end the following:
       ``(4) A plan shall not fail to meet the requirements of 
     this subsection if, under the terms of the plan, the present 
     value of the nonforfeitable accrued benefit is determined 
     without regard to that portion of such benefit which is 
     attributable to rollover contributions (and earnings 
     allocable thereto). For purposes of this subparagraph, the 
     term `rollover contributions' means any rollover contribution 
     under sections 402(c), 403(a)(4), 403(b)(8), 
     408(d)(3)(A)(ii), and 457(e)(16) of the Internal Revenue Code 
     of 1986.''
       (b) Eligible Deferred Compensation Plans.--Clause (i) of 
     section 457(e)(9)(A) is amended by striking ``such amount'' 
     and inserting ``the portion of such amount which is not 
     attributable to rollover contributions (as defined in section 
     411(a)(11)(D))''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to distributions after December 31, 2000.

       Subtitle D--Strengthening Pension Security and Enforcement

     SEC. 831. TREATMENT OF MULTIEMPLOYER PLANS UNDER SECTION 415.

       (a) Compensation Limit.--Paragraph (11) of section 415(b) 
     (relating to limitation for defined benefit plans) is amended 
     to read as follows:
       ``(11) Special limitation rule for governmental and 
     multiemployer plans.--In the case of a governmental plan (as 
     defined in section 414(d)) or a multiemployer plan (as 
     defined in section 414(f)), subparagraph (B) of paragraph (1) 
     shall not apply.''
       (b) 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 the limitations established in this 
     section. The preceding sentence shall not apply for purposes 
     of applying subsection (b)(1)(A) to a plan which is not a 
     multiemployer 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, 2000.

     SEC. 832. EXTENSION OF MISSING PARTICIPANTS PROGRAM TO 
                   MULTIEMPLOYER PLANS.

       (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 (d) and by 
     inserting after subsection (b) the following:
       ``(c) Multiemployer Plans.--The corporation shall prescribe 
     rules similar to the rules in subsection (a) for 
     multiemployer plans covered by this title that terminate 
     under section 4041A.''
       (b) Conforming Amendment.--Section 206(f) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1056(f)) is 
     amended by striking ``the plan shall provide that,''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to distributions made after final regulations 
     implementing subsection (c) of section 4050 of the Employee 
     Retirement Income Security Act of 1974 (as added by 
     subsection (a)) are prescribed.

     SEC. 833. CIVIL PENALTIES FOR BREACH OF FIDUCIARY 
                   RESPONSIBILITY.

       (a) Imposition and Amount of Penalty Made Discretionary.--
     Section 502(l)(1) of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1132(l)(1)) is amended--
       (1) by striking ``shall'' and inserting ``may'', and
       (2) by striking ``equal to'' and inserting ``not greater 
     than''.
       (b) Applicable Recovery Amount.--Section 502(l)(2) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1132(l)(2)) is amended to read as follows:
       ``(2) For purposes of paragraph (1), the term `applicable 
     recovery amount' means any amount which is recovered from (or 
     on behalf of) any fiduciary or other person with respect to a 
     breach or violation described in paragraph (1) on or after 
     the 90th day following receipt by such fiduciary or other 
     person of written notice from the Secretary of the violation, 
     whether paid voluntarily or by order of a court in a judicial 
     proceeding instituted by the Secretary under subsection 
     (a)(2) or (a)(5). The Secretary may, in the Secretary's sole 
     discretion, extend the 90-day period described in the 
     preceding sentence.''
       (c) Other Rules.--Section 502(l) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1132(l)) is amended by 
     adding at the end the following:
       ``(5) A person shall be jointly and severally liable for 
     the penalty described in paragraph (1) to the same extent 
     that such person is jointly and severally liable for the 
     applicable recovery amount on which the penalty is based.
       ``(6) No penalty shall be assessed under this subsection 
     unless the person against whom the penalty is assessed is 
     given notice and opportunity for a hearing with respect to 
     the violation and applicable recovery amount.''
       (d) Effective Date.--The amendments made by this section 
     shall apply to any action or claim, including any action or 
     claim commenced by the Secretary of Labor, pending on or 
     after the date of enactment of this Act.

     SEC. 834. FAILURE TO PROVIDE NOTICE BY DEFINED BENEFIT PLANS 
                   SIGNIFICANTLY REDUCING FUTURE BENEFIT ACCRUALS.

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

     ``SEC. 4980F. FAILURE OF DEFINED BENEFIT PLANS REDUCING 
                   BENEFIT ACCRUALS TO SATISFY NOTICE 
                   REQUIREMENTS.

       ``(a) Imposition of Tax.--There is hereby imposed a tax on 
     the failure of a large defined benefit 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

[[Page 18282]]

     with respect to any applicable individual shall be $100 for 
     each day in the noncompliance period with respect to such 
     failure.
       ``(2) Noncompliance period.--For purposes of this section, 
     the term `noncompliance period' means, with respect to any 
     failure, the period beginning on the date the failure first 
     occurs and ending on the date the failure is corrected.
       ``(3) Minimum tax for noncompliance period where failure 
     discovered after notice of examination.--Notwithstanding 
     paragraphs (1) and (2) of subsection (c)--
       ``(A) In general.--In the case of 1 or more failures with 
     respect to an applicable individual--
       ``(i) which are not corrected before the date a notice of 
     examination of income tax liability is sent to the employer, 
     and
       ``(ii) which occurred or continued during the period under 
     examination,
     the amount of tax imposed by subsection (a) by reason of such 
     failures with respect to such beneficiary shall not be less 
     than the lesser of $2,500 or the amount of tax which would be 
     imposed by subsection (a) without regard to such paragraphs.
       ``(B) Higher minimum tax where violations are more than de 
     minimis.--To the extent violations by the employer (or the 
     plan in the case of a multiemployer plan) for any year are 
     more than de minimis, subparagraph (A) shall be applied by 
     substituting `$15,000' for `$2,500' with respect to the 
     employer (or such plan).
       ``(c) Limitations on Amount of Tax.--
       ``(1) Tax not to apply where failure not discovered 
     exercising reasonable diligence.--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 none 
     of the persons referred to in subsection (d) knew, or 
     exercising reasonable diligence would have known, that the 
     failure existed.
       ``(2) Tax not to apply to failures corrected within 30 
     days.--No tax shall be imposed by subsection (a) on any 
     failure if--
       ``(A) such failure was due to reasonable cause and not to 
     willful neglect, and
       ``(B) such failure is corrected during the 30-day period 
     beginning on the first date any of the persons referred to in 
     subsection (d) knew, or exercising reasonable diligence would 
     have known, that such failure existed.
       ``(3) Overall limitation for unintentional failures.--
       ``(A) In general.--In the case of failures that are due to 
     reasonable cause and not to willful neglect, the tax imposed 
     by subsection (a) for failures during the taxable year of the 
     employer (or, in the case of a multiemployer plan, the 
     taxable year of the trust forming part of the plan) shall not 
     exceed $500,000. For purposes of the preceding sentence, all 
     multiemployer plans of which the same trust forms a part 
     shall be treated as 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 relative to the failure involved.
       ``(d) Liability for Tax.--The following shall be liable for 
     the tax imposed by subsection (a):
       ``(1) In the case of a plan other than a multiemployer 
     plan, the employer.
       ``(2) In the case of a multiemployer plan, the plan.
       ``(e) Notice Requirements for Plans Significantly Reducing 
     Benefit Accruals.--
       ``(1) In general.--If a large defined benefit plan adopts 
     an amendment which has the effect of significantly reducing 
     the rate of future benefit accrual of 1 or more participants, 
     a trust which is part of such plan shall not constitute a 
     qualified trust under this section unless, after adoption of 
     such amendment and not less than 15 days before its effective 
     date, the plan administrator provides--
       ``(A) a written statement of benefit change described in 
     paragraph (2) to each applicable individual, and
       ``(B) a written notice setting forth the plan amendment and 
     its effective date to each employee organization representing 
     participants in the plan.

     Any such notice may be provided to a person designated, in 
     writing, by the person to which it would otherwise be 
     provided. The plan administrator shall not be treated as 
     failing to meet the requirements of this paragraph merely 
     because the statement or notice is provided before the 
     adoption of the plan amendment if no material modification of 
     the amendment occurs before the amendment is adopted.
       ``(2) Statement of benefit change.--A statement of benefit 
     change described in this subparagraph shall--
       ``(A) be written in a manner calculated to be understood by 
     the average plan participant, and
       ``(B) include the information described in paragraph (3).
       ``(3) Information contained in statement of benefit 
     change.--The information described in this paragraph includes 
     the following:
       ``(A) Notice setting forth the plan amendment and its 
     effective date.
       ``(B) A comparison of the following amounts under the plan 
     with respect to an applicable individual, determined both 
     with and without regard to the plan amendment:
       ``(i) The accrued benefit and the present value of the 
     accrued benefit as of the effective date.
       ``(ii) The projected accrued benefit and the projected 
     present value of the accrued benefit as of the date which is 
     3 years, 5 years, and 10 years from the effective date and as 
     of the normal retirement age.

     Such comparison may include a statement that `The projected 
     benefits were computed using assumptions required under 
     Federal law and may not prove accurate over time.'
       ``(C) A table of all annuity factors used to calculate 
     benefits under the plan, presented in the form provided in 
     section 72 and the regulations thereunder.

     Benefits described in subparagraph (B) shall be stated 
     separately and shall be calculated by using the applicable 
     mortality table and the applicable interest rate under 
     section 417(e)(3)(A). The Secretary may prescribe regulations 
     under which information other than that described in this 
     paragraph may be provided in cases where the comparative 
     benefits are not needed.
       ``(4) Employers held harmless.--A plan (and any employer 
     maintaining the plan) shall not be treated as failing to meet 
     the requirements of this subsection (or as being liable to 
     any applicable individual) by reason of any projected amounts 
     under paragraph (3) being wrong if such amounts were computed 
     in accordance with such paragraph.
       ``(5) Large defined benefit plan; applicable individual.--
     For purposes of this subsection--
       ``(A) Large defined benefit plan.--The term `large defined 
     benefit plan' means any defined benefit plan which had 1,000 
     or more participants who had accrued a benefit under the plan 
     (whether or not nonforfeitable) as of the last day of the 
     plan year preceding the plan year in which the plan amendment 
     becomes effective. Such term shall not include a governmental 
     plan (within the meaning of section 414(d)) or a church plan 
     (within the meaning of section 414(e)).
       ``(B) Applicable individual.--The term `applicable 
     individual' means--
       ``(i) each participant in the plan, and
       ``(ii) each beneficiary who is an alternate payee (within 
     the meaning of section 414(p)(8)) under an applicable 
     qualified domestic relations order (within the meaning of 
     section 414(p)(1)(A)),

     who has a nonforfeitable benefit under the plan as of the 
     effective date of the plan amendment and who may reasonably 
     be expected to be affected by the plan amendment.
       ``(6) Accrued benefit; projected retirement benefit.--For 
     purposes of this subsection--
       ``(A) Present value of accrued benefit.--The present value 
     of an accrued benefit of any applicable individual shall be 
     calculated as if the accrued benefit were in the form of a 
     single life annuity commencing at the participant's normal 
     retirement age (and by taking into account any early 
     retirement subsidy).
       ``(B) Projected accrued benefit.--
       ``(i) In general.--The projected accrued benefit of any 
     applicable individual shall be calculated as if the benefit 
     were payable in the form of a single life annuity commencing 
     at the participant's normal retirement age (and by taking 
     into account any early retirement subsidy).
       ``(ii) Compensation and other assumptions.--Such benefit 
     shall be calculated by assuming that compensation and all 
     other benefit factors would increase for each plan year 
     beginning after the effective date of the plan amendment at a 
     rate equal to the median average of the CPI increase 
     percentage (as defined in section 215(i) of the Social 
     Security Act) for the 5 calendar years immediately preceding 
     the calendar year before the calendar year in which such 
     effective date occurs.
       ``(iii) Benefit factors.--For purposes of clause (ii), the 
     term `benefit factors' means social security benefits and all 
     other relevant factors under section 411(b)(1)(A) used to 
     compute benefits under the plan which had increased from the 
     2d plan year preceding the plan year in which the effective 
     date of the plan amendment occurs to the 1st such preceding 
     plan year.
       ``(C) Normal retirement age.--The term `normal retirement 
     age' means the later of--
       ``(i) the date determined under section 411(a)(8), or
       ``(ii) the date a plan participant attains age 62.''
       (2) Conforming amendment.--The table of sections for 
     chapter 43 of subtitle D is amended by adding at the end the 
     following new item:

``Sec. 4980F. Failure of defined benefit plans reducing benefit 
              accruals to satisfy notice requirements.''
       (b) Amendments to ERISA.--

[[Page 18283]]

       (1) Benefit statement requirement.--Section 204(h) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1054(h)) is amended by adding at the end the following new 
     paragraphs:
       ``(3)(A) If paragraph (1) applies to the adoption of a plan 
     amendment by a large defined benefit plan, the plan 
     administrator shall, after adoption of such amendment and not 
     less than 15 days before its effective date, provide with the 
     notice under paragraph (1) a written statement of benefit 
     change described in subparagraph (B) to each applicable 
     individual. The Secretary may provide that paragraph (1) 
     shall not apply to an amendment by reason of a failure under 
     this paragraph if such application would be an excessive 
     penalty relative to the failure involved.
       ``(B) A statement of benefit change described in this 
     subparagraph shall--
       ``(i) be written in a manner calculated to be understood by 
     the average plan participant, and
       ``(ii) include the information described in subparagraph 
     (C).
       ``(C) The information described in this subparagraph 
     includes the following:
       ``(i) A comparison of the following amounts under the plan 
     with respect to an applicable individual, determined both 
     with and without regard to the plan amendment:
       ``(I) The accrued benefit and the present value of the 
     accrued benefit as of the effective date.
       ``(II) The projected accrued benefit and the projected 
     present value of the accrued benefit as of the date which is 
     3 years, 5 years, and 10 years from the effective date and as 
     of the normal retirement age.

     Such comparison shall include a statement that `The projected 
     benefits were computed using assumptions required under 
     Federal law and may not prove accurate over time.'
       ``(ii) A table of all annuity factors used to calculate 
     benefits under the plan, presented in the form provided in 
     section 72 of the Internal Revenue Code of 1986 and the 
     regulations thereunder.

     Benefits described in clause (i) shall be stated separately 
     and shall be calculated by using the applicable mortality 
     table and the applicable interest rate under section 
     417(e)(3)(A) of such Code. The Secretary may prescribe 
     regulations under which information other than that described 
     in this subparagraph may be provided in cases where the 
     comparative benefits are not needed.
       ``(D) A plan (and any employer maintaining the plan) shall 
     not be treated as failing to meet the requirements of this 
     paragraph (or as being liable to any applicable individual) 
     by reason of any projected amounts under subparagraph (C) 
     being wrong if such amounts were computed in accordance with 
     such subparagraph.
       ``(E) For purposes of this paragraph--
       ``(i) The term `large defined benefit plan' means any 
     defined benefit plan which had 1,000 or more participants who 
     had accrued a benefit under the plan (whether or not 
     nonforfeitable) as of the last day of the plan year preceding 
     the plan year in which the plan amendment becomes effective. 
     Such term shall not include a governmental plan (within the 
     meaning of section 3(32)) or a church plan (within the 
     meaning of section 3(33)).
       ``(ii) The term `applicable individual' means an individual 
     described in subparagraph (A) or (B) of paragraph (1) who has 
     a nonforfeitable benefit under the plan as of the effective 
     date of the plan amendment and who may reasonably be expected 
     to be affected by the plan amendment.
       ``(F) For purposes of this paragraph--
       ``(i) The present value of an accrued benefit of any 
     applicable individual shall be calculated as if the accrued 
     benefit were in the form of a single life annuity commencing 
     at the participant's normal retirement age (and by taking 
     into account any early retirement subsidy).
       ``(ii)(I) The projected accrued benefit of any applicable 
     individual shall be calculated as if the benefit were payable 
     in the form of a single life annuity commencing at the 
     participant's normal retirement age (and by taking into 
     account any early retirement subsidy).
       ``(II) Such benefit shall be calculated by assuming that 
     compensation and all other benefit factors would increase for 
     each plan year beginning after the effective date of the plan 
     amendment at a rate equal to the median average of the CPI 
     increase percentage (as defined in section 215(i) of the 
     Social Security Act) for the 5 calendar years immediately 
     preceding the calendar year before the calendar year in which 
     such effective date occurs.
       ``(III) For purposes of subclause (II), the term `benefit 
     factors' means social security benefits and all other 
     relevant factors under section 204(b)(1)(A) used to compute 
     benefits under the plan which had increased from the 2d plan 
     year preceding the plan year in which the effective date of 
     the plan amendment occurs to the 1st such preceding plan 
     year.
       ``(iii) The term `normal retirement age' means the later 
     of--
       ``(I) the date determined under section 3(24), or
       ``(II) the date a plan participant attains age 62.
       ``(4) A plan administrator shall not be treated as failing 
     to meet the requirements of this subsection merely because 
     the notice or statement is provided before the adoption of 
     the plan amendment if no material modification of the 
     amendment occurs before the amendment is adopted.''
       (2) Conforming amendment.--Section 204(h)(1) of such Act 
     (29 U.S.C. 1054(h)(1)) is amended by inserting ``(including 
     any written statement of benefit change if required by 
     paragraph (3))'' after ``written notice''.
       (c) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to plan amendments taking effect in plan years 
     beginning on or after the earlier of--
       (A) the later of--
       (i) January 1, 1999, or
       (ii) the date on which the last of the collective 
     bargaining agreements pursuant to which the plan is 
     maintained terminates (determined without regard to any 
     extension thereof after the date of the enactment of this 
     Act), or
       (B) January 1, 2001.
       (2) Exception where notice given.--The amendments made by 
     this section shall not apply to any plan amendment for which 
     written notice was given to participants or their 
     representatives before March 17, 1999, without regard to 
     whether the amendment was adopted before such date.
       (3) Special rule.--The period for providing any notice 
     required by, or any notice the contents of which are changed 
     by, the amendments made by this Act shall not end before the 
     date which is 6 months after the date of the enactment of 
     this Act.

              Subtitle E--Encouraging Retirement Education

     SEC. 841. PERIODIC PENSION BENEFITS STATEMENTS.

       (a) In General.--Section 105(a) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1025(a)) is amended by 
     striking ``shall furnish to any plan participant or 
     beneficiary who so requests in writing, a statement'' and 
     inserting ``shall furnish to each plan participant at least 
     once each year (3 years in the case of a defined benefit 
     plan) or upon written request of a plan participant or 
     beneficiary, a statement in written or electronic form''.
       (b) Rule for Multiemployer Plans.--Section 105(d) of the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1025(d)) is amended to read as follows:
       ``(d) Upon written request of a plan participant or 
     beneficiary, each administrator of a plan to which more than 
     1 unaffiliated employer is required to contribute shall 
     furnish a statement described in subsection (a) in written or 
     electronic form.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after the earlier of--
       (1) the date of issuance by the Secretary of Labor of 
     regulations providing guidance for simplifying defined 
     benefit plan calculations with respect to the information 
     required under section 105 of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1025), or
       (2) December 31, 1998.

     SEC. 842. 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 advice.''
       (b) Qualified Retirement Planning Advice Defined.--Section 
     132 is amended by redesignating subsection (m) as subsection 
     (n) and by inserting after subsection (l) the following:
       ``(m) Qualified Retirement Planning Advice.--
       ``(1) In general.--For purposes of this section, the term 
     `qualified retirement planning advice' means any retirement 
     planning advice provided to an employee and his spouse by an 
     employer maintaining a qualified employer plan. Such term 
     shall not include the providing of tax preparation, 
     accounting, legal, brokerage, or other similar services.
       ``(2) Nondiscrimination rule.--Subsection (a)(7) shall 
     apply in the case of highly compensated employees only if 
     such advice is available on substantially the same terms to 
     each member of the group of employees normally provided 
     education and information regarding the employer's qualified 
     employer plan.
       ``(3) Qualified employer plan.--For purposes of this 
     subsection, the term `qualified employer plan' means a plan, 
     contract, pension, or account described in section 
     219(g)(5).''
       (c) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2000.

                     Subtitle F--Reducing Red Tape

     SEC. 851. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT LOSS OF 
                   DIVIDEND DEDUCTION.

       (a) In General.--Section 404(k)(2)(A) (defining applicable 
     dividends) is amended by

[[Page 18284]]

     striking ``or'' at the end of clause (ii), by redesignating 
     clause (iii) as clause (iv), and by inserting after clause 
     (ii) the following:
       ``(iii) is, at the election of such participants or their 
     beneficiaries--

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

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

     SEC. 852. REDUCED PBGC PREMIUM FOR NEW PLANS OF SMALL 
                   EMPLOYERS.

       (a) In General.--Subparagraph (A) of section 4006(a)(3) of 
     the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1306(a)(3)(A)) is amended--
       (1) in clause (i), by inserting ``other than a new single-
     employer plan (as defined in subparagraph (F)) maintained by 
     a small employer (as so defined),'' after ``single-employer 
     plan,'',
       (2) in clause (iii), by striking the period at the end and 
     inserting ``, and'', and
       (3) by adding at the end the following new clause:
       ``(iv) in the case of a new single-employer plan (as 
     defined in subparagraph (F)) maintained by a small employer 
     (as so defined) for the plan year, $5 for each individual who 
     is a participant in such plan during the plan year.''
       (b) Definition of New Single-Employer Plan.--Section 
     4006(a)(3) of the Employee Retirement Income Security Act of 
     1974 (29 U.S.C. 1306(a)(3)) is amended by adding at the end 
     the following new subparagraph:
       ``(F)(i) For purposes of this paragraph, a single-employer 
     plan maintained by a contributing sponsor shall be treated as 
     a new single-employer plan for each of its first 5 plan years 
     if, during the 36-month period ending on the date of the 
     adoption of such plan, the sponsor or any member of such 
     sponsor's controlled group (or any predecessor of either) had 
     not established or maintained a plan to which this title 
     applies with respect to which benefits were accrued for 
     substantially the same employees as are in the new single-
     employer plan.
       ``(ii)(I) For purposes of this paragraph, the term `small 
     employer' means an employer which on the first day of any 
     plan year has, in aggregation with all members of the 
     controlled group of such employer, 100 or fewer employees.
       ``(II) In the case of a plan maintained by 2 or more 
     contributing sponsors that are not part of the same 
     controlled group, the employees of all contributing sponsors 
     and controlled groups of such sponsors shall be aggregated 
     for purposes of determining whether any contributing sponsor 
     is a small employer.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to plans established after December 31, 2000.

     SEC. 853. REDUCTION OF ADDITIONAL PBGC PREMIUM FOR NEW PLANS.

       (a) In General.--Subparagraph (E) of section 4006(a)(3) of 
     the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1306(a)(3)(E)) is amended by adding at the end the 
     following new clause:
       ``(v) In the case of a new defined benefit plan, the amount 
     determined under clause (ii) for any plan year shall be an 
     amount equal to the product of the amount determined under 
     clause (ii) and the applicable percentage. For purposes of 
     this clause, the term `applicable percentage' means--
       ``(I) 0 percent, for the first plan year.
       ``(II) 20 percent, for the second plan year.
       ``(III) 40 percent, for the third plan year.
       ``(IV) 60 percent, for the fourth plan year.
       ``(V) 80 percent, for the fifth plan year.

     For purposes of this clause, a defined benefit plan (as 
     defined in section 3(35)) maintained by a contributing 
     sponsor shall be treated as a new defined benefit plan for 
     its first 5 plan years if, during the 36-month period ending 
     on the date of the adoption of the plan, the sponsor and each 
     member of any controlled group including the sponsor (or any 
     predecessor of either) did not establish or maintain a plan 
     to which this title applies with respect to which benefits 
     were accrued for substantially the same employees as are in 
     the new plan.''
       (b) Effective Date.--The amendments made by this section 
     shall apply to plans established after December 31, 2000.

     SEC. 854. 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 7527 of the Internal Revenue Code of 1986 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.--The term ``eligible employer'' 
     means an employer (or any predecessor employer) which has not 
     established or maintained a qualified employer plan with 
     respect to which contributions were made, or benefits were 
     accrued for service, in the 3 most recent taxable years 
     ending prior to the first taxable year in which the request 
     is made.
       (c) Effective Date.--The provisions of this section shall 
     apply with respect to requests made after December 31, 2000.

     SEC. 855. DISTRIBUTIONAL ANALYSIS OF PENSION TAX BENEFITS.

       (a) Analysis.--The Secretary of the Treasury shall, not 
     later than June 30, 2000 conduct a distributional analysis of 
     the tax benefits of major pension and retirement savings 
     arrangements by income group.
       (b) Report.--The Secretary shall report to the Committee on 
     Finance of the Senate and the Committee on Ways and Means of 
     the House of Representatives the results of the analysis 
     under subsection (a). To the extent feasible, the Secretary 
     shall report preliminary results of such analysis within 60 
     days of the date of the enactment of this Act.

                      Subtitle G--Other Provisions

     SEC. 303. TAX CREDIT FOR MATCHING CONTRIBUTIONS TO INDIVIDUAL 
                   DEVELOPMENT ACCOUNTS.

       (a) In General.--Subchapter F of chapter 1 (relating to 
     exempt organizations) is amended by adding at the end the 
     following new part:

               ``PART IX--INDIVIDUAL DEVELOPMENT ACCOUNTS

``Sec. 530A. Individual development accounts.

     ``SEC. 530A. INDIVIDUAL DEVELOPMENT ACCOUNTS.

       ``(a) Individual Development Account.--For purposes of this 
     section, the term `Individual Development Account' means a 
     custodial account established for the exclusive benefit of an 
     eligible individual or such individual's beneficiaries, but 
     only if the written governing instrument creating the account 
     meets the following requirements:
       ``(1) Except in the case of a qualified rollover (as 
     defined in subsection (c)(2)(E))--
       ``(A) no contribution will be accepted unless it is in 
     cash, and
       ``(B) contributions will not be accepted for the taxable 
     year in excess of the lesser of--
       ``(i) $350, or
       ``(ii) an amount equal to the compensation includible in 
     the eligible individual's gross income for such taxable year.
       ``(2) The custodian of the account is a qualified financial 
     institution.
       ``(3) The interest of an eligible individual in the balance 
     of the account (determined without regard to any such 
     matching contribution or earnings thereon) is nonforfeitable.
       ``(4) The assets of the account will not be commingled with 
     other property except in a common trust fund or common 
     investment fund.
       ``(5) Except as provided in subsection (c), any amount in 
     the account may be paid out only for qualified expense 
     distributions.
       ``(b) Matching Contributions With Respect To Individual 
     Development Accounts.--
       ``(1) In general.--If an eligible individual establishes an 
     Individual Development Account with a qualified financial 
     institution, the qualified financial institution may deposit 
     into a separate, parallel, individual or pooled matching 
     account an eligible matching contribution for the taxable 
     year. The qualified financial institution shall maintain a 
     separate accounting of matching contributions and earnings 
     thereon.
       ``(2) Eligible matching contribution.--For purposes of this 
     section, the term `eligible matching contribution' means a 
     dollar-for-dollar match of the contributions made by the 
     eligible individual into the Individual Development Account 
     described in paragraph (1) with respect to any taxable year.
       ``(3) Allowance of credit for eligible matching 
     contributions.--
       ``(A) In general.--In the case of a qualified financial 
     institution, there shall be allowed as a credit against the 
     tax imposed by this chapter for the taxable year an amount 
     equal to 85 percent of the eligible matching contributions 
     made by such institution with respect to an eligible 
     individual under this subsection for such taxable year 
     (determined without regard to any amount described in 
     paragraph (4)(B)). If any amount determined under the 
     preceding sentence is not a multiple of $10, such amount 
     shall be rounded to the next highest multiple of $10.
       ``(B) Limitation based on amount of tax.--The credit 
     allowed under subparagraph (A) for any taxable year shall not 
     exceed the excess of--
       ``(i) the sum of the regular tax liability (as defined in 
     section 26(b)) plus the tax imposed by section 55, over
       ``(ii) the sum of the credits allowable under part IV of 
     subchapter A of this chapter.
       ``(C) Credit treated as allowed under part IV of subchapter 
     A.--For purposes of subtitle F, the credit allowed under 
     subparagraph (A) shall be treated as a credit allowable under 
     part IV of subchapter A of this chapter.
       ``(4) Forfeiture of matching funds.--

[[Page 18285]]

       ``(A) In general.--Amounts in the matching account 
     established under this subsection for an eligible individual 
     shall be reduced by the amount of any distribution from an 
     Individual Development Account of such individual which is 
     not a qualified expense distribution and which is not 
     recontributed as part of a qualified rollover (as defined in 
     subsection (c)(2)(E)).
       ``(B) Use of forfeited funds.--Eligible matching 
     contributions which are forfeited by an eligible individual 
     under subparagraph (A) shall be used by the qualified 
     financial institution to make eligible matching contributions 
     for other Individual Development Account contributions by 
     eligible individuals.
       ``(5) Exclusion from income.--Gross income of an eligible 
     individual shall not include any eligible matching 
     contribution and the earnings thereon deposited into a 
     matching account under paragraph (1) on behalf of such 
     individual.
       ``(6) Regular reporting of matching contributions.--Any 
     qualified financial institution shall report eligible 
     matching contributions to eligible individuals with 
     Individual Development Accounts on not less than a quarterly 
     basis.
       ``(7) Termination.--No eligible matching contribution may 
     be made for any taxable year beginning after December 31, 
     2005.
       ``(c) Qualified Expense Distribution.--For purposes of this 
     section--
       ``(1) In general.--The term `qualified expense 
     distribution' means any amount paid or distributed out of an 
     Individual Development Account and the matching account 
     established under subsection (b) for an eligible individual 
     if such amount--
       ``(A) is used exclusively to pay the qualified expenses of 
     such individual or such individual's spouse or dependents,
       ``(B) is paid by the qualified financial institution 
     directly to the person to whom the amount is due or to 
     another Individual Development Account, and
       ``(C) is paid after the holder of the Individual 
     Development Account has completed an economic literacy course 
     offered by the qualified financial institution, a nonprofit 
     organization, or a government entity.
       ``(2) Qualified expenses.--
       ``(A) 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 costs.
       ``(iv) Qualified rollovers.
       ``(B) Qualified higher education expenses.--
       ``(i) In general.--The term `qualified higher education 
     expenses' has the meaning given such term by section 
     72(t)(7), determined by treating postsecondary vocational 
     educational schools as eligible educational institutions.
       ``(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 section.
       ``(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) and by the 
     amount of such expenses for which a credit or exclusion is 
     allowed under this chapter for such taxable year.
       ``(C) Qualified first-time homebuyer costs.--The term 
     `qualified first-time homebuyer costs' means qualified 
     acquisition costs (as defined in section 72(t)(8) without 
     regard to subparagraph (B) thereof) with respect to a 
     principal residence (within the meaning of section 121) for a 
     qualified first-time homebuyer (as defined in section 
     72(t)(8)).
       ``(D) Qualified business capitalization costs.--
       ``(i) In general.--The term `qualified business 
     capitalization costs' means qualified expenditures for the 
     capitalization 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 and inventory expenses.
       ``(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 meets such 
     requirements as the Secretary of Housing and Urban 
     Development may specify.
       ``(E) Qualified rollovers.--The term `qualified rollover' 
     means, with respect to any distribution from an Individual 
     Development Account, the payment, within 120 days of such 
     distribution, of all or a portion of such distribution to 
     such account or to another Individual Development Account 
     established in another qualified financial institution for 
     the benefit of the eligible individual. Rules similar to the 
     rules of section 408(d)(3) (other than subparagraph (C) 
     thereof) shall apply for purposes of this subparagraph.
       ``(d) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Eligible individual.--
       ``(A) In general.--The term `eligible individual' means an 
     individual who--
       ``(i) has attained the age of 18 years,
       ``(ii) is a citizen or legal resident of the United States, 
     and
       ``(iii) is a member of a household--

       ``(I) which is eligible for the earned income tax credit 
     under section 32,
       ``(II) which is eligible for assistance under a State 
     program funded under part A of title IV of the Social 
     Security Act, or
       ``(III) the gross income of which does not exceed 60 
     percent of the area median income (as determined by the 
     Department of Housing and Urban Affairs) and the net worth of 
     which does not exceed $10,000.

       ``(B) Household.--The term `household' means all 
     individuals who share use of a dwelling unit as primary 
     quarters for living and eating separate from other 
     individuals.
       ``(C) Determination of net worth.--
       ``(i) In general.--For purposes of subparagraph 
     (A)(iii)(III), the net worth of a household is the amount 
     equal to--

       ``(I) the aggregate fair market value of all assets that 
     are owned in whole or in part by any member of a household, 
     minus
       ``(II) the obligations or debts of any member of the 
     household.

       ``(ii) Certain assets disregarded.--For purposes of 
     determining the net worth of a household, a household's 
     assets shall not be considered to include the primary 
     dwelling unit and 1 motor vehicle owned by the household.
       ``(D) Proof of compensation and status as an eligible 
     individual.--Statements under section 6051 and other forms 
     specified by the Secretary proving the eligible individual's 
     wages and other compensation and the status of the individual 
     as an eligible individual shall be presented to the custodian 
     at the time of the establishment of the Individual 
     Development Account and at least once annually thereafter.
       ``(2) Qualified financial institution.--The term `qualified 
     financial institution' means any person authorized to be a 
     trustee of any individual retirement account under section 
     408(a)(2).
       ``(3) Treatment of more than one account.--All Individual 
     Development Accounts of an individual shall be treated as one 
     account.
       ``(4) Other rules to apply.--Rules similar to the rules of 
     paragraphs (1), (2), and (3) of section 219(f), section 
     220(f)(8), paragraphs (4) and (6) of section 408(d), and 
     section 408(m) shall apply for purposes of this section.
       ``(5) Reports.--The custodian of an Individual Development 
     Account shall make such reports regarding such account to the 
     Secretary and to the individual for whom the account is 
     maintained with respect to contributions (and the years to 
     which they relate), distributions, and such other matters as 
     the Secretary may require under regulations. The reports 
     required by this paragraph--
       ``(A) shall be filed at such time and in such manner as the 
     Secretary prescribes in such regulations, and
       ``(B) shall be furnished to individuals--
       ``(i) not later than January 31 of the calendar year 
     following the calendar year to which such reports relate, and
       ``(ii) in such manner as the Secretary prescribes in such 
     regulations.
       ``(e) Application of Section.--This section shall apply to 
     amounts paid to an Individual Development Account for any 
     taxable year beginning after December 31, 2000, and before 
     January 1, 2006.''
       (b) Tax on Excess Contributions.--
       (1) Tax imposed.--Subsection (a) of section 4973 is amended 
     by striking ``or'' at the end of paragraph (3), adding ``or'' 
     at the end of paragraph (4), and inserting after paragraph 
     (4) the following new paragraph:
       ``(5) an Individual Development Account (within the meaning 
     of section 530A(a)),''.
       (2) Excess contributions.--Section 4973 is amended by 
     adding at the end the following new subsection:
       ``(g) Individual Development Accounts.--For purposes of 
     this section, in the case of Individual Development Accounts, 
     the term `excess contributions' means the excess (if any) 
     of--
       ``(1) the amount contributed for the taxable year to the 
     accounts (other than a qualified rollover, as defined in 
     section 530A(c)(2)(E)), over
       ``(2) the amount allowable as a contribution under section 
     530A.

     For purposes of this subsection, any contribution which is 
     distributed from the Individual Development Account in a 
     distribution to which rules similar to the rules of section 
     408(d)(4) apply by reason of section 530A(d)(4) shall be 
     treated as an amount not contributed.''
       (c) Information Relating to Certain Trusts and Annuity 
     Plans.--Subsection (c) of section 6047 is amended--
       (1) by inserting ``or section 530A'' after ``section 219''; 
     and
       (2) by inserting ``, of any Individual Development Account 
     described in section 530A(a),'', after ``section 408(a)''.
       (d) Failure To Provide Reports on Individual Development 
     Accounts.--Paragraph

[[Page 18286]]

     (2) of section 6693(a) is amended by striking ``and'' at the 
     end of subparagraph (C), by striking the period and inserting 
     ``, and'' at the end of subparagraph (D), and by adding at 
     the end the following new subparagraph:
       ``(E) section 530(d)(5) (relating to Individual Development 
     Accounts).''
       (e) Clerical Amendment.--The table of parts for subchapter 
     F of chapter 1 is amended by adding at the end the following 
     new item:

       ``Part IX. Individual development accounts.''
       (f) Funds in Accounts Disregarded for Purposes of Certain 
     Means-Tested Federal Programs.--Notwithstanding any other 
     provision of the Internal Revenue Code of 1986 or the Social 
     Security Act that requires consideration of 1 or more 
     financial circumstances of an individual, for the purpose 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, 
     contributions (including earnings thereon) in any Individual 
     Development Account and applicable matching account under 
     section 530A of such Code shall be disregarded for such 
     purpose.
       (g) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 862. FEDERAL EMPLOYEE RETIREMENT CONTRIBUTIONS.

       (a) Deductions, Contributions, and Deposits.--
       (1) Civil service retirement system.--The table under 
     section 8334(c) of title 5, United States Code, is amended--
       (A) in the matter relating to an employee by striking:


 ``7.4  January 1, 2000, to December 31, 2000.
   7.5  January 1, 2001, to December 31, 2002.
     7  After December 31, 2002.'';
 

     and inserting the following:


   ``7  After December 31, 1999.'';
 

       (B) in the matter relating to a Member or employee for 
     Congressional employee service by striking:


 ``7.9  January 1, 2000, to December 31, 2000.
     8  January 1, 2001, to December 31, 2002.
   7.5  After December 31, 2002.'';
 

     and inserting the following:


   ``7  After December 31, 1999.'';
 

       (C) in the matter relating to a Member for Member service 
     by striking:


 ``8.4  January 1, 2000, to December 31, 2000.
   8.5  January 1, 2001, to December 31, 2002.
     8  After December 31, 2002.'';
 

     and inserting the following:


   ``8  After December 31, 1999.'';
 

       (D) in the matter relating to a law enforcement officer for 
     law enforcement service and firefighter for firefighter 
     service by striking:


 ``7.9  January 1, 2000, to December 31, 2000.
     8  January 1, 2001, to December 31, 2002.
   7.5  After December 31, 2002.'';
 

     and inserting the following:


 ``7.5  After December 31, 1999.'';
 

       (E) in the matter relating to a bankruptcy judge by 
     striking:


 ``8.4  January 1, 2000, to December 31, 2000.
   8.5  January 1, 2001, to December 31, 2002.
     8  After December 31, 2002.'';
 

     and inserting the following:


   ``8  After December 31, 1999.'';
 

       (F) in the matter relating to a judge of the United States 
     Court of Appeals for the Armed Forces for service as a judge 
     of that court by striking:


 ``8.4  January 1, 2000, to December 31, 2000.
   8.5  January 1, 2001, to December 31, 2002.
     8  After December 31, 2002.'';
 

     and inserting the following:


   ``8  After December 31, 1999.'';
 

       (G) in the matter relating to a United States magistrate by 
     striking:


 ``8.4  January 1, 2000, to December 31, 2000.
   8.5  January 1, 2001, to December 31, 2002.
     8  After December 31, 2002.'';
 

     and inserting the following:


   ``8  After December 31, 1999.'';
 

       (H) in the matter relating to a Court of Federal Claims 
     judge by striking:


 ``8.4  January 1, 2000, to December 31, 2000.
   8.5  January 1, 2001, to December 31, 2002.
     8  After December 31, 2002.'';
 

     and inserting the following:


   ``8  After December 31, 1999.'';
 

       (I) in the matter relating to the Capitol Police by 
     striking:


 ``7.9  January 1, 2000, to December 31, 2000.
     8  January 1, 2001, to December 31, 2002.
   7.5  After December 31, 2002.''.
 

     and inserting the following:


 ``7.5  After December 31, 1999.'';
 

     and
       (J) in the matter relating to a nuclear material courier by 
     striking:


 ``7.9  January 1, 2000, to December 31, 2000.
     8  January 1, 2001, to December 31, 2002.
   7.5  After December 31, 2002.''.
 

     and inserting the following:


 ``7.5  After December 31, 1999.''.
 

       (2) Federal employees' retirement system.--Section 8422(a) 
     of title 5, United States Code, is amended by striking 
     paragraph (3) and inserting the following:
       ``(3) The applicable percentage under this paragraph for 
     civilian service shall be as follows:


``Employee                                   7  January 1, 1987, to
                                                 December 31, 1998.
                                          7.25  January 1, 1999, to
                                                 December 31, 1999.
                                             7  After December 31, 1999.
Congressional employee                     7.5  January 1, 1987, to
                                                 December 31, 1998.
                                          7.75  January 1, 1999, to
                                                 December 31, 1999.
                                           7.5  After December 31, 1999.
Member                                     7.5  January 1, 1987, to
                                                 December 31, 1998.
                                          7.75  January 1, 1999, to
                                                 December 31, 1999.
                                           7.5  After December 31, 1999.
Law enforcement officer, firefighter,      7.5  January 1, 1987, to
 member of the Capitol Police, or air            December 31, 1998.
 traffic controller
                                          7.75  January 1, 1999, to
                                                 December 31, 1999.
                                           7.5  After December 31, 1999.
Nuclear materials courier                    7  January 1, 1987, to the
                                                 day before the date of
                                                 enactment of the strom
                                                 Thurmond National
                                                 Defense Authorization
                                                 Act for Fiscal Year
                                                 1999.
                                          7.75  The date of enactment of
                                                 the Strom Thurmond
                                                 National Defense
                                                 Authorization Act for
                                                 Fiscal Year 1999 to
                                                 December 31, 1998.
                                          7.75  January 1, 1999, to
                                                 December 31, 1999.
                                           7.5  After December 31,
                                                 1999.''.
 

       (b) Conforming Amendments Relating to Military and 
     Volunteer Service Under FERS.--
       (1) Military service.--Section 8422(e)(6) of title 5, 
     United States Code, is amended to read as follows:
       ``(6) The percentage of basic pay under section 204 of 
     title 37 payable under paragraph (1), with respect to any 
     period of military service performed during January 1, 1999, 
     through December 31, 1999, shall be 3.25 percent.''.
       (2) Volunteer service.--Section 8422(f)(4) of title 5, 
     United States Code, is amended to read as follows:
       ``(4) The percentage of the readjustment allowance or 
     stipend (as the case may be) payable under paragraph (1), 
     with respect to any period of volunteer service performed 
     during January 1, 1999, through December 31, 1999, shall be 
     3.25 percent.''.
       (c) Other Federal Retirement Systems.--
       (1) Central intelligence agency retirement and disability 
     system.--
       (A) Deductions, withholdings, and deposits.--Section 
     7001(c)(2) of the Balanced Budget Act of 1997 (Public Law 
     105-33; 111 Stat. 659) is amended to read as follows:
       ``(2) Individual deductions, withholdings, and deposits.--
     Notwithstanding section 211(a)(1) of the Central Intelligence 
     Agency Retirement Act (50 U.S.C. 2021(a)(1)) beginning on 
     January 1, 1999, through December 31, 1999, the percentage 
     deducted and withheld from the basic pay of an employee 
     participating in the Central Intelligence Agency Retirement 
     and Disability System shall be 7.25 percent.''.
       (B) Military service.--Section 252(h)(1)(A) of the Central 
     Intelligence Agency Retirement Act (50 U.S.C. 2082(h)(1)(A)), 
     is amended to read as follows:
       ``(h)(1)(A) Each participant who has performed military 
     service before the date of separation on which entitlement to 
     an annuity under this title is based may pay to the Agency an 
     amount equal to 7 percent of the

[[Page 18287]]

     amount of basic pay paid under section 204 of title 37, 
     United States Code, to the participant for each period of 
     military service after December 1956; except, the amount to 
     be paid for military service performed beginning on January 
     1, 1999, through December 31, 1999, shall be 7.25 percent of 
     basic pay.''.
       (2) Foreign Service Retirement and Disability System.--
       (A) In general.--Section 7001(d)(2) of the Balanced Budget 
     Act of 1997 (Public Law 105- 33; 111 Stat. 660) is amended by 
     striking subparagraphs (A) and (B) and inserting the 
     following:
       ``(A) In general.--Notwithstanding section 805(a)(1) of the 
     Foreign Service Act of 1980 (22 U.S.C. 4045(a)(1)), beginning 
     on January 1, 1999, through December 31, 1999, the amount 
     withheld and deducted from the basic pay of a participant in 
     the Foreign Service Retirement and Disability System shall be 
     7.25 percent.
       ``(B) Foreign service criminal investigators/inspectors of 
     the office of the inspector general, agency for international 
     development.--Notwithstanding section 805(a)(2) of the 
     Foreign Service Act of 1980 (22 U.S.C. 4045(a)(2)), beginning 
     on January 1, 1999, through December 31, 1999, the amount 
     withheld and deducted from the basic pay of an eligible 
     Foreign Service criminal investigator/inspector of the Office 
     of the Inspector General, Agency for International 
     Development participating in the Foreign Service Retirement 
     and Disability System shall be 7.75 percent.''.
       (B) Conforming amendment.--Section 805(d)(1) of the Foreign 
     Service Act of 1980 (22 U.S.C. 4045(d)(1)) is amended in the 
     table in the matter following subparagraph (B) by striking:


``January 1, 1970, through December 31, 1998, inclusive                7
January 1, 1999, through December 31, 1999, inclusive               7.25
January 1, 2000, through December 31, 2000, inclusive                7.4
January 1, 2001, through December 31, 2002, inclusive                7.5
After December 31, 2002                                             7''.
 

     and inserting the following:


``January 1, 1970, through December 31, 1998, inclusive                7
January 1, 1999, through December 31, 1999, inclusive               7.25
After December 31, 1999                                            7.''.
 

       (3) Foreign Service Pension System.--
       (A) In general.--Section 856(a)(2) of the Foreign Service 
     Act of 1980 (22 U.S.C. 4071e(a)(2)) is amended to read as 
     follows:
       ``(2) The applicable percentage under this subsection shall 
     be as follows:


 ``7.5  Before January 1, 1999.
  7.75  January 1, 1999, to December 31, 1999.
   7.5  After December 31, 1999.''.
 

       (B) Volunteer service.--Section 854(c)(1) of the Foreign 
     Service Act of 1980 (22 U.S.C. 4071c(c)(1)) is amended by 
     striking all after ``volunteer service;'' and inserting 
     ``except, the amount to be paid for volunteer service 
     beginning on January 1, 1999, through December 31, 1999, 
     shall be 3.25 percent.''.
       (e) Effective Date.--This section and the amendments made 
     by this section shall take effect on December 31, 1999.

     SEC. 863. EXCLUSION FROM INCOME OF SEVERANCE PAYMENT AMOUNTS

       (a) Exclusion From Income of Severance Payment Amounts.--
     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 by inserting 
     after section 138 the following new section:

     ``SEC. 139. SEVERANCE PAYMENTS.

       ``(a) In General.--In the case of an individual, gross 
     income shall not include any qualified severance payment.
       ``(b) Limitation.--The amount to which the exclusion under 
     subsection (a) applies shall not exceed $2,000 with respect 
     to any separation from employment.
       ``(c) Qualified Severance Payment.--For purposes of this 
     section--
       ``(1) In general.--The term `qualified severance payment' 
     means any payment received by an individual if--
       ``(A) such payment was paid by such individual's employer 
     on account of such individual's separation from employment,
       ``(B) such separation was in connection with a reduction in 
     the work force of the employer, and
       ``(C) such individual does not attain employment within 6 
     months of the date of such separation in which the amount of 
     compensation is equal to or greater than 95 percent of the 
     amount of compensation for the employment that is related to 
     such payment.
       ``(2) Limitation.--Such term shall not include any payment 
     received by an individual if the aggregate payments received 
     with respect to the separation from employment exceed 
     $75,000.''
       (b) Clerical 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. Severance payments.
``Sec. 140. Cross references to other Acts.''
       (c) Effective Dates.--The amendments made by subsections 
     (a) and (c) shall apply to taxable years beginning after 
     December 31, 2000, and before January 1, 2003.

                      Subtitle H--Plan Amendments

     SEC. 871. PROVISIONS RELATING TO PLAN AMENDMENTS.

       (a) In General.--If this section applies to any plan or 
     contract amendment--
       (1) such plan or contract shall be treated as being 
     operated in accordance with the terms of the plan during the 
     period described in subsection (b)(2)(A), and
       (2) such plan shall not fail to meet the requirements of 
     section 411(d)(6) of the Internal Revenue Code of 1986 or 
     section 204(g) of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1054(g)) by reason of such amendment.
       (b) Amendments to Which Section Applies.--
       (1) In general.--This section shall apply to any amendment 
     to any plan or annuity contract which is made--
       (A) pursuant to any amendment made by this title, or 
     pursuant to any regulation issued under this title, and
       (B) on or before the last day of the first plan year 
     beginning on or after January 1, 2004.

     In the case of a government plan (as defined in section 
     414(d) of the Internal Revenue Code of 1986 and section 3(32) 
     of the Employee Retirement Income Security Act of 1974), this 
     paragraph shall be applied by substituting ``2005'' for 
     ``2004''.
       (2) Conditions.--This section shall not apply to any 
     amendment unless--
       (A) during the period--
       (i) beginning on the date the legislative or regulatory 
     amendment described in paragraph (1)(A) takes effect (or in 
     the case of a plan or contract amendment not required by such 
     legislative or regulatory amendment, the effective date 
     specified by the plan), and
       (ii) ending on the date described in paragraph (1)(B) (or, 
     if earlier, the date the plan or contract amendment is 
     adopted),

     the plan or contract is operated as if such plan or contract 
     amendment were in effect, and
       (B) such plan or contract amendment applies retroactively 
     for such period.

             TITLE IX--FARM RELIEF AND ECONOMIC DEVELOPMENT

     SEC. 901. FARM AND RANCH RISK MANAGEMENT ACCOUNTS.

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

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

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

[[Page 18288]]

       ``(A) any amount distributed from a FARRM Account of the 
     taxpayer during such taxable year, and
       ``(B) any deemed distribution under--
       ``(i) subsection (f)(1) (relating to deposits not 
     distributed within 5 years),
       ``(ii) subsection (f)(2) (relating to cessation in eligible 
     farming business), and
       ``(iii) subparagraph (A) or (B) of subsection (f)(3) 
     (relating to prohibited transactions and pledging account as 
     security).
       ``(2) Exceptions.--Paragraph (1)(A) shall not apply to--
       ``(A) any distribution to the extent attributable to income 
     of the Account, and
       ``(B) the distribution of any contribution paid during a 
     taxable year to a FARRM Account to the extent that such 
     contribution exceeds the limitation applicable under 
     subsection (b) if requirements similar to the requirements of 
     section 408(d)(4) are met.

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

     The preceding sentence shall not apply if an amount equal to 
     such nonqualified balance is distributed from such Account to 
     the taxpayer before the due date (including extensions) for 
     filing the return of tax imposed by this chapter for such 
     year (or, if earlier, the date the taxpayer files such return 
     for such year).
       ``(B) Nonqualified balance.--For purposes of subparagraph 
     (A), the term `nonqualified balance' means any balance in the 
     Account on the last day of the taxable year which is 
     attributable to amounts deposited in such Account before the 
     4th preceding taxable year.
       ``(C) Ordering rule.--For purposes of this paragraph, 
     distributions from a FARRM Account (other than distributions 
     of current income) shall be treated as made from deposits in 
     the order in which such deposits were made, beginning with 
     the earliest deposits.
       ``(2) Cessation in eligible farming business.--At the close 
     of the first disqualification period after a period for which 
     the taxpayer was engaged in an eligible farming business, 
     there shall be deemed distributed from the FARRM Account of 
     the taxpayer an amount equal to the balance in such Account 
     (if any) at the close of such disqualification period. For 
     purposes of the preceding sentence, the term 
     `disqualification period' means any period of 2 consecutive 
     taxable years for which the taxpayer is not engaged in an 
     eligible farming business.
       ``(3) Certain rules to apply.--Rules similar to the 
     following rules shall apply for purposes of this section:
       ``(A) Section 220(f)(8) (relating to treatment on death).
       ``(B) Section 408(e)(2) (relating to loss of exemption of 
     account where individual engages in prohibited transaction).
       ``(C) Section 408(e)(4) (relating to effect of pledging 
     account as security).
       ``(D) Section 408(g) (relating to community property laws).
       ``(E) Section 408(h) (relating to custodial accounts).
       ``(4) Time when payments deemed made.--For purposes of this 
     section, a taxpayer shall be deemed to have made a payment to 
     a FARRM Account on the last day of a taxable year if such 
     payment is made on account of such taxable year and is made 
     on or before the due date (without regard to extensions) for 
     filing the return of tax for such taxable year.
       ``(5) Individual.--For purposes of this section, the term 
     `individual' shall not include an estate or trust.
       ``(6) Deduction not allowed for self-employment tax.--The 
     deduction allowable by reason of subsection (a) shall not be 
     taken into account in determining an individual's net 
     earnings from self-employment (within the meaning of section 
     1402(a)) for purposes of chapter 2.
       ``(g) Reports.--The trustee of a FARRM Account shall make 
     such reports regarding such Account to the Secretary and to 
     the person for whose benefit the Account is maintained with 
     respect to contributions, distributions, and such other 
     matters as the Secretary may require under regulations. The 
     reports required by this subsection shall be filed at such 
     time and in such manner and furnished to such persons at such 
     time and in such manner as may be required by such 
     regulations.''
       (b) Tax on Excess Contributions.--
       (1) Subsection (a) of section 4973 (relating to tax on 
     excess contributions to certain tax-favored accounts and 
     annuities), as amended by section 303(b)(1), is amended by 
     striking ``or'' at the end of paragraph (4), by redesignating 
     paragraphs (4) and (5) as paragraphs (5) and (6), 
     respectively, and by inserting after paragraph (3) the 
     following:
       ``(4) a FARRM Account (within the meaning of section 
     468C(d)), or''.
       (2) Section 4973, as amended by section 303(b)(2), is 
     amended by adding at the end the following:
       ``(h) Excess Contributions to FARRM Accounts.--For purposes 
     of this section, in the case of a FARRM Account (within the 
     meaning of section 468C(d)), the term `excess contributions' 
     means the amount by which the amount contributed for the 
     taxable year to the Account exceeds the amount which may be 
     contributed to the Account under section 468C(b) for such 
     taxable year. For purposes of this subsection, any 
     contribution which is distributed out of the FARRM Account in 
     a distribution to which section 468C(e)(2)(B) applies shall 
     be treated as an amount not contributed.''
       (3) The section heading for section 4973 is amended to read 
     as follows:

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

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

``Sec. 4973. Excess contributions to certain accounts, annuities, 
              etc.''
       (c) Tax on Prohibited Transactions.--
       (1) Subsection (c) of section 4975 (relating to tax on 
     prohibited transactions) is amended by adding at the end the 
     following:
       ``(6) Special rule for farrm accounts.--A person for whose 
     benefit a FARRM Account (within the meaning of section 
     468C(d)) is established shall be exempt from the tax imposed 
     by this section with respect to any transaction concerning 
     such account (which would otherwise be taxable under this 
     section) if, with respect to such transaction, the account 
     ceases to be a FARRM Account by reason of the application of 
     section 468C(f)(3)(A) to such account.''
       (2) Paragraph (1) of section 4975(e) is amended by 
     redesignating subparagraphs (E) and (F) as subparagraphs (F) 
     and (G), respectively, and by inserting after subparagraph 
     (D) the following:
       ``(E) a FARRM Account described in section 468C(d),''.
       (d) Failure To Provide Reports on FARRM Accounts.--
     Paragraph (2) of section 6693(a) (relating to failure to 
     provide reports on certain tax-favored accounts or 
     annuities), as amended by section 303(d), is amended by 
     redesignating subparagraphs (C), (D), and (E) as 
     subparagraphs (D), (E), and (F), respectively, and by 
     inserting after subparagraph (B) the following:
       ``(C) section 468C(g) (relating to FARRM Accounts),''.
       (e) Clerical Amendment.--The table of sections for subpart 
     C of part II of subchapter E of chapter 1 is amended by 
     inserting after the item relating to section 468B the 
     following:

``Sec. 468C. Farm and Ranch Risk Management Accounts.''
       (f) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 902. LEASE AGREEMENT RELATING TO EXCLUSION OF CERTAIN 
                   FARM RENTAL INCOME FROM NET EARNINGS FROM SELF-
                   EMPLOYMENT.

       (a) Internal Revenue Code.--Section 1402(a)(1)(A) (relating 
     to net earnings from self-employment) is amended by striking 
     ``an arrangement'' and inserting ``a lease agreement''.
       (b) Social Security Act.--Section 211(a)(1)(A) of the 
     Social Security Act is amended by striking ``an arrangement'' 
     and inserting ``a lease agreement''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 903. EXCLUSION OF GAIN FROM SALE OF CERTAIN FARMLAND.

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

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

       ``(a) Exclusion.--In the case of a natural person, gross 
     income shall not include gain from the sale or exchange of 
     qualified farm property, to the extent such property does not 
     exceed 160 acres.
       ``(b) Limitation on Amount of Exclusion.--
       ``(1) In general.--The amount of gain excluded from gross 
     income under subsection (a) with respect to any taxable year 
     shall not exceed $500,000 ($250,000 in the case of a married 
     individual filing a separate return), reduced by the 
     aggregate amount of gain excluded under subsection (a) for 
     all preceding taxable years.
       ``(2) Special rule for joint returns.--The amount of the 
     exclusion under subsection (a) on a joint return for any 
     taxable year shall be allocated equally between the spouses 
     for purposes of applying the limitation under paragraph (1) 
     for any succeeding taxable year.
       ``(c) Qualified Farm Property.--
       ``(1) Qualified farm property.--For purposes of this 
     section, the term `qualified farm property' means real 
     property located in the United States if--
       ``(A) during periods aggregating 3 years or more of the 5-
     year period ending on the date of the sale or exchange of 
     such real property--

[[Page 18289]]

       ``(i) such real property was used as a farm for farming 
     purposes by the taxpayer or a member of the family of the 
     taxpayer, and
       ``(ii) there was material participation by the taxpayer (or 
     such a member) in the operation of the farm, and
       ``(B) such real property is located contiguous to the 
     principal residence of the taxpayer which is sold or 
     exchanged in the same taxable year as such real property.
       ``(2) Definitions.--For purposes of this subsection, the 
     terms `member of the family', `farm', and `farming purposes' 
     have the respective meanings given such terms by paragraphs 
     (2), (4), and (5) of section 2032A(e).
       ``(3) Special rules.--For purposes of this section, rules 
     similar to the rules of paragraphs (4) and (5) of section 
     2032A(b) and paragraphs (3) and (6) of section 2032A(e) shall 
     apply.
       ``(d) Other Rules.--For purposes of this section, rules 
     similar to the rules of subsection (e) and subsection (f) of 
     section 121 shall apply.''
       (b) Conforming Amendment.--The table of sections for part 
     III of subchapter B of chapter 1 is amended by adding after 
     the item relating to section 121 the following new item:

``Sec. 121A. Exclusion of gain from sale of qualified farm property.''
       (c) Effective Date.--The amendment made by this section 
     shall apply to any sale or exchange after December 31, 2000, 
     in taxable years ending after such date.

     SEC. 904. EXEMPTION OF SMALL ISSUE AGRICULTURE BONDS FROM 
                   STATE VOLUME CAP.

       (a) In General.--Section 146(g) (relating to exception for 
     certain bonds) is amended by striking ``and'' at the end of 
     paragraph (3), by striking the period at the end of paragraph 
     (4) and inserting ``, and'', and by inserting after paragraph 
     (4) the following:
       ``(5) any small issue bond described in section 
     144(a)(12)(B)(ii).''
       (b) Effective Date.--The amendments made by this section 
     shall apply to bonds issued after December 31, 2000.

     SEC. 905. CAPITAL GAIN REALIZED FROM TRANSFER OF FARM 
                   PROPERTY IN COMPLETE OR PARTIAL SATISFACTION OF 
                   QUALIFIED FARM INDEBTEDNESS EXCLUDED FROM GROSS 
                   INCOME.

       (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 by 
     inserting after section 138 the following new section:

     ``SEC. 139. CAPITAL GAIN REALIZED FROM TRANSFER OF FARM 
                   PROPERTY IN COMPLETE OR PARTIAL SATISFACTION OF 
                   QUALIFIED FARM INDEBTEDNESS.

       ``(a) In General.--Gross income of any taxpayer described 
     in subsection (d) does not include so much of the gain from 
     the transfer of farm property in complete or partial 
     satisfaction of qualified farm indebtedness as does not 
     exceed $300,000.
       ``(b) Prior Gains and Discharges of Indebtedness Taken Into 
     Account.--
       ``(1) In general.--If for any prior year--
       ``(A) gain from the transfer of farm property in complete 
     or partial satisfaction of qualified farm indebtedness, or
       ``(B) a discharge of such indebtedness,

     is excluded from the taxpayer's gross income under subsection 
     (a) of this section or section 108(g), respectively, 
     subsection (a) of this section shall be applied for the 
     taxable year with respect to such gain by reducing the dollar 
     amount contained in such subsection by the such excluded 
     prior year gains and discharges.
       ``(2) Current year coordination with section 108.--
     Subsection (a) of this section shall be applied for the 
     taxable year with respect to any gain by reducing the dollar 
     amount contained in such subsection (after any reduction 
     under paragraph (1)) by any amount excluded from gross income 
     under section 108 for such year.
       ``(c) Reduction of Tax Attributes.--
       ``(1) In general.--The amount excluded from gross income 
     under subsection (a) shall be applied to reduce the tax 
     attributes described under section 108(b)(2).
       ``(2) Coordination with section 108.--For purposes of this 
     subsection, the amount of tax attributes shall be determined 
     after any reduction under section 108(b) by reason of amounts 
     excluded from gross income under section 108(a)(1).
       ``(d) Taxpayer Described in This Subsection.--
       ``(1) In general.--A taxpayer is described in this 
     subsection if--
       ``(A) more than 50 percent of the gross receipts of the 
     taxpayer for 6 of the 10 taxable years preceding such taxable 
     year are attributable to--
       ``(i) the trade or business of farming (within the meaning 
     of section 2032A(e)(5)), or
       ``(ii) the sale or lease of assets used in such trade or 
     business, or
       ``(iii) both, and
       ``(B) equity in all property held by the taxpayer after 
     such transfer is less than the greater of --
       ``(i) $25,000, or
       ``(ii) 150 percent of the excess (if any) of--

       ``(I) the tax imposed by this chapter determined as if this 
     section and section 108 did not apply to the transfer, over

       ``(II) the tax imposed by this chapter determined with 
     regard to this section and section 108 (if applicable).

       ``(2) Modified adjusted gross income.--For purposes of this 
     subsection, the term `modified adjusted gross income' means 
     adjusted gross income--
       ``(A) determined with regard to this section and section 
     108, and
       ``(B) increased by the amount of interest received or 
     accrued by the taxpayer during the taxable year which is 
     exempt from tax.
       ``(3) Equity.--For purposes of this subsection, the term 
     `equity' means, with respect to all property held by the 
     taxpayer, an amount equal to--
       ``(A) the fair market value of such property, minus
       ``(B) any indebtedness relating to such property.
       ``(e) Farm Property.--For purposes of this section, the 
     term `farm property' means real and personal property used by 
     the taxpayer in the trade or business of farming (within the 
     meaning of section 2032A(e)(5)).
       ``(f) Qualified Farm Indebtedness.--For purposes of this 
     section, indebtedness of a taxpayer shall be treated as 
     qualified farm indebtedness if such indebtedness was incurred 
     directly in connection with the operation by the taxpayer of 
     the trade or business of farming (within the meaning of 
     section 2032A(e)(5)) and when such taxpayer materially 
     participated in such trade or business (within the meaning of 
     section 2032A(e)(6)).
       ``(g) Application With Recapture Provisions.--In the case 
     of any gain from the transfer of farm property in complete or 
     partial satisfaction of qualified farm indebtedness which is 
     treated as ordinary income under section 1245, 1250, 1252, or 
     1255, subsection (a) shall be applied for the taxable year by 
     first reducing the dollar amount contained in such subsection 
     by such gain.''.
       (b) Clerical Amendment.--The table of sections for part III 
     of subchapter B of chapter 1 is amended by striking out the 
     item relating to section 139 and inserting in lieu thereof 
     the following new items:

``Sec. 139. Capital gain realized from transfer of farm property in 
              complete or partial satisfaction of qualified farm 
              indebtedness.
``Sec. 140. Cross references to other Acts.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to transfers occurring after December 31, 2000, 
     in taxable years ending after such date.

     SEC. 906. EXCLUSION OF DISCHARGE OF QUALIFIED FARM 
                   INDEBTEDNESS FROM GROSS INCOME INCREASED FOR 
                   CERTAIN SOLVENT FARMERS.

       (a) In General.--Section 108(g) (relating to special rules 
     for discharge of qualified farm indebtedness) is amended by 
     adding at the end thereof the following new paragraph:
       ``(4) Special limitations for certain farmers.--
       ``(A) In general.--With respect to a taxpayer who is 
     described in subparagraph (C) of this paragraph and who 
     elects the application of this paragraph--
       ``(i) the amount excluded under subparagraph (C) of 
     subsection (a)(1) shall not exceed $300,000, and
       ``(ii) paragraph (2) of this subsection shall be applied by 
     amending such paragraph to read as follows: `For purposes of 
     this section, indebtedness of a taxpayer shall be treated as 
     qualified farm indebtedness if such indebtedness was incurred 
     directly in connection with the operation by the taxpayer of 
     the trade or business of farming and when such taxpayer 
     materially participated in such trade or business (within the 
     meaning of section 2032A(e)(6)).'
       ``(B) Prior discharges of indebtedness and gains taken into 
     account.--If for any prior year--
       ``(i) a discharge of qualified farm indebtedness, or
       ``(ii) gain from the transfer of farm property in complete 
     or partial satisfaction of such indebtedness,

     is excluded from the taxpayer's gross income under this 
     subsection or section 139, respectively, subparagraph (A) 
     shall be applied for the taxable year with respect to such 
     discharge by reducing the dollar amount contained in such 
     subparagraph by the such excluded prior year discharges and 
     gains.
       ``(C) Taxpayer described in this subparagraph.--A taxpayer 
     is described in this subparagraph if--
       ``(i) more than 50 percent of the gross receipts of the 
     taxpayer for 6 of the 10 taxable years preceding such taxable 
     year are attributable to--

       ``(I) the trade or business of farming (within the meaning 
     of section 2032A(e)(5)), or
       ``(II) the sale or lease of assets used in such trade or 
     business, or
       ``(III) both,

       ``(ii) the indebtedness of the taxpayer both before and 
     after such discharge is equal to 70 percent or more of the 
     fair market value in all property held by such taxpayer, and
       ``(iii) equity in all property held by the taxpayer after 
     such discharge is less than the greater of--

       ``(I) $25,000, or
       ``(II) 150 percent of the excess (if any) of the tax 
     imposed by this chapter determined as if this section and 
     section 139 did not apply to the transfer, over the tax 
     imposed by this chapter determined with regard to this 
     section and section 139 (if applicable).

[[Page 18290]]

       ``(D) Definitions.--For purposes of this paragraph--
       ``(i) Farm property.--The term `farm property' means real 
     and personal property used by the taxpayer in the trade or 
     business of farming (within the meaning of section 
     2032A(e)(5)).
       ``(ii) Modified adjusted gross income.--The term `modified 
     adjusted gross income' means adjusted gross income--

       ``(I) determined with regard to this section and section 
     139, and
       ``(II) increased by the amount of interest received or 
     accrued by the taxpayer during the taxable year which is 
     exempt from tax.

       ``(iii) Equity.--The term `equity' means, with respect to 
     any property, an amount equal to--

       ``(I) the fair market value of such property, minus
       ``(II) any indebtedness relating to such property.''.

       (b) Conforming Amendment.--Subparagraph (A) of section 
     108(g)(3) is amended by striking out ``The amount'' and 
     inserting in lieu thereof ``Except as provided in paragraph 
     (4), the amount''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to any sale or exchange occurring after December 
     31, 2000, in taxable years ending after such date.

     SEC. 907. NET OPERATING LOSS OF FARMERS.

       (a) Increase in Carryback Years.--Paragraph (1) of section 
     172(b) (relating to net operating loss carrybacks and 
     carryforwards) is amended by adding at the end the following 
     new subparagraph:
       ``(G) Farming losses.--Subparagraph (A) shall be applied--
       ``(i) in the matter preceding clause (i), by substituting 
     `any taxable year beginning with the 3rd taxable year after 
     the taxable year of such loss' for `any taxable year', and
       ``(ii) in clause (i), by substituting `10 years' for `2 
     years',

     with respect to the portion of the net operating loss of an 
     eligible taxpayer (as defined in subsection (i)) for any 
     taxable year beginning after December 31, 1997, and ending 
     before January 1, 2000, which is a farming loss (as so 
     defined) with respect to the taxpayer.''
       (b) Definitions and Rules Relating to Farming Losses.--
     Section 172 is amended by redesignating subsection (i) as 
     subsection (j) and inserting after subsection (h) the 
     following new subsection:
       ``(i) Definitions and Rules Relating to Farming Losses.--
     For purposes of this section--
       ``(1) Farming loss.--
       ``(A) In general.--The term `farming loss' means the lesser 
     of--
       ``(i) the net operating loss of the taxpayer for the 
     taxable year, or
       ``(ii) the net operating loss of the taxpayer for the 
     taxable year determined by only taking into account items of 
     income and deduction attributable to 1 or more qualified 
     farming business of the taxpayer.
       ``(B) Dollar limitation.--
       ``(i) In general.--The farming loss of taxpayer for any 
     taxable year shall not exceed $200,000.
       ``(ii) Aggregation rules.--

       ``(I) In general.--All persons treated as 1 employer under 
     subsections (a) or (b) of section 52 shall be treated as 1 
     person.
       ``(II) Pass-thru entity.--In the case of a partnership, 
     trust, or other pass-thru entity, the limitation shall be 
     applied at both the entity and the owner level.
       ``(III) Owner.--The limitation shall be reduced by the 
     amount of farming loss determined for a corporation for which 
     the taxpayer is a 50 percent owner in the taxable year of the 
     corporation ending in the taxable year of the taxpayer owner.

       ``(2) Eligible taxpayer.--
       ``(A) In general.--The term `eligible taxpayer' means a 
     taxpayer which derives more than 50 percent of its gross 
     income for the 3-year period beginning 2 years prior to the 
     current taxable year from qualified farming businesses.
       ``(B) Qualified farming business.--The term `qualified 
     farming business' means a trade or business of farming 
     (within the meaning of section 2032A)--
       ``(i) with respect to which--

       ``(I) the taxpayer or a member of the family of the 
     taxpayer materially participates (within the meaning of 
     section 2032A(e)(6)), or
       ``(II) in the case of a taxpayer other than an individual, 
     a 20 percent owner of the taxpayer or a member of the owner's 
     family materially participates (as so defined), and

       ``(ii) which does not receive in excess of $7,000,000 for 
     sales in a taxable year.

     For purposes of clause (i)(II), owners which are members of a 
     single family shall be treated as a single owner.
       ``(3) Owner.--
       ``(A) 20 percent owner.--The term `20 percent owner' means 
     any person who would be described in section 416(i)(1)(B)(i) 
     if `20 percent' were substituted for `5 percent' each place 
     it appears in such section.
       ``(B) 50 percent owner.--The term `50 percent owner' means 
     any person who would be described in section 416(i)(1)(B)(i) 
     if `50 percent' were substituted for `5 percent' each place 
     it appears in such section.
       ``(4) Coordination with subsection (b)(2).--For purposes of 
     applying subsection (b)(2), a farming loss for any taxable 
     year shall be treated as a separate net operating loss for 
     such taxable year to be taken into account for the remaining 
     portion of the net operating loss for such taxable year.
       ``(5) Election.--Any taxpayer entitled to a 10-year 
     carryback under subsection (b)(1)(G) from any loss year may 
     elect to have the carryback period with respect to such loss 
     year, and any portion of the farming loss for such year, 
     determined without regard to subsection (b)(1)(G). Such 
     election shall be made in such manner as may be prescribed by 
     the Secretary and shall be made by the due date (including 
     extensions of time) for filing the taxpayer's return for the 
     taxable year of the net operating loss. Such election, once 
     made for any taxable year, shall be irrevocable for the 
     taxable year.''

     SEC. 908. CERTAIN CASH RENTALS OF FARMLAND NOT TO CAUSE 
                   RECAPTURE OF SPECIAL ESTATE TAX VALUATION.

       (a) In General.--Subsection (c) of section 2032A (relating 
     to tax treatment of dispositions and failures to use for 
     qualified use) is amended by adding at the end the following 
     new paragraph:
       ``(8) Certain cash rental not to cause recapture.--For 
     purposes of this subsection, a qualified heir shall not be 
     treated as failing to use property in a qualified use solely 
     because such heir rents such property on a net cash basis to 
     a member of the decedent's family, but only if, during the 
     period of the lease, such member of the decedent's family 
     uses such property in a qualified use.''
       (b) Conforming Amendment.--Section 2032A (b)(5)(A) is 
     amended by striking the last sentence.
       (c) Effective Date.--The amendment made by subsection (a) 
     shall apply with respect to rentals occurring after December 
     31, 1976.

     SEC. 909. DECLARATORY JUDGMENT REMEDY RELATING TO STATUS AND 
                   CLASSIFICATION OF FARMERS' COOPERATIVES.

       (a) In General.--Paragraph (1) of section 7428(a) (relating 
     to creation of remedy) is amended by striking ``or'' at the 
     end of subparagraph (B), and by inserting after subparagraph 
     (C) the following new subparagraph:
       ``(D) with respect to the initial qualification or 
     continuing qualification of an organization as a cooperative 
     described in section 521(b) which is exempt from tax under 
     section 521(a), or''.
       (b) Effective Date.--The amendment made by this section 
     shall apply with respect to pleadings filed with the United 
     States Tax Court, the district court of the United States for 
     the District of Columbia, or the United States Court of 
     Federal Claims after the date of enactment of this Act but 
     only with respect to determinations (or requests for 
     determinations) made after January 1, 1998.

              TITLE X--TECHNOLOGY AND ECONOMIC DEVELOPMENT

     SEC. 1001. PERMANENT EXTENSION AND MODIFICATION OF RESEARCH 
                   CREDIT.

       (a) Permanent Extension.--
       (1) In general.--Section 41 (relating to credit for 
     increasing research activities) is amended by striking 
     subsection (h).
       (2) Conforming amendment.--Paragraph (1) of section 45C(b) 
     is amended by striking subparagraph (D).
       (3) Effective date.--The amendments made by this subsection 
     shall apply to amounts paid or incurred after June 30, 1999.
       (b) Increase in Percentages Under Alternative Incremental 
     Credit.--
       (1) In general.--Subparagraph (A) of section 41(c)(4) is 
     amended--
       (A) by striking ``1.65 percent'' and inserting ``2.65 
     percent'',
       (B) by striking ``2.2 percent'' and inserting ``3.2 
     percent'', and
       (C) by striking ``2.75 percent'' and inserting ``3.75 
     percent''.
       (2) Effective date.--The amendments made by this subsection 
     shall apply to taxable years beginning after June 30, 1999.
       (c) Extension of Research Credit to Research in Puerto Rico 
     and the possessions of the United States.--
       (1) In general.--Section 41(d)(4)(F) (relating to foreign 
     research) is amended by inserting ``, the Commonwealth of 
     Puerto Rico, or any possession of the United States'' after 
     ``United States''.
       (2) Effective date.--The amendment made by this section 
     shall apply to taxable years beginning after June 30, 1999.

     SEC. 1002. NEW MARKETS TAX CREDIT.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business-related credits), as amended 
     by section 608(a), is amended by adding at the end the 
     following new section:

     ``SEC. 45E. NEW MARKETS TAX CREDIT.

     ``(a) Allowance of Credit.--
       ``(1) In general.--For purposes of section 38, in the case 
     of a taxpayer who holds a qualified equity investment on a 
     credit allowance date of such investment which occurs during 
     the taxable year, the new markets tax credit determined under 
     this section for such taxable year is an amount equal to 6 
     percent of the amount paid to the qualified community 
     development entity for such investment at its original issue.
       ``(2) Credit allowance date.--The term `credit allowance 
     date' means, with respect to any qualified equity 
     investment--
       ``(A) the date on which such investment is initially made, 
     and

[[Page 18291]]

       ``(B) each of the 4 anniversary dates of such date 
     thereafter.
       ``(b) Qualified Equity Investment.--For purposes of this 
     section--
       ``(1) In general.--The term `qualified equity investment' 
     means any equity investment in a qualified community 
     development entity if--
       ``(A) such investment is acquired by the taxpayer at its 
     original issue (directly or through an underwriter) solely in 
     exchange for cash,
       ``(B) substantially all of such cash is used by the 
     qualified community development entity to make qualified low-
     income community investments, and
       ``(C) such investment is designated for purposes of this 
     section by the qualified community development entity.

     Such term shall not include any equity investment issued by a 
     qualified community development entity more than 5 years 
     after the date that such entity receives an allocation under 
     subsection (f). Any allocation not used within such 5-year 
     period may be reallocated by the Secretary under subsection 
     (f).
       ``(2) Limitation.--The maximum amount of equity investments 
     issued by a qualified community development entity which may 
     be designated under paragraph (1)(C) by such entity shall not 
     exceed the portion of the limitation amount allocated under 
     subsection (f) to such entity.
       ``(3) Safe harbor for determining use of cash.--The 
     requirement of paragraph (1)(B) shall be treated as met if at 
     least 85 percent of the aggregate gross assets of the 
     qualified community development entity are invested in 
     qualified low-income community investments.
       ``(4) Treatment of subsequent purchasers.--The term 
     `qualified equity investment' includes any equity investment 
     which would (but for paragraph (1)(A)) be a qualified equity 
     investment in the hands of the taxpayer if such investment 
     was a qualified equity investment in the hands of a prior 
     holder.
       ``(5) Redemptions.--A rule similar to the rule of section 
     1202(c)(3) shall apply for purposes of this subsection.
       ``(6) Equity investment.--The term `equity investment' 
     means--
       ``(A) any stock in a qualified community development entity 
     which is a corporation, and
       ``(B) any capital interest in a qualified community 
     development entity which is a partnership.
       ``(c) Qualified Community Development Entity.--For purposes 
     of this section--
       ``(1) In general.--The term `qualified community 
     development entity' means any domestic corporation or 
     partnership if--
       ``(A) the primary mission of the entity is serving, or 
     providing investment capital for, low-income communities or 
     low-income persons,
       ``(B) the entity maintains accountability to residents of 
     low-income communities through representation on governing or 
     advisory boards or otherwise, and
       ``(C) the entity is certified by the Secretary for purposes 
     of this section as being a qualified community development 
     entity.
       ``(2) Special rules for certain organizations.--The 
     requirements of paragraph (1) shall be treated as met by--
       ``(A) any specialized small business investment company (as 
     defined in section 1044(c)(3)), and
       ``(B) any community development financial institution (as 
     defined in section 103 of the Community Development Banking 
     and Financial Institutions Act of 1994 (12 U.S.C. 4702)).
       ``(d) Qualified Low-Income Community Investments.--For 
     purposes of this section--
       ``(1) In general.--The term `qualified low-income community 
     investment' means--
       ``(A) any equity investment in, or loan to, any qualified 
     active low-income community business,
       ``(B) the purchase from another community development 
     entity of any loan made by such entity which is a qualified 
     low-income community investment if the amount received by 
     such other entity from such purchase is used by such other 
     entity to make qualified low-income community investments,
       ``(C) financial counseling and other services specified in 
     regulations prescribed by the Secretary to businesses located 
     in, and residents of, low-income communities, and
       ``(D) any equity investment in, or loan to, any qualified 
     community development entity if substantially all of the 
     investment or loan is used by such entity to make qualified 
     low-income community investments described in subparagraphs 
     (A), (B), and (C).
       ``(2) Qualified active low-income community business.--
       ``(A) In general.--For purposes of paragraph (1), the term 
     `qualified active low-income community business' means, with 
     respect to any taxable year, any corporation or partnership 
     if for such year--
       ``(i) at least 50 percent of the total gross income of such 
     entity is derived from the active conduct of a qualified 
     business within any low-income community,
       ``(ii) a substantial portion of the use of the tangible 
     property of such entity (whether owned or leased) is within 
     any low-income community,
       ``(iii) a substantial portion of the services performed for 
     such entity by its employees are performed in any low-income 
     community,
       ``(iv) less than 5 percent of the average of the aggregate 
     unadjusted bases of the property of such entity is 
     attributable to collectibles (as defined in section 
     408(m)(2)) other than collectibles that are held primarily 
     for sale to customers in the ordinary course of such 
     business, and
       ``(v) less than 5 percent of the average of the aggregate 
     unadjusted bases of the property of such entity is 
     attributable to nonqualified financial property (as defined 
     in section 1397B(e)).
       ``(B) Proprietorship.--Such term shall include any business 
     carried on by an individual as a proprietor if such business 
     would meet the requirements of subparagraph (A) were it 
     incorporated.
       ``(C) Portions of business may be qualified active low-
     income community business.--The term `qualified active low-
     income community business' includes any trades or businesses 
     which would qualify as a qualified active low-income 
     community business if such trades or businesses were 
     separately incorporated.
       ``(3) Qualified business.--For purposes of this subsection, 
     the term `qualified business' has the meaning given to such 
     term by section 1397B(d); except that--
       ``(A) in lieu of applying paragraph (2)(B) thereof, the 
     rental to others of real property located in any low-income 
     community shall be treated as a qualified business if there 
     are substantial improvements located on such property,
       ``(B) paragraph (3) thereof shall not apply, and
       ``(C) such term shall not include any business if a 
     significant portion of the equity interests in such business 
     are held by any person who holds a significant portion of the 
     equity investments in the community development entity.
       ``(e) Low-Income Community.--For purposes of this section--
       ``(1) In general.--The term `low-income community' means 
     any population census tract if--
       ``(A) the poverty rate for such tract is at least 20 
     percent, or
       ``(B)(i) in the case of a tract not located within a 
     metropolitan area, the median family income for such tract 
     does not exceed 80 percent of statewide median family income, 
     or
       ``(ii) in the case of a tract located within a metropolitan 
     area, the median family income for such tract does not exceed 
     80 percent of the greater of statewide median family income 
     or the metropolitan area median family income.
       ``(2) Areas not within census tracts.--In the case of an 
     area which is not tracted for population census tracts, the 
     equivalent county divisions (as defined by the Bureau of the 
     Census for purposes of defining poverty areas) shall be used 
     for purposes of determining poverty rates and median family 
     income.
       ``(f) National Limitation on Amount of Investments 
     Designated.--
       ``(1) In general.--There is a new markets tax credit 
     limitation of $750,000,000 for each of calendar years 2000 
     through 2004 and zero for any succeeding calendar year.
       ``(2) Allocation of limitation.--The limitation under 
     paragraph (1) shall be allocated by the Secretary among 
     qualified community development entities selected by the 
     Secretary. In making allocations under the preceding 
     sentence, the Secretary shall give priority to entities with 
     records of having successfully provided capital or technical 
     assistance to disadvantaged businesses or communities.
       ``(3) Carryover of unused limitation.--If the new markets 
     tax credit limitation for any calendar year exceeds the 
     aggregate amount allocated under paragraph (2) for such year, 
     such limitation for the succeeding calendar year shall be 
     increased by the amount of such excess.
       ``(g) Recapture of Credit In Certain Cases.--
       ``(1) In general.--If, at any time during the 5-year period 
     beginning on the date of the original issue of a qualified 
     equity investment in a qualified community development 
     entity, there is a recapture event with respect to such 
     investment, then the tax imposed by this chapter for the 
     taxable year in which such event occurs shall be increased by 
     the credit recapture amount.
       ``(2) Credit recapture amount.--For purposes of paragraph 
     (1), the credit recapture amount is an amount equal to the 
     sum of--
       ``(A) the aggregate decrease in the credits allowed to the 
     taxpayer under section 38 for all prior taxable years which 
     would have resulted if no credit had been determined under 
     this section with respect to such investment, plus
       ``(B) interest at the overpayment rate established under 
     section 6621 on the amount determined under subparagraph (A) 
     for each prior taxable year for the period beginning on the 
     due date for filing the return for the prior taxable year 
     involved.

     No deduction shall be allowed under this chapter for interest 
     described in subparagraph (B).
       ``(3) Recapture event.--For purposes of paragraph (1), 
     there is a recapture event with

[[Page 18292]]

     respect to an equity investment in a qualified community 
     development entity if--
       ``(A) such entity ceases to be a qualified community 
     development entity,
       ``(B) the proceeds of the investment cease to be used as 
     required of subsection (b)(1)(B), or
       ``(C) such investment is redeemed by such entity.
       ``(4) Special rules.--
       ``(A) Tax benefit rule.--The tax for the taxable year shall 
     be increased under paragraph (1) 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 
     this subsection shall not be treated as a tax imposed by this 
     chapter for purposes of determining the amount of any credit 
     under this chapter or for purposes of section 55.
       ``(h) Basis Reduction.--The basis of any qualified equity 
     investment shall be reduced by the amount of any credit 
     determined under this section with respect to such 
     investment.
       ``(i) Regulations.--The Secretary shall prescribe such 
     regulations as may be appropriate to carry out this section, 
     including regulations--
       ``(1) which limit the credit for investments which are 
     directly or indirectly subsidized by other Federal benefits 
     (including the credit under section 42 and the exclusion from 
     gross income under section 103),
       ``(2) which prevent the abuse of the provisions of this 
     section through the use of related parties,
       ``(3) which impose appropriate reporting requirements
       ``(4) which apply the provisions of this section to newly 
     formed entities.''
       (b) Credit Made Part of General Business Credit.--
       (1) In general.--Subsection (b) of section 38, as amended 
     by section 608(b), 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) the new markets tax credit determined under section 
     45E(a).''
       (2) Limitation on carryback.--Subsection (d) of section 39, 
     as amended by section 608(c) is amended by adding at the end 
     the following new paragraph:
       ``(11) No carryback of new markets tax credit before 
     january 1, 2000.--No portion of the unused business credit 
     for any taxable year which is attributable to the credit 
     under section 45E may be carried back to a taxable year 
     ending before January 1, 2000.''
       (c) Deduction for Unused Credit.--Subsection (c) of section 
     196, as amended by section 205(d), 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 new markets tax credit determined under section 
     45E(a).''
       (d) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1, as amended by 
     section 608(d), is amended by adding at the end the following 
     new item:

``Sec. 45E. New markets tax credit.''
       (e) Effective Date.--The amendments made by this section 
     shall apply to investments made after December 31, 1999.

     SEC. 1003. INCREASE IN STATE CEILING ON LOW-INCOME HOUSING 
                   CREDIT.

       (a) In General.--Clause (i) of section 42(h)(3)(C) 
     (relating to State housing credit ceiling) is amended to read 
     as follows:
       ``(i) the applicable amount under subparagraph (H) 
     multiplied by the State population,''.
       (b) Applicable Amount.--Paragraph (3) of section 42(h) 
     (relating to housing credit dollar amount for agencies) is 
     amended by adding at the end the following new subparagraph:
       ``(H) Applicable amount of state ceiling.--For purposes of 
     subparagraph (C)(i), the applicable amount shall be 
     determined under the following table:

``For calendar year--                        The applicable amount is--
      2001, 2002, and 2003.......................................$1.30 
      2004 and 2005.............................................  1.40 
      2006 and thereafter.....................................  1.50.''

       (c) Effective Date.--The amendments made by this section 
     shall apply to calendar years after 2000.

     SEC. 1004. INCREASE IN VOLUME CAP ON PRIVATE ACTIVITY BONDS.

       (a) In General.--The table contained in section 146(d)(2) 
     (relating to per capita limit; aggregate limit) is amended by 
     striking ``2002'', ``2003'', ``2004'', ``2005'', ``2006'', 
     and ``2007'' and inserting ``2000'', ``2001'', ``2002'', 
     ``2003'', ``2004'', and ``2005'', respectively.
       (b) Effective Date.--The amendments made by this section 
     shall apply to calendar years after 2000.

     SEC. 1005. SPACEPORTS TREATED LIKE AIRPORTS UNDER EXEMPT 
                   FACILITY BOND RULES.

       (a) In General.--Paragraph (1) of section 142(a) (relating 
     to exempt facility bond) is amended to read as follows:
       ``(1) airports and spaceports,''.
       (b) Treatment of Ground Leases.--Paragraph (1) of section 
     142(b) (relating to certain facilities must be governmentally 
     owned) is amended by adding at the end the following new 
     subparagraph:
       ``(C) Special rule for spaceport ground leases.--For 
     purposes of subparagraph (A), spaceport property which is 
     located on land owned by the United States and which is used 
     by a governmental unit pursuant to a lease (as defined in 
     section 168(h)(7)) from the United States shall be treated as 
     owned by such unit if--
       ``(i) the lease term (within the meaning of section 
     168(i)(3)) is at least 15 years, and
       ``(ii) such unit would be treated as owning such property 
     if such lease term were equal to the useful life of such 
     property.''.
       (c) Bond may be Federally Guaranteed.--Paragraph (3) of 
     section 149(b) (relating to exceptions) is amended by adding 
     at the end the following new subparagraph:
       ``(E) Exception for spaceports.--Paragraph (1) shall not 
     apply to any exempt facility bond issued as part of an issue 
     described in paragraph (1) of section 142(a) to provide a 
     spaceport in situations where--
       ``(i) the guarantee of the United States (or an agency or 
     instrumentality thereof) is the result of payment of rent, 
     user fees, or other charges by the United States (or any 
     agency or instrumentality thereof), and
       ``(ii) the payment of the rent, user fees, or other charges 
     is for, and conditioned upon, the use of the spaceport by the 
     United States (or any agency or instrumentality thereof).''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to obligations issued after December 31, 2000.

     SEC. 1006. INCREASE IN EXPENSE TREATMENT FOR SMALL 
                   BUSINESSES.

       (a) In General.--Paragraph (1) of section 179(b) (relating 
     to dollar limitation) is amended to read as follows:
       ``(1) Dollar limitation.--The aggregate cost which may be 
     taken into account under subsection (a) for any taxable year 
     shall not exceed $25,000.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

                   TITLE XI--MISCELLANEOUS INCENTIVES

                  Subtitle A--Miscellaneous Provisions

     SEC. 1101. OIL AND GAS INCENTIVES.

       (a) Election to Expense Geological and Geophysical 
     Expenditures.--
       (1) In general.--Section 263 (relating to capital 
     expenditures) is amended by adding at the end the following 
     new paragraph:
       ``(j) Geological and Geophysical Expenditures for Domestic 
     Oil and Gas Wells.--Notwithstanding subsection (a), a 
     taxpayer may elect to treat geological and geophysical 
     expenses incurred in connection with the exploration for, or 
     development of, oil or gas within the United States (as 
     defined in section 638) as expenses which are not chargeable 
     to capital account. Any expenses so treated shall be allowed 
     as a deduction in the taxable year in which paid or 
     incurred.''
       (2) Conforming Amendment.--Section 263A(c)(3) is amended by 
     inserting ``263(j),'' after ``263(i),''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to expenses paid or incurred in taxable years 
     beginning after December 31, 2000.
       (b) Election to Expense Delay Rental Payments.--
       (1) In general.--Section 263 (relating to capital 
     expenditures), as amended by subsection (a)(1), is amended by 
     adding at the end the following new paragraph:
       ``(k) Delay Rental Payments for Domestic Oil and Gas 
     Wells.--
       ``(1) In general.--Notwithstanding subsection (a), a 
     taxpayer may elect to treat delay rental payments incurred in 
     connection with the development of oil or gas within the 
     United States (as defined in section 638) as payments which 
     are not chargeable to capital account. Any payments so 
     treated shall be allowed as a deduction in the taxable year 
     in which paid or incurred.
       ``(2) Delay rental payments.--For purposes of paragraph 
     (1), the term `delay rental payment' means an amount paid for 
     the privilege of deferring development of an oil or gas 
     well.''
       (2) Conforming amendment.--Section 263A(c)(3), as amended 
     by subsection (a)(2), is amended by inserting ``263(k),'' 
     after ``263(j),''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to payments made or incurred in taxable years 
     beginning after December 31, 2000.
       (c) Suspension of Gross Income Limit for Percentage 
     Depletion.--Section 613A(d)(1) (relating to limitation based 
     on taxable income) is amended by adding at the end the 
     following: ``This paragraph shall not apply to any taxpayer 
     in taxable years beginning after December 31, 2000, and 
     ending before January 1, 2006.''

     SEC. 1102. TREATMENT OF CERTAIN REVENUES OF ELECTRIC 
                   COOPERATIVES.

       (a) In General.--Section 501(c)(12)(C) 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 adding at the end the following new clause:

[[Page 18293]]

       ``(iii) from revenues received from nonmembers solely as a 
     result of conforming operations to meet provisions of an 
     applicable Federal or State plan designed to provide customer 
     choice in electric power supply, including wheeling revenue, 
     revenue from replacement of lost member sales with nonmember 
     sales, revenue from unbundled electric activities (including 
     metering, billing, and service charges), revenue from member 
     sales at below cost in order to meet market rates, revenue 
     from asset sales, and revenue from diversified businesses if 
     such a business is conducted on a cooperative basis.''
       (b) Effective Date.--The amendments made by this section 
     shall apply to amounts received after December 31, 1999.

     SEC. 1103. TAX-EXEMPT BOND FINANCING OF CERTAIN ELECTRIC 
                   FACILITIES.

       (a) Permitted Open Access Transactions Not a Private 
     Business Use.--Section 141(b)(6) of the Internal Revenue Code 
     of 1986 (defining private business use) is amended by adding 
     at the end the following:
       ``(C) Permitted open access transactions not a private 
     business use.--
       ``(i) In general.--For purposes of this subsection, the 
     term `private business use' shall not include a permitted 
     open access transaction.
       ``(ii) Permitted open access transaction defined.--For 
     purposes of clause (i), the term `permitted open access 
     transaction' means any of the following transactions or 
     activities with respect to an electric output facility (as 
     defined in subsection (f)(4)(A)) owned by a governmental 
     unit:

       ``(I) Providing open access transmission services and 
     ancillary services which meet the reciprocity requirements of 
     Federal Energy Regulatory Commission Order No. 888, which are 
     ordered by the Federal Energy Regulatory Commission, which 
     are provided in accordance with a transmission tariff of an 
     independent system operator approved by such Commission, or 
     which are consistent with State administered laws, rules, or 
     orders providing for open transmission access.
       ``(II) Participation in an independent system operator 
     agreement (including the relinquishment of control of 
     transmission facilities to an independent system operator), 
     in a regional transmission group, or in a power exchange 
     agreement approved by such Commission.
       ``(III) Delivery on an open access basis of electric energy 
     sold by other entities to end-users served by such 
     governmental unit's distribution facilities.
       ``(IV) If open access service is provided under subclauses 
     (I) and (III), the sale of electric output of electric output 
     facilities on terms other than those available to the general 
     public if such sale is to an on-system purchaser or is an 
     existing off-system sale.
       ``(V) Such other transactions or activities as may be 
     provided in regulations prescribed by the Secretary.

       ``(iii) Definitions; special rules.--For purposes of this 
     subparagraph--

       ``(I) On-system purchaser.--The term `on-system purchaser' 
     means a person who purchases electric energy from a 
     governmental unit and whose electric facilities or equipment 
     are directly connected with transmission or distribution 
     facilities that are owned by such governmental unit.
       ``(II) Off-system purchaser.--The term `off-system 
     purchaser' means a purchaser of electric energy from a 
     governmental unit other than an on-system purchaser.
       ``(III) Existing off-system sale.--The term `existing off-
     system sale' means a sale of electric energy to a person that 
     was an off-system purchaser of electric energy in the base 
     year, but not in excess of the kilowatt hours purchased by 
     such person in such year.
       ``(IV) Base year.--The term `base year' means 1998 (or, at 
     the election of such unit, in 1996 or 1997).
       ``(V) Joint action agencies.--A member of a joint action 
     agency that is entitled to make a sale described in clause 
     (ii)(IV) in a year may transfer that entitlement to the joint 
     action agency in accordance with rules of the Secretary.
       ``(VI) Government-owned facility.--An electric output 
     facility (as defined in subsection (f)(4)(A)) which is leased 
     by a governmental unit or in which a governmental unit has 
     capacity rights acquired with the proceeds of tax-exempt 
     bonds issued before the date of the enactment of this 
     subparagraph shall be treated as owned by such governmental 
     unit.''.

       (b) Election To Terminate Tax Exempt Financing.--Section 
     141 of the Internal Revenue Code of 1986 (relating to private 
     activity bond; qualified bond) is amended by adding at the 
     end the following:
       ``(f) Election To Terminate Tax-Exempt Bond Financing for 
     Certain Electric Output Facilities.--
       ``(1) In general.--An issuer may make an irrevocable 
     election under this paragraph to terminate certain tax-exempt 
     financing for electric output facilities. If the issuer makes 
     such election, then--
       ``(A) except as provided in paragraph (2), no bond the 
     interest on which is exempt from tax under section 103 may be 
     issued on or after the date of such election with respect to 
     an electric output facility; and
       ``(B) notwithstanding paragraph (1) or (2) of subsection 
     (a) or paragraph (5) of subsection (b), with respect to an 
     electric output facility no bond that was issued before the 
     date of the enactment of this subsection, the interest on 
     which was exempt from tax on such date, shall be treated as a 
     private activity bond, for so long as such facility continues 
     to be owned by a governmental unit.
       ``(2) Exceptions.--An election under paragraph (1) does not 
     apply to--
       ``(A) any qualified bond (as defined in subsection (e)),
       ``(B) any eligible refunding bond,
       ``(C) any bond issued to finance a qualifying T&D facility, 
     or
       ``(D) any bond issued to finance--
       ``(i) equipment necessary to meet Federal or State 
     environmental requirements applicable to electric output 
     facilities, or
       ``(ii) repair of electric output facilities in service on 
     the date of the enactment of this subsection.
     Any repair under subparagraph (D)(ii) may not increase by 
     more than a de minimis degree the capacity of the facility 
     beyond its original design.
       ``(3) Form and effect of elections.--An election under 
     paragraph (1) shall be made in such a manner as the Secretary 
     prescribes and shall be binding on any successor in interest 
     to the electing issuer.
       ``(4) Definitions.--For purposes of this subsection--
       ``(A) Electric output facility.--The term `electric output 
     facility' means an output facility that is an electric 
     generation, transmission, or distribution facility.
       ``(B) Eligible refunding bond.--The term `eligible 
     refunding bond' means any bond (or series of bonds) issued 
     after an election described in paragraph (1) to directly or 
     indirectly refund a bond issued before such election, if--
       ``(i) the average maturity date of the issue of which the 
     refunding bond is a part is not later than the average 
     maturity date of the bonds to be refunded by such issue, and
       ``(ii) the amount of the refunding bond does not exceed the 
     outstanding amount of the refunded bond.

     For purposes of clause (i), average maturity shall be 
     determined in accordance with section 147(b)(2)(A).
       ``(C) Qualifying t&d facility.--The term `qualifying T&D 
     facility' means--
       ``(i) transmission facilities over which services described 
     in subsection (b)(6)(C)(ii)(I) are provided, or
       ``(ii) distribution facilities over which services 
     described in subsection (b)(6)(C)(ii)(III) are provided.''
       (c) Effective Date and Transition Rules.--
       (1) Effective date.--The amendments made by this section 
     take effect on the date of enactment of this Act, except that 
     a governmental unit may elect to apply section 141(b)(6)(C) 
     of the Internal Revenue Code of 1986, as added by subsection 
     (a), with respect to permitted open access transactions on or 
     after July 9, 1996.
       (3) Transition rules.--
       (A) Private business use.--Any activity that was not a 
     private business use prior to the effective date of the 
     amendment made by subsection (a) shall not be deemed to be a 
     private business use by reason of the enactment of such 
     amendment.
       (B) Election.--An issuer making the election under section 
     141(f) of the Internal Revenue Code of 1986, as added by 
     subsection (b), shall not be liable under any contract in 
     effect on the date of enactment of this Act for any claim 
     arising from having made the election.

     SEC. 1104. MODIFICATIONS TO SPECIAL RULES FOR NUCLEAR 
                   DECOMMISSIONING COSTS.

       (a) Repeal of Limitation on Deposits Into Fund Based on 
     Cost of Service.--Subsection (b) of section 468A is amended 
     to read as follows:
       ``(b) Limitation on Amounts Paid Into Fund.--The amount 
     which a taxpayer may pay into the Fund for any taxable year 
     shall not exceed the ruling amount applicable to such taxable 
     year.''
       (b) Clarification of Treatment of Fund Transfers.--
     Subsection (e) of section 468A is amended by adding at the 
     end the following new paragraph:
       ``(8) Treatment of fund transfers.--If, in connection with 
     the transfer of the taxpayer's interest in a nuclear 
     powerplant, the taxpayer transfers the Fund with respect to 
     such powerplant to the transferee of such interest and the 
     transferee elects to continue the application of this section 
     to such Fund--
       ``(A) the transfer of such Fund shall not cause such Fund 
     to be disqualified from the application of this section, and
       ``(B) no amount shall be treated as distributed from such 
     Fund, or be includible in gross income, by reason of such 
     transfer.''
       (c) Transfers of Balances in Nonqualified Funds.--Section 
     468A is amended by redesignating subsections (f) and (g) as 
     subsections (g) and (h), respectively, and by inserting after 
     subsection (e) the following new subsection:
       ``(f) Transfers of Balances in Nonqualified Funds Into 
     Qualified Funds.--
       ``(1) In general.--Notwithstanding subsection (b), any 
     taxpayer maintaining a Fund to which this section applies 
     with respect to a nuclear powerplant may transfer

[[Page 18294]]

     into such Fund amounts held in any nonqualified fund of such 
     taxpayer with respect to such powerplant.
       ``(2) Maximum amount permitted to be transferred.--The 
     amount permitted to be transferred under paragraph (1) shall 
     not exceed the balance in the nonqualified fund as of 
     December 31, 1998.
       ``(3) Deduction for amounts transferred.--
       ``(A) In general.--The deduction allowed by subsection (a) 
     for any transfer permitted by this subsection shall be 
     allowed ratably over the remaining estimated useful life 
     (within the meaning of subsection (d)(2)(A)) of the nuclear 
     powerplant, beginning with the later of the taxable year 
     during which the transfer is made or the taxpayer's first 
     taxable year beginning after December 31, 2001.
       ``(B) Denial of deduction for previously deducted 
     amounts.--No deduction shall be allowed for any transfer 
     under this subsection of an amount for which a deduction was 
     allowed when such amount was paid into the nonqualified fund. 
     For purposes of the preceding sentence, a ratable portion of 
     each transfer shall be treated as being from previously 
     deducted amounts to the extent thereof.
       ``(C) Transfers of qualified funds.--If--
       ``(i) any transfer permitted by this subsection is made to 
     any Fund to which this section applies, and
       ``(ii) such Fund is transferred thereafter,

     any deduction under this subsection for taxable years ending 
     after the date that such Fund is transferred shall be allowed 
     to the transferee and not to the transferor. The preceding 
     sentence shall not apply if the transferor is an organization 
     exempt from tax imposed by this chapter.
       ``(4) New ruling amount required.--Paragraph (1) shall not 
     apply to any transfer unless the taxpayer requests from the 
     Secretary a new schedule of ruling amounts in connection with 
     such transfer.
       ``(5) Nonqualified fund.--For purposes of this subsection, 
     the term `nonqualified fund' means, with respect to any 
     nuclear powerplant, any fund in which amounts are irrevocably 
     set aside pursuant to the requirements of any State or 
     Federal agency exclusively for the purpose of funding the 
     decommissioning of such powerplant.
       ``(6) No basis in qualified funds.--Notwithstanding any 
     other provision of law, the basis of any Fund to which this 
     section applies shall not be increased by reason of any 
     transfer permitted by this subsection.''
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.

     SEC. 1105. MODIFICATION OF DEPENDENT CARE CREDIT.

       (b) Increase in Limit on Employment-Related Expenses.--
     Section 21(c) (relating to dollar limit on amount creditable) 
     is amended--
       (1) by striking ``$2,400'' in paragraph (1) and inserting 
     ``$2,700'', and
       (2) by striking ``$4,800'' in paragraph (2) and inserting 
     ``$5,400''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 1106. ALLOWANCE OF CREDIT FOR EMPLOYER EXPENSES FOR 
                   CHILD CARE ASSISTANCE.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits), as amended 
     by section 1002(a), is amended by adding at the end the 
     following:

     ``SEC. 45F. EMPLOYER-PROVIDED CHILD CARE CREDIT.

       ``(a) In General.--For purposes of section 38, the 
     employer-provided child care credit determined under this 
     section for the taxable year is an amount equal to 25 percent 
     of the qualified child care expenditures of the eligible 
     taxpayer for such taxable year.
       ``(b) Dollar Limitation.--The credit allowable under 
     subsection (a) for any taxable year shall not exceed $90,000.
       ``(c) Definitions.--For purposes of this section--
       ``(1) Qualified child care expenditure.--
       ``(A) In general.--The term `qualified child care 
     expenditure' means any amount paid or incurred--
       ``(i) to acquire, construct, rehabilitate, or expand 
     property--

       ``(I) which is to be used as part of a qualified child care 
     facility of the taxpayer,
       ``(II) with respect to which a deduction for depreciation 
     (or amortization in lieu of depreciation) is allowable, and
       ``(III) which does not constitute part of the principal 
     residence (within the meaning of section 121) of the taxpayer 
     or any employee of the taxpayer,

       ``(ii) for the operating costs of a qualified child care 
     facility of the taxpayer, including costs related to the 
     training of employees, to scholarship programs, and to the 
     providing of increased compensation to employees with higher 
     levels of child care training,
       ``(iii) under a contract with a qualified child care 
     facility to provide child care services to employees of the 
     taxpayer, or
       ``(iv) to reimburse an employee for expenses for child care 
     which enables the employee to be gainfully employed including 
     expenses related to--

       ``(I) day care and before and after school care,
       ``(II) transportation associated with such care, and
       ``(III) before and after school and holiday programs 
     including educational and recreational programs and camp 
     programs.

       ``(B) Fair market value.--The term `qualified child care 
     expenditures' shall not include expenses in excess of the 
     fair market value of such care.
       ``(2) Qualified child care facility.--
       ``(A) In general.--The term `qualified child care facility' 
     means a facility--
       ``(i) the principal use of which is to provide child care 
     assistance, and
       ``(ii) which meets the requirements of all applicable laws 
     and regulations of the State or local government in which it 
     is located, including, but not limited to, the licensing of 
     the facility as a child care facility.
     Clause (i) shall not apply to a facility which is the 
     principal residence (within the meaning of section 121) of 
     the operator of the facility.
       ``(B) Special rules with respect to a taxpayer.--A facility 
     shall not be treated as a qualified child care facility with 
     respect to a taxpayer unless--
       ``(i) enrollment in the facility is open to employees of 
     the taxpayer during the taxable year,
       ``(ii) if the facility is the principal trade or business 
     of the taxpayer, at least 30 percent of the enrollees of such 
     facility are dependents of employees of the taxpayer, and
       ``(iii) the use of such facility (or the eligibility to use 
     such facility) does not discriminate in favor of employees of 
     the taxpayer who are highly compensated employees (within the 
     meaning of section 414(q)).
       ``(3) Eligible taxpayer.--The term `eligible taxpayer' 
     means for any taxable year a taxpayer with gross receipts of 
     less than $50,000,000 for such year.
       ``(d) Recapture of Acquisition and Construction Credit.--
       ``(1) In general.--If, as of the close of any taxable year, 
     there is a recapture event with respect to any qualified 
     child care facility of the taxpayer, then the tax of the 
     taxpayer under this chapter for such taxable year shall be 
     increased by an amount equal to the product of--
       ``(A) the applicable recapture percentage, and
       ``(B) the aggregate decrease in the credits allowed under 
     section 38 for all prior taxable years which would have 
     resulted if the qualified child care expenditures of the 
     taxpayer described in subsection (c)(1)(A) with respect to 
     such facility had been zero.
       ``(2) Applicable recapture percentage.--
       ``(A) In general.--For purposes of this subsection, the 
     applicable recapture percentage shall be determined from the 
     following table:

                                                         The applicable
                                                              recapture
                                    ``If the recapture evpercentage is:
    Years 1-3....................................................100   
    Year 4........................................................85   
    Year 5........................................................70   
    Year 6........................................................55   
    Year 7........................................................40   
    Year 8........................................................25   
    Years 9 and 10................................................10   
    Years 11 and thereafter........................................0.  
       ``(B) Years.--For purposes of subparagraph (A), year 1 
     shall begin on the first day of the taxable year in which the 
     qualified child care facility is placed in service by the 
     taxpayer.
       ``(3) Recapture event defined.--For purposes of this 
     subsection, the term `recapture event' means--
       ``(A) Cessation of operation.--The cessation of the 
     operation of the facility as a qualified child care facility.
       ``(B) Change in ownership.--
       ``(i) In general.--Except as provided in clause (ii), the 
     disposition of a taxpayer's interest in a qualified child 
     care facility with respect to which the credit described in 
     subsection (a) was allowable.
       ``(ii) Agreement to assume recapture liability.--Clause (i) 
     shall not apply if the person acquiring such interest in the 
     facility agrees in writing to assume the recapture liability 
     of the person disposing of such interest in effect 
     immediately before such disposition. In the event of such an 
     assumption, the person acquiring the interest in the facility 
     shall be treated as the taxpayer for purposes of assessing 
     any recapture liability (computed as if there had been no 
     change in ownership).
       ``(4) Special rules.--
       ``(A) Tax benefit rule.--The tax for the taxable year shall 
     be increased under paragraph (1) 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 
     this subsection shall not be treated as a tax imposed by this 
     chapter for purposes of determining the amount of any credit 
     under subpart A, B, or D of this part.
       ``(C) No recapture by reason of casualty loss.--The 
     increase in tax under this subsection shall not apply to a 
     cessation of operation of the facility as a qualified child 
     care facility by reason of a casualty loss to

[[Page 18295]]

     the extent such loss is restored by reconstruction or 
     replacement within a reasonable period established by the 
     Secretary.
       ``(e) Special Rules.--For purposes of this section--
       ``(1) Aggregation rules.--All persons which are treated as 
     a single employer under subsections (a) and (b) of section 52 
     shall be treated as a single taxpayer.
       ``(2) Pass-thru in the case of estates and trusts.--Under 
     regulations prescribed by the Secretary, rules similar to the 
     rules of subsection (d) of section 52 shall apply.
       ``(3) Allocation in the case of partnerships.--In the case 
     of partnerships, the credit shall be allocated among partners 
     under regulations prescribed by the Secretary.
       ``(f) No Double Benefit.--
       ``(1) Reduction in basis.--For purposes of this subtitle--
       ``(A) In general.--If a credit is determined under this 
     section with respect to any property by reason of 
     expenditures described in subsection (c)(1)(A), the basis of 
     such property shall be reduced by the amount of the credit so 
     determined.
       ``(B) Certain dispositions.--If, during any taxable year, 
     there is a recapture amount determined with respect to any 
     property the basis of which was reduced under subparagraph 
     (A), the basis of such property (immediately before the event 
     resulting in such recapture) shall be increased by an amount 
     equal to such recapture amount. For purposes of the preceding 
     sentence, the term `recapture amount' means any increase in 
     tax (or adjustment in carrybacks or carryovers) determined 
     under subsection (d).
       ``(2) Other deductions and credits.--No deduction or credit 
     shall be allowed under any other provision of this chapter 
     with respect to the amount of the credit determined under 
     this section.''
       (b) Conforming Amendments.--
       (1) Section 38(b), as amended by section 1002(b)(1), 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) the employer-provided child care credit determined 
     under section 45F.''
       (2) The table of sections for subpart D of part IV of 
     subchapter A of chapter 1, as amended by section 1002(d), is 
     amended by adding at the end the following:

``Sec. 45F. Employer-provided child care credit.''

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

     SEC. 1107. RECOVERY PERIOD FOR DEPRECIATION OF CERTAIN 
                   LEASEHOLD IMPROVEMENTS.

       (a) 15-Year Recovery Period.--Subparagraph (E) of section 
     168(e)(3) (relating to 15-year property) is amended by 
     striking ``and'' at the end of clause (ii), by striking the 
     period at the end of clause (iii) and inserting ``, and'', 
     and by adding at the end the following new clause:
       ``(iv) any qualified leasehold improvement property.''
       (b) Qualified Leasehold Improvement Property.--Subsection 
     (e) of section 168 is amended by adding at the end the 
     following new paragraph:
       ``(6) Qualified leasehold improvement property.--
       ``(A) In general.--The term `qualified leasehold 
     improvement property' means any improvement to an interior 
     portion of a building which is nonresidential real property 
     if--
       ``(i) such improvement is made under or pursuant to a lease 
     (as defined in subsection (h)(7))--

       ``(I) by the lessee (or any sublessee) of such portion, or
       ``(II) by the lessor of such portion,

       ``(ii) the original use of such improvement begins with the 
     lessee and after December 31, 2000,
       ``(iii) such portion is to be occupied exclusively by the 
     lessee (or any sublessee) of such portion, and
       ``(iv) such improvement is placed in service more than 3 
     years after the date the building was first placed in 
     service.
       ``(B) Certain improvements not included.--Such term shall 
     not include any improvement for which the expenditure is 
     attributable to--
       ``(i) the enlargement of the building,
       ``(ii) any elevator or escalator,
       ``(iii) any structural component benefiting a common area, 
     and
       ``(iv) the internal structural framework of the building.
       ``(C) Definitions and special rules.--For purposes of this 
     paragraph--
       ``(i) Commitment to lease treated as lease.--A commitment 
     to enter into a lease shall be treated as a lease, and the 
     parties to such commitment shall be treated as lessor and 
     lessee, respectively, if the lease is in effect at the time 
     the property is placed in service.
       ``(ii) Related persons.--A lease between related persons 
     shall not be considered a lease. For purposes of the 
     preceding sentence, the term `related persons' means--

       ``(I) members of an affiliated group (as defined in section 
     1504), and
       ``(II) persons having a relationship described in 
     subsection (b) of section 267(b) or 707(b)(1); except that, 
     for purposes of this clause, the phrase `80 percent or more' 
     shall be substituted for the phrase `more than 50 percent' 
     each place it appears in such subsections.''

       (c) Requirement To Use Straight Line Method.--Paragraph (3) 
     of section 168(b) is amended by adding at the end the 
     following new subparagraph:
       ``(G) Qualified leasehold improvement property described in 
     subsection (e)(6).''
       (d) Effective Date.--The amendments made by this section 
     shall apply to qualified leasehold improvement property 
     placed in service after December 31, 2000.

     SEC. 1108. EXEMPTION FROM INCOME TAX FOR STATE-CREATED 
                   ORGANIZATIONS PROVIDING PROPERTY AND CASUALTY 
                   INSURANCE FOR PROPERTY FOR WHICH SUCH COVERAGE 
                   IS OTHERWISE UNAVAILABLE.

       (a) In General.--Subsection (c) of section 501 (relating to 
     exemption from tax on corporations, certain trusts, etc.) is 
     amended by adding at the end the following new paragraph:
       ``(28)(A) Any association created before January 1, 1999, 
     by State law and organized and operated exclusively to 
     provide property and casualty insurance coverage for property 
     located within the State for which the State has determined 
     that coverage in the authorized insurance market is limited 
     or unavailable at reasonable rates, if--
       ``(i) no part of the net earnings of which inures to the 
     benefit of any private shareholder or individual,
       ``(ii) except as provided in clause (v), no part of the 
     assets of which may be used for, or diverted to, any purpose 
     other than--
       ``(I) to satisfy, in whole or in part, the liability of the 
     association for, or with respect to, claims made on policies 
     written by the association,
       ``(II) to invest in investments authorized by applicable 
     law,
       ``(III) to pay reasonable and necessary administration 
     expenses in connection with the establishment and operation 
     of the association and the processing of claims against the 
     association, or
       ``(IV) to make remittances pursuant to State law to be used 
     by the State to provide for the payment of claims on policies 
     written by the association, purchase reinsurance covering 
     losses under such policies, or to support governmental 
     programs to prepare for or mitigate the effects of natural 
     catastrophic events,
       ``(iii) the State law governing the association permits the 
     association to levy assessments on insurance companies 
     authorized to sell property and casualty insurance in the 
     State, or on property and casualty insurance policyholders 
     with insurable interests in property located in the State to 
     fund deficits of the association, including the creation of 
     reserves,
       ``(iv) the plan of operation of the association is subject 
     to approval by the chief executive officer or other executive 
     branch official of the State, by the State legislature, or 
     both, and
       ``(v) the assets of the association revert upon dissolution 
     to the State, the State's designee, or an entity designated 
     by the State law governing the association, or State law does 
     not permit the dissolution of the association.
       ``(B)(i) An entity described in clause (ii) shall be 
     disregarded as a separate entity and treated as part of the 
     association described in subparagraph (A) from which it 
     receives remittances described in clause (ii) if an election 
     is made within 30 days after the date that such association 
     is determined to be exempt from tax.
       ``(ii) An entity is described in this clause if it is an 
     entity or fund created before January 1, 1999, pursuant to 
     State law and organized and operated exclusively to receive, 
     hold, and invest remittances from an association described in 
     subparagraph (A) and exempt from tax under subsection (a) and 
     to make disbursements to pay claims on insurance contracts 
     issued by such association, and to make disbursements to 
     support governmental programs to prepare for or mitigate the 
     effects of natural catastrophic events.''
       (b) Unrelated Business Taxable Income.--Subsection (a) of 
     section 512 (relating to unrelated business taxable income) 
     is amended by adding at the end the following new paragraph:
       ``(6) Special rule applicable to organizations described in 
     section 501(c)(28).--In the case of an organization described 
     in section 501(c)(28), the term `unrelated business taxable 
     income' means taxable income for a taxable year computed 
     without the application of section 501(c)(28) if, at the end 
     of the immediately preceding taxable year, the organization's 
     net equity exceeded 15 percent of the total coverage in force 
     under insurance contracts issued by the organization and 
     outstanding at the end of such preceding year.''
       (c) Transitional Rule.--No income or gain shall be 
     recognized by an association as a result of a change in 
     status to that of an association described by section 
     501(c)(28) of the Internal Revenue Code of 1986, as amended 
     by subsection (a).
       (d) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2000.

[[Page 18296]]



     SEC. 1109. DISCLOSURE OF TAX INFORMATION TO FACILITATE 
                   COMBINED EMPLOYMENT TAX REPORTING.

       Section 6103(d)(5) is amended to read as follows:
       ``(5) Disclosure for combined employment tax reporting.--
     The Secretary may disclose taxpayer identity information and 
     signatures to any agency, body, or commission of any State 
     for the purpose of carrying out with such agency, body, or 
     commission a combined Federal and State employment tax 
     reporting program approved by the Secretary. Subsections 
     (a)(2) and (p)(4) and sections 7213 and 7213A shall not apply 
     with respect to disclosures or inspections made pursuant to 
     this paragraph.''

     SEC. 1110. INCREASE IN LIMIT ON CERTAIN CHARITABLE 
                   CONTRIBUTIONS AS PERCENTAGE OF AGI.

       (a) In General.--Section 170(b)(1) (relating to percentage 
     limitations) is amended by striking ``30 percent'' each place 
     it appears in subparagraphs (B) and (C) and inserting ``50 
     percent''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 1111. LOW-INCOME SECOND MORTGAGE TAX CREDIT.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 (relating to business related credits), as amended 
     by section 1002(a), is amended by adding at the end the 
     following:

     ``SEC. 45F. LOW-INCOME SECOND MORTGAGE TAX CREDIT.

       ``(a) Allowance of Credit.--
       ``(1) In general.--For purposes of section 38, the amount 
     of the low-income second mortgage tax credit determined under 
     this section for any taxable year in the credit period shall 
     be an amount equal to the applicable percentage of the low-
     income second mortgage tax credit amount allocated such 
     taxpayer by a State housing finance agency in the credit 
     allocation year under subsection (b).
       ``(2) Applicable percentage.--For purposes of this section, 
     the Secretary shall prescribe the applicable percentage for 
     any year in which the taxpayer is a qualified lender. Such 
     percentage with respect to any month in the credit period 
     with respect to such taxpayer shall be percentages which will 
     yield over such period amounts of credit under paragraph (1) 
     which have a present value equal to 100 percent of the low-
     income second mortgage tax credit amount allocated such 
     taxpayer under subsection (b).
       ``(3) Method of discounting.--The present value under 
     paragraph (2) shall be determined in the same manner as the 
     low-income housing credit under section 42(b)(2)(C).
       ``(b) Allocation of Low-Income Second Mortgage Tax Credit 
     Amounts.--
       ``(1) Amount of credit.--Each qualified State shall receive 
     a low-income second mortgage tax credit dollar amount for 
     each calendar year in an amount equal to the sum of--
       ``(A) an amount equal to--
       ``(i) 10 cents multiplied by the State population, 
     multiplied by
       ``(ii) 10, plus
       ``(B) the unused low-income second mortgage tax credit 
     dollar amount (if any) of such State for the preceding year.
       ``(2) Qualified state.--For purposes of this section--
       ``(A) In general.--The term `qualified State' means a State 
     with an approved allocation plan to allocate low-income 
     second mortgage tax credits to qualified lenders through the 
     State housing finance agency.
       ``(B) Approved allocation plan.--For purposes of this 
     paragraph, the term `approved allocation plan' means a 
     written plan, certified by the Secretary, which includes--
       ``(i) selection criteria for the allocation of credits to 
     qualified lenders--

       ``(I) based on a process in which lenders submit bids for 
     the value of the credit, and
       ``(II) which gives priority to qualified lenders with 
     qualified low-income second mortgage tax credit loans which 
     are prepaid during a calendar year, for credit allocations in 
     the succeeding calendar year,

       ``(ii) an assurance that the State will not allocate in 
     excess of 10 percent of the low-income second mortgage tax 
     credit amount for the calendar year for qualified low-income 
     second mortgage tax credit loans which are neighborhood 
     revitalization project loans,
       ``(iii) a procedure that the agency (or an agent or other 
     private contractor of such agency) will follow in monitoring 
     for noncompliance with the provisions of this section and in 
     notifying the Internal Revenue Service of such noncompliance 
     with respect to which such agency becomes aware, and
       ``(iv) such other assurances as the Secretary may require.
       ``(3) Qualified lender.--For purposes of this section, the 
     term `qualified lender' means a lender which--
       ``(A) is an insured depository institution (as defined in 
     section 3 of the Federal Deposit Insurance Act), insured 
     credit union (as defined in section 101 of the Federal Credit 
     Union Act), community development financial institution (as 
     defined in section 103 of the Community Development Banking 
     and Financial Institutions Act of 1994 (12 U.S.C. 4702)), or 
     nonprofit community development corporation (as defined in 
     section 613 of the Community Economic Development Act of 1981 
     (42 U.S.C. 9802)),
       ``(B) makes available, through such lender or the lender's 
     designee, pre-purchase homeownership counseling for 
     mortgagors, and
       ``(C) during the 1-year period beginning on the date of the 
     credit allocation, originates not less than 100 qualified 
     low-income second mortgage tax credit loans in an aggregate 
     amount not less than the amount of the bid of such lender for 
     such credit allocation.
       ``(4) Carryover of credit.--A low-income second mortgage 
     tax credit amount received by a State for any calendar year 
     and not allocated in such year shall remain available to be 
     allocated in the succeeding calendar year.
       ``(5) Population.--For purposes of this section, population 
     shall be determined in accordance with section 146(j).
       ``(6) Cost-of-living adjustment.--In the case of a calendar 
     year after 2001, the 10 cent amount contained in paragraph 
     (1)(A)(i) shall be increased by an amount equal to--
       ``(A) such amount, multiplied by
       ``(B) the cost-of-living adjustment determined under 
     section 1(f)(3) for such calendar year by substituting 
     `calendar year 1999' for `calendar year 1992' in subparagraph 
     (B) thereof.
       ``(c) Qualified Low-Income Second Mortgage Tax Credit Loan 
     Defined.--For purposes of this section--
       ``(1) In general.--The term `qualified low-income second 
     mortgage tax credit loan' means a loan originated and funded 
     by a qualified lender which is secured by a second lien on a 
     residence, but only if--
       ``(A) the requirements of subsections (d), (e), and (f) are 
     met,
       ``(B) subject to subparagraphs (F), (H), and (I), the 
     proceeds from such loan are applied exclusively--
       ``(i) to acquire such residence, or
       ``(ii) to substantially improve such residence in 
     connection with a neighborhood revitalization project,
       ``(C) the principal amount of the loan is equal to an 
     amount which is--
       ``(i) not less than 18 percent of the purchase price of the 
     residence securing the loan, and
       ``(ii) not more than the lesser of--

       ``(I) 22 percent of such purchase price, or
       ``(II) $25,000,

       ``(D) in the case of a neighborhood revitalization project 
     loan, subparagraph (C) is applied by substituting--
       ``(i) `purchase price or appraised value' for `purchase 
     price', and
       ``(ii) `$40,000' for `$25,000',
       ``(E) the loan is--
       ``(i) amortized over a period of not more than 30 years (or 
     any lesser period of time as determined by the lender or the 
     State housing finance agency (as applicable)), or
       ``(ii) described in paragraph (2),
       ``(F) the proceeds of such loan are not used for settlement 
     or other closing costs of the transaction in an amount in 
     excess of 4 percent of the purchase price of the residence 
     securing the loan,
       ``(G) the rate of interest of the loan does not exceed the 
     greater of--
       ``(i) the excess of--

       ``(I) the prime lending rate in effect as of the date on 
     which the loan is originated, over
       ``(II) 5.5 percent, or

       ``(ii) 3 percent,
       ``(H) the origination fee paid with respect to the loan 
     does not cause the aggregate amount of origination fees paid 
     with respect to any loans secured by the residence--
       ``(i) in the case of a neighborhood revitalization project 
     loan, to exceed 1 percent of the appraised value of the 
     residence which secures the loan, and
       ``(ii) in the case of any other loan, to exceed 2 percent 
     of the appraised value of such residence, and
       ``(I) the servicing fees of such loan--
       ``(i) are allocated from interest payments made with 
     respect to the loan, and
       ``(ii) may not--

       ``(I) in the case of a neighborhood revitalization project 
     loan, exceed a total of 38 basis points, and
       ``(II) in the case of any other loan, when added to such 
     fees of any other loan secured by the residence, exceed a 
     total of 63 basis points.

       ``(2) Balloon payment loan.--
       ``(A) In general.--A loan is described in this paragraph if 
     such loan--
       ``(i) meets the requirements of subparagraphs (B) and (C),
       ``(ii) is for a period of 25 years and, except as provided 
     in clause (iv), no payment is due on such loan until the 
     sooner of--

       ``(I) the end of such period, or
       ``(II) the date on which the residence which secures the 
     loan is disposed of,

       ``(iii) does not prohibit early repayment of such loan, and
       ``(iv) requires payment on such loan if the mortgagor 
     receives any portion of the equity of such residence as part 
     of a refinancing of any loan secured by such residence.
       ``(B) Interest.--Notwithstanding paragraph (1)(G), the rate 
     of interest of the loan is zero percent.
       ``(C) Servicing fees.--Notwithstanding paragraph (1)(I), 
     there shall be no servicing fees in connection with the loan.
       ``(3) Index of amount.--

[[Page 18297]]

       ``(A) In general.--In the case of a calendar year after 
     2001, the amounts under subparagraphs (C) and (D) of 
     paragraph (1) shall be increased by an amount equal to--
       ``(i) such amount, multiplied by
       ``(ii) the housing price adjustment for such calendar year.
       ``(B) Housing price adjustment.--For purposes of 
     subparagraph (A), the housing price adjustment for any 
     calendar year is the percentage (if any) by which--
       ``(i) the housing price index for the preceding calendar 
     year, exceeds
       ``(ii) the housing price index for calendar year 2001.
       ``(C) Housing price index.--For purposes of subparagraph 
     (B), the housing price index means the housing price index 
     published by the Federal Housing Finance Board (as 
     established in section 2A of the Federal Home Loan Bank Act 
     (12 U.S.C. 1422a)) for the calendar year.
       ``(d) Mortgagor.--
       ``(1) In general.--A loan meets the requirements of this 
     subsection if it is made to a mortgagor--
       ``(A) whose family income for the year in which the 
     mortgagor applies for the loan is 80 percent or less of the 
     area median gross income for the area in which the residence 
     which secures the mortgage is located,
       ``(B) for whom the loan would not result in a housing debt-
     to-income ratio, with respect to the residence securing the 
     loan, or total debt-to-income ratio which is greater than the 
     guidelines set by the Federal Housing Administration (or any 
     other ratio as determined by the State housing finance agency 
     or lender if such ratio is less than such guidelines), and
       ``(C) who attends pre-purchase homeownership counseling 
     provided by the qualified lender or the lender's designee.
       ``(2) Determination of family income.--For purposes of this 
     subsection and subsection (h), the family income of a 
     mortgagor and area median gross income shall be determined in 
     accordance with section 143(f)(2).
       ``(e) Residence Requirements.--A loan meets the 
     requirements of this subsection if it is secured by a 
     residence that is--
       ``(1) a single-family residence (including a manufactured 
     home (within the meaning of section 25(e)(10))) which is the 
     principal residence (within the meaning of section 121) of 
     the mortgagor, or can reasonably be expected to become the 
     principal residence of the mortgagor within a reasonable time 
     after the financing is provided,
       ``(2) purchased by the mortgagor with a down payment in an 
     amount not less than the lesser of--
       ``(A) 2 percent of the purchase price, or
       ``(B) $1,000, and
       ``(3) in the case of a mortgagor with a family income 
     greater than 50 percent of the area median gross income, as 
     determined under subsection (d)(1)(A), not financed in 
     connection with a qualified mortgage issued under section 
     143.
       ``(f) Definition and Special Rules Relating to Credit 
     Period.--
       ``(1) Credit period defined.--For purposes of this section, 
     the term `credit period' means the period of 10 taxable years 
     beginning with the taxable year in which a low-income second 
     mortgage tax credit amount is allocated to the taxpayer.
       ``(2) Special rule for 1st year of credit period.--
       ``(A) In general.--The credit allowable under subsection 
     (a) with respect to any taxpayer for the 1st taxable year of 
     the credit period shall be determined by substituting for the 
     applicable percentage under subsection (a)(2) the fraction--
       ``(i) the numerator of which is the sum of the applicable 
     percentages determined under subsection (a)(2) as of the 
     close of each full month of such year, during which the 
     taxpayer was a qualified lender, and
       ``(ii) the denominator of which is 12.
       ``(B) Disallowed 1st year credit allowed in 11th year.--Any 
     reduction by reason of subparagraph (A) in the credit 
     allowable (without regard to subparagraph (A)) for the 1st 
     taxable year of the credit period shall be allowable under 
     subsection (a) for the 1st taxable year following the credit 
     period.
       ``(3) Disposition of low-income second mortgage tax credit 
     loans.--If a qualified low-income second mortgage tax credit 
     loan is disposed of during any year for which a credit is 
     allowable under subsection (a), such credit shall be 
     allocated between the parties on the basis of the number of 
     days during such year the mortgage was held by each and the 
     portion of the total credit allocated to the qualified lender 
     which is attributable to such mortgage.
       ``(g) Loss of Credit.--If, during the taxable year, a 
     qualified low-income second mortgage tax credit loan is 
     repaid prior to the expiration of the credit period with 
     respect to such loan, the amount of the low-income second 
     mortgage tax credit attributable to such loan is no longer 
     available under subsection (a). For purposes of the preceding 
     sentence, the tax credit is allowable for the portion of the 
     year in which such repayment occurs for which the loan is 
     outstanding, determined in the same manner as provided in 
     subsection (f)(2)(A).
       ``(h) Recapture of Portion of Federal Subsidy From Home-
     Owner.--
       ``(1) In general.--If, during the taxable year, any 
     taxpayer described in paragraph (3) disposes of an interest 
     in a residence with respect to which a low-income second 
     mortgage tax credit amount applies, then the taxpayer's tax 
     imposed by this chapter for such taxable year shall be 
     increased by 50 percent of the gain (if any) on the 
     disposition of such interest.
       ``(2) Exceptions.--Paragraph (1) shall not apply to any 
     disposition--
       ``(A) by reason of death,
       ``(B) which is made on a date that is more than 10 years 
     after the date on which the qualified low-income second 
     mortgage tax credit loan secured by such residence was made, 
     or
       ``(C) in which the purchaser of the residence assumes the 
     qualified low-income second mortgage tax credit loan secured 
     by the residence.
       ``(3) Income limitation.--A taxpayer is described in this 
     paragraph if, on the date of the disposition, the family 
     income of the mortgagor is 115 percent or more of the area 
     median gross income as determined under subsection (d)(1)(A) 
     for the year in which the disposition occurs.
       ``(4) Special rules relating to limitation on recapture 
     amount based on gain realized.--For purposes of this 
     subsection, rules similar to the rules of section 143(m)(6) 
     shall apply.
       ``(5) Lender to inform mortgagor of potential recapture.--
     The qualified lender which makes a qualified low-income 
     second mortgage tax credit loan to a mortgagor shall, at the 
     time of settlement, provide a written statement informing the 
     mortgagor of the potential recapture under this subsection.
       ``(6) Special rules.--For purposes of this subsection, 
     rules similar to the rules of section 143(m)(8) shall apply.
       ``(i) Other Definitions.--
       ``(1) Neighborhood revitalization project loan.--
       ``(A) In general.--The term `neighborhood revitalization 
     project loan' means a loan secured by a second lien on a 
     residence, the proceeds of which are used to substantially 
     improve such residence in connection with a neighborhood 
     revitalization project.
       ``(B) Neighborhood revitalization project.--The term 
     `neighborhood revitalization project' means a project of 
     sufficient size and scope to alleviate physical deterioration 
     and stimulate investment in--
       ``(i) a geographic location within the jurisdiction of a 
     unit of local government (but not the entire jurisdiction) 
     designated in comprehensive plans, ordinances, or other 
     documents as a neighborhood, village, or similar geographic 
     designation, or
       ``(ii) the entire jurisdiction of a unit of local 
     government if the population of such jurisdiction is not in 
     excess of 25,000.
       ``(2) State.--The term `State' includes a possession of the 
     United States.
       ``(3) State housing finance agency.--The term `State 
     housing finance agency' means the public agency, authority, 
     corporation, or other instrumentality of a State that has the 
     authority to provide residential mortgage loan financing 
     throughout the State.
       ``(j) Certification and Other Reports to the Secretary.--
       ``(1) Certification with respect to State allocation of 
     low-income second mortgage tax credits.--The Secretary may, 
     upon a finding of noncompliance, revoke the certification of 
     a qualified State and revoke any qualified low-income second 
     mortgage tax credit amounts allocated to such State or 
     allocated by such State to a qualified lender.
       ``(2) Annual report from housing finance agencies.--Each 
     State housing finance agency which allocates any low-income 
     second mortgage tax credit amount to any qualified lender for 
     any calendar year shall submit to the Secretary (at such time 
     and in such manner as the Secretary shall prescribe) an 
     annual report specifying--
       ``(A) the low-income second mortgage tax credit amount 
     allocated to each qualified lender for such year, and
       ``(B) with respect to each qualified lender--
       ``(i) the principal amount of the aggregate qualified low-
     income second mortgage tax credit loans made by such lender 
     in such year and the outstanding amount of such loans in such 
     year, and
       ``(ii) the number of qualified low-income second mortgage 
     tax credit loans made by such lender in such year.

     The penalty under section 6652(j) shall apply to any failure 
     to submit the report required by this paragraph on the date 
     prescribed therefore.
       ``(k) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this section.''
       (b) Limitation on Carryback of Unused Credit.--Subsection 
     (d) of section 39 (relating to carryback and carryforward of 
     unused credits), as amended by section 1002(b)(2), is amended 
     by adding at the end the following:
       ``(12) No carryback of low-income second mortgage tax 
     credits before effective date.--No portion of the unused 
     business credit for any taxable year which is attributable to 
     the low-income second mortgage tax credit determined under 
     section 45F may

[[Page 18298]]

     be carried back to a taxable year ending before the date of 
     the enactment of section 45F.''
       (c) Conforming Amendments.--
       (1) Section 38(b), as amended by section 1002(b)(1), is 
     amended--
       (A) by striking ``plus'' at the end of paragraph (14),
       (B) by striking the period at the end of paragraph (15), 
     and inserting ``, plus'', and
       (C) by adding at the end the following:
       ``(16) the low-income second mortgage tax credit determined 
     under section 45F.''
       (2) The table of sections for subpart D of part IV of 
     subchapter A of chapter 1, as amended by section 1002(d), is 
     amended by adding at the end the following:

``Sec. 45F. Low-income second mortgage tax credit.''

       (d) Regulations.--The Secretary of the Treasury shall, by 
     regulation, make any necessary adjustments to the amount of 
     credit allocated under section 45F(b)(1) of the Internal 
     Revenue Code of 1986, as added by subsection (a), to ensure 
     that the decrease in revenues in the Treasury, resulting from 
     the amendments made by this section, in calendar years before 
     2011 does not exceed $1,000,000,000.
       (e) Effective Date.--The amendments made by this section 
     apply to calendar years after 2000.

     SEC. 1112. COORDINATION OF CHILD TAX CREDIT AND EARNED INCOME 
                   CREDIT WITH CERTAIN MEANS-TESTED PROGRAMS.

       (a) Child Tax Credit.--Section 24 (relating to child tax 
     credit) is amended by adding at the end the following new 
     subsection:
       ``(g) Coordination With Certain Means-Tested Programs.--Any 
     refund or credit made to an individual by reason of this 
     section shall not be treated as income or receipts (or taken 
     into account in determining resources) for purposes of 
     determining--
       ``(1) the eligibility of the individual or any other 
     individual for any month for benefits or assistance under any 
     Federal program or any State or local program financed in 
     whole or in part with Federal funds, or
       ``(2) the amount or extent of such benefits or 
     assistance.''
       (b) Earned Income Credit.--Subsection (l) of section 32 
     (relating to coordination with certain means-tested programs) 
     is amended to read as follows:
       ``(l) Coordination With Certain Means-Tested Programs.--Any 
     refund or credit made to an individual by reason of this 
     section, and any payment made to such individual by an 
     employer under section 3507, shall not be treated as income 
     or receipts (or taken into account in determining resources) 
     for purposes of determining--
       ``(1) the eligibility of the individual or any other 
     individual for any month for benefits or assistance under any 
     Federal program or any State or local program financed in 
     whole or in part with Federal funds, or
       ``(2) the amount or extent of such benefits or 
     assistance.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 1113. NO FEDERAL INCOME TAX ON AMOUNTS RECEIVED BY 
                   HOLOCAUST VICTIMS OR THEIR HEIRS.

       (a) In General.--For purposes of the Internal Revenue Code 
     of 1986, gross income shall not include any amount received 
     by an individual (or any heir of the individual)--
       (1) from the Swiss Humanitarian Fund established by the 
     Government of Switzerland or from any similar fund 
     established by any foreign country, or
       (2) as a result of the settlement of the action entitled 
     ``In re Holocaust Victims' Asset Litigation'', (E.D. NY), 
     C.A. No. 96-4849, or as a result of any similar action.
       (b) Effective Date.--This section shall apply to any amount 
     received before, on, or after the date of the enactment of 
     this Act.

     SEC. 1114. TAX TREATMENT OF SPECIAL PAY FOR MEMBERS OF THE 
                   ARMED FORCES.

       (a) In General.--Subchapter C of chapter 80 (relating to 
     provisions affecting more than one subtitle) is amended by 
     adding at the end the following:

     ``SEC. 7874. TREATMENT OF SPECIAL PAY FOR MEMBERS OF THE 
                   ARMED FORCES.

       ``(a) General Rule.--For purposes of the following 
     provisions, a special pay area shall be treated in the same 
     manner as if it were a combat zone (as determined under 
     section 112):
       ``(1) Section 2(a)(3) (relating to special rule where 
     deceased spouse was in missing status).
       ``(2) Section 112 (relating to the exclusion of certain 
     combat pay of members of the Armed Forces).
       ``(3) Section 692 (relating to income taxes of members of 
     Armed Forces on death).
       ``(4) Section 2201 (relating to members of the Armed Forces 
     dying in combat zone or by reason of combat-zone-incurred 
     wounds, etc.).
       ``(5) Section 3401(a)(1) (defining wages relating to combat 
     pay for members of the Armed Forces).
       ``(6) Section 4253(d) (relating to the taxation of phone 
     service originating from a combat zone from members of the 
     Armed Forces).
       ``(7) Section 6013(f)(1) (relating to joint return where 
     individual is in missing status).
       ``(8) Section 7508 (relating to time for performing certain 
     acts postponed by reason of service in combat zone).
       ``(b) Special Pay Area.--For purposes of this section, the 
     term `special pay area' means any area in which an individual 
     receives special pay under section 310 of title 37, United 
     States Code, for services performed in such area.''
       (b) Conforming Amendment.--The table of sections for 
     subchapter C of chapter 80 is amended by adding at the end 
     the following:

``Sec. 7874. Treatment of special pay.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to remuneration paid in taxable years ending 
     after the date of the enactment of this Act.

    Subtitle B--Provisions Relating to Real Estate Investment Trusts

   PART I--TREATMENT OF INCOME AND SERVICES PROVIDED BY TAXABLE REIT 
                              SUBSIDIARIES

     SEC. 1121. MODIFICATIONS TO ASSET DIVERSIFICATION TEST.

       (a) In General.--Subparagraph (B) of section 856(c)(4) is 
     amended to read as follows:
       ``(B)(i) not more than 25 percent of the value of its total 
     assets is represented by securities (other than those 
     includible under subparagraph (A)), and
       ``(ii) except with respect to a taxable REIT subsidiary and 
     securities includible under subparagraph (A)--
       ``(I) not more than 5 percent of the value of its total 
     assets is represented by securities of any 1 issuer,
       ``(II) the trust does not hold securities possessing more 
     than 10 percent of the total voting power of the outstanding 
     securities of any 1 issuer, and
       ``(III) the trust does not hold securities having a value 
     of more than 10 percent of the total value of the outstanding 
     securities of any 1 issuer.''
       (b) Exception for Straight Debt Securities.--Subsection (c) 
     of section 856 is amended by adding at the end the following 
     new paragraph:
       ``(7) Straight debt safe harbor in applying paragraph 
     (4).--Securities of an issuer which are straight debt (as 
     defined in section 1361(c)(5) without regard to subparagraph 
     (B)(iii) thereof) shall not be taken into account in applying 
     paragraph (4)(B)(ii)(III) if--
       ``(A) the issuer is an individual, or
       ``(B) the only securities of such issuer which are held by 
     the trust or a taxable REIT subsidiary of the trust are 
     straight debt (as so defined), or
       ``(C) the issuer is a partnership and the trust holds at 
     least a 20 percent profits interest in the partnership.''

     SEC. 1122. TREATMENT OF INCOME AND SERVICES PROVIDED BY 
                   TAXABLE REIT SUBSIDIARIES.

       (a) Income From Taxable REIT Subsidiaries Not Treated as 
     Impermissible Tenant Service Income.--Clause (i) of section 
     856(d)(7)(C) (relating to exceptions to impermissible tenant 
     service income) is amended by inserting ``or through a 
     taxable REIT subsidiary of such trust'' after ``income''.
       (b) Certain Income From Taxable REIT Subsidiaries Not 
     Excluded From Rents From Real Property.--
       (1) In general.--Subsection (d) of section 856 (relating to 
     rents from real property defined) is amended by adding at the 
     end the following new paragraphs:
       ``(8) Special rule for taxable reit subsidiaries.--For 
     purposes of this subsection, amounts paid to a real estate 
     investment trust by a taxable REIT subsidiary of such trust 
     shall not be excluded from rents from real property by reason 
     of paragraph (2)(B) if the requirements of subparagraph (A) 
     or (B) are met.
       ``(A) Limited rental exception.--The requirements of this 
     subparagraph are met with respect to any property if at least 
     90 percent of the leased space of the property is rented to 
     persons other than taxable REIT subsidiaries of such trust 
     and other than persons described in section 856(d)(2)(B). The 
     preceding sentence shall apply only to the extent that the 
     amounts paid to the trust as rents from real property (as 
     defined in paragraph (1) without regard to paragraph (2)(B)) 
     from such property are substantially comparable to such rents 
     made by the other tenants of the trust's property for 
     comparable space.
       ``(B) Exception for certain lodging facilities.--The 
     requirements of this subparagraph are met with respect to an 
     interest in real property which is a qualified lodging 
     facility leased by the trust to a taxable REIT subsidiary of 
     the trust if the property is operated on behalf of such 
     subsidiary by a person who is an eligible independent 
     contractor.
       ``(9) Eligible independent contractor.--For purposes of 
     paragraph (8)(B)--
       ``(A) In general.--The term `eligible independent 
     contractor' means, with respect to any qualified lodging 
     facility, any independent contractor if, at the time such 
     contractor enters into a management agreement or other 
     similar service contract with the taxable REIT subsidiary to 
     operate the facility, such contractor (or any related person) 
     is actively engaged in the trade or business of operating 
     qualified lodging facilities for any person who is not a 
     related person with respect to the real estate investment 
     trust or the taxable REIT subsidiary.

[[Page 18299]]

       ``(B) Special rules.--Solely for purposes of this paragraph 
     and paragraph (8)(B), a person shall not fail to be treated 
     as an independent contractor with respect to any qualified 
     lodging facility by reason of any of the following:
       ``(i) The taxable REIT subsidiary bears the expenses for 
     the operation of the facility pursuant to the management 
     agreement or other similar service contract.
       ``(ii) The taxable REIT subsidiary receives the revenues 
     from the operation of such facility, net of expenses for such 
     operation and fees payable to the operator pursuant to such 
     agreement or contract.
       ``(iii) The real estate investment trust receives income 
     from such person with respect to another property that is 
     attributable to a lease of such other property to such person 
     that was in effect as on the later of--

       ``(I) January 1, 1999, or
       ``(II) the earliest date that any taxable REIT subsidiary 
     of such trust entered into a management agreement or other 
     similar service contract with such person with respect to 
     such qualified lodging facility.

       ``(C) Renewals, etc., of existing leases.--For purposes of 
     subparagraph (B)(iii)--
       ``(i) a lease shall be treated as in effect on January 1, 
     1999, without regard to its renewal after such date, so long 
     as such renewal is pursuant to the terms of such lease as in 
     effect on whichever of the dates under subparagraph (B)(iii) 
     is the latest, and
       ``(ii) a lease of a property entered into after whichever 
     of the dates under subparagraph (B)(iii) is the latest shall 
     be treated as in effect on such date if--

       ``(I) on such date, a lease of such property from the trust 
     was in effect, and
       ``(II) under the terms of the new lease, such trust 
     receives a substantially similar or lesser benefit in 
     comparison to the lease referred to in subclause (I).

       ``(D) Qualified lodging facility.--For purposes of this 
     paragraph--
       ``(i) In general.--The term `qualified lodging facility' 
     means any lodging facility unless wagering activities are 
     conducted at or in connection with such facility by any 
     person who is engaged in the business of accepting wagers and 
     who is legally authorized to engage in such business at or in 
     connection with such facility.
       ``(ii) Lodging facility.--The term `lodging facility' means 
     a hotel, motel, or other establishment more than one-half of 
     the dwelling units in which are used on a transient basis.
       ``(iii) Customary amenities and facilities.--The term 
     `lodging facility' includes customary amenities and 
     facilities operated as part of, or associated with, the 
     lodging facility so long as such amenities and facilities are 
     customary for other properties of a comparable size and class 
     owned by other owners unrelated to such real estate 
     investment trust.
       ``(E) Operate includes manage.--References in this 
     paragraph to operating a property shall be treated as 
     including a reference to managing the property.
       ``(F) Related person.--Persons shall be treated as related 
     to each other if such persons are treated as a single 
     employer under subsection (a) or (b) of section 52.''
       (2) Conforming amendment.--Subparagraph (B) of section 
     856(d)(2) is amended by inserting ``except as provided in 
     paragraph (8),'' after ``(B)''.

     SEC. 1123. TAXABLE REIT SUBSIDIARY.

       (a) In General.--Section 856 is amended by adding at the 
     end the following new subsection:
       ``(l) Taxable REIT Subsidiary.--For purposes of this part--
       ``(1) In general.--The term `taxable REIT subsidiary' 
     means, with respect to a real estate investment trust, a 
     corporation (other than a real estate investment trust) if--
       ``(A) such trust directly or indirectly owns stock in such 
     corporation, and
       ``(B) such trust and such corporation jointly elect that 
     such corporation shall be treated as a taxable REIT 
     subsidiary of such trust for purposes of this part.

     Such an election, once made, shall be irrevocable unless both 
     such trust and corporation consent to its revocation. Such 
     election, and any revocation thereof, may be made without the 
     consent of the Secretary.
       ``(2) 35 percent ownership in another taxable reit 
     subsidiary.--The term `taxable REIT subsidiary' includes, 
     with respect to any real estate investment trust, any 
     corporation (other than a real estate investment trust) with 
     respect to which a taxable REIT subsidiary of such trust owns 
     directly or indirectly--
       ``(A) securities possessing more than 35 percent of the 
     total voting power of the outstanding securities of such 
     corporation, or
       ``(B) securities having a value of more than 35 percent of 
     the total value of the outstanding securities of such 
     corporation.

     The preceding sentence shall not apply to a qualified REIT 
     subsidiary (as defined in subsection (i)(2)). The rule of 
     section 856(c)(7) shall apply for purposes of subparagraph 
     (B).
       ``(3) Exceptions.--The term `taxable REIT subsidiary' shall 
     not include--
       ``(A) any corporation which directly or indirectly operates 
     or manages a lodging facility or a health care facility, and
       ``(B) any corporation which directly or indirectly provides 
     to any other person (under a franchise, license, or 
     otherwise) rights to any brand name under which any lodging 
     facility or health care facility is operated.

     Subparagraph (B) shall not apply to rights provided to an 
     eligible independent contractor to operate or manage a 
     lodging facility if such rights are held by such corporation 
     as a franchisee, licensee, or in a similar capacity and such 
     lodging facility is either owned by such corporation or is 
     leased to such corporation from the real estate investment 
     trust.
       ``(4) Definitions.--For purposes of paragraph (3)--
       ``(A) Lodging facility.--The term `lodging facility' has 
     the meaning given to such term by paragraph (9)(D)(ii).
       ``(B) Health care facility.--The term `health care 
     facility' has the meaning given to such term by subsection 
     (e)(6)(D)(ii).''
       (b) Conforming Amendment.--Paragraph (2) of section 856(i) 
     is amended by adding at the end the following new sentence: 
     ``Such term shall not include a taxable REIT subsidiary.''

     SEC. 1124. LIMITATION ON EARNINGS STRIPPING.

       Paragraph (3) of section 163(j) (relating to limitation on 
     deduction for interest on certain indebtedness) is amended by 
     striking ``and'' at the end of subparagraph (A), by striking 
     the period at the end of subparagraph (B) and inserting ``, 
     and'', and by adding at the end the following new 
     subparagraph:
       ``(C) any interest paid or accrued (directly or indirectly) 
     by a taxable REIT subsidiary (as defined in section 856(l)) 
     of a real estate investment trust to such trust.''

     SEC. 1125. 100 PERCENT TAX ON IMPROPERLY ALLOCATED AMOUNTS.

       (a) In General.--Subsection (b) of section 857 (relating to 
     method of taxation of real estate investment trusts and 
     holders of shares or certificates of beneficial interest) is 
     amended by redesignating paragraphs (7) and (8) as paragraphs 
     (8) and (9), respectively, and by inserting after paragraph 
     (6) the following new paragraph:
       ``(7) Income from redetermined rents, redetermined 
     deductions, and excess interest.--
       ``(A) Imposition of tax.--There is hereby imposed for each 
     taxable year of the real estate investment trust a tax equal 
     to 100 percent of redetermined rents, redetermined 
     deductions, and excess interest.
       ``(B) Redetermined rents.--
       ``(i) In general.--The term `redetermined rents' means 
     rents from real property (as defined in subsection 856(d)) 
     the amount of which would (but for subparagraph (E)) be 
     reduced on distribution, apportionment, or allocation under 
     section 482 to clearly reflect income as a result of services 
     furnished or rendered by a taxable REIT subsidiary of the 
     real estate investment trust to a tenant of such trust.
       ``(ii) Exception for certain services.--Clause (i) shall 
     not apply to amounts received directly or indirectly by a 
     real estate investment trust for services described in 
     paragraph (1)(B) or (7)(C)(i) of section 856(d).
       ``(iii) Exception for de minimis amounts.--Clause (i) shall 
     not apply to amounts described in section 856(d)(7)(A) with 
     respect to a property to the extent such amounts do not 
     exceed the one percent threshold described in section 
     856(d)(7)(B) with respect to such property.
       ``(iv) Exception for comparably priced services.--Clause 
     (i) shall not apply to any service rendered by a taxable REIT 
     subsidiary of a real estate investment trust to a tenant of 
     such trust if--

       ``(I) such subsidiary renders a significant amount of 
     similar services to persons other than such trust and tenants 
     of such trust who are unrelated (within the meaning of 
     section 856(d)(8)(F)) to such subsidiary, trust, and tenants, 
     but
       ``(II) only to the extent the charge for such service so 
     rendered is substantially comparable to the charge for the 
     similar services rendered to persons referred to in subclause 
     (I).

       ``(v) Exception for certain separately charged services.--
     Clause (i) shall not apply to any service rendered by a 
     taxable REIT subsidiary of a real estate investment trust to 
     a tenant of such trust if--

       ``(I) the rents paid to the trust by tenants (leasing at 
     least 25 percent of the net leasable space in the trust's 
     property) who are not receiving such service from such 
     subsidiary are substantially comparable to the rents paid by 
     tenants leasing comparable space who are receiving such 
     service from such subsidiary, and
       ``(II) the charge for such service from such subsidiary is 
     separately stated.

       ``(vi) Exception for certain services based on subsidiary's 
     income from the services.--Clause (i) shall not apply to any 
     service rendered by a taxable REIT subsidiary of a real 
     estate investment trust to a tenant of such trust if the 
     gross income of such subsidiary from such service is not less 
     than 150 percent of such subsidiary's direct cost in 
     furnishing or rendering the service.
       ``(vii) Exceptions granted by secretary.--The Secretary may 
     waive the tax otherwise imposed by subparagraph (A) if the 
     trust establishes to the satisfaction of the Secretary that 
     rents charged to tenants were established on an arms' length 
     basis even though a taxable REIT subsidiary of the trust 
     provided services to such tenants.

[[Page 18300]]

       ``(C) Redetermined deductions.--The term `redetermined 
     deductions' means deductions (other than redetermined rents) 
     of a taxable REIT subsidiary of a real estate investment 
     trust if the amount of such deductions would (but for 
     subparagraph (E)) be increased on distribution, 
     apportionment, or allocation under section 482 to clearly 
     reflect income as between such subsidiary and such trust.
       ``(D) Excess interest.--The term `excess interest' means 
     any deductions for interest payments by a taxable REIT 
     subsidiary of a real estate investment trust to such trust to 
     the extent that the interest payments are in excess of a rate 
     that is commercially reasonable.
       ``(E) Coordination with section 482.--The imposition of tax 
     under subparagraph (A) shall be in lieu of any distribution, 
     apportionment, or allocation under section 482.
       ``(F) Regulatory authority.--The Secretary shall prescribe 
     such regulations as may be necessary or appropriate to carry 
     out the purposes of this paragraph. Until the Secretary 
     prescribes such regulations, real estate investment trusts 
     and their taxable REIT subsidiaries may base their 
     allocations on any reasonable method.''
       (b) Amount Subject to Tax Not Required To Be Distributed.--
     Subparagraph (E) of section 857(b)(2) (relating to real 
     estate investment trust taxable income) is amended by 
     striking ``paragraph (5)'' and inserting ``paragraphs (5) and 
     (7)''.

     SEC. 1126. EFFECTIVE DATE.

       (a) In General.--The amendments made by this part shall 
     apply to taxable years beginning after December 31, 2000.
       (b) Transitional Rules Related to Section 1121.--
       (1) Existing arrangements.--
       (A) In general.--Except as otherwise provided in this 
     paragraph, the amendment made by section 1121 shall not apply 
     to a real estate investment trust with respect to--
       (i) securities of a corporation held directly or indirectly 
     by such trust on July 12, 1999,
       (ii) securities of a corporation held by an entity on July 
     12, 1999, if such trust acquires control of such entity 
     pursuant to a written binding contract in effect on such date 
     and at all times thereafter before such acquisition,
       (iii) securities received by such trust (or a successor) in 
     exchange for, or with respect to, securities described in 
     clause (i) or (ii) in a transaction in which gain or loss is 
     not recognized, and
       (iv) securities acquired directly or indirectly by such 
     trust as part of a reorganization (as defined in section 
     368(a)(1) of the Internal Revenue Code of 1986) with respect 
     to such trust if such securities are described in clause (i), 
     (ii), or (iii) with respect to any other real estate 
     investment trust.
       (B) New trade or business or substantial new assets.--
     Subparagraph (A) shall cease to apply to securities of a 
     corporation as of the first day after July 12, 1999, on which 
     such corporation engages in a substantial new line of 
     business, or acquires any substantial asset, other than--
       (i) pursuant to a binding contract in effect on such date 
     and at all times thereafter before the acquisition of such 
     asset,
       (ii) in a transaction in which gain or loss is not 
     recognized by reason of section 1031 or 1033 of the Internal 
     Revenue Code of 1986, or
       (iii) in a reorganization (as so defined) with another 
     corporation the securities of which are described in 
     paragraph (1)(A) of this subsection.
       (2) Tax-free conversion.--If--
       (A) at the time of an election for a corporation to become 
     a taxable REIT subsidiary, the amendment made by section 1121 
     does not apply to such corporation by reason of paragraph 
     (1), and
       (B) such election first takes effect before January 1, 
     2004,

     such election shall be treated as a reorganization qualifying 
     under section 368(a)(1)(A) of such Code.

                       PART II--HEALTH CARE REITS

     SEC. 1131. HEALTH CARE REITS.

       (a) Special Foreclosure Rule for Health Care Properties.--
     Subsection (e) of section 856 (relating to special rules for 
     foreclosure property) is amended by adding at the end the 
     following new paragraph:
       ``(6) Special rule for qualified health care properties.--
     For purposes of this subsection--
       ``(A) Acquisition at expiration of lease.--The term 
     `foreclosure property' shall include any qualified health 
     care property acquired by a real estate investment trust as 
     the result of the termination of a lease of such property 
     (other than a termination by reason of a default, or the 
     imminence of a default, on the lease).
       ``(B) Grace period.--In the case of a qualified health care 
     property which is foreclosure property solely by reason of 
     subparagraph (A), in lieu of applying paragraphs (2) and 
     (3)--
       ``(i) the qualified health care property shall cease to be 
     foreclosure property as of the close of the second taxable 
     year after the taxable year in which such trust acquired such 
     property, and
       ``(ii) if the real estate investment trust establishes to 
     the satisfaction of the Secretary that an extension of the 
     grace period in clause (i) is necessary to the orderly 
     leasing or liquidation of the trust's interest in such 
     qualified health care property, the Secretary may grant 1 or 
     more extensions of the grace period for such qualified health 
     care property.

     Any such extension shall not extend the grace period beyond 
     the close of the 6th year after the taxable year in which 
     such trust acquired such qualified health care property.
       ``(C) Income from independent contractors.--For purposes of 
     applying paragraph (4)(C) with respect to qualified health 
     care property which is foreclosure property by reason of 
     subparagraph (A) or paragraph (1), income derived or received 
     by the trust from an independent contractor shall be 
     disregarded to the extent such income is attributable to--
       ``(i) any lease of property in effect on the date the real 
     estate investment trust acquired the qualified health care 
     property (without regard to its renewal after such date so 
     long as such renewal is pursuant to the terms of such lease 
     as in effect on such date), or
       ``(ii) any lease of property entered into after such date 
     if--

       ``(I) on such date, a lease of such property from the trust 
     was in effect, and
       ``(II) under the terms of the new lease, such trust 
     receives a substantially similar or lesser benefit in 
     comparison to the lease referred to in subclause (I).

       ``(D) Qualified health care property.--
       ``(i) In general.--The term `qualified health care 
     property' means any real property (including interests 
     therein), and any personal property incident to such real 
     property, which--

       ``(I) is a health care facility, or
       ``(II) is necessary or incidental to the use of a health 
     care facility.

       ``(ii) Health care facility.--For purposes of clause (i), 
     the term `health care facility' means a hospital, nursing 
     facility, assisted living facility, congregate care facility, 
     qualified continuing care facility (as defined in section 
     7872(g)(4)), or other licensed facility which extends medical 
     or nursing or ancillary services to patients and which, 
     immediately before the termination, expiration, default, or 
     breach of the lease of or mortgage secured by such facility, 
     was operated by a provider of such services which was 
     eligible for participation in the medicare program under 
     title XVIII of the Social Security Act with respect to such 
     facility.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

      PART III--CONFORMITY WITH REGULATED INVESTMENT COMPANY RULES

     SEC. 1141. CONFORMITY WITH REGULATED INVESTMENT COMPANY 
                   RULES.

       (a) Distribution Requirement.--Clauses (i) and (ii) of 
     section 857(a)(1)(A) (relating to requirements applicable to 
     real estate investment trusts) are each amended by striking 
     ``95 percent (90 percent for taxable years beginning before 
     January 1, 1980)'' and inserting ``90 percent''.
       (b) Imposition of Tax.--Clause (i) of section 857(b)(5)(A) 
     (relating to imposition of tax in case of failure to meet 
     certain requirements) is amended by striking ``95 percent (90 
     percent in the case of taxable years beginning before January 
     1, 1980)'' and inserting ``90 percent''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

 PART IV--CLARIFICATION OF EXCEPTION FROM IMPERMISSIBLE TENANT SERVICE 
                                 INCOME

     SEC. 1151. CLARIFICATION OF EXCEPTION FOR INDEPENDENT 
                   OPERATORS.

       (a) In General.--Paragraph (3) of section 856(d) (relating 
     to independent contractor defined) is amended by adding at 
     the end the following flush sentence:

     ``In the event that any class of stock of either the real 
     estate investment trust or such person is regularly traded on 
     an established securities market, only persons who own, 
     directly or indirectly, more than 5 percent of such class of 
     stock shall be taken into account as owning any of the stock 
     of such class for purposes of applying the 35 percent 
     limitation set forth in subparagraph (B) (but all of the 
     outstanding stock of such class shall be considered 
     outstanding in order to compute the denominator for purpose 
     of determining the applicable percentage of ownership).''
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

           PART V--MODIFICATION OF EARNINGS AND PROFITS RULES

     SEC. 1161. MODIFICATION OF EARNINGS AND PROFITS RULES.

       (a) Rules for Determining Whether Regulated Investment 
     Company Has Earnings and Profits From Non-RIC Year.--
     Subsection (c) of section 852 is amended by adding at the end 
     the following new paragraph:
       ``(3) Distributions to meet requirements of subsection 
     (a)(2)(B).--Any distribution which is made in order to comply 
     with the requirements of subsection (a)(2)(B)--
       ``(A) shall be treated for purposes of this subsection and 
     subsection (a)(2)(B) as made from the earliest earnings and 
     profits accumulated in any taxable year to which the 
     provisions of this part did not apply rather than the most 
     recently accumulated earnings and profits, and

[[Page 18301]]

       ``(B) to the extent treated under subparagraph (A) as made 
     from accumulated earnings and profits, shall not be treated 
     as a distribution for purposes of subsection (b)(2)(D) and 
     section 855.''
       (b) Clarification of Application of REIT Spillover Dividend 
     Rules to Distributions To Meet Qualification Requirement.--
     Subparagraph (B) of section 857(d)(3) is amended by inserting 
     before the period ``and section 858''.
       (c) Application of Deficiency Dividend Procedures.--
     Paragraph (1) of section 852(e) is amended by adding at the 
     end the following new sentence: ``If the determination under 
     subparagraph (A) is solely as a result of the failure to meet 
     the requirements of subsection (a)(2), the preceding sentence 
     shall also apply for purposes of applying subsection (a)(2) 
     to the non-RIC year.''
       (d) Effective Date.--The amendments made by this section 
     shall apply to distributions after December 31, 2000.

                       TITLE XII--REVENUE OFFSETS

                     Subtitle A--General Provisions

     SEC. 1201. MODIFICATION TO FOREIGN TAX CREDIT CARRYBACK AND 
                   CARRYOVER PERIODS.

       (a) In General.--Section 904(c) (relating to limitation on 
     credit) is amended--
       (1) by striking ``in the second preceding taxable year,'', 
     and
       (2) by striking ``or fifth'' and inserting ``fifth, sixth, 
     or seventh''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to credits arising in taxable years beginning 
     after December 31, 1999.

     SEC. 1202. LIMITATION ON USE OF NON-ACCRUAL EXPERIENCE METHOD 
                   OF ACCOUNTING.

       (a) In General.--Section 448(d)(5) (relating to special 
     rule for services) is amended--
       (1) by inserting ``in fields described in paragraph 
     (2)(A)'' after ``services by such person'', and
       (2) by inserting ``certain personal'' before ``services'' 
     in the heading.
       (b) Effective Date.--g before the period ``and section 
     858''.
       (c) Application of Deficiency Dividend procedures.--
     Paragraph (1) of section 852(e) is amended by adding at the 
     end the following new sentence: ``If the determination under 
     subparagraph (A) is solely as a result of the failure to meet 
     the requirement of subsection (a)(2), the preceding sentence 
     shall also apply for purposes of applying subsection (a)(2) 
     to the non-RIC year.''
       (d) Effective Date.--The amendments made by this section 
     shall apply to distributions after December 31, 2000.
       (c) Effective Date.--This section shall apply to taxable 
     years beginning after December 31, 2000.

 PART IV--CLARIFICATION OF EXCEPTION FROM IMPERMISSIBLE TENANT SERVICE 
                                 INCOME

     SEC. 1151. CLARIFICATION OF EXCEPTION FOR INDEPENDENT 
                   OPERATORS.

       (a) In General.--Paragraph (3) of section 856(d) (relating 
     to independent contractor defined) is amended by adding at 
     the end the following flush sentence:
       ``In the event that any class of stock of either the real 
     estate investment trust or such person is regularly traded on 
     an established securities market, only persons who own, 
     directly or indirectly, more than 5 percent of such class of 
     stock shall be taken into account as owning any of the stock 
     of such class for purposes of applying the 35 percent 
     limitation set forth in subparagraph (B) (but all of the 
     outstanding stock of such class shall be considered 
     outstanding in order to compute the denominator for purpose 
     of determining the applicable percentage of ownership).''
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

           PART V--MODIFICATION OF EARNINGS AND PROFITS RULES

     SEC. 1161. MODIFICATION OF EARNINGS AND PROFITS RULES.

       (a) Rules for Determining Whether Regulated Investment 
     Company Has Earnings and Profits From Non-RIC Year.--
     Subsection (c) of section 852 is amended by adding at the end 
     the following new paragraph:
       ``(3) Distributions to meet requirements of subsection 
     (a)(2)(B).--Any distribution which is made in order to comply 
     with the requirements of subsection (a)(2)(B)--
       ``(A) shall be treated for purposes of this subsection and 
     subsection (a)(2)(B) as made from the earliest earnings and 
     profits accumulated in any taxable year to which the 
     provisions of this part did not apply rather than the most 
     recently accumulated earnings and profits, and
       ``(B) to the extent treated under subparagraph (A) as made 
     from accumulated earnings and profits, shall not be treated 
     as a distribution for purposes of subsection (b)(2)(D) and 
     section 855.''
       (b) Clarification of Application of REIT Spillover Dividend 
     Rules to Distributions To Meet Qualification Requirement.--
     Subparagraph (B) of section 857(d)(3) is amended by inserting 
     before the period ``and section 858''.
       (c) Application of Deficiency Dividend Procedures.--
     Paragraph (1) of section 852(e) is amended by adding at the 
     end the following new sentence: ``If the determination under 
     subparagraph (A) is solely as a result of the failure to meet 
     the requirements of subsection (a)(2), the preceding sentence 
     shall also apply for purposes of applying subsection (a)(2) 
     to the non-RIC year.''
       (d) Effective Date.--The amendments made by this section 
     shall apply to distributions after December 31, 2000.

                       TITLE XII--REVENUE OFFSETS

                     Subtitle A--General Provisions

     SEC. 1201. MODIFICATION TO FOREIGN TAX CREDIT CARRYBACK AND 
                   CARRYOVER PERIODS.

       (a) In General.--Section 904(c) (relating to limitation on 
     credit) is amended--
       (1) by striking ``in the second preceding taxable year,'', 
     and
       (2) by striking ``or fifth'' and inserting ``fifth, sixth, 
     or seventh''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to credits arising in taxable years beginning 
     after December 31, 1999.

     SEC. 1202. LIMITATION ON USE OF NON-ACCRUAL EXPERIENCE METHOD 
                   OF ACCOUNTING.

       (a) In General.--Section 448(d)(5) (relating to special 
     rule for services) is amended--
       (1) by inserting ``in fields described in paragraph 
     (2)(A)'' after ``services by such person'', and
       (2) by inserting ``certain personal'' before ``services'' 
     in the heading.
       (b) Effective Date.--To reduce the basis of the property of 
     such controlled corporation. This subsection shall be 
     reapplied to any property of any controlled corporation which 
     is stock in a corporation which it controls.
       ``(8) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to carry out the purposes of 
     this subsection, including regulations to avoid double 
     counting and to prevent the abuse of such purposes.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to distributions made after July 14, 1999.
       (C) Section 404(a)(10)(B) is amended by striking ``, the 
     exclusion allowance under section 403(b)(2),''.
       (D) 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)''.
       (E) 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).''
       (F) Section 415(c) is amended by striking paragraph (4) and 
     by redesignating paragraph (6) as paragraph (4).
       (G) Section 415(c) is amended by striking paragraph (7) and 
     inserting the following new paragraph:
       ``(5) 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, 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 al of deduction for 
     previously deducted amounts.--No deduction shall be allowed 
     for any transfer under this subsection of an amount for which 
     a deduction was allowed when such amount was paid into the 
     nonqualified fund. For purposes of the preceding sentence, a 
     ratable portion of each transfer shall be treated as being 
     from previously deducted amounts to the extent thereof.
       ``(C) Transfers of qualified funds.--If--
       ``(i) any transfer permitted by this subsection is made to 
     any Fund to which this section applies, and
       ``(ii) such Fund is transferred thereafter, any deduction 
     under this subsection for taxable years ending after the date 
     that such Fund is transferred shall be allowed to the 
     transferee and not to the transferor. The preceding sentence 
     shall not apply if the transferor is an organization exempt 
     from tax imposed by this chapter.
       (4) New ruling amount required.--Paragraph (1) shall not 
     apply to d not to the transferor. The preceding se
       (1) In general.--The amendments made by this section shall 
     apply to taxable years ending after the date of the enactment 
     of this Act.
       (2) Change in method of accounting.--In the case of any 
     taxpayer required by the amendments made by this section to 
     change its method of accounting for its first taxable year 
     ending after the date of the enactment of this Act--
       (A) such change shall be treated as initiated by the 
     taxpayer,
       (B) such change shall be treated as made with the consent 
     of the Secretary of the Treasury, and
       (C) the net amount of the adjustments required to be taken 
     into account by the taxpayer under section 481 of the 
     Internal Revenue Code of 1986 shall be taken into account

[[Page 18302]]

     over a period (not greater than 4 taxable years) beginning 
     with such first taxable year.

     SEC. 1203. RETURNS RELATING TO CANCELLATIONS OF INDEBTEDNESS 
                   BY ORGANIZATIONS LENDING MONEY.

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

     SEC. 1204. EXTENSION OF INTERNAL REVENUE SERVICE USER FEES.

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

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

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

``Category                                                  Average Fee
    Employee plan ruling and opinion...............................$250
    Exempt organization ruling......................................350
    Employee plan determination.....................................300
    Exempt organization determination...............................275
    Chief counsel ruling...........................................200.

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

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

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

     SEC. 1205. CHARITABLE SPLIT-DOLLAR LIFE INSURANCE, ANNUITY, 
                   AND ENDOWMENT CONTRACTS.

       (a) In general.--Subsection (f) of section 170 (relating to 
     disallowance of deduction in certain cases and special 
     rules), as amended by section 807, is amended by adding at 
     the end the following new paragraph:
       ``(11) Split-dollar life insurance, annuity, and endowment 
     contracts.--
       ``(A) In general.--Nothing in this section or in section 
     545(b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2), or 2522 shall 
     be construed to allow a deduction, and no deduction shall be 
     allowed, for any transfer to or for the use of an 
     organization described in subsection (c) if in connection 
     with such transfer--
       ``(i) the organization directly or indirectly pays, or has 
     previously paid, any premium on any personal benefit contract 
     with respect to the transferor, or
       ``(ii) there is an understanding or expectation that any 
     person will directly or indirectly pay any premium on any 
     personal benefit contract with respect to the transferor.
       ``(B) Personal benefit contract.--For purposes of 
     subparagraph (A), the term `personal benefit contract' means, 
     with respect to the transferor, any life insurance, annuity, 
     or endowment contract if any direct or indirect beneficiary 
     under such contract is the transferor, any member of the 
     transferor's family, or any other person (other than an 
     organization described in subsection (c)) designated by the 
     transferor.
       ``(C) Application to charitable remainder trusts.--In the 
     case of a transfer to a trust referred to in subparagraph 
     (E), references in subparagraphs (A) and (B) to an 
     organization described in subsection (c) shall be treated as 
     a reference to such trust.
       ``(D) Exception for certain annuity contracts.--If, in 
     connection with a transfer to or for the use of an 
     organization described in subsection (c), such organization 
     incurs an obligation to pay a charitable gift annuity (as 
     defined in section 501(m)) and such organization purchases 
     any annuity contract to fund such obligation, persons 
     receiving payments under the charitable gift annuity shall 
     not be treated for purposes of subparagraph (B) as in direct 
     beneficiaries under such contract if--
       ``(i) such organization possesses all of the incidents of 
     ownership under such contract,
       ``(ii) such organization is entitled to all the payments 
     under such contract, and
       ``(iii) the timing and amount of payments under such 
     contract are substantially the same as the timing and amount 
     of payments to each such person under such obligation (as 
     such obligation is in effect at the time of such transfer.)
       ``(E) Exception for certain contracts held by charitable 
     remainder trusts.--A person shall not be treated for purposes 
     of subparagraph (B) as an indirect beneficiary under any life 
     insurance, annuity, or endowment contract held by a 
     charitable remainder annuity trust or a charitable remainder 
     unitrust (as defined in section 664(d)) solely by reason of 
     being entitled to any payment referred to in paragraph (1)(A) 
     or (2)(A) of section 664(d) if--
       ``(i) such trust possesses all of the incidents of 
     ownership under such contract, and
       (ii) such trust is entitled to all the payments under such 
     contract.
       ``(F) Excise tax on premiums paid.--
       ``(i) In general.--There is hereby imposed on any 
     organization described in subsection (c) an excise tax equal 
     to the premiums paid by such organization on any life 
     insurance, annuity; or endowment contract if the payment of 
     premiums on such contract is in connection with a transfer 
     for which a deduction is not allowable under subparagraph 
     (A), determined with out regard to when such transfer is 
     made.
       ``(ii) Payments by other persons.--For purposes of clause 
     (i), payments made by any other person pursuant to an 
     understanding or expectation referred to in subparagraph (A) 
     shall be treated as made by the organization.
       ``(iii) Reporting.--Any organization on which tax is 
     imposed by clause (i) with to any premium shall file an 
     annual return which includes--
       ``(I) the amount of such premium paid during the year and 
     the name and TIN of each beneficiary under the contract to 
     which the premium relates, and
       ``(II) such other information as Secretary may require.
       The penalties applicable to returns required under section 
     6033 shall apply to returns required under this clause. 
     Returns required under this clause shall be furnished at such 
     time and in such manner as the Secretary shall by forms or 
     regulations require.
       ``(iv) Certain rules to apply.--The tax imposed by this 
     subparagraph shall be treated as imposed by chapter 42 for 
     purposes of this title other than subchapter B of chapter 42.
       ``(G) Special rule where state requires specification of 
     charitable gift annuitant in contract.--In the case of an 
     obligation to pay a charitable gift annuity referred to in 
     subparagraph (D) which is entered into under the laws of the 
     State which requires, in order for the charitable gift 
     annuity to be exempt from insurance regulation by such State, 
     that each beneficiary under the charitable gift annuity be 
     named as a beneficiary under an annuity contract issued by an 
     insurance company authorized to transact business in such 
     State, the requirements of clauses (i) and (ii) of 
     subparagraph (D) shall be treated as met if--
       ``(i) such State law requirement was in effect on February 
     8, 1999,
       ``(ii) each such beneficiary under the charitable gift 
     annuity is a bona fide resident of such State at the time the 
     obligation to pay a charitable gift annuity is entered into, 
     and
       ``(iii) the only persons entitled to payments under such 
     contract are persons entitled to payments as beneficiaries 
     under such obligation on the date such obligation is entered 
     into.
       ``(H) Member of family.--For purposes of this paragraph, an 
     individual's family consists of the individual's 
     grandparents, the grandparents of such individual's spouse, 
     the lineal descendants of such grandparents, and any spouse 
     of such a lineal descendant.
       ``(I) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this paragraph, including regulations to 
     prevent the avoidance of such purposes.''.
       (b) Effective Date.--
       (1) In general.--Except as otherwise provided in this 
     section, the amendment made by this section shall apply to 
     transfer made after February 8, 1999.
       (2) Excise tax.--Except as provided in paragraph (3) of 
     this subsection, section 170(f)(11)(F) of the Internal 
     Revenue Code of 1986 (as added by this section) shall apply 
     to premiums paid after the date of the enactment of this Act.
       (3) Reporting.--Clause (iii) of such section 170(f)(11)(F) 
     shall apply to premiums paid after February 8, 1999 
     (determined as if the tax imposed by such section applies to 
     premiums paid after such date).

     SEC. 1206. TRANSFER OF EXCESS DEFINED BENEFIT PLAN ASSETS FOR 
                   RETIREE HEALTH BENEFITS.

       (a) Extension.--

[[Page 18303]]

       (1) In general.--Paragraph (5) of section 420(b) (relating 
     to expiration) is amended by striking ``in any taxable year 
     beginning after December 31, 2000'' and inserting ``made 
     after September 30, 2009''.
       (2) Conforming amendments.--
       (A) Section 101(e)(3) of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1021(e)(3)) is amended by 
     striking ``1995'' and inserting ``2001''.
       (B) Section 403(c)(1) of such Act (29 U.S.C. 1103(c)(1)) is 
     amended by striking ``1995'' and inserting ``2001''.
       (C) Paragraph (13) of section 408(b) of such Act (29 U.S.C. 
     1108(b)(13)) is amended--
       (i) by striking ``in a taxable year beginning before 
     January 1, 2001'' and inserting ``made before October 1, 
     2009'', and
       (ii) by striking ``1995'' and inserting ``2001''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to qualified transfers occurring after December 
     31, 2000.

     SEC. 1207. LIMITATIONS ON WELFARE BENEFIT FUNDS OF 10 OR MORE 
                   EMPLOYER PLANS.

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

     then such portion shall be treated as reverting to the 
     benefit of the employers maintaining the fund.''
       ``(c) Effective Date.--The amendments made by this section 
     shall apply to contributions paid or accrued after June 9, 
     1999, in taxable years ending after such date.

     SEC. 1208. MODIFICATION OF INSTALLMENT METHOD AND REPEAL OF 
                   INSTALLMENT METHOD FOR ACCRUAL METHOD 
                   TAXPAYERS.

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

     SEC. 1209. INCLUSION OF CERTAIN VACCINES AGAINST 
                   STREPTOCOCCUS PENUMONLAE TO LIST OF TAXABLE 
                   VACCINES.

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

     SEC. 1210. RESTORATION OF PHASE-OUT OF UNIFIED CREDIT.

       (a) In General.--Paragraph (2) of section 2001(c) is 
     amended by striking ``$10,000,000'' and all that follows and 
     inserting ``$10,000,000. The amount of the increase under the 
     preceding sentence shall not exceed the sum of the applicable 
     credit amount under section 2010(c) (determined without 
     regard to section 2057(a)(3)) and $359,200.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to estates of decedents dying after the date of 
     enactment of this Act.

     SEC. 1211. REPEAL OF LOWER-OF-COST-OR-MARKET METHOD OF 
                   ACCOUNTING FOR INVENTORIES.

       (a) In General.--Section 471 (relating to general rule for 
     inventories) is amended by redesignating subsection (b) as 
     subsection (c) and by inserting after subsection (a) the 
     following new subsection:
       (b) Certain Write-Downs Not Permitted; Use or Mark-Downs 
     Required Under Retail Method.--
       (1) In General.--A taxpayer--
       (A) may not use the lower-of-cost-or-market method of 
     accounting for inventories, and
       ``(B) may not write-down items by reason of being unsalable 
     at normal prices or unusable in the normal way because of 
     damage, imperfections, shop wear, chances of style, odd or 
     broken lots, or other similar causes.
       Subparagraph (B) shall not apply to a taxpayer using a 
     mark-to-market method of accounting for both gains and losses 
     in inventory values.
       ``(2) Mark-downs required to be taken into account under 
     retail method.--The retail method of accounting for 
     inventories

     shall be applied by taking into account mark-downs in 
     determining the approximate cost of the inventories.
       ``(3) Exception for certain small businesses.--Paragraph 
     (1) shall not apply to any taxpayer for any taxable year if, 
     for all prior taxable years ending on or after the date of 
     the enactment of this subsection, the taxpayer (or any 
     predecessor) met the $5,000,000 gross receipts test of 
     section 448(c).
       ``(4) Regulations.--The Secretary shall prescribe such 
     regulations as may be appropriate to carry out the purposes 
     of this subsection, including regulations relating to wash-
     sale-type transaction.''
       (b) Conforming Amendments.--
       (1) Clause (iii) of section 312(n)(4)(C) is amended to read 
     as follows:
       ``(iii) Inventory amount.--The inventory among of assets 
     under the first-in, first-out method authorized by section 
     471 shall be determined using the method authorized to be 
     used by the taxpayer under such section.''
       (2) Subparagraph (C) of section 1363(d)(4) is amended to 
     read as follows:
       ``(C) Inventory amount.--The inventory amount of assets 
     under a method authorized by section 471 shall be determined 
     using the method authorized to be used by the corporation 
     under such section.''
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to taxable years beginning after the date of the 
     enactment of this subsection.
       (2) Changes in method of accounting.--In the case of any 
     taxpayer required by this section to change its method of 
     accounting for its first taxable year beginning after the 
     date of the enactment of this subsection--
       (A) such change shall be treated as initiated by the 
     taxpayer,
       (B) such change shall be treated as made with the consent 
     of the Secretary of the Treasury, and
       (C) the net amount of the adjustments required to be taken 
     into account by the taxpayer under section 481 of the 
     Internal Revenue Code of 1986 shall be taken into account 
     ratably over the 4-taxable year period beginning with the 
     first taxable year beginning after such date.

     SEC. 1212. CONSISTENT AMORTIZATION PERIODS FOR INTANGIBLES.

       (a) Start-Up Expenditures.--
       (1) Allowance of deduction.--Subsection (b) of section 195 
     (relating to start-up expenditures) is amended by striking 
     paragraph (1), by redesignating paragraph (2) as paragraph 
     (3), and by inserting before paragraph (3), as so 
     redesignated, the following new paragraphs:
       ``(1) Allowance of Deduction.--If a taxpayer elects the 
     application of this subsection with respect to any start-up 
     expenditures--
       ``(A) the taxpayer shall be allowed a deduction for the 
     taxable year in which the active trade or business begins in 
     an amount equal to the lesser of--
       ``(i) the amount of start-up expenditures with respect to 
     the active trade or business, or
       ``(ii) $5,000, reduced (but not below zero) by the amount 
     by which such start-up expenditures exceed $50,000, and
       ``(B) the remainder of such start-up expenditures shall be 
     allowed as a deduction ratably over the 180-month period 
     beginning with the month in which the active trade or 
     business begins.
       ``(2) Aggregation rule.--For purposes of paragraph (1), all 
     persons which are treated as a single employer under 
     subsections (a) and (b) of section 52 shall be treated as a 
     single person.''
       (2) Conforming amendment.--Subsection (b) of section 195 is 
     amended by striking

[[Page 18304]]

     ``Amortize'' and inserting ``Deduct'' in the heading.
       (b) Organizational Expenditures.--Subsection (a) of section 
     248 (relating to organizational expenditures) is amended to 
     read as follows:
       ``(a) Election to Deduct.--
       ``(1) In general.--If a corporation elects the application 
     of this subsection (in accordance with regulations prescribed 
     by the Secretary) with respect to any organizational 
     expenditures--
       ``(A) the corporation shall be allowed a deduction for the 
     taxable year in which the corporation begins business in an 
     amount equal to the lesser of--
       ``(i) the amount of organizational expenditures with 
     respect to the taxpayer, or
       ``(ii) $5,000, reduced (but not below zero) by the amount 
     by which such organizational expenditures exceed $50,000, and
       ``(B) the remainder of such organizational expenditures 
     shall be allowed as a deduction ratably over the 180-month 
     period beginning with the month in which the corporation 
     begins business.
       ``(2) Aggegation rule.--For purposes of paragraph (1), all 
     persons which are treated as a single employer under 
     subsection (a) or (b) of section 52 shall be treated as a 
     single person.''
       (c) Treatment of Organizational and Syndication Fees or 
     Partnerships.--Section 709(b) (relating to amortization of 
     organization fees) is amended by redesignating paragraph (2) 
     as paragraph (4) and by amending paragraph (1) to read as 
     follows:
       ``(1) Allowance of deduction.--If a taxpayer elects the 
     application of this subsection (in accordance with 
     regulations prescribed by the Secretary) with respect to any 
     organizational expenses--
       ``(A) the taxpayer shall be allowed a deduction for the 
     taxable year in which the partnership begins business in an 
     amount equal to the lesser of--
       ``(i) the amount of organizational expenses with respect to 
     the partnership, or
       ``(ii) $5,000, reduced (but not below zero) by the amount 
     by which such organizational expenses exceed $50,000, and
       ``(B) the remainder of such organizational expenses shall 
     be allowed as a deduction ratably over the 180-month period 
     beginning with the month in which the partnership begins 
     business.
       ``(2) Dispositions before close of amortization period.--In 
     any case in which a partnership is liquidated before the end 
     of the period to which paragraph (1)(B) applies, any deferred 
     expenses attributable to the partnership which were not 
     allowed as a deduction by reasons of this section may be 
     deducted to the extent allowable under section 165.
       ``(3) Aggregation rule.--For purposes of paragraph (1), all 
     persons which are treated as a single employer under 
     subsection (a) or (b) of section 52 shall be treated as a 
     single person.''
       (d) Conforming Amendment.--Subsection (b) of section 709 is 
     amended by striking ``Amortization'' and inserting 
     ``Deduction'' in the heading.
       (e) Effective Date.--The amendments made by this section 
     shall apply to amounts paid or incurred after the date of the 
     enactment of this Act.

     SEC. 1213. EXTENSION OF HAZARDOUS SUBSTANCE SUPERFUND TAXES.

       (a) Extension of Taxes.--
       (1) Environmental tax.--Section 59A(e) is amended to read 
     as follows:
       ``(e) Application of Tax.--The tax imposed by this section 
     shall apply to taxable years beginning after December 31, 
     1986, and before January 1, 1996, and to taxable years 
     beginning after December 31, 1999, and before January 1, 
     2010.''
       (2) Excise taxes.--Section 4611(e) is amended to read as 
     follows:
       ``(e) Application of Hazardous Substance Superfund 
     Financing Rate.--The Hazardous Substance Superfund Financing 
     rate under this section shall apply after December 31, 1986 
     and before January 1, 1996, and after the date of the 
     enactment of the Taxpayer Refund Act of 1999, and before 
     October 1, 2009.''
       (b) Effective Dates.--
       (1) Income tax.--The amendment made by subsection (a)(1) 
     shall apply to taxable years beginning after December 31, 
     1999.
       (2) Excise tax.--The amendment made by subsection (a)(2) 
     shall take effect on the date of the enactment of this Act.

     SEC. 1214. CONTROLLED ENTITIES INELIGIBLE FOR REIT STATUS.

       (a) In General.--Subsection (a) of section 856 (relating to 
     definition of real estate investment trust) is amended by 
     striking ``and'' at the end of paragraph (6), by 
     redesignating paragraph (7) as paragraph (8), and by 
     inserting after paragraph (6) the following new paragraph:
       ``(7) which is not a controlled entity (as defined in 
     subsection (1)); and''.
       (b) Controlled Entity.--Section 856 is amended by adding at 
     the end the following new subsection:
       ``(l) Controlled Entity.--
       ``(1) In general.--For purposes of subsection (a)(7), an 
     entity is a controlled entity if, at any time during the 
     taxable year, one person (other than a qualified entity)--
       ``(A) in the case of a corporation, owns stock--
       ``(i) possessing at least 50 percent of the total voting 
     power of the stock of such corporation, or
       ``(ii) having a value equal to at least 50 percent of the 
     total value of the stock of such corporation, or
       ``(B) in the case of a trust, owns beneficial interests in 
     the trust which would meet the requirements of subparagraph 
     (A) if such interests were stock.
       ``(2) Qualified entity.--For purposes of paragraph (1), the 
     term `qualified entity' means--
       ``(A) any real estate investment trust, and
       ``(B) any partnership in which one real estate investment 
     trust owns at least 50 percent of the capital and profits 
     interests in the partnership.
       ``(3) Attribution rules.--For purposes of this paragraphs 
     (1) and (2)--
       ``(A) In general.--Rules similar to the rules of 
     subsections (d)(5) and (h)(3) shall apply.
       ``(B) Stapled entities.--A group of entities which are 
     stapled entities (as defined in section 269(c)(2)) shall be 
     treated as 1 person.''
       (c) Conforming Amendment.--Paragraph (2) of section 856(h) 
     is amended by striking ``and (6)'' each place it appears and 
     inserting ``, (6), and (7)''.
       (d) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to taxable years ending after July 14, 1999.
       (2) Exceptions for existing controlled entities.--The 
     amendments made by this section shall not apply to any entity 
     which is a controlled entity (as defined in section 856(l) of 
     the Internal Revenue Code of 1986, as added by this section) 
     as of July 14, 1999, which is a real estate investment trust 
     for the taxable year which includes such date, and which has 
     significant business assets or activities as of such date.

     SEC. 1215. INCREASE IN ELECTIVE WITHHOLDING RATE FOR 
                   NONPERIODIC DISTRIBUTIONS FROM DEFERRED 
                   COMPENSATION PLANS.

       (a) In General.--Section 3405(b)(1) (relating to 
     withholding) is amended by striking ``10 percent'' and 
     inserting ``15 percent''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to distributions after December 31, 2000.

     SEC. 1216. TREATMENT OF GAIN FROM CONSTRUCTIVE OWNERSHIP 
                   TRANSACTIONS.

       (a) In General.--Part IV of subchapter P of chapter 1 
     (relating to special rules for determining capital gains and 
     losses) is amended by inserting after section 1259 the 
     following section:

     ``SEC. 1260. GAINS FROM CONSTRUCTIVE OWNERSHIP TRANSACTIONS.

       ``(a) In General.--If the taxpayer has gain from a 
     constructive ownership transaction with respect to any 
     financial asset and such gain would (without regard to this 
     section) be treated as a long-term capital gain--
       ``(1) such gain shall be treated as ordinary income to the 
     extent that such gain exceeds the net underlying long-term 
     capital gain, and
       ``(2) to the extent such gain is treated as a long-term 
     capital gain after the application of paragraph (1), the 
     determination of the capital gain rate (or rates) applicable 
     to such
     gain under section 1(h) shall be determined on the basis of 
     the respective rate (or rates) that would have been 
     applicable to the net underlying long-term capital gain.
       ``(b) Interest Charge on Deferral of Gain Recognition.--
       ``(1) In general.--If any gain is treated as ordinary 
     income for any taxable year by reason of subsection (a)(1), 
     the tax imposed by this chapter for such taxable year shall 
     be increased by the amount of interest determined under 
     paragraph (2) with respect to each prior taxable year during 
     any portion of which the constructive ownership transaction 
     was open. Any amount payable under this paragraph shall be 
     taken into account in computing the amount of any deduction 
     allowable to the taxpayer for interest paid or accrued during 
     such taxable year.
       ``(2) Amount of interest.--The amount of interest 
     determined under this paragraph with respect to a prior 
     taxable year is the amount of interest which would have been 
     imposed under section 6601 on the underpayment of tax for 
     such year which would have resulted if the gain (which is 
     treated as ordinary income by reason of subsection (a)(1)) 
     had been included in gross income in the taxable years in 
     which it accrued (determined by treating the income as 
     accruing at a constant rate equal to the applicable Federal 
     rate as in effect on the day the transaction closed). The 
     period during which such interest shall accrue shall end on 
     the due date (without extensions) for the return of tax 
     imposed by this chapter for the taxable year in which such 
     transaction closed
       ``(3) Applicable federal rate.--For purposes of paragraph 
     (2), the applicable Federal rate is the applicable Federal 
     rate determined under 1274(d) (compound semiannually) which 
     would apply to a debt instrument with a term equal to the 
     period the transaction was open.
       ``(4) No credits against increase in tax.--Any increase in 
     tax under paragraph (1) shall not be treated as tax imposed 
     by this chapter of purposes of determining--
       ``(A) the amount of any credit allowable under this 
     chapter, or
       ``(B) the amount of the tax imposed by section 55.
       ``(c) Financial Asset.--For purposed of ration
       ``(1) In general.--The term `financial asset' means--
       ``(A) any equity interest in any pass-thou entity, and
       ``(B) to the extent provided in regulations--
       ``(i) any debt instrument, and
       (ii) any stock in a corporation which in not a pass-thru 
     entity.
       ``(2) Pass-thru entity.--For purposes of paragraph (1), the 
     term `pass-thru entity' means--
       ``(A) a regulated investment company,
       ``(B) a real estate investment trust,

[[Page 18305]]

       ``(C) an S corporation,
       ``(D) a partnership,
       ``(E) a trust,
       ``(F) a common trust fund,
       ``(G) a passive foreign investment company (as defined in 
     section 1297 without regard to subsection (e) thereof).
       ``(H) a foreign personal holding company,
       ``(I) a foreign investment company (as defined in section 
     1246(b)), and
       ``(J) a REMIC.
       ``(d) Constructive Ownership Transaction.--For purposes of 
     this section--
       ``(1) In general.--The taxpayer shall be treated as having 
     entered into a constructive ownership transaction with 
     respect to any financial asset if the taxpayer--
       ``(A) holds a long position under a notional principal 
     contract with respect to the financial asset,
       ``(B) enters into a forward or futures contract to acquire 
     the financial asset,
       ``(C) is the holder of a call option, and is the grantor of 
     a put option, with respect to the financial asset and such 
     options have substantially equal strike prices and 
     substantially contemporaneous maturity dates, or
       ``(D) to the extent provided in regulations prescribed by 
     the Secretary, enters into 1 or more other transactions (or 
     acquires 1 or more positions) that have substantially the 
     same effect as a transaction described in any of the 
     preceding subparagraphs.
       ``(2) Exception for positions which are marked to market.--
     This section shall not apply to any constructive ownership 
     transaction if all of the positions which are part of such 
     transaction are marked to market under any provision of this 
     title or the regulations thereunder.
       ``(3) Long position under notional principal contract.--A 
     person shall be treated as holding a long position under a 
     notional principal contract with respect to any financial 
     asset if such person--
       ``(A) has the right to be paid (or receive credit for) all 
     or substantially all of the investment yield (including 
     appreciation) on such financial asset for a specified period, 
     and
       ``(B) is obligated to reimburse (or provide credit for) all 
     or substantially all of any decline in the value of such 
     financial asset.
       ``(4) Forward contract.--The term `forward contract' means 
     any contract to acquire in the future (or provide or receive 
     credit for the future value of) any financial asset.
       ``(e) Net Underlying Long-Term Capital Gain.--For purposes 
     of this section, in the case of any constructive ownership 
     transaction with respect to any financial asset, the term 
     `net underlying long-term capital gain' means the aggregate 
     net capital gain that the tax-payer would have had if--
       ``(1) the financial asset had been acquired for fair market 
     value on the date such transaction was opened and sold for 
     fair market value on the date such transaction was closed, 
     and
       ``(2) only gains and losses that would have resulted from 
     the deemed ownership under paragraph (1) were taken into 
     account.

     The amount of the net underlying long-term capital gain with 
     respect to any financial asset shall be treated as zero 
     unless the amount thereof is established by clear and 
     convincing evidence.
       ``(f) Special Rule Where Taxpayer Takes Delivery.--Except 
     as provided in regulations prescribed by the Secretary, if a 
     constructive ownership transaction is closed by reason of 
     taking delivery, this section shall be applied as if the 
     taxpayer had sold all the contracts, options, or other 
     positions which are part of such transaction for fair market 
     value on the closing date. The amount of gain recognized 
     under the preceding sentence shall not exceed the amount of 
     gain treated as ordinary income under subsection (a). Proper 
     adjustments shall be made in the amount of any gain or loss 
     subsequently realized for gain recognized and treated as 
     ordinary income under this subsection.
       ``(g) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this section, including regulations--
       ``(1) to permit taxpayers to mark to market constructive 
     ownership transactions in lieu of applying this section, and
       ``(2) to exclude certain forward contracts which do not 
     convey substantially all of the economic return with respect 
     to a financial asset.''
       (b) Clerical Amendment.--The table of sections for part IV 
     of subchapter P of chapter 1 is amended by adding at the end 
     the following new item:

``Sec. 1260. Gains from constructive ownership transactions.''
       (c) Effective Date.-The amendments made by this section 
     shall apply to transactions entered into after July 11, 1999.

     SEC. 1217. RESTRICTION ON USE OF REAL ESTATE INVESTMENT 
                   TRUSTS TO AVOID ESTIMATED TAX PAYMENT 
                   REQUIREMENTS.

       (a) In General.--Subsection (c) of section 6655 (relating 
     to estimated tax by corporations) is amended by adding at the 
     end the following new paragraph:
       ``(5) Treatment of certain reit dividends.--
       ``(A) In general.--Any dividend received from a closely 
     held real estate investment trust by any person which owns 
     (after application of subsections (d)(5) and (1)(3)(B) of 
     section 856) 10 percent or more (by vote or value) of the 
     stock or beneficial interests in the trust shall be taken 
     into account in computing annualized income installments 
     under paragraph (2) in a manner similar to the manner under 
     which partnership income inclusions are taken into account.
       ``(B) Closely held reit.--For purposes of subparagraph (A), 
     the term `closely held real estate investment trust' means a 
     real estate investment trust with respect to which 5 or fewer 
     persons own (after application of subsections (d)(5) and 
     (1)(3)(B) of section 856) 50 percent or more (by vote or 
     value) of the stock or beneficial interests in the trust.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to estimated tax payments due on or after 
     September 15, 1999.

     SEC. 1218. PROHIBITED ALLOCATIONS OF S CORPORATION STOCK HELD 
                   BY AN 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 Allocation 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 individual.
       ``(2) Failure to meet requirements.--If a plan fails to 
     meet the requirements of paragraph (1)--
       ``(A) the plan shall be treated as having distributed to 
     any disqualified individual the amount allocated to the 
     account of such individual in violation of paragraph (1) at 
     the time of such allocation,
       ``(B) the provisions of section 4979A shall apply, and
       ``(C) the statutory period for the assessment of any tax 
     imposed by section 4979A shall not expire before the date 
     which is 3 years from the later of--
       ``(i) the allocation of employer securities resulting in 
     the failure under paragraph (1) giving rise to such tax, or
       ``(ii) the date on which the Secretary is notified of such 
     failure.
       ``(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 individuals own at least 50 percent of 
     the number of outstanding shares of stock in such 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), disqualified 
     individuals shall be treated as owning deemed-owned shares.
       ``(4) Disqualified individual.--For purposes of this 
     subsection--
       ``(A) In general.--The term `disqualified individual' means 
     any individual who is a participant or beneficiary under the 
     employee stock ownership plan if--
       ``(i) the aggregate number of deemed-owned shares of such 
     individual and the members of the individual's family is at 
     least 20 percent of the number of outstanding shares of stock 
     in the S corporation constituting employer securities of such 
     plan, or
       ``(ii) if such individual is not described in clause (i), 
     the number of deemed-owned shares of such individual is at 
     least 10 percent of the number of outstanding shares of stock 
     in such corporation.
       ``(B) Treatment of family members.--In the case of a 
     disqualified individual described in subparagraph (A)(i), any 
     member of the individual's family with deemed-owned shares 
     shall be treated as a disqualified individual if not 
     otherwise a disqualified individual under subparagraph (A).
       ``(C) Deemed-owned shares.--For purposes of this 
     paragraph--
       ``(i) In general.--The term `deemed-owned shares' means, 
     with respect to any participant or beneficiary under the 
     employee stock ownership plan--
       ``(I) the stock in the S corporation constituting employer 
     securities of such plan which is allocated to such 
     participant or beneficiary under the plan, and
       ``(II) such participant's or beneficiary's share of the 
     stock in such corporation which is held by such trust but 
     which is not allocated under the plan to employees.

[[Page 18306]]

       ``(ii) Individuals share of unallocated stock.--For 
     purposes of clause (i)(II), an individual's share of 
     unallocated S corporation stock held by the trust in the 
     amount of the unallocated stock which would be allocated to 
     such individual if the unallocated stock were allocated to 
     individuals in the same proportions as the most recent stock 
     allocation under the plan.
       ``(D) Members of family.--For purposes of this paragraph, 
     the term `member of the family' means, with respect of 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 person described in clause (ii) or 
     (iii).
       ``(5) 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).
       ``(6) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to carry out the purposes of 
     this subsection, including regulations providing for the 
     treatment of any stock option, restricted stock, sock 
     appreciation right, phantom stock unit, performance unit, or 
     similar instrumental granted by an S corporation as stock or 
     not stock.''
       (b) Excise Tax.--
       (1) In general.--Section 4979A(b) (defining prohibited 
     allocation) 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) any allocation of employer securities which violate 
     the provisions of section 409(p).''
       (2) Liability.--Section 4979A(c) (defining liability for 
     tax) is amended by adding at the end the following new 
     sentence: ``in the case of a prohibited allocation described 
     in subsection (b)(3), such tax shall be paid by the S 
     corporation the stock in which was allocated in violation of 
     section 409(p).''
       (c) Effective Dates.--
       (1) in general.--The amendments made by this section shall 
     apply to plan years beginning after December 31, 2000.
       (2) Exception for certain plans.--In the ease of any--
       (A) employee stock ownership plan established after July 
     14, 1999, 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 14, 1999.

     SEC. 1219. MODIFICATION OF ANTI-ABUSE RULES RELATED TO 
                   ASSUMPTION OF LIABILITY.

       (a) In General.--Section 357(b)(1) (relating to tax 
     avoidance purpose) is amended--
       (1) by striking ``the principal purpose'' and inserting ``a 
     principal purpose'', and
       (2) by striking ``on the exchange'' in subparagraph (A).
       (b) Effective Date.--The amendments made by this section 
     shall apply to assumptions of liability after July 14, 1999.

     SEC. 1220. ALLOCATION OF BASIS ON TRANSFERS OF INTANGIBLES IN 
                   CERTAIN NONRECOGNITION TRNSACTIONS

       (a) Transfers to Corporations.--Section 351 (relating to 
     transfer to corporation controlled by transferor) is amended 
     by redesignating subsection (h) or subsection (i) and by 
     inserting after subsection (g) the following new subsection:
       ``(h) Treatment of Transfers of Intangible Property.--
       ``(1) Transfers of less than all substantial rights.
       ``(A) In general.--A transfer of an interest in intangible 
     property (as defined in section 936(h)(3)(B)) shall be 
     treated under this section as a transfer of property even if 
     the transfer is of less than all of the substantial rights of 
     the transferor in the property.
       ``(B) Allocation of basis.--In the case of a transfer of 
     less than all of the substantial rights of the transferor in 
     the intangible property, the transferor's basis immediately 
     before the transfer shall be allocated among the rights 
     retained by the transferor and the rights transferred on the 
     basis of their respective fair market values.
       ``(2) Nonrecognition not to apply to intangible property 
     developed for transferee.--This section shall not apply to a 
     transfer of intangible property developed by the transferor 
     or any related person if such development was pursuant to an 
     arrangement with the transferee.''
       (b) Transfers to Partnerships.--Subsection (d) of section 
     721 is amended to read as follows:
       ``(d) Transfers of Intangible Property.--
       ``(1) In general.--Rules similar to the rules of section 
     351(h) shall apply for purposes of this section.
       ``(2) Transfers to foreign partnerships.--For regulatory 
     authority to treat intangibles transferred to a partnership 
     as sold, see section 367(d)(3).''
       (c) Effective Date.--The amendments made by this section 
     shall apply to transfers on or after the date of the 
     enactment of this Act.

     SEC. 1221. DISTRIBUTIONS TO A CORPORATE PARTNER OF STOCK IN 
                   ANOTHER CORPORATION.

       (c) In General.--Section 732 (relating to basis of 
     distributed property other than money) is amended by adding 
     at the end the following new subsection:
       ``(f) Corresponding Adjustment to Basis of Assets of a 
     Distributed Corporation Controlled by a Corporate Partner.--
       ``(1) In general.--If--
       ``(A) a corporation (hereafter in this subsection referred 
     to as the `corporate partner') receives a distribution from a 
     partnership of stock in another corporation (hereafter in 
     this subsection referred to as the `distributed 
     corporation').
       ``(B) the corporate partner has control of the distributed 
     corporation immediately after the distribution or at any time 
     thereafter, and
       ``(C) the partnership's adjusted basis in such stock 
     immediately before the distribution exceeded the corporate 
     partner's adjusted basis in such stock immediately after the 
     distribution,

     then an amount equal to such excess shall be applied to 
     reduce (in accordance with subsection (c) the basis of 
     property held by the distributed corporation at such time 
     (or, if the corporate partner does not control the 
     distributed corporation at such time, at the time the 
     corporation partner first has such control).
       ``(2) Exception for certain distributions before control 
     acquired.--Paragraph (1) shall not apply to any distribution 
     of stock in the distributed corporation if--
       ``(A) the corporate partner does not have control of such 
     corporation immediately after such distribution, and
       ``(B) the corporate partner establishes to the satisfaction 
     of the Secretary that such distribution was not part of a 
     plan or arrangement to acquire control of the distributed 
     corporation.
       ``(3) Limitations on basis reduction.--
       ``(A) In general.--The amount of the reduction under 
     paragraph (1) shall not exceed the amount by which the sum of 
     the aggregate adjusted bases of the property and the amount 
     of money of the distributed corporation exceeds the corporate 
     partner's adjusted basis in the stock of the distributed 
     corporation.
       ``(B) Reduction not to exceed adjusted basis of property.--
     No reduction under paragraph (1) in the basis of any property 
     shall exceed the adjusted basis of such property (determined 
     without regard to such reduction).
       ``(4) Gain recognition where reduction limited.--If the 
     amount of any reduction under paragraph (1) (determined after 
     the application of paragraph (3)(A)) exceeds the aggregate 
     adjusted bases of the property of the distributed 
     corporation--
       ``(A) such excess shall be recognized by the corporate 
     partner as long-term capital gain, and
       ``(B) the corporate partner's adjusted basis in the stock 
     of the distributed corporation shall be increased by such 
     excess.
       ``(5) Control.--For purposes of this subsection, the term 
     `control' means ownership of a stock meeting the requirements 
     of section 1504(a)(2).
       ``(6) Indirect distributions.--For purposes of paragraph 
     (1), if a corporation acquires (other than in a distribution 
     from a partnership) stock the basis of which is determined in 
     whole or in part by reference to subsection (a)(2) or (b), 
     the corporation shall be treated as receiving a distribution 
     of such stock from a partnership.
       ``(7) Special rule for stock in controlled corporation.--If 
     the property held by a distributed corporation is stock in a 
     corporation which the distributed corporation controls, this 
     subsection shall be applied to reduce the basis of the 
     property of such controlled corporation. This subsection 
     shall be reapplied to any property of any controlled 
     corporation which is stock in a corporation which it 
     controls.
       ``(8) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to carry out the purposes of 
     this subsection, including regulations to avoid double 
     counting and to prevent the abuse of such purposes.''
       ``(b) Effective Date.--the amendment made by this section 
     shall apply to distributions made after July 14, 1999.
          TITLE XIII--COMPLIANCE WITH CONGRESSIONAL BUDGET ACT

     SEC. 1301. SUNSET OF PROVISIONS OF ACT.

       All provisions of, and amendments made by, this Act which 
     are in effect on September 30, 2009, shall cease to apply as 
     of the close of September 30, 2009.
                                 ______
                                 

                       LINCOLN AMENDMENT NO. 1385

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


[[Page 18307]]

       At the appropriate place add the following:
       To amend the Internal Revenue Code of 1986 to clarify that 
     any amount allowable as a child tax credit under section 24 
     or an earned income credit under section 32 shall not be 
     treated as income for purposes of any means-tested Federal 
     program.
       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. COORDINATION OF CHILD TAX CREDIT WITH CERTAIN 
                   MEANS-TESTED PROGRAMS.

       Section 24 of the Internal Revenue Code of 1986 (relating 
     to child tax credit) is amended by adding at the end the 
     following new subsection:
       (g) Coordination With Certain Means-Tested Programs.--Any 
     refund or credit made to an individual by reason of this 
     section shall not be treated as income or receipts (or taken 
     into account in determining resources) for purposes of 
     determining--
       (1) the eligibility of the individual or any other 
     individual for any month for benefits or assistance under any 
     Federal program or any State or local program financed in 
     whole or in part with Federal funds, or
       (2) the amount or extent of such benefits or assistance.

     SEC. 2. COORDINATION OF EARNED INCOME CREDIT WITH CERTAIN 
                   MEANS-TESTED PROGRAMS.

       Subsection (l) of section 32 of the Internal Revenue Code 
     of 1986 (relating to coordination with certain means-tested 
     programs) is amended to read as follows:
       (l) Coordination With Certain Means-Tested Programs.--Any 
     refund or credit made to an individual by reason of this 
     section, and any payment made to such individual by an 
     employer under section 3507, shall not be treated as income 
     or receipts (or taken into account in determining resources) 
     for purposes of determining--
       (1) the eligibility of the individual or any other 
     individual for any month for benefits or assistance under any 
     Federal program or any State or local program financed in 
     whole or in part with Federal funds, or
       (2) the amount or extent of such benefits or assistance.
                                 ______
                                 

                       SPECTER AMENDMENT NO. 1386

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

       Strike all after the first word and insert:

           1. SHORT TITLE; TABLE OF CONTENTS; AMENDMENT OF 1986 
                   CODE.

       (a) Short Title.--This Act may be cited as the ``Flat Tax 
     Act of 1999''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; table of contents; amendment of 1986 Code.
Sec. 2. Flat tax on individual taxable earned income and business 
              taxable income.
Sec. 3. Repeal of estate and gift taxes.
Sec. 4. Additional repeals.
Sec. 5. Effective dates.
       (c) 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.

     SEC. 2. FLAT TAX ON INDIVIDUAL TAXABLE EARNED INCOME AND 
                   BUSINESS TAXABLE INCOME.

       (a) In General.--Subchapter A of chapter 1 of subtitle A is 
     amended to read as follows:

             ``Subchapter A--Determination of Tax Liability

``Part I.   Tax on individuals.
``Part II.  Tax on business activities.

                      ``PART I--TAX ON INDIVIDUALS

``Sec. 1. Tax imposed.
``Sec. 2. Standard deduction.
``Sec. 3. Deduction for cash charitable contributions.
``Sec. 4. Deduction for home acquisition indebtedness.
``Sec. 5. Definitions and special rules.

     ``SECTION 1. TAX IMPOSED.

       ``(a) Imposition of Tax.--There is hereby imposed on every 
     individual a tax equal to 20 percent of the taxable earned 
     income of such individual.
       ``(b) Taxable Earned Income.--For purposes of this section, 
     the term `taxable earned income' means the excess (if any) 
     of--
       ``(1) the earned income received or accrued during the 
     taxable year, over
       ``(2) the sum of--
       ``(A) the standard deduction,
       ``(B) the deduction for cash charitable contributions, and
       ``(C) the deduction for home acquisition indebtedness,
     for such taxable year.
       ``(c) Earned Income.--For purposes of this section--
       ``(1) In general.--The term `earned income' means wages, 
     salaries, or professional fees, and other amounts received 
     from sources within the United States as compensation for 
     personal services actually rendered, but does not include 
     that part of compensation derived by the taxpayer for 
     personal services rendered by the taxpayer to a corporation 
     which represents a distribution of earnings or profits rather 
     than a reasonable allowance as compensation for the personal 
     services actually rendered.
       ``(2) Taxpayer engaged in trade or business.--In the case 
     of a taxpayer engaged in a trade or business in which both 
     personal services and capital are material income-producing 
     factors, under regulations prescribed by the Secretary, a 
     reasonable allowance as compensation for the personal 
     services rendered by the taxpayer, not in excess of 30 
     percent of the taxpayer's share of the net profits of such 
     trade or business, shall be considered as earned income.

     ``SEC. 2. STANDARD DEDUCTION.

       ``(a) In General.--For purposes of this subtitle, the term 
     `standard deduction' means the sum of--
       ``(1) the basic standard deduction, plus
       ``(2) the additional standard deduction.
       ``(b) Basic Standard Deduction.--For purposes of subsection 
     (a), the basic standard deduction is--
       ``(1) $17,500 in the case of--
       ``(A) a joint return, and
       ``(B) a surviving spouse (as defined in section 5(a)),
       ``(2) $15,000 in the case of a head of household (as 
     defined in section 5(b)), and
       ``(3) $10,000 in the case of an individual--
       ``(A) who is not married and who is not a surviving spouse 
     or head of household, or
       ``(B) who is a married individual filing a separate return.
       ``(c) Additional Standard Deduction.--For purposes of 
     subsection (a), the additional standard deduction is $5,000 
     for each dependent (as defined in section 5(d))--
       ``(1) whose earned income for the calendar year in which 
     the taxable year of the taxpayer begins is less than the 
     basic standard deduction specified in subsection (b)(3), or
       ``(2) who is a child of the taxpayer and who--
       ``(A) has not attained the age of 19 at the close of the 
     calendar year in which the taxable year of the taxpayer 
     begins, or
       ``(B) is a student who has not attained the age of 24 at 
     the close of such calendar year.
       ``(d) Inflation Adjustment.--
       ``(1) In general.--In the case of any taxable year 
     beginning in a calendar year after 1999, each dollar amount 
     contained in subsections (b) and (c) shall be increased by an 
     amount equal to--
       ``(A) such dollar amount, multiplied by
       ``(B) the cost-of-living adjustment under section 1(f)(3) 
     for the calendar year in which the taxable year begins, 
     determined by substituting `calendar year 1998' for `calendar 
     year 1992' in subparagraph (B) of such section.
       ``(2) Rounding.--If any increase determined under paragraph 
     (1) is not a multiple of $50, such amount shall be rounded to 
     the next lowest multiple of $50.

     ``SEC. 3. DEDUCTION FOR CASH CHARITABLE CONTRIBUTIONS.

       ``(a) General Rule.--For purposes of this part, there shall 
     be allowed as a deduction any charitable contribution (as 
     defined in subsection (b)) not to exceed $2,500 ($1,250, in 
     the case of a married individual filing a separate return), 
     payment of which is made within the taxable year.
       ``(b) Charitable Contribution Defined.--For purposes of 
     this section, the term `charitable contribution' means a 
     contribution or gift of cash or its equivalent to or for the 
     use of the following:
       ``(1) A State, a possession of the United States, or any 
     political subdivision of any of the foregoing, or the United 
     States or the District of Columbia, but only if the 
     contribution or gift is made for exclusively public purposes.
       ``(2) A corporation, trust, or community chest, fund, or 
     foundation--
       ``(A) created or organized in the United States or in any 
     possession thereof, or under the law of the United States, 
     any State, the District of Columbia, or any possession of the 
     United States,
       ``(B) organized and operated exclusively for religious, 
     charitable, scientific, literary, or educational purposes, or 
     to foster national or international amateur sports 
     competition (but only if no part of its activities involve 
     the provision of athletic facilities or equipment), or for 
     the prevention of cruelty to children or animals,
       ``(C) no part of the net earnings of which inures to the 
     benefit of any private shareholder or individual, and
       ``(D) which is not disqualified for tax exemption under 
     section 501(c)(3) by reason of attempting to influence 
     legislation, and which does not participate in, or intervene 
     in (including the publishing or distributing of statements), 
     any political campaign on behalf of (or in opposition to) any 
     candidate for public office.

     A contribution or gift by a corporation to a trust, chest, 
     fund, or foundation shall be deductible by reason of this 
     paragraph only if it is to be used within the United States 
     or any of its possessions exclusively for purposes specified 
     in subparagraph (B). Rules similar to the rules of section 
     501(j) shall apply for purposes of this paragraph.
       ``(3) A post or organization of war veterans, or an 
     auxiliary unit or society of, or trust or foundation for, any 
     such post or organization--
       ``(A) organized in the United States or any of its 
     possessions, and

[[Page 18308]]

       ``(B) no part of the net earnings of which inures to the 
     benefit of any private shareholder or individual.
       ``(4) In the case of a contribution or gift by an 
     individual, a domestic fraternal society, order, or 
     association, operating under the lodge system, but only if 
     such contribution or gift is to be used exclusively for 
     religious, charitable, scientific, literary, or educational 
     purposes, or for the prevention of cruelty to children or 
     animals.
       ``(5) A cemetery company owned and operated exclusively for 
     the benefit of its members, or any corporation chartered 
     solely for burial purposes as a cemetery corporation and not 
     permitted by its charter to engage in any business not 
     necessarily incident to that purpose, if such company or 
     corporation is not operated for profit and no part of the net 
     earnings of such company or corporation inures to the benefit 
     of any private shareholder or individual.
     For purposes of this section, the term `charitable 
     contribution' also means an amount treated under subsection 
     (d) as paid for the use of an organization described in 
     paragraph (2), (3), or (4).
       ``(c) Disallowance of Deduction in Certain Cases and 
     Special Rules.--
       ``(1) Substantiation requirement for certain 
     contributions.--
       ``(A) General rule.--No deduction shall be allowed under 
     subsection (a) for any contribution of $250 or more unless 
     the taxpayer substantiates the contribution by a 
     contemporaneous written acknowledgment of the contribution by 
     the donee organization that meets the requirements of 
     subparagraph (B).
       ``(B) Content of acknowledgment.--An acknowledgment meets 
     the requirements of this subparagraph if it includes the 
     following information:
       ``(i) The amount of cash contributed.
       ``(ii) Whether the donee organization provided any goods or 
     services in consideration, in whole or in part, for any 
     contribution described in clause (i).
       ``(iii) A description and good faith estimate of the value 
     of any goods or services referred to in clause (ii) or, if 
     such goods or services consist solely of intangible religious 
     benefits, a statement to that effect.

     For purposes of this subparagraph, the term `intangible 
     religious benefit' means any intangible religious benefit 
     which is provided by an organization organized exclusively 
     for religious purposes and which generally is not sold in a 
     commercial transaction outside the donative context.
       ``(C) Contemporaneous.--For purposes of subparagraph (A), 
     an acknowledgment shall be considered to be contemporaneous 
     if the taxpayer obtains the acknowledgment on or before the 
     earlier of--
       ``(i) the date on which the taxpayer files a return for the 
     taxable year in which the contribution was made, or
       ``(ii) the due date (including extensions) for filing such 
     return.
       ``(D) Substantiation not required for contributions 
     reported by the donee organization.--Subparagraph (A) shall 
     not apply to a contribution if the donee organization files a 
     return, on such form and in accordance with such regulations 
     as the Secretary may prescribe, which includes the 
     information described in subparagraph (B) with respect to the 
     contribution.
       ``(E) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this paragraph, including regulations that 
     may provide that some or all of the requirements of this 
     paragraph do not apply in appropriate cases.
       ``(2) Denial of deduction where contribution for lobbying 
     activities.--No deduction shall be allowed under this section 
     for a contribution to an organization which conducts 
     activities to which section 11(d)(2)(C)(i) applies on matters 
     of direct financial interest to the donor's trade or 
     business, if a principal purpose of the contribution was to 
     avoid Federal income tax by securing a deduction for such 
     activities under this section which would be disallowed by 
     reason of section 11(d)(2)(C) if the donor had conducted such 
     activities directly. No deduction shall be allowed under 
     section 11(d) for any amount for which a deduction is 
     disallowed under the preceding sentence.
       ``(d) Amounts Paid To Maintain Certain Students as Members 
     of Taxpayer's Household.--
       ``(1) In general.--Subject to the limitations provided by 
     paragraph (2), amounts paid by the taxpayer to maintain an 
     individual (other than a dependent, as defined in section 
     5(d), or a relative of the taxpayer) as a member of such 
     taxpayer's household during the period that such individual 
     is--
       ``(A) a member of the taxpayer's household under a written 
     agreement between the taxpayer and an organization described 
     in paragraph (2), (3), or (4) of subsection (b) to implement 
     a program of the organization to provide educational 
     opportunities for pupils or students in private homes, and
       ``(B) a full-time pupil or student in the twelfth or any 
     lower grade at an educational organization located in the 
     United States which normally maintains a regular faculty and 
     curriculum and normally has a regularly enrolled body of 
     pupils or students in attendance at the place where its 
     educational activities are regularly carried on,

     shall be treated as amounts paid for the use of the 
     organization.
       ``(2) Limitations.--
       ``(A) Amount.--Paragraph (1) shall apply to amounts paid 
     within the taxable year only to the extent that such amounts 
     do not exceed $50 multiplied by the number of full calendar 
     months during the taxable year which fall within the period 
     described in paragraph (1). For purposes of the preceding 
     sentence, if 15 or more days of a calendar month fall within 
     such period such month shall be considered as a full calendar 
     month.
       ``(B) Compensation or reimbursement.--Paragraph (1) shall 
     not apply to any amount paid by the taxpayer within the 
     taxable year if the taxpayer receives any money or other 
     property as compensation or reimbursement for maintaining the 
     individual in the taxpayer's household during the period 
     described in paragraph (1).
       ``(3) Relative defined.--For purposes of paragraph (1), the 
     term `relative of the taxpayer' means an individual who, with 
     respect to the taxpayer, bears any of the relationships 
     described in subparagraphs (A) through (H) of section 
     5(d)(1).
       ``(4) No other amount allowed as deduction.--No deduction 
     shall be allowed under subsection (a) for any amount paid by 
     a taxpayer to maintain an individual as a member of the 
     taxpayer's household under a program described in paragraph 
     (1)(A) except as provided in this subsection.
       ``(e) Denial of Deduction for Certain Travel Expenses.--No 
     deduction shall be allowed under this section for traveling 
     expenses (including amounts expended for meals and lodging) 
     while away from home, whether paid directly or by 
     reimbursement, unless there is no significant element of 
     personal pleasure, recreation, or vacation in such travel.
       ``(f) Disallowance of Deductions in Certain Cases.--For 
     disallowance of deductions for contributions to or for the 
     use of Communist controlled organizations, see section 11(a) 
     of the Internal Security Act of 1950 (50 U.S.C. 790).
       ``(g) Treatment of Certain Amounts Paid to or for the 
     Benefit of Institutions of Higher Education.--
       ``(1) In general.--For purposes of this section, 80 percent 
     of any amount described in paragraph (2) shall be treated as 
     a charitable contribution.
       ``(2) Amount described.--For purposes of paragraph (1), an 
     amount is described in this paragraph if--
       ``(A) the amount is paid by the taxpayer to or for the 
     benefit of an educational organization--
       ``(i) which is described in subsection (d)(1)(B), and
       ``(ii) which is an institution of higher education (as 
     defined in section 3304(f)), and
       ``(B) such amount would be allowable as a deduction under 
     this section but for the fact that the taxpayer receives 
     (directly or indirectly) as a result of paying such amount 
     the right to purchase tickets for seating at an athletic 
     event in an athletic stadium of such institution.

     If any portion of a payment is for the purchase of such 
     tickets, such portion and the remaining portion (if any) of 
     such payment shall be treated as separate amounts for 
     purposes of this subsection.
       ``(h) Other Cross References.--
       ``(1) For treatment of certain organizations providing 
     child care, see section 501(k).
       ``(2) For charitable contributions of partners, see section 
     702.
       ``(3) For treatment of gifts for benefit of or use in 
     connection with the Naval Academy as gifts to or for the use 
     of the United States, see section 6973 of title 10, United 
     States Code.
       ``(4) For treatment of gifts accepted by the Secretary of 
     State, the Director of the International Communication 
     Agency, or the Director of the United States International 
     Development Cooperation Agency, as gifts to or for the use of 
     the United States, see section 25 of the State Department 
     Basic Authorities Act of 1956.
       ``(5) For treatment of gifts of money accepted by the 
     Attorney General for credit to the `Commissary Funds, Federal 
     Prisons' as gifts to or for the use of the United States, see 
     section 4043 of title 18, United States Code.
       ``(6) For charitable contributions to or for the use of 
     Indian tribal governments (or subdivisions of such 
     governments), see section 7871.

     ``SEC. 4. DEDUCTION FOR HOME ACQUISITION INDEBTEDNESS.

       ``(a) General Rule.--For purposes of this part, there shall 
     be allowed as a deduction all qualified residence interest 
     paid or accrued within the taxable year.
       ``(b) Qualified Residence Interest Defined.--The term 
     `qualified residence interest' means any interest which is 
     paid or accrued during the taxable year on acquisition 
     indebtedness with respect to any qualified residence of the 
     taxpayer. For purposes of the preceding sentence, the 
     determination of whether any property is a qualified 
     residence of the taxpayer shall be made as of the time the 
     interest is accrued.
       ``(c) Acquisition Indebtedness.--
       ``(1) In general.--The term `acquisition indebtedness' 
     means any indebtedness which--
       ``(A) is incurred in acquiring, constructing, or 
     substantially improving any qualified residence of the 
     taxpayer, and

[[Page 18309]]

       ``(B) is secured by such residence.
     Such term also includes any indebtedness secured by such 
     residence resulting from the refinancing of indebtedness 
     meeting the requirements of the preceding sentence (or this 
     sentence); but only to the extent the amount of the 
     indebtedness resulting from such refinancing does not exceed 
     the amount of the refinanced indebtedness.
       ``(2) $100,000 limitation.--The aggregate amount treated as 
     acquisition indebtedness for any period shall not exceed 
     $100,000 ($50,000 in the case of a married individual filing 
     a separate return).
       ``(d) Treatment of Indebtedness Incurred on or Before 
     October 13, 1987.--
       ``(1) In general.--In the case of any pre-October 13, 1987, 
     indebtedness--
       ``(A) such indebtedness shall be treated as acquisition 
     indebtedness, and
       ``(B) the limitation of subsection (c)(2) shall not apply.
       ``(2) Reduction in $100,000 limitation.--The limitation of 
     subsection (c)(2) shall be reduced (but not below zero) by 
     the aggregate amount of outstanding pre-October 13, 1987, 
     indebtedness.
       ``(3) Pre-october 13, 1987, indebtedness.--The term `pre-
     October 13, 1987, indebtedness' means--
       ``(A) any indebtedness which was incurred on or before 
     October 13, 1987, and which was secured by a qualified 
     residence on October 13, 1987, and at all times thereafter 
     before the interest is paid or accrued, or
       ``(B) any indebtedness which is secured by the qualified 
     residence and was incurred after October 13, 1987, to 
     refinance indebtedness described in subparagraph (A) (or 
     refinanced indebtedness meeting the requirements of this 
     subparagraph) to the extent (immediately after the 
     refinancing) the principal amount of the indebtedness 
     resulting from the refinancing does not exceed the principal 
     amount of the refinanced indebtedness (immediately before the 
     refinancing).
       ``(4) Limitation on period of refinancing.--Subparagraph 
     (B) of paragraph (3) shall not apply to any indebtedness 
     after--
       ``(A) the expiration of the term of the indebtedness 
     described in paragraph (3)(A), or
       ``(B) if the principal of the indebtedness described in 
     paragraph (3)(A) is not amortized over its term, the 
     expiration of the term of the first refinancing of such 
     indebtedness (or if earlier, the date which is 30 years after 
     the date of such first refinancing).
       ``(e) Other Definitions and Special Rules.--For purposes of 
     this section--
       ``(1) Qualified residence.--For purposes of this 
     subsection--
       ``(A) In general.--Except as provided in subparagraph (C), 
     the term `qualified residence' means the principal residence 
     of the taxpayer.
       ``(B) Married individuals filing separate returns.--If a 
     married couple does not file a joint return for the taxable 
     year--
       ``(i) such couple shall be treated as 1 taxpayer for 
     purposes of subparagraph (A), and
       ``(ii) each individual shall be entitled to take into 
     account \1/2\ of the principal residence unless both 
     individuals consent in writing to 1 individual taking into 
     account the principal residence.
       ``(C) Pre-october 13, 1987, indebtedness.--In the case of 
     any pre-October 13, 1987, indebtedness, the term `qualified 
     residence' has the meaning given that term in section 
     163(h)(4), as in effect on the day before the date of 
     enactment of this subparagraph.
       ``(2) Special rule for cooperative housing corporations.--
     Any indebtedness secured by stock held by the taxpayer as a 
     tenant-stockholder in a cooperative housing corporation shall 
     be treated as secured by the house or apartment which the 
     taxpayer is entitled to occupy as such a tenant-stockholder. 
     If stock described in the preceding sentence may not be used 
     to secure indebtedness, indebtedness shall be treated as so 
     secured if the taxpayer establishes to the satisfaction of 
     the Secretary that such indebtedness was incurred to acquire 
     such stock.
       ``(3) Unenforceable security interests.--Indebtedness shall 
     not fail to be treated as secured by any property solely 
     because, under any applicable State or local homestead or 
     other debtor protection law in effect on August 16, 1986, the 
     security interest is ineffective or the enforceability of the 
     security interest is restricted.
       ``(4) Special rules for estates and trusts.--For purposes 
     of determining whether any interest paid or accrued by an 
     estate or trust is qualified residence interest, any 
     residence held by such estate or trust shall be treated as a 
     qualified residence of such estate or trust if such estate or 
     trust establishes that such residence is a qualified 
     residence of a beneficiary who has a present interest in such 
     estate or trust or an interest in the residuary of such 
     estate or trust.

     ``SEC. 5. DEFINITIONS AND SPECIAL RULES.

       ``(a) Definition of Surviving Spouse.--
       ``(1) In general.--For purposes of this part, the term 
     `surviving spouse' means a taxpayer--
       ``(A) whose spouse died during either of the taxpayer's 2 
     taxable years immediately preceding the taxable year, and
       ``(B) who maintains as the taxpayer's home a household 
     which constitutes for the taxable year the principal place of 
     abode (as a member of such household) of a dependent--
       ``(i) who (within the meaning of subsection (d)) is a son, 
     stepson, daughter, or stepdaughter of the taxpayer, and
       ``(ii) with respect to whom the taxpayer is entitled to a 
     deduction for the taxable year under section 2.

     For purposes of this paragraph, an individual shall be 
     considered as maintaining a household only if over one-half 
     of the cost of maintaining the household during the taxable 
     year is furnished by such individual.
       ``(2) Limitations.--Notwithstanding paragraph (1), for 
     purposes of this part a taxpayer shall not be considered to 
     be a surviving spouse--
       ``(A) if the taxpayer has remarried at any time before the 
     close of the taxable year, or
       ``(B) unless, for the taxpayer's taxable year during which 
     the taxpayer's spouse died, a joint return could have been 
     made under the provisions of section 6013 (without regard to 
     subsection (a)(3) thereof).
       ``(3) Special rule where deceased spouse was in missing 
     status.--If an individual was in a missing status (within the 
     meaning of section 6013(f)(3)) as a result of service in a 
     combat zone and if such individual remains in such status 
     until the date referred to in subparagraph (A) or (B), then, 
     for purposes of paragraph (1)(A), the date on which such 
     individual dies shall be treated as the earlier of the date 
     determined under subparagraph (A) or the date determined 
     under subparagraph (B):
       ``(A) The date on which the determination is made under 
     section 556 of title 37 of the United States Code or under 
     section 5566 of title 5 of such Code (whichever is 
     applicable) that such individual died while in such missing 
     status.
       ``(B) Except in the case of the combat zone designated for 
     purposes of the Vietnam conflict, the date which is 2 years 
     after the date designated as the date of termination of 
     combatant activities in that zone.
       ``(b) Definition of Head of Household.--
       ``(1) In general.--For purposes of this part, an individual 
     shall be considered a head of a household if, and only if, 
     such individual is not married at the close of such 
     individual's taxable year, is not a surviving spouse (as 
     defined in subsection (a)), and either--
       ``(A) maintains as such individual's home a household which 
     constitutes for more than one-half of such taxable year the 
     principal place of abode, as a member of such household, of--
       ``(i) a son, stepson, daughter, or stepdaughter of the 
     taxpayer, or a descendant of a son or daughter of the 
     taxpayer, but if such son, stepson, daughter, stepdaughter, 
     or descendant is married at the close of the taxpayer's 
     taxable year, only if the taxpayer is entitled to a deduction 
     for the taxable year for such person under section 2 (or 
     would be so entitled but for subparagraph (B) or (D) of 
     subsection (d)(5)), or
       ``(ii) any other person who is a dependent of the taxpayer, 
     if the taxpayer is entitled to a deduction for the taxable 
     year for such person under section 2, or
       ``(B) maintains a household which constitutes for such 
     taxable year the principal place of abode of the father or 
     mother of the taxpayer, if the taxpayer is entitled to a 
     deduction for the taxable year for such father or mother 
     under section 2.

     For purposes of this paragraph, an individual shall be 
     considered as maintaining a household only if over one-half 
     of the cost of maintaining the household during the taxable 
     year is furnished by such individual.
       ``(2) Determination of status.--For purposes of this 
     subsection--
       ``(A) a legally adopted child of a person shall be 
     considered a child of such person by blood,
       ``(B) an individual who is legally separated from such 
     individual's spouse under a decree of divorce or of separate 
     maintenance shall not be considered as married,
       ``(C) a taxpayer shall be considered as not married at the 
     close of such taxpayer's taxable year if at any time during 
     the taxable year such taxpayer's spouse is a nonresident 
     alien, and
       ``(D) a taxpayer shall be considered as married at the 
     close of such taxpayer's taxable year if such taxpayer's 
     spouse (other than a spouse described in subparagraph (C)) 
     died during the taxable year.
       ``(3) Limitations.--Notwithstanding paragraph (1), for 
     purposes of this part, a taxpayer shall not be considered to 
     be a head of a household--
       ``(A) if at any time during the taxable year the taxpayer 
     is a nonresident alien, or
       ``(B) by reason of an individual who would not be a 
     dependent for the taxable year but for--
       ``(i) subparagraph (I) of subsection (d)(1), or
       ``(ii) paragraph (3) of subsection (d).
       ``(c) Certain Married Individuals Living Apart.--For 
     purposes of this part, an individual shall be treated as not 
     married at the close of the taxable year if such individual 
     is so treated under the provisions of section 7703(b).
       ``(d) Dependent Defined.--
       ``(1) General definition.--For purposes of this part, the 
     term `dependent' means any of the following individuals over 
     one-half of whose support, for the calendar year in which the 
     taxable year of the taxpayer begins, was received from the 
     taxpayer (or is treated under paragraph (3) or (5) as 
     received from the taxpayer):

[[Page 18310]]

       ``(A) A son or daughter of the taxpayer, or a descendant of 
     either.
       ``(B) A stepson or stepdaughter of the taxpayer.
       ``(C) A brother, sister, stepbrother, or stepsister of the 
     taxpayer.
       ``(D) The father or mother of the taxpayer, or an ancestor 
     of either.
       ``(E) A stepfather or stepmother of the taxpayer.
       ``(F) A son or daughter of a brother or sister of the 
     taxpayer.
       ``(G) A brother or sister of the father or mother of the 
     taxpayer.
       ``(H) A son-in-law, daughter-in-law, father-in-law, mother-
     in-law, brother-in-law, or sister-in-law of the taxpayer.
       ``(I) An individual (other than an individual who at any 
     time during the taxable year was the spouse, determined 
     without regard to section 7703, of the taxpayer) who, for the 
     taxable year of the taxpayer, has as such individual's 
     principal place of abode the home of the taxpayer and is a 
     member of the taxpayer's household.
       ``(2) Rules relating to general definition.--For purposes 
     of this section--
       ``(A) Brother; sister.--The terms `brother' and `sister' 
     include a brother or sister by the halfblood.
       ``(B) Child.--In determining whether any of the 
     relationships specified in paragraph (1) or subparagraph (A) 
     of this paragraph exists, a legally adopted child of an 
     individual (and a child who is a member of an individual's 
     household, if placed with such individual by an authorized 
     placement agency for legal adoption by such individual), or a 
     foster child of an individual (if such child satisfies the 
     requirements of paragraph (1)(I) with respect to such 
     individual), shall be treated as a child of such individual 
     by blood.
       ``(C) Citizenship.--The term `dependent' does not include 
     any individual who is not a citizen or national of the United 
     States unless such individual is a resident of the United 
     States or of a country contiguous to the United States. The 
     preceding sentence shall not exclude from the definition of 
     `dependent' any child of the taxpayer legally adopted by such 
     taxpayer, if, for the taxable year of the taxpayer, the child 
     has as such child's principal place of abode the home of the 
     taxpayer and is a member of the taxpayer's household, and 
     if the taxpayer is a citizen or national of the 
     United States.
       ``(D) Alimony, etc.--A payment to a wife which is alimony 
     or separate maintenance shall not be treated as a payment by 
     the wife's husband for the support of any dependent.
       ``(E) Unlawful arrangements.--An individual is not a member 
     of the taxpayer's household if at any time during the taxable 
     year of the taxpayer the relationship between such individual 
     and the taxpayer is in violation of local law.
       ``(3) Multiple support agreements.--For purposes of 
     paragraph (1), over one-half of the support of an individual 
     for a calendar year shall be treated as received from the 
     taxpayer if--
       ``(A) no one person contributed over one-half of such 
     support,
       ``(B) over one-half of such support was received from 
     persons each of whom, but for the fact that such person did 
     not contribute over one-half of such support, would have been 
     entitled to claim such individual as a dependent for a 
     taxable year beginning in such calendar year,
       ``(C) the taxpayer contributed over 10 percent of such 
     support, and
       ``(D) each person described in subparagraph (B) (other than 
     the taxpayer) who contributed over 10 percent of such support 
     files a written declaration (in such manner and form as the 
     Secretary may by regulations prescribe) that such person will 
     not claim such individual as a dependent for any taxable year 
     beginning in such calendar year.
       ``(4) Special support test in case of students.--For 
     purposes of paragraph (1), in the case of any individual who 
     is--
       ``(A) a son, stepson, daughter, or stepdaughter of the 
     taxpayer (within the meaning of this subsection), and
       ``(B) a student,

     amounts received as scholarships for study at an educational 
     organization described in section 3(d)(1)(B) shall not be 
     taken into account in determining whether such individual 
     received more than one-half of such individual's support from 
     the taxpayer.
       ``(5) Support test in case of child of divorced parents, 
     etc.--
       ``(A) Custodial parent gets exemption.--Except as otherwise 
     provided in this paragraph, if--
       ``(i) a child receives over one-half of such child's 
     support during the calendar year from such child's parents--

       ``(I) who are divorced or legally separated under a decree 
     of divorce or separate maintenance,
       ``(II) who are separated under a written separation 
     agreement, or
       ``(III) who live apart at all times during the last 6 
     months of the calendar year, and

       ``(ii) such child is in the custody of 1 or both of such 
     child's parents for more than one-half of the calendar year,

     such child shall be treated, for purposes of paragraph (1), 
     as receiving over one-half of such child's support during the 
     calendar year from the parent having custody for a greater 
     portion of the calendar year (hereafter in this paragraph 
     referred to as the `custodial parent').
       ``(B) Exception where custodial parent releases claim to 
     exemption for the year.--A child of parents described in 
     subparagraph (A) shall be treated as having received over 
     one-half of such child's support during a calendar year from 
     the noncustodial parent if--
       ``(i) the custodial parent signs a written declaration (in 
     such manner and form as the Secretary may by regulations 
     prescribe) that such custodial parent will not claim such 
     child as a dependent for any taxable year beginning in such 
     calendar year, and
       ``(ii) the noncustodial parent attaches such written 
     declaration to the noncustodial parent's return for the 
     taxable year beginning during such calendar year.

     For purposes of this paragraph, the term `noncustodial 
     parent' means the parent who is not the custodial parent.
       ``(C) Exception for multiple-support agreement.--This 
     paragraph shall not apply in any case where over one-half of 
     the support of the child is treated as having been received 
     from a taxpayer under the provisions of paragraph (3).
       ``(D) Exception for certain pre-1985 instruments.--
       ``(i) In general.--A child of parents described in 
     subparagraph (A) shall be treated as having received over 
     one-half such child's support during a calendar year from the 
     noncustodial parent if--

       ``(I) a qualified pre-1985 instrument between the parents 
     applicable to the taxable year beginning in such calendar 
     year provides that the noncustodial parent shall be entitled 
     to any deduction allowable under section 2 for such child, 
     and
       ``(II) the noncustodial parent provides at least $600 for 
     the support of such child during such calendar year.

     For purposes of this clause, amounts expended for the support 
     of a child or children shall be treated as received from the 
     noncustodial parent to the extent that such parent provided 
     amounts for such support.
       ``(ii) Qualified pre-1985 instrument.--For purposes of this 
     subparagraph, the term `qualified pre-1985 instrument' means 
     any decree of divorce or separate maintenance or written 
     agreement--

       ``(I) which is executed before January 1, 1985,
       ``(II) which on such date contains the provision described 
     in clause (i)(I), and
       ``(III) which is not modified on or after such date in a 
     modification which expressly provides that this subparagraph 
     shall not apply to such decree or agreement.

       ``(E) Special rule for support received from new spouse of 
     parent.--For purposes of this paragraph, in the case of the 
     remarriage of a parent, support of a child received from the 
     parent's spouse shall be treated as received from the parent.

                 ``PART II--TAX ON BUSINESS ACTIVITIES

``Sec. 11. Tax imposed on business activities.

     ``SEC. 11. TAX IMPOSED ON BUSINESS ACTIVITIES.

       ``(a) Tax Imposed.--There is hereby imposed on every person 
     engaged in a business activity located in the United States a 
     tax equal to 20 percent of the business taxable income of 
     such person.
       ``(b) Liability for Tax.--The tax imposed by this section 
     shall be paid by the person engaged in the business activity, 
     whether such person is an individual, partnership, 
     corporation, or otherwise.
       ``(c) Business Taxable Income.--
       ``(1) In general.--For purposes of this section, the term 
     `business taxable income' means gross active income reduced 
     by the deductions specified in subsection (d).
       ``(2) Gross active income.--For purposes of paragraph (1), 
     the term `gross active income' means gross income other than 
     investment income.
       ``(d) Deductions.--
       ``(1) In general.--The deductions specified in this 
     subsection are--
       ``(A) the cost of business inputs for the business 
     activity,
       ``(B) the compensation (including contributions to 
     qualified retirement plans but not including other fringe 
     benefits) paid for employees performing services in such 
     activity, and
       ``(C) the cost of personal and real property used in such 
     activity.
       ``(2) Business inputs.--
       ``(A) In general.--For purposes of paragraph (1)(A), the 
     term `cost of business inputs' means--
       ``(i) the actual cost of goods, services, and materials, 
     whether or not resold during the taxable year, and
       ``(ii) the actual cost, if reasonable, of travel and 
     entertainment expenses for business purposes.
       ``(B) Purchases of goods and services excluded.--Such term 
     shall not include purchases of goods and services provided to 
     employees or owners.
       ``(C) Certain lobbying and political expenditures 
     excluded.--
       ``(i) In general.--Such term shall not include any amount 
     paid or incurred in connection with--

       ``(I) influencing legislation,

[[Page 18311]]

       ``(II) participation in, or intervention in, any political 
     campaign on behalf of (or in opposition to) any candidate for 
     public office,
       ``(III) any attempt to influence the general public, or 
     segments thereof, with respect to elections, legislative 
     matters, or referendums, or
       ``(IV) any direct communication with a covered executive 
     branch official in an attempt to influence the official 
     actions or positions of such official.

       ``(ii) Exception for local legislation.--In the case of any 
     legislation of any local council or similar governing body--

       ``(I) clause (i)(I) shall not apply, and
       ``(II) such term shall include all ordinary and necessary 
     expenses (including, but not limited to, traveling expenses 
     described in subparagraph (A)(iii) and the cost of preparing 
     testimony) paid or incurred during the taxable year in 
     carrying on any trade or business--

       ``(aa) in direct connection with appearances before, 
     submission of statements to, or sending communications to the 
     committees, or individual members, of such council or body 
     with respect to legislation or proposed legislation of direct 
     interest to the taxpayer, or
       ``(bb) in direct connection with communication of 
     information between the taxpayer and an organization of which 
     the taxpayer is a member with respect to any such legislation 
     or proposed legislation which is of direct interest to the 
     taxpayer and to such organization, and that portion of the 
     dues so paid or incurred with respect to any organization of 
     which the taxpayer is a member which is attributable to the 
     expenses of the activities carried on by such organization.
       ``(iii) Application to dues of tax-exempt organizations.--
     Such term shall include the portion of dues or other similar 
     amounts paid by the taxpayer to an organization which is 
     exempt from tax under this subtitle which the organization 
     notifies the taxpayer under section 6033(e)(1)(A)(ii) is 
     allocable to expenditures to which clause (i) applies.
       ``(iv) Influencing legislation.--For purposes of this 
     subparagraph--

       ``(I) In general.--The term `influencing legislation' means 
     any attempt to influence any legislation through 
     communication with any member or employee of a legislative 
     body, or with any government official or employee who may 
     participate in the formulation of legislation.
       ``(II) Legislation.--The term `legislation' has the meaning 
     given that term in section 4911(e)(2).

       ``(v) Other special rules.--

       ``(I) Exception for certain taxpayers.--In the case of any 
     taxpayer engaged in the trade or business of conducting 
     activities described in clause (i), clause (i) shall not 
     apply to expenditures of the taxpayer in conducting such 
     activities directly on behalf of another person (but shall 
     apply to payments by such other person to the taxpayer for 
     conducting such activities).
       ``(II) De minimis exception.--

       ``(aa) In general.--Clause (i) shall not apply to any in-
     house expenditures for any taxable year if such expenditures 
     do not exceed $2,000. In determining whether a taxpayer 
     exceeds the $2,000 limit, there shall not be taken into 
     account overhead costs otherwise allocable to activities 
     described in subclauses (I) and (IV) of clause (i).
       ``(bb) In-house expenditures.--For purposes of provision 
     (aa), the term `in-house expenditures' means expenditures 
     described in subclauses (I) and (IV) of clause (i) other than 
     payments by the taxpayer to a person engaged in the trade or 
     business of conducting activities described in clause (i) for 
     the conduct of such activities on behalf of the taxpayer, or 
     dues or other similar amounts paid or incurred by the 
     taxpayer which are allocable to activities described in 
     clause (i).

       ``(III) Expenses incurred in connection with lobbying and 
     political activities.--Any amount paid or incurred for 
     research for, or preparation, planning, or coordination of, 
     any activity described in clause (i) shall be treated as paid 
     or incurred in connection with such activity.

       ``(vi) Covered executive branch official.--For purposes of 
     this subparagraph, the term `covered executive branch 
     official' means--

       ``(I) the President,
       ``(II) the Vice President,
       ``(III) any officer or employee of the White House Office 
     of the Executive Office of the President, and the 2 most 
     senior level officers of each of the other agencies in such 
     Executive Office, and
       ``(IV) any individual serving in a position in level I of 
     the Executive Schedule under section 5312 of title 5, United 
     States Code, any other individual designated by the President 
     as having Cabinet level status, and any immediate deputy of 
     such an individual.

       ``(vii) Special rule for indian tribal governments.--For 
     purposes of this subparagraph, an Indian tribal government 
     shall be treated in the same manner as a local council or 
     similar governing body.
       ``(viii) Cross Reference.--

  ``For reporting requirements and alternative taxes related to this 
subsection, see section 6033(e).
       ``(e) Carryover of Excess Deductions.--
       ``(1) In general.--If the aggregate deductions for any 
     taxable year exceed the gross active income for such taxable 
     year, the amount of the deductions specified in subsection 
     (d) for the succeeding taxable year (determined without 
     regard to this subsection) shall be increased by the sum of--
       ``(A) such excess, plus
       ``(B) the product of such excess and the 3-month Treasury 
     rate for the last month of such taxable year.
       ``(2) 3-month treasury rate.--For purposes of paragraph 
     (1), the 3-month Treasury rate is the rate determined by the 
     Secretary based on the average market yield (during any 1-
     month period selected by the Secretary and ending in the 
     calendar month in which the determination is made) on 
     outstanding marketable obligations of the United States with 
     remaining periods to maturity of 3 months or less.''
       (b) Conforming Repeals and Redesignations.--
       (1) Repeals.--The following subchapters of chapter 1 of 
     subtitle A and the items relating to such subchapters in the 
     table of subchapters for such chapter 1 are repealed:
       (A) Subchapter B (relating to computation of taxable 
     income).
       (B) Subchapter C (relating to corporate distributions and 
     adjustments).
       (C) Subchapter D (relating to deferred compensation, etc.).
       (D) Subchapter G (relating to corporations used to avoid 
     income tax on shareholders).
       (E) Subchapter H (relating to banking institutions).
       (F) Subchapter I (relating to natural resources).
       (G) Subchapter J (relating to estates, trusts, 
     beneficiaries, and decedents).
       (H) Subchapter L (relating to insurance companies).
       (I) Subchapter M (relating to regulated investment 
     companies and real estate investment trusts).
       (J) Subchapter N (relating to tax based on income from 
     sources within or without the United States).
       (K) Subchapter O (relating to gain or loss on disposition 
     of property).
       (L) Subchapter P (relating to capital gains and losses).
       (M) Subchapter Q (relating to readjustment of tax between 
     years and special limitations).
       (N) Subchapter S (relating to tax treatment of S 
     corporations and their shareholders).
       (O) Subchapter T (relating to cooperatives and their 
     patrons).
       (P) Subchapter U (relating to designation and treatment of 
     empowerment zones, enterprise communities, and rural 
     development investment areas).
       (Q) Subchapter V (relating to title 11 cases).
       (R) Subchapter W (relating to District of Columbia 
     Enterprise Zone).
       (2) Redesignations.--The following subchapters of chapter 1 
     of subtitle A and the items relating to such subchapters in 
     the table of subchapters for such chapter 1 are redesignated:
       (A) Subchapter E (relating to accounting periods and 
     methods of accounting) as subchapter B.
       (B) Subchapter F (relating to exempt organizations) as 
     subchapter C.
       (C) Subchapter K (relating to partners and partnerships) as 
     subchapter D.

     SEC. 3. REPEAL OF ESTATE AND GIFT TAXES.

       Subtitle B (relating to estate, gift, and generation-
     skipping taxes) and the item relating to such subtitle in the 
     table of subtitles is repealed.

     SEC. 4. ADDITIONAL REPEALS.

       Subtitles H (relating to financing of presidential election 
     campaigns) and J (relating to coal industry health benefits) 
     and the items relating to such subtitles in the table of 
     subtitles are repealed.

     SEC. 5. EFFECTIVE DATES.

       (a) In General.--Except as provided in subsection (b), the 
     amendments made by this Act apply to taxable years beginning 
     after December 31, 1999.
       (b) Repeal of Estate and Gift Taxes.--The repeal made by 
     section 3 applies to estates of decedents dying, and 
     transfers made, after December 31, 1999.
       (c) Technical and Conforming Changes.--The Secretary of the 
     Treasury or the Secretary's delegate shall, as soon as 
     practicable but in any event not later than 90 days after the 
     date of enactment of this Act, submit to the Committee on 
     Ways and Means of the House of Representatives and the 
     Committee on Finance of the Senate a draft of any technical 
     and conforming changes in the Internal Revenue Code of 1986 
     which are necessary to reflect throughout such Code the 
     changes in the substantive provisions of law made by this 
     Act.
                                 ______
                                 

                   GRASSLEY AMENDMENTS NOS. 1387-1388

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

                           Amendment No. 1387

       On page 38, after line 24, add the following:

[[Page 18312]]



     SEC. __. 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 contributions to such account or annuity as 
     contributions to an individual retirement 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) 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), and
       ``(B) any account or annuity described in paragraph (1), 
     and any contribution to the account or annuity, shall not be 
     subject to any requirement of this title applicable to a 
     qualified employer plan or taken into account in applying any 
     such requirement to any other contributions under the plan.
       ``(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).
       ``(B) Voluntary employee contribution.--The term `voluntary 
     employee contribution' 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, 1999.
                                  ____


                           Amendment No. 1388

       At the end of title XIV, insert:

     SEC. __. TECHNICAL CORRECTIONS TO SAVER ACT.

       Section 517 of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1147) is amended--
       (1) in subsection (a), by striking ``2001 and 2005 on or 
     after September 1 of each year involved'' and inserting 
     ``2001, 2005, and 2009 in the month of September of each year 
     involved'';
       (2) in subsection (b), by adding at the end the following 
     new sentence: ``To effectuate the purposes of this paragraph, 
     the Secretary may enter into a cooperative agreement, 
     pursuant to the Federal Grant and Cooperative Agreement Act 
     of 1977 (31 U.S.C. 6301 et seq.), with the American Savings 
     Education Council.'';
       (3) in subsection (e)(2)--
       (A) by striking ``Committee on Labor and Human Resources'' 
     in subparagraph (B) and inserting ``Committee on Health, 
     Education, Labor, and Pensions'';
       (B) by striking subparagraph (D) and inserting the 
     following:
       ``(D) the Chairman and Ranking Member of the Subcommittee 
     on Labor, Health and Human Services, and Education of the 
     Committee on Appropriations of the House of Representatives 
     and the Chairman and Ranking Member of the Subcommittee on 
     Labor, Health and Human Services, and Education of the 
     Committee on Appropriations of the Senate;'';
       (C) by redesignating subparagraph (G) as subparagraph (J); 
     and
       (D) by inserting after subparagraph (F) the following new 
     subparagraphs:
       ``(G) the Chairman and Ranking Member of the Committee on 
     Finance of the Senate;
       ``(H) the Chairman and Ranking Member of the Committee on 
     Ways and Means of the House of Representatives;
       ``(I) the Chairman and Ranking Member of the Subcommittee 
     on Employer-Employee Relations of the Committee on Education 
     and the Workforce of the House of Representatives; and'';
       (4) in subsection (e)(3)(A)--
       (A) by striking ``There shall be no more than 200 
     additional participants.'' and inserting ``The participants 
     in the National Summit shall also include additional 
     participants appointed under this subparagraph.'';
       (B) by striking ``one-half shall be appointed by the 
     President,'' in clause (i) and inserting ``not more than 100 
     participants shall be appointed under this clause by the 
     President,'', and by striking ``and'' at the end of clause 
     (i);
       (C) by striking ``one-half shall be appointed by the 
     elected leaders of Congress'' in clause (ii) and inserting 
     ``not more than 100 participants shall be appointed under 
     this clause by the elected leaders of Congress'', and by 
     striking the period at the end of clause (ii) and inserting 
     ``; and''; and
       (D) by adding at the end the following new clause:
       ``(iii) The President, in consultation with the elected 
     leaders of Congress referred to in subsection (a), may 
     appoint under this clause additional participants to the 
     National Summit. The number of such additional participants 
     appointed under this clause may not exceed the lesser of 3 
     percent of the total number of all additional participants 
     appointed under this paragraph, or 10. Such additional 
     participants shall be appointed from persons nominated by the 
     organization referred to in subsection (b)(2) which is made 
     up of private sector businesses and associations partnered 
     with Government entities to promote long term financial 
     security in retirement through savings and with which the 
     Secretary is required thereunder to consult and cooperate and 
     shall not be Federal, State, or local government 
     employees.'';
       (5) in subsection (e)(3)(B), by striking ``January 31, 
     1998'' in subparagraph (B) and inserting ``May 1, 2001, May 
     1, 2005, and May 1, 2009, for each of the subsequent summits, 
     respectively'';
       (6) in subsection (f)(1)(C), by inserting ``, no later than 
     90 days prior to the date of the commencement of the National 
     Summit,'' after ``comment'' in paragraph (1)(C);
       (7) in subsection (g), by inserting ``, in consultation 
     with the congressional leaders specified in subsection 
     (e)(2),'' after ``report'';
       (8) in subsection (i)--
       (A) by striking ``beginning on or after October 1, 1997'' 
     in paragraph (1) and inserting ``2001, 2005, and 2009''; and
       (B) by adding at the end the following new paragraph:
       ``(3) Reception and representation authority.--The 
     Secretary is hereby granted reception and representation 
     authority limited specifically to the events at the National 
     Summit. The Secretary shall use any private contributions 
     received in connection with the National Summit prior to 
     using funds appropriated for purposes of the National Summit 
     pursuant to this paragraph.''; and
       (9) in subsection (k)--
       (A) by striking ``shall enter into a contract on a sole-
     source basis'' and inserting ``may enter into a contract on a 
     sole-source basis''; and
       (B) by striking ``fiscal year 1998'' and inserting ``fiscal 
     years 2001, 2005, and 2009''.

                          ____________________