[Congressional Record (Bound Edition), Volume 145 (1999), Part 13]
[Senate]
[Pages 19028-19081]
[From the U.S. Government Publishing Office, www.gpo.gov]



                      TAXPAYER REFUND ACT OF 1999

  On July 30, 1999, the Senate amended and passed H.R. 2488. The text 
of the bill follows:

       Resolved, That the bill from the House of Representatives 
     (H.R. 2488) entitled ``An Act to provide for reconciliation 
     pursuant to sections 105 and 211 of the concurrent resolution 
     on the budget for fiscal year 2000.'', do pass with the 
     following amendment:
       Strike out all after the enacting clause and insert:

     SECTION 1. SHORT TITLE; ETC.

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

Sec. 1. Short title; etc.

                    TITLE I--BROAD BASED TAX RELIEF

Sec. 101. Reduction of 15 percent individual income tax rate.
Sec. 102. Increase in maximum taxable income for 14 percent rate 
              bracket.

                 TITLE II--FAMILY TAX RELIEF PROVISIONS

Sec. 201. Combined return to which unmarried rates apply.
Sec. 202. Marriage penalty relief for earned income credit.
Sec. 203. Exclusion for foster care payments to apply to payments by 
              qualified placement agencies.
Sec. 204. Modification of dependent care credit.
Sec. 205. Allowance of credit for employer expenses for child care 
              assistance.
Sec. 206. Modification of alternative minimum tax for individuals.
Sec. 207. Long-term capital gains deduction for individuals.
Sec. 208. Credit for interest on higher education loans.
Sec. 209. Elimination of marriage penalty in standard deduction.
Sec. 210. Expansion of adoption credit.
Sec. 211. Modification of tax rates for trusts for individuals who are 
              disabled.

                TITLE III--RETIREMENT SAVINGS TAX RELIEF

             Subtitle A--Individual Retirement Arrangements

Sec. 301. Modification of deduction limits for IRA contributions.
Sec. 302. Modification of income limits on contributions and rollovers 
              to Roth IRAs.
Sec. 303. Deemed IRAs under employer plans.
Sec. 304. Tax credit for matching contributions to Individual 
              Development Accounts.
Sec. 305. Certain coins not treated as collectibles.

                     Subtitle B--Expanding Coverage

Sec. 311. Option to treat elective deferrals as after-tax 
              contributions.
Sec. 312. Increase in elective contribution limits.
Sec. 313. Plan loans for subchapter S owners, partners, and sole 
              proprietors.
Sec. 314. Elective deferrals not taken into account for purposes of 
              deduction limits.
Sec. 315. Reduced PBGC premium for new plans of small employers.
Sec. 316. Reduction of additional PBGC premium for new plans.
Sec. 317. Elimination of user fee for requests to IRS regarding new 
              pension plans.
Sec. 318. SAFE annuities and trusts.
Sec. 319. Modification of top-heavy rules.

                Subtitle C--Enhancing Fairness for Women

Sec. 321. Catchup contributions for individuals age 50 or over.

[[Page 19029]]

Sec. 322. Equitable treatment for contributions of employees to defined 
              contribution plans.
Sec. 323. Clarification of tax treatment of division of section 457 
              plan benefits upon divorce.
Sec. 324. Modification of safe harbor relief for hardship withdrawals 
              from cash or deferred arrangements.
Sec. 325. Faster vesting of certain employer matching contributions.

          Subtitle D--Increasing Portability for Participants

Sec. 331. Rollovers allowed among various types of plans.
Sec. 332. Rollovers of IRAs into workplace retirement plans.
Sec. 333. Rollovers of after-tax contributions.
Sec. 334. Hardship exception to 60-day rule.
Sec. 335. Treatment of forms of distribution.
Sec. 336. Rationalization of restrictions on distributions.
Sec. 337. Purchase of service credit in governmental defined benefit 
              plans.
Sec. 338. Employers may disregard rollovers for purposes of cash-out 
              amounts.
Sec. 339. Inclusion requirements for section 457 plans.

       Subtitle E--Strengthening Pension Security and Enforcement

Sec. 341. Repeal of 150 percent of current liability funding limit.
Sec. 342. Extension of missing participants program to multiemployer 
              plans.
Sec. 343. Excise tax relief for sound pension funding.
Sec. 344. Failure to provide notice by defined benefit plans 
              significantly reducing future benefit accruals.
Sec. 345. Protection of investment of employee contributions to 401(k) 
              plans.
Sec. 346. Treatment of multiemployer plans under section 415.
Sec. 347. Maximum contribution deduction rules modified and applied to 
              all defined benefit plans.
Sec. 348. Increase in section 415 early retirement limit for 
              governmental and other plans.

              Subtitle F--Encouraging Retirement Education

Sec. 351. Periodic pension benefits statements.
Sec. 352. Clarification of treatment of employer-provided retirement 
              advice.

                Subtitle G--Reducing Regulatory Burdens

Sec. 361. Flexibility in nondiscrimination and coverage rules.
Sec. 362. Modification of timing of plan valuations.
Sec. 363. Substantial owner benefits in terminated plans.
Sec. 364. ESOP dividends may be reinvested without loss of dividend 
              deduction.
Sec. 365. Notice and consent period regarding distributions.
Sec. 366. Repeal of transition rule relating to certain highly 
              compensated employees.
Sec. 367. Employees of tax-exempt entities.
Sec. 368. Extension to international organizations of moratorium on 
              application of certain nondiscrimination rules applicable 
              to State and local plans.
Sec. 369. Annual report dissemination.
Sec. 370. Modification of exclusion for employer provided transit 
              passes and passengers permitted to utilize otherwise 
              empty seats on aircraft.
Sec. 371. Reporting simplification.

                      Subtitle H--Plan Amendments

Sec. 381. Provisions relating to plan amendments.

               TITLE IV--EDUCATION TAX RELIEF PROVISIONS

Sec. 401. Elimination of 60-month limit and increase in income 
              limitation on student loan interest deduction.
Sec. 402. Modifications to qualified tuition programs.
Sec. 403. Exclusion of certain amounts received under the National 
              Health Service Corps Scholarship Program and the F. 
              Edward Hebert Armed Forces Health Professions Scholarship 
              and Financial Assistance Program.
Sec. 404. Extension of exclusion for employer-provided educational 
              assistance.
Sec. 405. Additional increase in arbitrage rebate exception for 
              governmental bonds used to finance educational 
              facilities.
Sec. 406. Treatment of qualified public educational facility bonds as 
              exempt facility bonds.
Sec. 407. Federal guarantee of school construction bonds by Federal 
              Home Loan Banks.
Sec. 408. Certain educational benefits provided by an employer to 
              children of employees excludable from gross income as a 
              scholarship.

               TITLE V--HEALTH CARE TAX RELIEF PROVISIONS

Sec. 501. Deduction for health and long-term care insurance costs of 
              individuals not participating in employer-subsidized 
              health plans.
Sec. 502. Long-term care insurance permitted to be offered under 
              cafeteria plans and flexible spending arrangements.
Sec. 503. Additional personal exemption for taxpayer caring for elderly 
              family member in taxpayer's home.
Sec. 504. Inclusion of certain vaccines against streptococcus 
              pneumoniae to list of taxable vaccines; reduction in per 
              dose tax rate.

             TITLE VI--SMALL BUSINESS TAX RELIEF PROVISIONS

Sec. 601. Deduction for 100 percent of health insurance costs of self-
              employed individuals.
Sec. 602. Increase in expense treatment for small businesses.
Sec. 603. Repeal of Federal unemployment surtax.
Sec. 604. Income averaging for farmers and fishermen not to increase 
              alternative minimum tax liability.
Sec. 605. Farm, Fishing, and Ranch Risk Management Accounts.
Sec. 606. Exclusion of investment securities income from passive income 
              test for bank S corporations.
Sec. 607. Treatment of qualifying director shares.
Sec. 608. Increase in estate tax deduction for family-owned business 
              interest.
Sec. 609. Credit for employee health insurance expenses.

            TITLE VII--ESTATE AND GIFT TAX RELIEF PROVISIONS

    Subtitle A--Reductions of Estate, Gift, and Generation-Skipping 
                             Transfer Taxes

Sec. 701. Reductions of estate, gift, and generation-skipping transfer 
              taxes.
Sec. 702. Unified credit against estate and gift taxes replaced with 
              unified exemption amount.

                   Subtitle B--Conservation Easements

Sec. 711. Expansion of estate tax rule for conservation easements.

                   Subtitle C--Annual Gift Exclusion

Sec. 721. Increase in annual gift exclusion.

     Subtitle D--Simplification of Generation-Skipping Transfer Tax

Sec. 731. Retroactive allocation of GST exemption.
Sec. 732. Severing of trusts.
Sec. 733. Modification of certain valuation rules.
Sec. 734. Relief provisions.

            TITLE VIII--TAX EXEMPT ORGANIZATIONS PROVISIONS

Sec. 801. Exemption from income tax for State-created organizations 
              providing property and casualty insurance for property 
              for which such coverage is otherwise unavailable.
Sec. 802. Modifications to section 512(b)(13).
Sec. 803. Simplification of lobbying expenditure limitation.
Sec. 804. Tax-free distributions from individual retirement accounts 
              for charitable purposes.
Sec. 805. Mileage reimbursements to charitable volunteers excluded from 
              gross income.
Sec. 806. Charitable contribution deduction for certain expenses 
              incurred in support of Native Alaskan subsistence 
              whaling.
Sec. 807. Charitable contributions to certain low income schools may be 
              made in next taxable year.
Sec. 808. Deduction for portion of charitable contributions to be 
              allowed to individuals who do not itemize deductions.
Sec. 809. Increase in limit on charitable contributions as percentage 
              of AGI.
Sec. 810. Limited exception to excess business holdings rule.
Sec. 811. Certain costs of private foundation in removing hazardous 
              substances treated as qualifying distribution.
Sec. 812. Holding period reduced to 12 months for purposes of 
              determining whether horses are section 1231 assets.

                   TITLE IX--INTERNATIONAL TAX RELIEF

Sec. 901. Interest allocation rules.
Sec. 902. Look-thru rules to apply to dividends from noncontrolled 
              section 902 corporations.
Sec. 903. Clarification of treatment of pipeline transportation income.
Sec. 904. Subpart F treatment of income from transmission of high 
              voltage electricity.
Sec. 905. Advance pricing agreements treated as confidential taxpayer 
              information.
Sec. 906. Airline mileage awards to certain foreign persons.
Sec. 907. Repeal of foreign tax credit limitation under alternative 
              minimum tax.
Sec. 908. Treatment of military property of foreign sales corporations.

         TITLE X--HOUSING AND REAL ESTATE TAX RELIEF PROVISIONS

                 Subtitle A--Low-Income Housing Credit

Sec. 1001. Modification of State ceiling on low-income housing credit.

                       Subtitle B--Historic Homes

Sec. 1011. Tax credit for renovating historic homes.

    Subtitle C--Provisions Relating to Real Estate Investment Trusts

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

Sec. 1021. Modifications to asset diversification test.

[[Page 19030]]

Sec. 1022. Treatment of income and services provided by taxable REIT 
              subsidiaries.
Sec. 1023. Taxable REIT subsidiary.
Sec. 1024. Limitation on earnings stripping.
Sec. 1025. 100 percent tax on improperly allocated amounts.
Sec. 1026. Effective date.

                       Part II--Health Care REITs

Sec. 1031. Health care REITs.

      Part III--Conformity With Regulated Investment Company Rules

Sec. 1041. Conformity with regulated investment company rules.

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

Sec. 1051. Clarification of exception for independent operators.

           Part V--Modification of Earnings and Profits Rules

Sec. 1061. Modification of earnings and profits rules.

          Part VI--Study Relating to Taxable REIT Subsidiaries

Sec. 1071. Study relating to taxable REIT subsidiaries.

              Subtitle D--Private Activity Bond Volume Cap

Sec. 1081. Increase in volume cap on private activity bonds.

            Subtitle E--Leasehold Improvements Depreciation

Sec. 1091. Recovery period for depreciation of certain leasehold 
              improvements.

                   TITLE XI--MISCELLANEOUS PROVISIONS

Sec. 1101. Repeal of certain motor fuel excise taxes on fuel used by 
              railroads and on inland waterway transportation.
Sec. 1102. Tax treatment of Alaska Native Settlement Trusts.
Sec. 1103. Long-term unused credits allowed against minimum tax.
Sec. 1104. 5-year net operating loss carryback for losses attributable 
              to operating mineral interests of independent oil and gas 
              producers.
Sec. 1105. Election to expense geological and geophysical expenditures.
Sec. 1106. Election to expense delay rental payments
Sec. 1107. Modification of active business definition under section 
              355.
Sec. 1108. Temporary suspension of maximum amount of amortizable 
              reforestation expenditures.
Sec. 1109. Modification of excise tax imposed on arrow components.
Sec. 1110. Increase in threshold for Joint Committee reports on refunds 
              and credits.
Sec. 1111. Modification of rural airport definition.
Sec. 1112. Payment of dividends on stock of cooperatives without 
              reducing patronage dividends.
Sec. 1113. Consolidation of life insurance companies with other 
              corporations.
Sec. 1114. Expansion of exemption from personal holding company tax for 
              lending or finance companies.
Sec. 1115. Credit for modifications to inter-city buses required under 
              the Americans With Disabilities Act of 1990.
Sec. 1116. Increased deductibility of business meal expenses for 
              individuals subject to Federal limitations on hours of 
              service.
Sec. 1117. Tax-exempt financing of qualified highway infrastructure 
              construction.
Sec. 1118. Expansion of DC homebuyer tax credit.
Sec. 1119. Extension of DC zero percent capital gains rate.
Sec. 1120. Natural gas gathering lines treated as 7-year property.
Sec. 1121. Exemption from ticket taxes for certain transportation 
              provided by small seaplanes.
Sec. 1122. No Federal income tax on amounts and lands received by 
              Holocaust victims or their heirs.
Sec. 1123. 2-Percent floor on miscellaneous itemized deductions not to 
              apply to qualified professional development expenses and 
              qualified incidental expenses of elementary and secondary 
              school teachers.
Sec. 1124. Expansion of deduction for computer donations to schools.
Sec. 1125. Credit for computer donations to schools and senior centers.
Sec. 1126. Increase in mandatory spending for Child Care and 
              Development Block Grant.
Sec. 1127. Sense of the Senate regarding savings incentives.
Sec. 1128. Sense of Congress regarding the need for additional Federal 
              funding and tax incentives for empowerment zones and 
              enterprise communities authorized and designated pursuant 
              to 1997 and 1998 laws.
Sec. 1129. Sense of Congress regarding the need to encourage 
              improvements in Main Street businesses by expanding 
              existing small business tax expensing rules to include 
              investments in buildings and other depreciable real 
              property.
Sec. 1130. Certain Native American housing assistance disregarded in 
              determining whether building is federally subsidized for 
              purposes of the low-income housing credit.
Sec. 1131. Disclosure of tax information to facilitate combined 
              employment tax reporting.
Sec. 1132. Treatment of maple syrup production.
Sec. 1133. Treatment of bonds issued to acquire renewable resources on 
              land subject to conservation easement.
Sec. 1134. Modification of alternative minimum tax for individuals.
Sec. 1135. Exclusion from income of severance payment amounts.
Sec. 1136. Capital gain treatment under section 631(b) to apply to 
              outright sales by land owner.
Sec. 1137. Credit for clinical testing research expenses attributable 
              to certain qualified academic institutions including 
              teaching hospitals.

        TITLE XII--EXTENSION OF EXPIRED AND EXPIRING PROVISIONS

Sec. 1201. Permanent extension and modification of research credit.
Sec. 1202. Subpart F exemption for active financing income.
Sec. 1203. Taxable income limit on percentage depletion for marginal 
              production.
Sec. 1204. Work opportunity credit and welfare-to-work credit.
Sec. 1205. Extension and modification of credit for producing 
              electricity from certain renewable resources.
Sec. 1206. Alaska exemption from dyeing requirements.
Sec. 1207. Extension of expensing of environmental remediation costs.

                      TITLE XIII--REVENUE OFFSETS

                     Subtitle A--General Provisions

Sec. 1301. Modification to foreign tax credit carryback and carryover 
              periods.
Sec. 1302. Returns relating to cancellations of indebtedness by 
              organizations lending money.
Sec. 1303. Increase in elective withholding rate for nonperiodic 
              distributions from deferred compensation plans.
Sec. 1304. Extension of Internal Revenue Service user fees.
Sec. 1305. Transfer of excess defined benefit plan assets for retiree 
              health benefits.
Sec. 1306. Tax treatment of income and loss on derivatives.

                      Subtitle B--Loophole Closers

Sec. 1311. Limitation on use of non-accrual experience method of 
              accounting.
Sec. 1312. Limitations on welfare benefit funds of 10 or more employer 
              plans.
Sec. 1313. Modification of installment method and repeal of installment 
              method for accrual method taxpayers.
Sec. 1314. Treatment of gain from constructive ownership transactions.
Sec. 1315. Charitable split-dollar life insurance, annuity, and 
              endowment contracts.
Sec. 1316. Restriction on use of real estate investment trusts to avoid 
              estimated tax payment requirements.
Sec. 1317. Prohibited allocations of S corporation stock held by an 
              ESOP.
Sec. 1318. Modification of anti-abuse rules related to assumption of 
              liability.
Sec. 1319. Allocation of basis on transfers of intangibles in certain 
              nonrecognition transactions.
Sec. 1320. Controlled entities ineligible for REIT status.
Sec. 1321. Distributions to a corporate partner of stock in another 
              corporation.

                    TITLE XIV--TECHNICAL CORRECTIONS

Sec. 1401. Amendments related to Tax and Trade Relief Extension Act of 
              1998.
Sec. 1402. Amendments related to Internal Revenue Service Restructuring 
              and Reform Act of 1998.
Sec. 1403. Amendments related to Taxpayer Relief Act of 1997.
Sec. 1404. Other technical corrections.
Sec. 1405. Clerical changes.
Sec. 1406. Technical corrections to Saver Act.

           TITLE XV--COMPLIANCE WITH CONGRESSIONAL BUDGET ACT

Sec. 1501. Sunset of provisions of Act.

                    TITLE I--BROAD BASED TAX RELIEF

     SEC. 101. REDUCTION OF 15 PERCENT INDIVIDUAL INCOME TAX RATE.

       (a) Reduction in Rate.--Subsection (f) of section 1 is 
     amended by adding at the end the following new paragraph:
       ``(8) Rate reduction.--In prescribing the tables under 
     paragraph (1) which apply with respect to taxable years 
     beginning in a calendar year after 2000, the rate applicable 
     to the lowest income bracket shall be 14 percent.''.
       (b) Conforming Amendments.--
       (1) Subparagraph (B) of section 1(f)(2) is amended by 
     inserting ``, except as provided in paragraph (8),'' before 
     ``by not changing''.
       (2) Subparagraph (C) of section 1(f)(2) is amended by 
     inserting ``and the reduction under paragraph (8) in the rate 
     of tax'' before the period.
       (3) The heading for subsection (f) of section 1 is amended 
     by inserting ``Rate Reduction;'' before ``Adjustments''.
       (4) Section 1(g)(7)(B)(ii)(II) is amended by striking ``15 
     percent'' and inserting ``14 percent''.

[[Page 19031]]

       (5) Section 3402(p)(1)(B) is amended by striking ``15'' and 
     inserting ``14''.
       (6) Section 3402(p)(2) is amended by striking ``15 
     percent'' and inserting ``14 percent''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 102. INCREASE IN MAXIMUM TAXABLE INCOME FOR 14 PERCENT 
                   RATE BRACKET.

       (a) In General.--Section 1(f) (relating to adjustments in 
     tax tables so that inflation will not result in tax 
     increases), as amended by section 101, is amended--
       (1) in paragraph (2)--
       (A) by redesignating subparagraphs (B) and (C) as 
     subparagraphs (C) and (D),
       (B) by inserting after subparagraph (A) the following:
       ``(B) in the case of the tables contained in subsections 
     (a), (b), (c), and (d), by increasing (after adjustment under 
     paragraph (8)) the maximum taxable income level for the 14 
     percent rate bracket and the minimum taxable income level for 
     the 28 percent rate bracket otherwise determined under 
     subparagraph (A) for taxable years beginning in any calendar 
     year after 2005 by the applicable dollar amount for such 
     calendar year,'', and
       (C) by striking ``subparagraph (A)'' in subparagraph (C) 
     (as so redesignated) and inserting ``subparagraphs (A) and 
     (B)'', and
       (2) by adding at the end the following:
       ``(9) Applicable dollar amount.--For purposes of paragraph 
     (2)(B)--
       ``(A) In general.--The applicable dollar amount for any 
     calendar year shall be determined as follows:
       ``(i) Joint returns and surviving spouses.--In the case of 
     the table contained in subsection (a)--

                                                             Applicable
``Calendar year:                                         dollar amount:
  2006......................................................$4,000 ....

  2007 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:
  2006......................................................$2,000 ....

  2007 and thereafter.......................................$2,500.....

       ``(B) Cost-of-living adjustment.--In the case of any 
     taxable year beginning in any calendar year after 2007, 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 2006' for 
     `calendar year 1992' in subparagraph (B) thereof.''.
       (b) Rounding.--Section 1(f)(6)(A) is amended by inserting 
     ``(after being increased under paragraph (2)(B))'' after 
     ``paragraph (2)(A)''.

                 TITLE II--FAMILY TAX RELIEF PROVISIONS

     SEC. 201. COMBINED RETURN TO WHICH UNMARRIED RATES APPLY.

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

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

       ``(a) General Rule.--A husband and wife may make a combined 
     return of income taxes under subtitle A under which--
       ``(1) a separate taxable income is determined for each 
     spouse by applying the rules provided in this section, and
       ``(2) the tax imposed by section 1 is the aggregate amount 
     resulting from applying the separate rates set forth in 
     section 1(c) to each such taxable income.
       ``(b) Treatment of Income.--For purposes of this section--
       ``(1) earned income (within the meaning of section 911(d)), 
     and any income received as a pension or annuity which arises 
     from an employer-employee relationship, shall be treated as 
     the income of the spouse who rendered the services, and
       ``(2) income from property shall be divided between the 
     spouses in accordance with their respective ownership rights 
     in such property (equally in the case of property held 
     jointly by the spouses).
       ``(c) Treatment of Deductions.--For purposes of this 
     section--
       ``(1) except as otherwise provided in this subsection, the 
     deductions described in section 62(a) shall be allowed to the 
     spouse treated as having the income to which such deductions 
     relate,
       ``(2) the deduction for retirement savings described in 
     paragraph (7) of section 62(a) shall be allowed to the spouse 
     whose earned income qualified the savings for the deduction,
       ``(3) the deduction for alimony described in paragraph (10) 
     of section 62(a) shall be allowed to the spouse who has the 
     liability to pay the alimony,
       ``(4) the deduction described in paragraph (16) of section 
     62(a) (relating to contributions to medical savings accounts) 
     shall be allowed to the spouse with respect to whose 
     employment or self-employment such account relates,
       ``(5) the deductions allowable by section 151(b) (relating 
     to personal exemptions for taxpayer and spouse) shall be 
     determined by allocating 1 personal exemption to each spouse,
       ``(6) section 63 shall be applied as if such spouses were 
     not married, except that the election whether or not to 
     itemize deductions shall be made jointly by both spouses and 
     apply to each, and
       ``(7) each spouse's share of all other deductions shall be 
     determined by multiplying the aggregate amount thereof by the 
     fraction--
       ``(A) the numerator of which is such spouse's adjusted 
     gross income, and
       ``(B) the denominator of which is the combined adjusted 
     gross incomes of the 2 spouses.
     Any fraction determined under paragraph (7) shall be rounded 
     to the nearest percentage point.
       ``(d) Treatment of Credits.--Credits shall be determined 
     (and applied against the joint liability of the couple for 
     tax determined under this section) as if the spouses had 
     filed a joint return.
       ``(e) Treatment as Joint Return.--Except as otherwise 
     provided in this section or in the regulations prescribed 
     hereunder, for purposes of this title (other than sections 1 
     and 63(c)) a combined return under this section shall be 
     treated as a joint return.
       ``(f) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     this section.''.
       (b) Unmarried Rate Made Applicable.--So much of subsection 
     (c) of section 1 as precedes the table is amended to read as 
     follows:
       ``(c) Separate or Unmarried Return Rate.--There is hereby 
     imposed on the taxable income of every individual (other than 
     a married individual (as defined in section 7703) filing a 
     return which is not a combined return under section 6013A, a 
     surviving spouse as defined in section 2(a), or a head of 
     household as defined in section 2(b)) a tax determined in 
     accordance with the following table:''.
       (c) Basic Standard Deduction for Unmarried Individuals Made 
     Applicable.--Subparagraph (C) of section 63(c)(2) is amended 
     to read as follows:
       ``(C) $3,000 in the case of an individual other than--
       ``(i) a married individual filing a return which is not a 
     combined return under section 6013A,
       ``(ii) a surviving spouse, or
       ``(iii) a head of household, or''.
       (d) Clerical Amendment.--The table of sections for subpart 
     B of part II of subchapter A of chapter 61 is amended by 
     inserting after the item relating to section 6013 the 
     following:

``Sec. 6013A. Combined return with separate rates.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2004.

     SEC. 202. MARRIAGE PENALTY RELIEF FOR EARNED INCOME CREDIT.

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

     SEC. 203. EXCLUSION FOR FOSTER CARE PAYMENTS TO APPLY TO 
                   PAYMENTS BY QUALIFIED PLACEMENT AGENCIES.

       (a) In General.--The matter preceding subparagraph (B) of 
     section 131(b)(1) (defining qualified foster care payment) is 
     amended to read as follows:
       ``(1) In general.--The term `qualified foster care payment' 
     means any payment made pursuant to a foster care program of a 
     State or political subdivision thereof--
       ``(A) which is paid by--
       ``(i) the State or political subdivision thereof, or
       ``(ii) a qualified foster care placement agency of such 
     State or political subdivision, and''.
       (b) Qualified Foster Individuals To Include Individuals 
     Placed by Qualified Placement Agencies.--Subparagraph (B) of 
     section 131(b)(2) (defining qualified foster individual) is 
     amended to read as follows:
       ``(B) a qualified foster care placement agency.''.
       (c) Qualified Foster Care Placement Agency Defined.--
     Subsection (b) of section 131 is amended by redesignating 
     paragraph (3) as paragraph (4) and by inserting after 
     paragraph (2) the following new paragraph:
       ``(3) Qualified foster care placement agency.--The term 
     `qualified foster care placement agency' means any placement 
     agency which is licensed or certified by--
       ``(A) a State or political subdivision thereof, or
       ``(B) an entity designated by a State or political 
     subdivision thereof,


[[Page 19032]]


     to make foster care payments under the foster care program of 
     such State or political subdivision to providers of foster 
     care.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.

     SEC. 204. MODIFICATION OF DEPENDENT CARE CREDIT.

       (a) Increase in Percentage of Employment-Related Expenses 
     Taken Into Account.--Subsection (a)(2) of section 21 
     (relating to expenses for household and dependent care 
     services necessary for gainful employment) is amended--
       (1) by striking ``30 percent'' and inserting ``40 
     percent'',
       (2) by striking ``$2,000'' and inserting ``$1,000'', and
       (3) by striking ``$10,000'' and inserting ``$30,000''.
       (b) Indexing of Limit on Employment-Related Expenses.--
     Section 21(c) (relating to dollar limit on amount creditable) 
     is amended to read as follows:
       ``(c) Dollar Limit on Amount Creditable.--
       ``(1) In general.--The amount of the employment-related 
     expenses incurred during any taxable year which may be taken 
     into account under subsection (a) shall not exceed--
       ``(A) an amount equal to 50 percent of the amount 
     determined under subparagraph (B) if there is 1 qualifying 
     individual with respect to the taxpayer for such taxable 
     year, or
       ``(B) $4,800 if there are 2 or more qualifying individuals 
     with respect to the taxpayer for such taxable year.

     The amount determined under subparagraph (A) or (B) 
     (whichever is applicable) shall be reduced by the aggregate 
     amount excludable from gross income under section 129 for the 
     taxable year.
       ``(2) Cost-of-living adjustment.--
       ``(A) In general.--In the case of a taxable year beginning 
     after 2000, the $4,800 amount under paragraph (1)(B) shall be 
     increased by an amount equal to--
       ``(i) such dollar amount, multiplied by
       ``(ii) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, determined by substituting `calendar year 1999' 
     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.''.
       (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.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 205. 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) is amended 
     by adding at the end the following new section:

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

       ``(a) Allowance of Credit.--For purposes of section 38, the 
     employer-provided child care credit determined under this 
     section for the taxable year is an amount equal to the sum 
     of--
       ``(1) 25 percent of the qualified child care expenditures, 
     and
       ``(2) 10 percent of the qualified child care resource and 
     referral expenditures,

     of the taxpayer for such taxable year.
       ``(b) Dollar Limitation.--The credit allowable under 
     subsection (a) for any taxable year shall not exceed 
     $150,000.
       ``(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 an eligible 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 an eligible qualified 
     child care facility of the taxpayer, including costs related 
     to the training of employees of the child care facility, to 
     scholarship programs, to the providing of differential 
     compensation to employees based on level of child care 
     training, and to expenses associated with achieving 
     accreditation, or
       ``(iii) under a contract with a qualified child care 
     facility to provide child care services to employees of the 
     taxpayer.
       ``(B) Exclusion for amounts funded by grants, etc.--The 
     term `qualified child care expenditure' 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) Nondiscrimination.--The term `qualified child care 
     expenditure' shall not include any amount expended in 
     relation to any child care services unless the providing of 
     such services to employees of the taxpayer does not 
     discriminate in favor of highly compensated employees (within 
     the meaning of section 404(q)).
       ``(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) Eligible qualified child care facility.--A qualified 
     child care facility shall be treated as an eligible qualified 
     child care facility with respect to the taxpayer if--
       ``(i) enrollment in the facility is open to employees of 
     the taxpayer during the taxable year,
       ``(ii) the facility is not the principal trade or business 
     of the taxpayer, and
       ``(iii) at least 30 percent of the enrollees of such 
     facility are dependents of employees of the taxpayer.
       ``(C) Application of subparagraph (b).--In the case of a 
     new facility, the facility shall be treated as meeting the 
     requirement of subparagraph (B)(iii) if not later than 2 
     years after placing such facility in service at least 30 
     percent of the enrollees of such facility are dependents of 
     employees of the taxpayer.
       ``(3) Qualified child care resource and referral 
     expenditure.--
       ``(A) In general.--The term `qualified child care resource 
     and referral expenditure' means any amount paid or incurred 
     under a contract to provide child care resource and referral 
     services to employees of the taxpayer.
       ``(B) Exclusion for amounts funded by grants, etc.--The 
     term `qualified child care resource and referral expenditure' 
     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) Nondiscrimination.--The term `qualified child care 
     resource and referral expenditure' shall not include any 
     amount expended in relation to any child care resource and 
     referral services unless the providing of such services to 
     employees of the taxpayer does not discriminate in favor of 
     highly compensated employees (within the meaning of section 
     404(q)).
       ``(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 eligible 
     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:
    Year 1.......................................................100   
    Year 2........................................................80   
    Year 3........................................................60   
    Year 4........................................................40   
    Year 5........................................................20   
    Years 6 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 
     eligible 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 an eligible 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 an eligible 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

[[Page 19033]]

     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 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) is amended--
       (A) by striking out ``plus'' at the end of paragraph (11),
       (B) by striking out the period at the end of paragraph 
     (12), and inserting a comma and ``plus'', and
       (C) by adding at the end the following new paragraph:
       ``(13) the employer-provided child care credit determined 
     under section 45D.''.
       (2) 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. 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. 206. MODIFICATION OF ALTERNATIVE MINIMUM TAX FOR 
                   INDIVIDUALS.

       (a) Nonrefundable Personal Credits Fully Allowed Against 
     Regular Tax Liability.--
       (1) In general.--Subsection (a) of section 26 (relating to 
     limitation based on amount of tax) is amended to read as 
     follows:
       ``(a) Limitation Based on Amount of Tax.--The aggregate 
     amount of credits allowed by this subpart for the taxable 
     year shall not exceed the taxpayer's regular tax liability 
     for the taxable year.''.
       (2) Child credit.--Subsection (d) of section 24 is amended 
     by striking paragraph (2) and by redesignating paragraph (3) 
     as paragraph (2).
       (3) Effective date.--The amendments made by this subsection 
     shall apply to taxable years beginning after December 31, 
     1998.
       (b) Personal Exemptions Allowed in Computing Minimum Tax.--
       (1) In general.--Subparagraph (E) of section 56(b)(1) is 
     amended to read as follows:
       ``(E) Special rule for certain deductions.--The standard 
     deduction under section 63(c) shall not be allowed and the 
     deduction for personal exemptions under section 151 and the 
     deduction under section 642(b) shall each be allowed, but 
     shall each be reduced by $250.''.
       (2) Effective date.--The amendments made by this subsection 
     shall apply to taxable years beginning after December 31, 
     2005.

     SEC. 207. LONG-TERM CAPITAL GAINS DEDUCTION FOR INDIVIDUALS.

       (a) General Rule.--Part I of subchapter P of chapter 1 
     (relating to treatment of capital gains) is amended by 
     redesignating section 1202 as section 1203 and by inserting 
     after section 1201 the following new section:

     ``SEC. 1202. CAPITAL GAINS DEDUCTION FOR INDIVIDUALS.

       ``(a) In General.--In the case of an individual, there 
     shall be allowed as a deduction for the taxable year an 
     amount equal to the lesser of--
       ``(1) the net capital gain of the taxpayer for the taxable 
     year, or
       ``(2) $1,000.
       ``(b) Sales Between Related Parties.--Gains from sales and 
     exchanges to any related person (within the meaning of 
     section 267(b) or 707(b)(1)) shall not be taken into account 
     in determining net capital gain.
       ``(c) Special Rule for Section 1250 Property.--Solely for 
     purposes of this section, in applying section 1250 to any 
     disposition of section 1250 property, all depreciation 
     adjustments in respect of the property shall be treated as 
     additional depreciation.
       ``(d) Section Not To Apply to Certain Taxpayers.--No 
     deduction shall be allowed under this section to--
       ``(1) an individual with respect to whom a deduction under 
     section 151 is allowable to another taxpayer for a taxable 
     year beginning in the calendar year in which such 
     individual's taxable year begins,
       ``(2) a married individual (within the meaning of section 
     7703) filing a separate return for the taxable year, or
       ``(3) an estate or trust.
       ``(e) Special Rule for Pass-Thru Entities.--
       ``(1) In general.--In applying this section with respect to 
     any pass-thru entity, the determination of when the sale or 
     exchange occurs shall be made at the entity level.
       ``(2) Pass-thru entity defined.--For purposes of paragraph 
     (1), the term `pass-thru entity' means--
       ``(A) a regulated investment company,
       ``(B) a real estate investment trust,
       ``(C) an S corporation,
       ``(D) a partnership,
       ``(E) an estate or trust, and
       ``(F) a common trust fund.''.
       (b) Coordination With Maximum Capital Gains Rate.--
     Paragraph (3) of section 1(h) (relating to maximum capital 
     gains rate) is amended to read as follows:
       ``(3) Coordination with other provisions.--For purposes of 
     this subsection, the amount of the net capital gain shall be 
     reduced (but not below zero) by the sum of--
       ``(A) the amount of the net capital gain taken into account 
     under section 1202(a) for the taxable year, plus
       ``(B) the amount which the taxpayer elects to take into 
     account as investment income for the taxable year under 
     section 163(d)(4)(B)(iii).''.
       (c) Deduction Allowable in Computing Adjusted Gross 
     Income.--Subsection (a) of section 62 (defining adjusted 
     gross income) is amended by inserting after paragraph (17) 
     the following new paragraph:
       ``(18) Long-term capital gains.--The deduction allowed by 
     section 1202.''.
       (d) Treatment of Collectibles.--
       (1) In general.--Section 1222 (relating to other terms 
     relating to capital gains and losses) is amended by inserting 
     after paragraph (11) the following new paragraph:
       ``(12) Special rule for collectibles.--
       ``(A) In general.--Any gain or loss from the sale or 
     exchange of a collectible shall be treated as a short-term 
     capital gain or loss (as the case may be), without regard to 
     the period such asset was held. The preceding sentence shall 
     apply only to the extent the gain or loss is taken into 
     account in computing taxable income.
       ``(B) Treatment of certain sales of interest in 
     partnership, etc.--For purposes of subparagraph (A), any gain 
     from the sale or exchange of an interest in a partnership, S 
     corporation, or trust which is attributable to unrealized 
     appreciation in the value of collectibles held by such entity 
     shall be treated as gain from the sale or exchange of a 
     collectible. Rules similar to the rules of section 751(f) 
     shall apply for purposes of the preceding sentence.
       ``(C) Collectible.--For purposes of this paragraph, the 
     term `collectible' means any capital asset which is a 
     collectible (as defined in section 408(m) without regard to 
     paragraph (3) thereof).''.
       (2) Charitable deduction not affected.--
       (A) Paragraph (1) of section 170(e) is amended by adding at 
     the end the following new sentence: ``For purposes of this 
     paragraph, section 1222 shall be applied without regard to 
     paragraph (12) thereof (relating to special rule for 
     collectibles).''.
       (B) Clause (iv) of section 170(b)(1)(C) is amended by 
     inserting before the period at the end the following: ``and 
     section 1222 shall be applied without regard to paragraph 
     (12) thereof (relating to special rule for collectibles)''.
       (e) Conforming Amendments.--
       (1) Section 57(a)(7) is amended by striking ``1202'' and 
     inserting ``1203''.
       (2) Clause (iii) of section 163(d)(4)(B) is amended to read 
     as follows:
       ``(iii) the sum of--

       ``(I) the portion of the net capital gain referred to in 
     clause (ii)(II) (or, if lesser, the net capital gain referred 
     to in clause (ii)(I)) taken into account under section 1202, 
     reduced by the amount of the deduction allowed with respect 
     to such gain under section 1202, plus
       ``(II) so much of the gain described in subclause (I) which 
     is not taken into account under section 1202 and which the 
     taxpayer elects to take into account under this clause.''.

       (3) Subparagraph (B) of section 172(d)(2) is amended to 
     read as follows:
       ``(B) the deduction under section 1202 and the exclusion 
     under section 1203 shall not be allowed.''.

[[Page 19034]]

       (4) Section 642(c)(4) is amended by striking ``1202'' and 
     inserting ``1203''.
       (5) Section 643(a)(3) is amended by striking ``1202'' and 
     inserting ``1203''.
       (6) Paragraph (4) of section 691(c) is amended inserting 
     ``1203,'' after ``1202,''.
       (7) The second sentence of section 871(a)(2) is amended by 
     inserting ``or 1203'' after ``section 1202''.
       (8) The last sentence of section 1044(d) is amended by 
     striking ``1202'' and inserting ``1203''.
       (9) Paragraph (1) of section 1402(i) is amended by 
     inserting ``, and the deduction provided by section 1202 and 
     the exclusion provided by section 1203 shall not apply'' 
     before the period at the end.
       (10) Section 121 is amended by adding at the end the 
     following new subsection:
       ``(h) Cross Reference.--

  ``For treatment of eligible gain not excluded under subsection (a), 
see section 1202.''.
       (11) Section 1203, as redesignated by subsection (a), is 
     amended by adding at the end the following new subsection:
       ``(l) Cross Reference.--

  ``For treatment of eligible gain not excluded under subsection (a), 
see section 1202.''.
       (12) The table of sections for part I of subchapter P of 
     chapter 1 is amended by striking the item relating to section 
     1202 and by inserting after the item relating to section 1201 
     the following new items:

``Sec. 1202. Capital gains deduction.
``Sec. 1203. 50-percent exclusion for gain from certain small business 
              stock.''.
       (f) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to taxable years 
     beginning after December 31, 2005.
       (2) Collectibles.--The amendments made by subsection (d) 
     shall apply to sales and exchanges after December 31, 2005.

     SEC. 208. CREDIT FOR INTEREST ON HIGHER EDUCATION LOANS.

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

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

       ``(a) Allowance of Credit.--In the case of an individual, 
     there shall be allowed as a credit against the tax imposed by 
     this chapter for the taxable year an amount equal to the 
     interest paid by the taxpayer during the taxable year on any 
     qualified education loan.
       ``(b) Maximum Credit.--
       ``(1) In general.--Except as provided in paragraph (2), the 
     credit allowed by subsection (a) for the taxable year shall 
     not exceed $1,500.
       ``(2) Limitation based on modified adjusted gross income.--
       ``(A) In general.--If the modified adjusted gross income of 
     the taxpayer for the taxable year exceeds $50,000 ($80,000 in 
     the case of a joint return), the amount which would (but for 
     this paragraph) be allowable as a credit under this section 
     shall be reduced (but not below zero) by the amount which 
     bears the same ratio to the amount which would be so 
     allowable as such excess bears to $20,000.
       ``(B) Modified adjusted gross income.--The term `modified 
     adjusted gross income' means adjusted gross income determined 
     without regard to sections 911, 931, and 933.
       ``(C) Inflation adjustment.--In the case of any taxable 
     year beginning after 2005, the $50,000 and $80,000 amounts 
     referred to in subparagraph (A) shall be increased by an 
     amount equal to--
       ``(i) such dollar amount, multiplied by
       ``(ii) the cost-of-living adjustment determined under 
     section (1)(f)(3) for the calendar year in which the taxable 
     year begins, by substituting `2004' for `1992'.
       ``(D) Rounding.--If any amount as adjusted under 
     subparagraph (C) is not a multiple of $50, such amount shall 
     be rounded to the nearest multiple of $50.
       ``(c) Dependents Not Eligible for Credit.--No credit shall 
     be allowed by this section to an individual for the taxable 
     year if a deduction under section 151 with respect to such 
     individual is allowed to another taxpayer for the taxable 
     year beginning in the calendar year in which such 
     individual's taxable year begins.
       ``(d) Limit on Period Credit Allowed.--A credit shall be 
     allowed under this section only with respect to interest paid 
     on any qualified education loan during the first 60 months 
     (whether or not consecutive) in which interest payments are 
     required. For purposes of this paragraph, any loan and all 
     refinancings of such loan shall be treated as 1 loan.
       ``(e) Definitions.--For purposes of this section--
       ``(1) Qualified education loan.--The term `qualified 
     education loan' has the meaning given such term by section 
     221(e)(1).
       ``(2) Dependent.--The term `dependent' has the meaning 
     given such term by section 152.
       ``(f) Special Rules.--
       ``(1) Denial of double benefit.--No credit shall be allowed 
     under this section for any amount taken into account for any 
     deduction under any other provision of this chapter.
       ``(2) Married couples must file joint return.--If the 
     taxpayer is married at the close of the taxable year, the 
     credit shall be allowed under subsection (a) only if the 
     taxpayer and the taxpayer's spouse file a joint return for 
     the taxable year.
       ``(3) Marital status.--Marital status shall be determined 
     in accordance with section 7703.''.
       (b) Conforming Amendment.--The table of sections for 
     subpart A of part IV of subchapter A of chapter 1 is amended 
     by inserting after the item relating to section 25A the 
     following new item:

``Sec. 25B. Interest on higher education loans.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to any qualified education loan (as defined in 
     section 25B(e)(1) of the Internal Revenue Code of 1986, as 
     added by this section) incurred on, before, or after the date 
     of the enactment of this Act, but only with respect to any 
     loan interest payment due after December 31, 2004.

     SEC. 209. ELIMINATION OF MARRIAGE PENALTY IN STANDARD 
                   DEDUCTION.

       (a) In General.--Paragraph (2) of section 63(c) (relating 
     to standard deduction) is amended--
       (1) by striking ``$5,000'' in subparagraph (A) and 
     inserting ``twice the dollar amount in effect under 
     subparagraph (C) for the taxable year'',
       (2) by adding ``or'' at the end of subparagraph (B),
       (3) by striking ``in the case of'' and all that follows in 
     subparagraph (C) and inserting ``in any other case.'', and
       (4) by striking subparagraph (D).
       (b) Phase-in.--Subsection (c) of section 63 is amended by 
     adding at the end the following new paragraph:
       ``(7) Phase-in of increase in basic standard deduction.--In 
     the case of taxable years beginning before January 1, 2008--
       ``(A) paragraph (2)(A) shall be applied by substituting for 
     `twice'--
       ``(i) `1.671 times' in the case of taxable years beginning 
     during 2001,
       ``(ii) `1.70 times' in the case of taxable years beginning 
     during 2002,
       ``(iii) `1.727 times' in the case of taxable years 
     beginning during 2003,
       ``(iv) `1.837 times' in the case of taxable years beginning 
     during 2004,
       ``(v) `1.951 times' in the case of taxable years beginning 
     during 2005,
       ``(vi) `1.953 times' in the case of taxable years beginning 
     during 2006, and
       ``(vii) `1.973 times' in the case of taxable years 
     beginning during 2007, and
       ``(B) the basic standard deduction for a married individual 
     filing a separate return shall be one-half of the amount 
     applicable under paragraph (2)(A).

     If any amount determined under subparagraph (A) is not a 
     multiple of $50, such amount shall be rounded to the next 
     lowest multiple of $50.''.
       (c) Technical Amendments.--
       (1) Subparagraph (B) of section 1(f)(6) is amended by 
     striking ``(other than with'' and all that follows through 
     ``shall be applied'' and inserting ``(other than with respect 
     to sections 63(c)(4) and 151(d)(4)(A)) shall be applied''.
       (2) Paragraph (4) of section 63(c) is amended by adding at 
     the end the following flush sentence:
     ``The preceding sentence shall not apply to the amount 
     referred to in paragraph (2)(A).''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 210. EXPANSION OF ADOPTION CREDIT.

       (a) In General.--Section 23(a)(1) (relating to allowance of 
     credit) is amended to read as follows:
       ``(1) In general.--In the case of an individual, there 
     shall be allowed as a credit against the tax imposed by this 
     chapter--
       ``(A) in the case of an adoption of a child other than a 
     child with special needs, the amount of the qualified 
     adoption expenses paid or incurred by the taxpayer, and
       ``(B) in the case of an adoption of a child with special 
     needs, $10,000.''.
       (b) Dollar Limitation.--Section 23(b)(1) is amended--
       (1) by striking ``($6,000, in the case of a child with 
     special needs)'', and
       (2) by striking ``subsection (a)'' and inserting 
     ``subsection (a)(1)''.
       (c) Year Credit Allowed.--Section 23(a)(2) is amended by 
     adding at the end the following new flush sentence:

     ``In the case of the adoption of a child with special needs, 
     the credit allowed under paragraph (1) shall be allowed for 
     the taxable year in which the adoption becomes final.''.
       (d) Definition of Eligible Child.--Section 23(d)(2) is 
     amended to read as follows:
       ``(2) Eligible child.--The term `eligible child' means any 
     individual who--
       ``(A) has not attained age 18, or
       ``(B) is physically or mentally incapable of caring for 
     himself.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 211. MODIFICATION OF TAX RATES FOR TRUSTS FOR 
                   INDIVIDUALS WHO ARE DISABLED.

       (a) In General.--Section 1(e) (relating to tax imposed on 
     estates and trusts) is amended to read as follows:
       ``(e) Estates and Trusts.--
       ``(1) In general.--Except as provided in paragraph (2), 
     there is hereby imposed on the taxable income of--
       ``(A) every estate, and
       ``(B) 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..................................................
$225, plus 28% of the excess over $1,500...............................
$785, plus 31% of the excess over $3,500...............................

[[Page 19035]]

$1,405, plus 36% of the excess over $5,500.............................
$2,125, plus 39.6% of the excess over $7,500...........................
       ``(2) Special rule for trusts for disabled individuals.--
       ``(A) In general.--There is hereby imposed on the taxable 
     income of an eligible trust taxable under this subsection a 
     tax determined in the same manner as under subsection (c).
       ``(B) Eligible trust.--For purposes of subparagraph (A), a 
     trust shall be treated as an eligible trust for any taxable 
     year if, at all times during such year during which the trust 
     is in existence, the exclusive purpose of the trust is to 
     provide reasonable amounts for the support and maintenance of 
     1 beneficiary who is permanently and totally disabled (within 
     the meaning of section 22(e)(3)). A trust shall not fail to 
     meet the requirements of this subparagraph merely because the 
     corpus of the trust may revert to the grantor or a member of 
     the grantor's family upon the death of the beneficiary.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2006.

                TITLE III--RETIREMENT SAVINGS TAX RELIEF

             Subtitle A--Individual Retirement Arrangements

     SEC. 301. MODIFICATION OF DEDUCTION LIMITS FOR IRA 
                   CONTRIBUTIONS.

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

``For taxable years                                      The deductible
beginning in:                                                amount is:
  2001......................................................$3,000 ....

  2002......................................................$4,000 ....

  2003 and thereafter.......................................$5,000.....

       ``(B) Cost-of-living adjustment.--
       ``(i) In general.--In the case of any taxable year 
     beginning in a calendar year after 2003, the $5,000 amount 
     under subparagraph (A) shall be increased by an amount equal 
     to--

       ``(I) such dollar amount, multiplied by
       ``(II) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, determined by substituting `calendar year 2002' 
     for `calendar year 1992' in subparagraph (B) thereof.

       ``(ii) Rounding rules.--If any amount after adjustment 
     under clause (i) is not a multiple of $100, such amount shall 
     be rounded to the next lower multiple of $100.''.
       (b) Increase in Adjusted Gross Income Limits for Active 
     Participants.--
       (1) In general.--Subparagraph (B) of section 219(g)(3) 
     (relating to applicable dollar amount) is amended to read as 
     follows:
       ``(B) Applicable dollar amount.--The term `applicable 
     dollar amount' means the following:
       ``(i) In the case of a taxpayer filing a joint return:

``For taxable years beginning in:      The applicable dollar amount is:
  2001.....................................................$53,000 ....

  2002.....................................................$54,000 ....

  2003.....................................................$60,000 ....

  2004.....................................................$65,000 ....

  2005.....................................................$70,000 ....

  2006.....................................................$75,000 ....

  2007.....................................................$80,000 ....

  2008.....................................................$84,000 ....

  2009.....................................................$89,000 ....

  2010 and thereafter......................................$94,000.....

       ``(ii) In the case of any other taxpayer (other than a 
     married individual filing a separate return):

``For taxable years beginning in:      The applicable dollar amount is:
    2001.......................................................$33,000 
    2002.......................................................$34,000 
    2003.......................................................$40,000 
    2004.......................................................$45,000 
    2005, 2006, and 2007.......................................$50,000 
    2008.......................................................$52,000 
    2009.......................................................$54,500 
    2010 and thereafter.....................................$57,000.''.
       (2) Cost-of-living adjustment.--Section 219(g)(3) is 
     amended by adding at the end the following new subparagraph:
       ``(C) Cost-of-living adjustment.--
       ``(i) In general.--In the case of any taxable year 
     beginning in a calendar year after 2010, the $94,000 amount 
     in subparagraph (B)(i) and the $57,000 amount in 
     subparagraph(B)(ii) shall each be increased by an amount 
     equal to--

       ``(I) such dollar amount, multiplied by
       ``(II) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, determined by substituting `calendar year 2009' 
     for `calendar year 1992' in subparagraph (B) thereof.

       ``(ii) Rounding rules.--If any amount after adjustment 
     under clause (i) is not a multiple of $1,000, such amount 
     shall be reduced to the next lowest multiple of $1,000.''.
       (c) Conforming Amendments.--
       (1) Section 408(a)(1) is amended by striking ``in excess of 
     $2,000 on behalf of any individual'' and inserting ``on 
     behalf of any individual in excess of the amount in effect 
     for such taxable year under section 219(b)(1)(A)''.
       (2) Section 408(b)(2)(B) is amended by striking ``$2,000'' 
     and inserting ``the dollar amount in effect under section 
     219(b)(1)(A)''.
       (3) Section 408(b) is amended by striking ``$2,000'' in the 
     matter following paragraph (4) and inserting ``the dollar 
     amount in effect under section 219(b)(1)(A)''.
       (4) Section 408(j) is amended by striking ``$2,000''.
       (5) Section 408(p)(8) is amended by striking ``$2,000'' and 
     inserting ``the dollar amount in effect under section 
     219(b)(1)(A)''
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 302. MODIFICATION OF INCOME LIMITS ON CONTRIBUTIONS AND 
                   ROLLOVERS TO ROTH IRAS.

       (a) Repeal of AGI Limit on Contributions.--Section 
     408A(c)(3) (relating to limits based on modified adjusted 
     gross income) is amended by striking subparagraph (A) and by 
     redesignating subparagraphs (B), (C), and (D) as 
     subparagraphs (A), (B), and (C), respectively.
       (b) Increase in AGI Limit for Rollover Contributions.--
     Section 408A(c)(3)(A) (relating to rollover from IRA), as 
     redesignated by subsection (a), is amended to read as 
     follows:
       ``(A) Rollover from ira.--A taxpayer shall not be allowed 
     to make a qualified rollover contribution from an individual 
     retirement plan other than a Roth IRA during any taxable year 
     if, for the taxable year of the distribution to which the 
     contribution relates, the taxpayer's adjusted gross income 
     exceeds $1,000,000.''.
       (c) Conforming Amendments.--
       (1) Subparagraph (B) of section 408A(c)(3), as redesignated 
     by subsection (a) and as in effect before and after the 
     amendments made by the Internal Revenue Service Restructuring 
     and Reform Act of 1998, is amended to read as follows:
       ``(B) Definition of adjusted gross income.--For purposes of 
     subparagraph (A), adjusted gross income shall be determined--
       ``(i) after application of sections 86 and 469, and
       ``(ii) without regard to sections 135, 137, 221, and 911, 
     the deduction allowable under section 219, or any amount 
     included in gross income under subsection (d)(3).''.
       (2) Subparagraph (B) of section 408A(c)(3), as amended by 
     paragraph (1), is amended by inserting ``or by reason of a 
     required distribution under a provision described in 
     paragraph (5)'' before the period at the end.
       (d) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to taxable years beginning after December 31, 2002.
       (2) Rollovers.--The amendment made by subsection (b) shall 
     apply to taxable years beginning after December 31, 2002.
       (3) Adjusted gross income.--The amendment made by 
     subsection (c)(2) shall apply to taxable years beginning 
     after December 31, 2004.

     SEC. 303. 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:

[[Page 19036]]

       ``(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.

     SEC. 304. 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.--
       ``(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

[[Page 19037]]

       ``(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 (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. 305. CERTAIN COINS NOT TREATED AS COLLECTIBLES.

       (a) In General.--Subparagraph (A) of section 408(m)(3) 
     (relating to exception for certain coins and bullion) is 
     amended to read as follows:
       ``(A) any coin certified by a recognized grading service 
     and traded on a nationally recognized electronic network, or 
     listed by a recognized wholesale reporting service, and--
       ``(i) which is or was at any time legal tender in the 
     United States, or
       ``(ii) issued under the laws of any State, or''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.

                     Subtitle B--Expanding Coverage

     SEC. 311. OPTION TO TREAT ELECTIVE DEFERRALS AS AFTER-TAX 
                   CONTRIBUTIONS.

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

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

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

[[Page 19038]]

       ``(e) Other Definitions.--For purposes of this section--
       ``(1) Applicable retirement plan.--The term `applicable 
     retirement plan' means--
       ``(A) an employees' trust described in section 401(a) which 
     is exempt from tax under section 501(a), and
       ``(B) a plan under which amounts are contributed by an 
     individual's employer for an annuity contract described in 
     section 403(b).
       ``(2) Elective deferral.--The term `elective deferral' 
     means any elective deferral described in subparagraph (A) or 
     (C) of section 402(g)(3).''.
       (b) Excess Deferrals.--Section 402(g) (relating to 
     limitation on exclusion for elective deferrals) is amended--
       (1) by adding at the end of paragraph (1) the following new 
     sentence: ``The preceding sentence shall not apply to so much 
     of such excess as does not exceed the designated plus 
     contributions of the individual for the taxable year.'', and
       (2) by inserting ``(or would be included but for the last 
     sentence thereof)'' after ``paragraph (1)'' in paragraph 
     (2)(A).
       (c) Rollovers.--Subparagraph (B) of section 402(c)(8) is 
     amended by adding at the end the following:

     ``If any portion of an eligible rollover distribution is 
     attributable to payments or distributions from a designated 
     plus account (as defined in section 402A), an eligible 
     retirement plan with respect to such portion shall include 
     only another designated plus account and a Roth IRA.''.
       (d) Reporting Requirements.--
       (1) W-2 information.--Section 6051(a)(8) is amended by 
     inserting ``, including the amount of designated plus 
     contributions (as defined in section 402A)'' before the comma 
     at the end.
       (2) Information.--Section 6047 is amended by redesignating 
     subsection (f) as subsection (g) and by inserting after 
     subsection (e) the following new subsection:
       ``(f) Designated Plus Contributions.--The Secretary shall 
     require the plan administrator of each applicable retirement 
     plan (as defined in section 402A) to make such returns and 
     reports regarding designated plus contributions (as so 
     defined) to the Secretary, participants and beneficiaries of 
     the plan, and such other persons as the Secretary may 
     prescribe.''.
       (e) Conforming Amendments.--
       (1) Section 408A(e) is amended by adding after the first 
     sentence the following new sentence: ``Such term includes a 
     rollover contribution described in section 402A(c)(3)(A).''.
       (2) The table of sections for subpart A of part I of 
     subchapter D of chapter 1 is amended by inserting after the 
     item relating to section 402 the following new item:

``Sec. 402A. Optional treatment of elective deferrals as plus 
              contributions.''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 312. INCREASE IN ELECTIVE CONTRIBUTION LIMITS.

       (a) Elective Deferrals.--
       (1) In general.--Paragraph (1) of section 402(g) (relating 
     to limitation on exclusion for elective deferrals) is amended 
     to read as follows:
       ``(1) In general.--
       ``(A) Limitation.--Notwithstanding subsections (e)(3) and 
     (h)(1)(B), the elective deferrals of any individual for any 
     taxable year shall be included in such individual's gross 
     income to the extent the amount of such deferrals for the 
     taxable year exceeds the applicable dollar amount.
       ``(B) Applicable dollar amount.--For purposes of 
     subparagraph (A), the applicable dollar amount shall be the 
     amount determined in accordance with the following table:

``For taxable years beginning in:      The applicable dollar amount is:
    2001.......................................................$11,000 
    2002.......................................................$12,000 
    2003.......................................................$13,000 
    2004.......................................................$14,000 
    2005 or thereafter......................................$15,000.''.
       (2) Cost-of-living adjustment.--Paragraph (5) of section 
     402(g) is amended to read as follows:
       ``(5) Cost-of-living adjustment.--In the case of taxable 
     years beginning after December 31, 2005, the Secretary shall 
     adjust the $15,000 amount under paragraph (1)(B) at the same 
     time and in the same manner as under section 415(d); except 
     that the base period shall be the calendar quarter beginning 
     July 1, 2004, and any increase under this paragraph which is 
     not a multiple of $500 shall be rounded to the next lowest 
     multiple of $500.''.
       (3) Conforming amendments.--
       (A) Section 402(g) (relating to limitation on exclusion for 
     elective deferrals), as amended by paragraphs (1) and (2), is 
     further amended by striking paragraph (4) and redesignating 
     paragraphs (5), (6), (7), (8), and (9) as paragraphs (4), 
     (5), (6), (7), and (8), respectively.
       (B) Paragraph (2) of section 457(c) is amended by striking 
     ``402(g)(8)(A)(iii)'' and inserting ``402(g)(7)(A)(iii)''.
       (C) Clause (iii) of section 501(c)(18)(D) is amended by 
     striking ``(other than paragraph (4) thereof)''.
       (b) Deferred Compensation Plans of State and Local 
     Governments and Tax-Exempt Organizations.--
       (1) In general.--Section 457 (relating to deferred 
     compensation plans of State and local governments and tax-
     exempt organizations) is amended--
       (A) by striking ``$7,500'' each place it appears in 
     subsections (b)(2)(A) and (c)(1) and inserting ``the 
     applicable dollar amount'', and
       (B) by striking ``$15,000'' in subsection (b)(3)(A) and 
     inserting ``twice the dollar amount in effect under 
     subsection (b)(2)(A)''.
       (2) Applicable dollar amount; cost-of-living adjustment.--
     Paragraph (15) of section 457(e) is amended to read as 
     follows:
       ``(15) Applicable dollar amount.--
       ``(A) In general.--The applicable dollar amount shall be 
     the amount determined in accordance with the following table:

``For taxable years beginning in:      The applicable dollar amount is:
    2001........................................................$9,000 
    2002.......................................................$10,000 
    2003.......................................................$11,000 
    2004 or thereafter.........................................$12,000.
       ``(B) Cost-of-living adjustments.--In the case of taxable 
     years beginning after December 31, 2004, the Secretary shall 
     adjust the $12,000 amount specified in the table in 
     subparagraph (A) at the same time and in the same manner as 
     under section 415(d), except that the base period shall be 
     the calendar quarter beginning July 1, 2003, and any increase 
     under this paragraph which is not a multiple of $500 shall be 
     rounded to the next lowest multiple of $500.''.
       (c) Simple Retirement Accounts.--
       (1) Limitation.--Clause (ii) of section 408(p)(2)(A) 
     (relating to general rule for qualified salary reduction 
     arrangement) is amended by striking ``$6,000'' and inserting 
     ``the applicable dollar amount''.
       (2) Applicable dollar amount.--Subparagraph (E) of 
     408(p)(2) is amended to read as follows:
       ``(E) Applicable dollar amount; cost-of-living 
     adjustment.--
       ``(i) In general.--For purposes of subparagraph (A)(ii), 
     the applicable dollar amount shall be the amount determined 
     in accordance with the following table:

``For taxable years beginning in:      The applicable dollar amount is:
    2001........................................................$7,000 
    2002........................................................$8,000 
    2003........................................................$9,000 
    2004 or thereafter.........................................$10,000.
       ``(ii) Cost-of-living adjustment.--In the case of a year 
     beginning after December 31, 2004, the Secretary shall adjust 
     the $10,000 amount under clause (i) at the same time and in 
     the same manner as under section 415(d), except that the base 
     period taken into account shall be the calendar quarter 
     beginning July 1, 2003, and any increase under this 
     subparagraph which is not a multiple of $500 shall be rounded 
     to the next lower multiple of $500.''.
       (3) Conforming amendments.--
       (A) Subclause (I) of section 401(k)(11)(B)(i) is amended by 
     striking ``$6,000'' and inserting ``the amount in effect 
     under section 408(p)(2)(A)(ii)''.
       (B) Section 401(k)(11) is amended by striking subparagraph 
     (E).
       (d) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2000.

     SEC. 313. 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. 314. ELECTIVE DEFERRALS NOT TAKEN INTO ACCOUNT FOR 
                   PURPOSES OF DEDUCTION LIMITS.

       (a) In General.--Section 404 (relating to deduction for 
     contributions of an employer to an employees' trust or 
     annuity plan and compensation under a deferred payment plan) 
     is amended by adding at the end the following new subsection:
       ``(n) Elective Deferrals Not Taken Into Account for 
     Purposes of Deduction Limits.--Elective deferrals (as defined 
     in section 402(g)(3)) shall not be subject to any limitation 
     contained in paragraph (3), (7), or (9) of subsection (a), 
     and such elective deferrals shall not be taken into account 
     in applying any such limitation to any other 
     contributions.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to years beginning after December 31, 2000.

     SEC. 315. 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:

[[Page 19039]]

       ``(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. 316. 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. 317. 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. 318. SAFE ANNUITIES AND TRUSTS.

       (a) In General.--Subpart A of part I of subchapter D of 
     chapter 1 (relating to deferred compensation, etc.) is 
     amended by inserting after section 408A the following new 
     section:

     ``SEC. 408B. SAFE ANNUITIES AND TRUSTS.

       ``(a) Employer Eligibility.--
       ``(1) In general.--An employer may establish and maintain a 
     SAFE annuity or a SAFE trust for any year only if--
       ``(A) the employer is an eligible employer (as defined in 
     section 408(p)(2)(C)), and
       ``(B) the employer does not maintain (and no predecessor of 
     the employer maintains) a qualified plan (other than a 
     permissible plan) with respect to which contributions were 
     made, or benefits were accrued, for service in any year in 
     the period beginning with the year such annuity or trust 
     became effective and ending with the year for which the 
     determination is being made.
       ``(2) Definitions.--For purposes of paragraph (1)--
       ``(A) Qualified plan.--The term `qualified plan' has the 
     meaning given such term by section 408(p)(2)(D)(ii).
       ``(B) Permissible plan.--The term `permissible plan' 
     means--
       ``(i) a SIMPLE plan described in section 408(p),
       ``(ii) a SIMPLE 401(k) plan described in section 
     401(k)(11),
       ``(iii) an eligible deferred compensation plan described in 
     section 457(b),
       ``(iv) a collectively bargained plan but only if the 
     employees eligible to participate in such plan are not also 
     entitled to a benefit described in subsection (b)(5) or 
     (c)(5), or
       ``(v) a plan under which there may be made only--

       ``(I) elective deferrals described in section 402(g)(3), 
     and
       ``(II) employer matching contributions not in excess of the 
     amounts described in subclauses (I) and (II) of section 
     401(k)(12)(B)(i).

       ``(b) SAFE Annuity.--
       ``(1) In general.--For purposes of this title, the term 
     `SAFE annuity' means an individual retirement annuity (as 
     defined in section 408(b) without regard to paragraph (2) 
     thereof and without regard to the limitation on aggregate 
     annual premiums contained in the flush language of section 
     408(b)) if--
       ``(A) such annuity meets the requirements of paragraphs (2) 
     through (7), and
       ``(B) the only contributions to such annuity (other than 
     rollover contributions) are employer contributions.

     Nothing in this section shall be construed as preventing an 
     employer from using a group annuity contract which is 
     divisible into individual retirement annuities for purposes 
     of providing SAFE annuities.
       ``(2) Participation requirements.--
       ``(A) In general.--The requirements of this paragraph are 
     met for any year only if all employees of the employer who--
       ``(i) received at least $5,000 in compensation from the 
     employer during any 2 consecutive preceding years, and
       ``(ii) received at least $5,000 in compensation during the 
     year,

     are entitled to the benefit described in paragraph (5) for 
     such year.
       ``(B) Excludable employees.--An employer may elect to 
     exclude from the requirements under subparagraph (A) 
     employees described in section 410(b)(3).
       ``(3) Vesting.--The requirements of this paragraph are met 
     if the employee's rights to any benefits under the annuity 
     are nonforfeitable.
       ``(4) Benefit form.--
       ``(A) In general.--The requirements of this paragraph are 
     met if the only form of benefit is--
       ``(i) a benefit payable annually in the form of a single 
     life annuity with monthly payments (with no ancillary 
     benefits) beginning at age 65, or
       ``(ii) at the election of the participant, any other form 
     of benefit which is the actuarial equivalent (based on the 
     assumptions specified in the SAFE annuity) of the benefit 
     described in clause (i).

     The requirements of sections 401(a)(11) and 411(b)(1)(H) 
     shall apply to the benefits described in this subparagraph.
       ``(B) Direct transfers and rollovers.--A plan shall not 
     fail to meet the requirements of this paragraph by reason of 
     permitting, at the election of the employee, a trustee-to-
     trustee transfer or a rollover contribution.
       ``(5) Amount of annual accrued benefit.--
       ``(A) In general.--The requirements of this paragraph are 
     met for any year if the accrued benefit of each participant 
     derived from employer contributions for such year, when 
     expressed as a benefit described in paragraph (4)(A), is not 
     less than the applicable percentage of the participant's 
     compensation for such year.
       ``(B) Applicable percentage.--For purposes of this 
     paragraph--
       ``(i) In general.--The term `applicable percentage' means 3 
     percent.
       ``(ii) Election of lower percentage.--An employer may elect 
     to apply an applicable percentage of 1 percent, 2 percent or 
     zero percent for any plan year for all employees eligible to 
     participate in the plan for such year if the employer 
     notifies the employees of such percentage within a reasonable 
     period before the beginning of such year.
       ``(C) Compensation limit.--The compensation taken into 
     account under this paragraph for any year shall not exceed 
     the limitation in effect for such year under section 
     401(a)(17).
       ``(D) Credit for service before plan adopted.--
       ``(i) In general.--An employer may elect to take into 
     account a specified number of years of service (not greater 
     than 10) performed before the adoption of the plan (each 
     hereinafter referred to as a `prior service year') as service 
     under the plan if the same specified number of years is 
     available to all employees eligible to participate in the 
     plan for the first plan year.
       ``(ii) Accrual of prior service benefit.--Such an election 
     shall be effective for a prior service year only if the 
     requirements of this paragraph are met for an eligible plan 
     year (with respect to employees entitled to credit for such 
     prior service year) by doubling the applicable percentage (if 
     any) for such plan year. For purposes of the preceding 
     sentence, an eligible plan year is a plan year in the period 
     of consecutive plan years (but not more than the number 
     specified under clause (i)) beginning with the first plan 
     year that the plan is in effect.

[[Page 19040]]

       ``(iii) Election may not apply to certain prior service 
     years.--This subparagraph shall not apply with respect to any 
     prior service year of an employee if--

       ``(I) for any part of such prior service year such employee 
     was an active participant (within the meaning of section 
     219(g)(5)) under any defined benefit plan of the employer (or 
     any predecessor thereof), or
       ``(II) such employee received during such prior service 
     year less than $5,000 in compensation from the employer.

       ``(6) Funding.--
       ``(A) In general.--The requirements of this paragraph are 
     met only if the employer is required to contribute to the 
     annuity for each plan year the amount necessary to purchase a 
     SAFE annuity in the amount of the benefit accrued for such 
     year for each participant entitled to such benefit.
       ``(B) Time when contributions deemed made.--For purposes of 
     this paragraph, an employer shall be deemed to have made a 
     contribution on the last day of the preceding taxable year if 
     the payment is 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 (including extensions thereof).
       ``(C) Penalty for failure to make required contribution.--
     The taxes imposed by section 4971 shall apply to a failure to 
     make the contribution required by this paragraph in the same 
     manner as if the amount of the failure were an accumulated 
     funding deficiency to which such section applies.
       ``(7) Limitation on distributions.--The requirements of 
     this paragraph are met only if payments under the contract 
     may be made only after the employee attains age 65 or when 
     the employee separates from service, dies, or becomes 
     disabled (within the meaning of section 72(m)(7)).
       ``(c) SAFE Trust.--
       ``(1) In general.--For purposes of this title, the term 
     `SAFE trust' means a trust forming part of a defined benefit 
     plan if--
       ``(A) such trust meets the requirements of section 401(a) 
     as modified by subsection (d),
       ``(B) a participant's benefits under the plan are based 
     solely on the balance of a separate account in such plan of 
     such participant,
       ``(C) such plan meets the requirements of paragraphs (2) 
     through (8), and
       ``(D) the only contributions to such trust (other than 
     rollover contributions) are employer contributions.
       ``(2) Participation requirements.--A plan meets the 
     requirements of this paragraph for any year only if the 
     requirements of subsection (b)(2) are met for such year.
       ``(3) Vesting.--A plan meets the requirements of this 
     paragraph for any year only if the requirements of subsection 
     (b)(3) are met for such year.
       ``(4) Benefit form.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     a plan meets the requirements of this paragraph only if the 
     trustee distributes a SAFE annuity that satisfies subsection 
     (b)(4) where the annual benefit described in subsection 
     (b)(4)(A) is not less than the accrued benefit determined 
     under paragraph (5).
       ``(B) Direct transfers to individual retirement plan or 
     safe annuity.--A plan shall not fail to meet the requirements 
     of this paragraph by reason of permitting, as an optional 
     form of benefit, the distribution of the entire balance to 
     the credit of the employee. If the employee is under age 65, 
     such distribution must be in the form of a direct trustee-to-
     trustee transfer to a SAFE annuity, another SAFE trust, or a 
     SAFE rollover plan (or, in the case of a distribution that 
     does not exceed the dollar limit in effect under section 
     411(a)(11)(A), any other individual retirement plan).
       ``(C) SAFE rollover plan.--For purposes of this section, 
     the term `SAFE rollover plan' means an individual retirement 
     plan for the benefit of the employee to which a rollover was 
     made from a SAFE annuity, SAFE trust, or another SAFE 
     rollover plan.
       ``(5) Amount of annual accrued benefit.--A plan meets the 
     requirements of this paragraph for any year only if the 
     requirements of subsection (b)(5) are met for such year.
       ``(6) Funding.--
       ``(A) In general.--A plan meets the requirements of this 
     paragraph for any year only if--
       ``(i) the requirements of subsection (b)(6) are met for 
     such year,
       ``(ii) in the case of a plan which has an unfunded annuity 
     amount with respect to the account of any participant, the 
     plan requires that the employer make an additional 
     contribution to such plan (at the time the annuity contract 
     to which such amount relates is purchased) equal to the 
     unfunded annuity amount, and
       ``(iii) in the case of a plan which has an unfunded prior 
     year liability as of the close of such plan year, the plan 
     requires that the employer make an additional contribution to 
     such plan for such year equal to the amount of such unfunded 
     prior year liability no later than 8\1/2\ months following 
     the end of the plan year.
       ``(B) Unfunded annuity amount.--For purposes of this 
     paragraph, the term `unfunded annuity amount' means, with 
     respect to the account of any participant for whom an annuity 
     is being purchased, the excess (if any) of--
       ``(i) the amount necessary to purchase an annuity contract 
     which meets the requirements of subsection (b)(4) in the 
     amount of the participant's accrued benefit determined under 
     paragraph (5), over
       ``(ii) the balance in such account at the time such 
     contract is purchased.
       ``(C) Unfunded prior year liability.--For purposes of this 
     paragraph, the term `unfunded prior year liability' means, 
     with respect to any plan year, the excess (if any) of--
       ``(i) the aggregate of the present value of the accrued 
     liabilities under the plan as of the close of the prior plan 
     year, over
       ``(ii) the value of the plan's assets determined under 
     section 412(c)(2) as of the close of the plan year 
     (determined without regard to any contributions for such plan 
     year).

     Such present value shall be determined using the assumptions 
     specified in subparagraph (D).
       ``(D) Actuarial assumptions.--In determining the amount 
     required to be contributed under subparagraph (A)--
       ``(i) the assumed interest rate shall be not less than 3 
     percent, and not greater than 5 percent, per year,
       ``(ii) the assumed mortality shall be determined under the 
     applicable mortality table (as defined in section 417(e)(3), 
     as modified by the Secretary so that it does not include any 
     assumption for preretirement mortality), and
       ``(iii) the assumed retirement age shall be 65.
       ``(E) Changes in mortality table.--If, for purposes of this 
     subsection, the applicable mortality table under section 
     417(e)(3) for any plan year is not the same as such table for 
     the prior plan year, the Secretary shall prescribe 
     regulations for such purposes which phase in the effect of 
     the changes over a reasonable period of plan years determined 
     by the Secretary.
       ``(F) Penalty for failure to make required contribution.--
     The taxes imposed by section 4971 shall apply to a failure to 
     make the contribution required by this paragraph in the same 
     manner as if the amount of the failure were an accumulated 
     funding deficiency to which such section applies.
       ``(7) Separate accounts for participants.--A plan meets the 
     requirements of this paragraph for any year only if the plan 
     provides--
       ``(A) for an individual account for each participant, and
       ``(B) for benefits based solely on--
       ``(i) the amount contributed to the participant's account,
       ``(ii) any income, expenses, gains and losses, and any 
     forfeitures of accounts of other participants which may be 
     allocated to such participant's account, and
       ``(iii) the amount of any unfunded annuity amount with 
     respect to the participant.
       ``(8) Trust may not hold securities which are not readily 
     tradable.--A plan meets the requirements of this paragraph 
     only if the plan prohibits the trust from holding directly or 
     indirectly securities which are not readily tradable on an 
     established securities market or otherwise. Nothing in this 
     paragraph shall prohibit the trust from holding insurance 
     company products regulated by State law.
       ``(d) Special Rules for SAFE Annuities and Trusts.--
       ``(1) Certain requirements treated as met.--For purposes of 
     section 401(a), a SAFE annuity and a SAFE trust shall be 
     treated as meeting the requirements of the following 
     provisions:
       ``(A) Section 401(a)(4) (relating to nondiscrimination 
     rules).
       ``(B) Section 401(a)(26) (relating to minimum 
     participation).
       ``(C) Section 410 (relating to minimum participation and 
     coverage requirements).
       ``(D) Except as provided in subsection (b)(4(A), section 
     411(b) (relating to accrued benefit requirements).
       ``(E) Section 412 (relating to minimum funding standards).
       ``(F) Section 415 (relating to limitations on benefits and 
     contributions under qualified plans).
       ``(G) Section 416 (relating to special rules for top-heavy 
     plans).
       ``(2) Contributions not taken into account in applying 
     limits to other plans.--
       ``(A) Deduction limits.--Contributions to a SAFE annuity or 
     a SAFE trust shall not be taken into account in applying 
     sections 404 to other plans maintained by the employer.
       ``(B) Benefit limits.--A SAFE annuity or a SAFE trust shall 
     be treated as a defined benefit plan for purposes of section 
     415.
       ``(3) Use of designated financial institutions.--A rule 
     similar to the rule of section 408(p)(7) (without regard to 
     the last sentence thereof) shall apply for purposes of this 
     section.
       ``(4) Definitions.--The definitions in section 408(p)(6) 
     shall apply for purposes of this section.''.
       (b) Deduction Limits Not To Apply to Employer 
     Contributions.--
       (1) In general.--Section 404 (relating to deductions for 
     contributions of an employer to pension, etc., plans), as 
     amended by section 314, is amended by adding at the end the 
     following new subsection:
       ``(o) Special Rules for SAFE Annuities.--
       ``(1) In general.--Employer contributions to a SAFE annuity 
     shall be treated as if they are made to a plan subject to the 
     requirements of this section.
       ``(2) Deductible limit.--For purposes of subsection 
     (a)(1)(A)(i), the amount necessary to satisfy the minimum 
     funding requirement of section 408B(b)(6) or (c)(6) shall be 
     treated as the amount necessary to satisfy the minimum 
     funding requirement of section 412.''.
       (2) Coordination with deduction under section 219.--
       (A) Section 219(b) (relating to maximum amount of 
     deduction), as amended by section 301, is amended by adding 
     at the end the following new paragraph:
       ``(6) Special rule for safe annuities.--This section shall 
     not apply with respect to any

[[Page 19041]]

     amount contributed to a SAFE annuity established under 
     section 408B(b).''.
       (B) Section 219(g)(5)(A) (defining active participant) is 
     amended by striking ``or'' at the end of clause (v) and by 
     adding at the end the following new clause:
       ``(vii) any SAFE annuity (within the meaning of section 
     408B), or''.
       (c) Contributions and Distributions.--
       (1) Section 402 (relating to taxability of beneficiary of 
     employees' trust) is amended by adding at the end the 
     following new subsection:
       ``(l) Treatment of SAFE Annuities.--Rules similar to the 
     rules of paragraphs (1) and (3) of subsection (h) shall apply 
     to contributions and distributions with respect to a SAFE 
     annuities under section 408B.''.
       (2) Section 408(d)(3) is amended by adding at the end the 
     following new subparagraph:
       ``(H) SAFE annuities.--This paragraph shall not apply to 
     any amount paid or distributed out of a SAFE annuity (as 
     defined in section 408B) unless it is paid in a trustee-to-
     trustee transfer into another SAFE annuity.''.
       (d) Increased Penalty on Early Withdrawals.--Section 72(t) 
     (relating to additional tax on early distributions) is 
     amended by adding at the end the following new paragraph:
       ``(7) Special rules for safe annuities and trusts.--In the 
     case of any amount received from a SAFE annuity or a SAFE 
     trust (within the meaning of section 408B), paragraph (1) 
     shall be applied by substituting `20 percent' for `10 
     percent'.''.
       (e) Simplified Employer Reports.--
       (1) SAFE annuities.--Section 408(l) (relating to simplified 
     employer reports) is amended by adding at the end the 
     following new paragraph:
       ``(3) SAFE annuities.--
       ``(A) Simplified report.--The employer maintaining any SAFE 
     annuity (within the meaning of section 408B) shall file a 
     simplified annual return with the Secretary containing only 
     the information described in subparagraph (B).
       ``(B) Contents.--The return required by subparagraph (A) 
     shall set forth--
       ``(i) the name and address of the employer,
       ``(ii) the date the plan was adopted,
       ``(iii) the number of employees of the employer,
       ``(iv) the number of such employees who are eligible to 
     participate in the plan,
       ``(v) the total amount contributed by the employer to each 
     such annuity for such year and the minimum amount required 
     under section 408B to be so contributed,
       ``(vi) the percentage elected under section 408B(b)(5)(B), 
     and
       ``(vii) the number of employees with respect to whom 
     contributions are required to be made for such year under 
     section 408B(b)(5)(D).
       ``(C) Reporting by issuer of safe annuity.--
       ``(i) In general.--The issuer of each SAFE annuity shall 
     provide to the owner of the annuity for each year a statement 
     setting forth as of the close of such year--

       ``(I) the benefits guaranteed at age 65 under the annuity, 
     and
       ``(II) the cash surrender value of the annuity.

       ``(ii) Summary description.--The issuer of any SAFE annuity 
     shall provide to the employer maintaining the annuity for 
     each year a description containing the following information:

       ``(I) The name and address of the employer and the issuer.
       ``(II) The requirements for eligibility for participation.
       ``(III) The benefits provided with respect to the annuity.
       ``(IV) The procedures for, and effects of, withdrawals 
     (including rollovers) from the annuity.

       ``(D) Time and manner of reporting.--Any return, report, or 
     statement required under this paragraph shall be made in such 
     form and at such time as the Secretary shall prescribe.''.
       (2) SAFE trusts.--Section 6059 (relating to actuarial 
     reports) is amended by redesignating subsections (c) and (d) 
     as subsections (d) and (e), respectively, and by inserting 
     after subsection (b) the following new subsection:
       ``(c) SAFE Trusts.--In the case of a SAFE trust (within the 
     meaning of section 408B), the Secretary shall require a 
     simplified actuarial report which contains information 
     similar to the information required in section 
     408(l)(3)(B).''.
       (f) Conforming Amendments.--
       (1) Section 280G(b)(6) is amended by striking ``or'' at the 
     end of subparagraph (C), by striking the period at the end of 
     subparagraph (D) and inserting ``, or'' and by adding after 
     subparagraph (D) the following new subparagraph:
       ``(E) a SAFE annuity described in section 408B.''.
       (2) Clause (ii) of section 408(p)(2)(D) is amended by 
     inserting before the period ``(other than clause (vii) of 
     such subparagraph (A))''.
       (3) Subsections (b), (c), (m)(4)(B), and (n)(3)(B) of 
     section 414 are each amended by inserting ``408B,'' after 
     ``408(p),''.
       (4) Section 4972(d)(1)(A) 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 after 
     clause (iv) the following new clause:
       ``(v) any SAFE annuity (within the meaning of section 
     408B).''.
       (5) The table of sections for subpart A of part I of 
     subchapter D of chapter 1 is amended by inserting after the 
     item relating to section 408A the following new item:

``Sec. 408B. SAFE annuities and trusts.''.
       (g) Modifications of ERISA.--
       (1) Exemption from insurance coverage.--Subsection (b) of 
     section 4021 of the Employee Retirement Income Security Act 
     of 1974 (29 U.S.C. 1321) is amended by striking ``or'' at the 
     end of paragraph (12), by striking the period at the end of 
     paragraph (13) and inserting ``; or'', and by adding at the 
     end the following new paragraph:
       ``(14) which is established and maintained as part of a 
     SAFE trust (as defined in section 408B of the Internal 
     Revenue Code of 1986).''.
       (2) Reporting requirements.--Section 101 of such Act (29 
     U.S.C. 1021) is amended by redesignating the second 
     subsection (h) as subsection (j) and by inserting after the 
     first subsection (h) the following new subsection:
       ``(i) SAFE Annuities.--
       ``(1) No employer reports.--Except as provided in this 
     subsection, no report shall be required under this section by 
     an employer maintaining a SAFE annuity under section 408B(b) 
     of the Internal Revenue Code of 1986.
       ``(2) Summary description.--The issuer of any SAFE annuity 
     shall provide to the employer maintaining the annuity for 
     each year a description containing the following information:
       ``(A) The name and address of the employer and the issuer.
       ``(B) The requirements for eligibility for participation.
       ``(C) The benefits provided with respect to the annuity.
       ``(D) The procedures for, and effects of, withdrawals 
     (including rollovers) from the annuity.
       ``(3) Employee notification.--The employer shall provide 
     each employee eligible to participate in the SAFE annuity 
     with the description described in paragraph (2) at the same 
     time as the notification required under section 408B(b)(5)(B) 
     of the Internal Revenue Code of 1986.''.
       (3) Waiver of funding standards.--Section 301(a) of such 
     Act (29 U.S.C. 1081) is amended by striking ``or'' at the end 
     of paragraph (9), by striking the period at the end of 
     paragraph (10) and inserting ``; or'', and by adding at the 
     end the following new paragraph:
       ``(11) any plan providing for the purchase of any SAFE 
     annuity or any SAFE trust (as such terms are defined in 
     section 408B of such Code).''.
       (h) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2000.

     SEC. 319. MODIFICATION OF TOP-HEAVY RULES.

       (a) Matching Contributions Taken Into Account for Minimum 
     Contribution Requirements.--Section 416(c)(2)(A) (relating to 
     defined contribution plans) is amended by adding at the end 
     the following: ``Employer matching contributions (as defined 
     in section 401(m)(4)(A)) shall be taken into account for 
     purposes of this subparagraph.''.
       (b) Elimination of Family Attribution.--Section 
     416(i)(1)(B) (defining 5-percent owner) is amended by adding 
     at the end the following new clause:
       ``(iv) Family attribution disregarded.--Solely for purposes 
     of applying this paragraph (and not for purposes of any 
     provision of this title which incorporates by reference the 
     definition of a key employee or 5-percent owner under this 
     paragraph), section 318 shall be applied without regard to 
     subsection (a)(1) thereof in determining whether any person 
     is a 5-percent owner.''.
       (c) Definition of Top-Heavy Plans.--Paragraph (4) of 
     section 416(g) (relating to other special rules for top-heavy 
     plans) is amended by adding at the end the following new 
     subparagraph:
       ``(H) Cash or deferred arrangements using alternative 
     methods of meeting nondiscrimination requirements.--The term 
     `top-heavy plan' shall not include a plan which consists 
     solely of--
       ``(i) a cash or deferred arrangement which meets the 
     requirements of section 401(k)(12), and
       ``(ii) matching contributions with respect to which the 
     requirements of section 401(m)(11) are met.

     If, but for this subparagraph, a plan would be treated as a 
     top-heavy plan because it is a member of an aggregation group 
     which is a top-heavy group, contributions under the plan may 
     be taken into account in determining whether any other plan 
     in the group meets the requirements of subsection (c)(2).''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after December 31, 2000.

                Subtitle C--Enhancing Fairness for Women

     SEC. 321. CATCHUP CONTRIBUTIONS FOR INDIVIDUALS AGE 50 OR 
                   OVER.

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

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

[[Page 19042]]

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

``For taxable years beginning in:      The applicable dollar amount is:
    2001....................................................10 percent 
    2002....................................................20 percent 
    2003....................................................30 percent 
    2004....................................................40 percent 
    2005 and thereafter.....................................50 percent.
       ``(3) Treatment of contributions.--In the case of any 
     contribution to a plan under paragraph (1)--
       ``(A) such contribution shall not, with respect to the year 
     in which the contribution is made--
       ``(i) be subject to any otherwise applicable limitation 
     contained in section 402(g), 402(h), 403(b), 404(a), 404(h), 
     408, 415, or 457, or
       ``(ii) be taken into account in applying such limitations 
     to other contributions or benefits under such plan or any 
     other such plan, and
       ``(B) such plan shall not be treated as failing to meet the 
     requirements of section 401(a)(4), 401(a)(26), 401(k)(3), 
     401(k)(11), 401(k)(12), 401(m), 403(b)(12), 408(k), 408(p), 
     408B, 410(b), or 416 by reason of the making of (or the right 
     to make) such contribution.
       ``(4) Eligible participant.--For purposes of this 
     subsection, the term `eligible participant' means, with 
     respect to any plan year, a participant in a plan--
       ``(A) who has attained the age of 50 before the close of 
     the plan year, and
       ``(B) with respect to whom no other elective deferrals may 
     (without regard to this subsection) be made to the plan for 
     the plan year by reason of the application of any limitation 
     or other restriction described in paragraph (3) or contained 
     in the terms of the plan.
       ``(5) Other definitions and rules.--For purposes of this 
     subsection--
       ``(A) Applicable dollar amount.--The term `applicable 
     dollar amount' means, with respect to any year, the amount in 
     effect under section 402(g)(1)(B), 408(p)(2)(E)(i), or 
     457(e)(15)(A), whichever is applicable to an applicable 
     employer plan, for such year.
       ``(B) Applicable employer plan.--The term `applicable 
     employer plan' means--
       ``(i) an employees' trust described in section 401(a) which 
     is exempt from tax under section 501(a),
       ``(ii) a plan under which amounts are contributed by an 
     individual's employer for an annuity contract described in 
     section 403(b),
       ``(iii) an eligible deferred compensation plan under 
     section 457 of an eligible employer as defined in section 
     457(e)(1)(A), and
       ``(iv) an arrangement meeting the requirements of section 
     408 (k) or (p).
       ``(C) Elective deferral.--The term `elective deferral' has 
     the meaning given such term by subsection (u)(2)(C).
       ``(D) Exception for section 457 plans.--This subsection 
     shall not apply to an applicable employer plan described in 
     paragraph (5)(B)(iii) for any year to which section 457(b)(3) 
     applies.''.
       (b) Individual Retirement Plans.--Section 219(b), as 
     amended by sections 301 and 318, is amended by adding at the 
     end the following new paragraph:
       ``(7) Catchup contributions.--
       ``(A) In general.--In the case of an individual who has 
     attained the age of 50 before the close of the taxable year, 
     the dollar amount in effect under paragraph (1)(A) for such 
     taxable year shall be equal to the applicable percentage of 
     such amount determined without regard to this paragraph.
       ``(B) Applicable percentage.--For purposes of this 
     paragraph, the applicable percentage shall be determined in 
     accordance with the following table:

``For taxable years beginning in:      The applicable dollar amount is:
    2001...................................................110 percent 
    2002...................................................120 percent 
    2003...................................................130 percent 
    2004...................................................140 percent 
    2005 and thereafter.................................150 percent.''.
       (c) Effective Date.--The amendment made by this section 
     shall apply to contributions in taxable years beginning after 
     December 31, 2000.

     SEC. 322. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF EMPLOYEES 
                   TO DEFINED CONTRIBUTION PLANS.

       (a) Equitable Treatment.--
       (1) In general.--Subparagraph (B) of section 415(c)(1) 
     (relating to limitation for defined contribution plans) is 
     amended by striking ``25 percent'' and inserting ``100 
     percent''.
       (2) Application to section 403(b).--Section 403(b) is 
     amended--
       (A) by striking ``the exclusion allowance for such taxable 
     year'' in paragraph (1) and inserting ``the applicable limit 
     under section 415'',
       (B) by striking paragraph (2), and
       (C) by inserting ``or any amount received by a former 
     employee after the 5th taxable year following the taxable 
     year in which such employee was terminated'' before the 
     period at the end of the second sentence of paragraph (3).
       (3) Conforming amendments.--
       (A) Subsection (f) of section 72 is amended by striking 
     ``section 403(b)(2)(D)(iii))'' and inserting ``section 
     403(b)(2)(D)(iii), as in effect before the enactment of the 
     Taxpayer Refund Act of 1999)''.
       (B) Section 404(a)(10)(B) is amended by striking ``, the 
     exclusion allowance under section 403(b)(2),''.
       (C) Section 415(a)(2) is amended by striking ``, and the 
     amount of the contribution for such portion shall reduce the 
     exclusion allowance as provided in section 403(b)(2)''.
       (D) Section 415(c)(3) is amended by adding at the end the 
     following new subparagraph:
       ``(E) Annuity contracts.--In the case of an annuity 
     contract described in section 403(b), the term `participant's 
     compensation' means the participant's includible compensation 
     determined under section 403(b)(3).''.
       (E) Section 415(c) is amended by striking paragraph (4).
       (F) Section 415(c)(7) is amended to read as follows:
       ``(7) Certain contributions by church plans not treated as 
     exceeding limit.--
       ``(A) In general.--Notwithstanding any other provision of 
     this subsection, at the election of a participant who is an 
     employee of a church or a convention or association of 
     churches, including an organization described in section 
     414(e)(3)(B)(ii), contributions and other additions for an 
     annuity contract or retirement income account described in 
     section 403(b) with respect to such participant, when 
     expressed as an annual addition to such participant's 
     account, shall be treated as not exceeding the limitation of 
     paragraph (1) if such annual addition is not in excess of 
     $10,000.
       ``(B) $40,000 aggregate limitation.--The total amount of 
     additions with respect to any participant which may be taken 
     into account for purposes of this subparagraph for all years 
     may not exceed $40,000.
       ``(C) Annual addition.--For purposes of this paragraph, the 
     term `annual addition' has the meaning given such term by 
     paragraph (2).''.
       (G) Subparagraph (B) of section 402(g)(7) (as redesignated 
     by section 312(a)) is amended by inserting before the period 
     at the end the following: ``(as in effect before the 
     enactment of the Taxpayer Refund Act of 1999)''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to years beginning after December 31, 2000.
       (b) Special Rules for Sections 403(b) and 408.--
       (1) In general.--Subsection (k) of section 415 is amended 
     by adding at the end the following new paragraph:
       ``(4) Special rules for sections 403(b) and 408.--For 
     purposes of this section, any annuity contract described in 
     section 403(b) for the benefit of a participant shall be 
     treated as a defined contribution plan maintained by each 
     employer with respect to which the participant has the 
     control required under subsection (b) or (c) of section 414 
     (as modified by subsection (h)). For purposes of this 
     section, any contribution by an employer to a simplified 
     employee pension plan for an individual for a taxable year 
     shall be treated as an employer contribution to a defined 
     contribution plan for such individual for such year.''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to limitation years beginning after December 31, 
     2000.
       (c) Deferred Compensation Plans of State and Local 
     Governments and Tax-Exempt Organizations.--
       (1) In general.--Subparagraph (B) of section 457(b)(2) 
     (relating to salary limitation on eligible deferred 
     compensation plans) is amended by striking ``33\1/3\ 
     percent'' and inserting ``100 percent''.
       (2) Effective date.--The amendment made by this subsection 
     shall apply to years beginning after December 31, 2000.

     SEC. 323. 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. 324. MODIFICATION OF SAFE HARBOR RELIEF FOR HARDSHIP 
                   WITHDRAWALS FROM CASH OR DEFERRED ARRANGEMENTS.

       (a) In General.--The Secretary of the Treasury shall revise 
     the regulations relating to hardship distributions under 
     section 401(k)(2)(B)(i)(IV) of the Internal Revenue Code of 
     1986 to provide that the period an employee is prohibited 
     from making elective and employee contributions in order for 
     a distribution to be deemed necessary to satisfy financial 
     need shall be equal to 6 months.
       (b) Effective Date.--The revised regulations under 
     subsection (a) shall apply to years beginning after December 
     31, 2000.

[[Page 19043]]



     SEC. 325. FASTER VESTING OF CERTAIN EMPLOYER MATCHING 
                   CONTRIBUTIONS.

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

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

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

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

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

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

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

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

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

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

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

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

       (c) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to contributions 
     for plan years beginning after December 31, 2000.
       (2) Collective bargaining agreements.--In the case of a 
     plan maintained pursuant to 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.

          Subtitle D--Increasing Portability for Participants

     SEC. 331. ROLLOVERS ALLOWED AMONG VARIOUS TYPES OF PLANS.

       (a) Rollovers From and to Section 457 Plans.--
       (1) Rollovers from section 457 plans.--
       (A) In general.--Section 457(e) (relating to other 
     definitions and special rules) is amended by adding at the 
     end the following:
       ``(16) Rollover amounts.--
       ``(A) General rule.--In the case of an eligible deferred 
     compensation plan established and maintained by an employer 
     described in subsection (e)(1)(A), if--
       ``(i) any portion of the balance to the credit of an 
     employee in such plan is paid to such employee in an eligible 
     rollover distribution (within the meaning of section 
     402(c)(4) without regard to subparagraph (C) thereof),
       ``(ii) the employee transfers any portion of the property 
     such employee receives in such distribution to an eligible 
     retirement plan described in section 402(c)(8)(B), and
       ``(iii) in the case of a distribution of property other 
     than money, the amount so transferred consists of the 
     property distributed,
     then such distribution (to the extent so transferred) shall 
     not be includible in gross income for the taxable year in 
     which paid.
       ``(B) Certain rules made applicable.--The rules of 
     paragraphs (2) through (7) (other than paragraph (4)(C)) and 
     (9) of section 402(c) and section 402(f) shall apply for 
     purposes of subparagraph (A).
       ``(C) Reporting.--Rollovers under this paragraph shall be 
     reported to the Secretary in the same manner as rollovers 
     from qualified retirement plans (as defined in section 
     4974(c)).''.
       (B) Deferral limit determined without regard to rollover 
     amounts.--Section 457(b)(2) (defining eligible deferred 
     compensation plan) is amended by inserting ``(other than 
     rollover amounts)'' after ``taxable year''.
       (C) Direct rollover.--Paragraph (1) of section 457(d) is 
     amended by striking ``and'' at the end of subparagraph (A), 
     by striking the period at the end of subparagraph (B) and 
     inserting ``, and'', and by inserting after subparagraph (B) 
     the following:
       ``(C) in the case of a plan maintained by an employer 
     described in subsection (e)(1)(A), the plan meets 
     requirements similar to the requirements of section 
     401(a)(31).
     Any amount transferred in a direct trustee-to-trustee 
     transfer in accordance with section 401(a)(31) shall not be 
     includible in gross income for the taxable year of 
     transfer.''.
       (D) Withholding.--
       (i) Paragraph (12) of section 3401(a) is amended by adding 
     at the end the following:
       ``(E) under or to an eligible deferred compensation plan 
     which, at the time of such payment, is a plan described in 
     section 457(b) maintained by an employer described in section 
     457(e)(1)(A); or''.
       (ii) Paragraph (3) of section 3405(c) is amended to read as 
     follows:
       ``(3) Eligible rollover distribution.--For purposes of this 
     subsection, the term `eligible rollover distribution' has the 
     meaning given such term by section 402(f)(2)(A).''.
       (iii) Liability for withholding.--Subparagraph (B) of 
     section 3405(d)(2) is amended by striking ``or'' at the end 
     of clause (ii), by striking the period at the end of clause 
     (iii) and inserting ``, or'', and by adding at the end the 
     following:
       ``(iv) section 457(b).''.
       (2) Rollovers to section 457 plans.--
       (A) In general.--Section 402(c)(8)(B) (defining eligible 
     retirement plan) is amended by striking ``and'' at the end of 
     clause (iii), by striking the period at the end of clause 
     (iv) and inserting ``, and'', and by inserting after clause 
     (iv) the following new clause:
       ``(v) an eligible deferred compensation plan described in 
     section 457(b) of an employer described in section 
     457(e)(1)(A).''.
       (B) Separate accounting.--Section 402(c) is amended by 
     adding at the end the following new paragraph:
       ``(11) Separate accounting.--Unless a plan described in 
     clause (v) of paragraph (8)(B) agrees to separately account 
     for amounts rolled into such plan from eligible retirement 
     plans not described in such clause, the plan described in 
     such clause may not accept transfers or rollovers from such 
     retirement plans.''.
       (C) 10 percent additional tax.--Subsection (t) of section 
     72 (relating to 10-percent additional tax on early 
     distributions from qualified retirement plans) is amended by 
     adding at the end the following new paragraph:
       ``(9) Special rule for rollovers to section 457 plans.--For 
     purposes of this subsection, a distribution from an eligible 
     deferred compensation plan (as defined in section 457(b)) of 
     an employer described in section 457(e)(1)(A) shall be 
     treated as a distribution from a qualified retirement plan 
     described in 4974(c)(1) to the extent that such distribution 
     is attributable to an amount transferred to an eligible 
     deferred compensation plan from a qualified retirement plan 
     (as defined in section 4974(c)).''.
       (b) Allowance of Rollovers From and to 403(b) Plans.--
       (1) Rollovers from section 403(b) plans.--Section 
     403(b)(8)(A)(ii) (relating to rollover 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

[[Page 19044]]

     section 402(c) and section 402(f) shall apply for purposes of 
     subparagraph (A), except that section 402(f) shall be applied 
     to the payor in lieu of the plan administrator.''.
       (8) Section 408(a)(1) is amended by striking ``or 
     403(b)(8)'' and inserting ``, 403(b)(8), or 457(e)(16)''.
       (9) Subparagraphs (A) and (B) of section 415(b)(2) are each 
     amended by striking ``and 408(d)(3)'' and inserting 
     ``403(b)(8), 408(d)(3), and 457(e)(16)''.
       (10) Section 415(c)(2) is amended by striking ``and 
     408(d)(3)'' and inserting ``408(d)(3), and 457(e)(16)''.
       (11) Section 4973(b)(1)(A) is amended by striking ``or 
     408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
       (f) Effective Date; Special Rule.--
       (1) Effective date.--The amendments made by this section 
     shall apply to distributions after December 31, 2000.
       (2) Special rule.--Notwithstanding any other provision of 
     law, subsections (h)(3) and (h)(5) of section 1122 of the Tax 
     Reform Act of 1986 shall not apply to any distribution from 
     an eligible retirement plan (as defined in clause (iii) or 
     (iv) of section 402(c)(8)(B) of the Internal Revenue Code of 
     1986) on behalf of an individual if there was a rollover to 
     such plan on behalf of such individual which is permitted 
     solely by reason of any amendment made by this section.

     SEC. 332. ROLLOVERS OF IRAS INTO WORKPLACE RETIREMENT PLANS.

       (a) In General.--Subparagraph (A) of section 408(d)(3) 
     (relating to rollover amounts) is amended by adding ``or'' at 
     the end of clause (i), by striking clauses (ii) and (iii), 
     and by adding at the end the following:
       ``(ii) the entire amount received (including money and any 
     other property) is paid into an eligible retirement plan for 
     the benefit of such individual not later than the 60th day 
     after the date on which the payment or distribution is 
     received, except that the maximum amount which may be paid 
     into such plan may not exceed the portion of the amount 
     received which is includible in gross income (determined 
     without regard to this paragraph).
     For purposes of clause (ii), the term `eligible retirement 
     plan' means an eligible retirement plan described in clause 
     (iii), (iv), (v), or (vi) of section 402(c)(8)(B).''.
       (b) Conforming Amendments.--
       (1) Paragraph (1) of section 403(b) is amended by striking 
     ``section 408(d)(3)(A)(iii)'' and inserting ``section 
     408(d)(3)(A)(ii)''.
       (2) Clause (i) of section 408(d)(3)(D) is amended by 
     striking ``(i), (ii), or (iii)'' and inserting ``(i) or 
     (ii)''.
       (3) Subparagraph (G) of section 408(d)(3) is amended to 
     read as follows:
       ``(G) Simple retirement accounts.--In the case of any 
     payment or distribution out of a simple retirement account 
     (as defined in subsection (p)) to which section 72(t)(6) 
     applies, this paragraph shall not apply unless such payment 
     or distribution is paid into another simple retirement 
     account.''.
       (c) Effective Date; Special Rule.--
       (1) Effective date.--The amendments made by this section 
     shall apply to distributions after December 31, 2000.
       (2) Special rule.--Notwithstanding any other provision of 
     law, subsections (h)(3) and (h)(5) of section 1122 of the Tax 
     Reform Act of 1986 shall not apply to any distribution from 
     an eligible retirement plan (as defined in clause (iii) or 
     (iv) of section 402(c)(8)(B) of the Internal Revenue Code of 
     1986) on behalf of an individual if there was a rollover to 
     such plan on behalf of such individual which is permitted 
     solely by reason of the amendments made by this section.

     SEC. 333. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.

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

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

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

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

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

     SEC. 334. HARDSHIP EXCEPTION TO 60-DAY RULE.

       (a) Exempt Trusts.--Paragraph (3) of section 402(c) 
     (relating to transfer must be made within 60 days of receipt) 
     is amended to read as follows:
       ``(3) Transfer must be made within 60 days of receipt.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     paragraph (1) shall not apply to any transfer of a 
     distribution made after the 60th day following the day on 
     which the distributee received the property distributed.
       ``(B) Hardship exception.--The Secretary may waive the 60-
     day requirement under subparagraph (A) where the failure to 
     waive such requirement would be against equity or good 
     conscience, including casualty, disaster, or other events 
     beyond the reasonable control of the individual subject to 
     such requirement.''.
       (b) IRAs.--Paragraph (3) of section 408(d) (relating to 
     rollover contributions), as amended by section 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. 335. TREATMENT OF FORMS OF DISTRIBUTION.

       (a) Plan Transfers.--
       (1) Amendment to internal revenue code of 1986.--Paragraph 
     (6) of section 411(d) (relating to accrued benefit not to be 
     decreased 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.
       ``(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

[[Page 19045]]

       ``(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.
       ``(5) Elimination of form of distribution.--Except to the 
     extent provided in regulations, a defined contribution plan 
     shall not be treated as failing to meet the requirements of 
     this section merely because of the elimination of a form of 
     distribution previously available thereunder. This paragraph 
     shall not apply to the elimination of a form of distribution 
     with respect to any participant unless--
       ``(A) a single sum payment is available to such participant 
     at the same time or times as the form of distribution being 
     eliminated; and
       ``(B) such single sum payment is based on the same or 
     greater portion of the participant's account as the form of 
     distribution being eliminated.''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to years beginning after December 31, 2000.
       (b) Regulations.--
       (1) Amendment to internal revenue code of 1986.--The last 
     sentence of paragraph (6)(B) of section 411(d) (relating to 
     accrued benefit not to be decreased by amendment) is amended 
     to read as follows: ``The Secretary 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. 336. RATIONALIZATION OF RESTRICTIONS ON DISTRIBUTIONS.

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

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

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

     SEC. 337. PURCHASE OF SERVICE CREDIT IN GOVERNMENTAL DEFINED 
                   BENEFIT PLANS.

       (a) 403(b) Plans.--Subsection (b) of section 403 is amended 
     by adding at the end the following new paragraph:
       ``(13) Trustee-to-trustee transfers to purchase permissive 
     service credit.--No amount shall be includible in gross 
     income by reason of a direct trustee-to-trustee transfer to a 
     defined benefit governmental plan (as defined in section 
     414(d)) if such transfer is--
       ``(A) for the purchase of permissive service credit (as 
     defined in section 415(n)(3)(A)) under such plan, or
       ``(B) a repayment to which section 415 does not apply by 
     reason of subsection (k)(3) thereof.''.
       (b) 457 Plans.--
       (1) Subsection (e) of section 457 is amended by adding 
     after paragraph (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. 338. EMPLOYERS MAY DISREGARD ROLLOVERS FOR PURPOSES OF 
                   CASH-OUT AMOUNTS.

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

     SEC. 339. INCLUSION REQUIREMENTS FOR SECTION 457 PLANS.

       (a) Year of Inclusion.--Subsection (a) of section 457 
     (relating to year of inclusion in gross income) is amended to 
     read as follows:
       ``(a) Year of Inclusion in Gross Income.--
       ``(1) In general.--Any amount of compensation deferred 
     under an eligible deferred compensation plan, and any income 
     attributable to the amounts so deferred, shall be includible 
     in gross income only for the taxable year in which such 
     compensation or other income--
       ``(A) is paid to the participant or other beneficiary, in 
     the case of a plan of an eligible employer described in 
     subsection (e)(1)(A), and
       ``(B) is paid or otherwise made available to the 
     participant or other beneficiary, in the case of a plan of an 
     eligible employer described in subsection (e)(1)(B).
       ``(2) Special rule for rollover amounts.--To the extent 
     provided in section 72(t)(9), section 72(t) shall apply to 
     any amount includible in gross income under this 
     subsection.''.

[[Page 19046]]

       (b) Conforming Amendment.--So much of paragraph (9) of 
     section 457(e) as precedes subparagraph (A) is amended to 
     read as follows:
       ``(9) Benefits of tax exempt organization plans not treated 
     as made available by reason of certain elections, etc.--In 
     the case of an eligible deferred compensation plan of an 
     employer described in paragraph (1)(B)--''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to distributions after December 31, 2000.

       Subtitle E--Strengthening Pension Security and Enforcement

     SEC. 341. REPEAL OF 150 PERCENT OF CURRENT LIABILITY FUNDING 
                   LIMIT.

       (a) Amendment to Internal Revenue Code of 1986.--Section 
     412(c)(7) (relating to full-funding limitation) is amended--
       (1) by striking ``the applicable percentage'' in 
     subparagraph (A)(i)(I) and inserting ``in the case of plan 
     years beginning before January 1, 2004, the applicable 
     percentage'', and
       (2) by amending subparagraph (F) to read as follows:
       ``(F) Applicable percentage.--For purposes of subparagraph 
     (A)(i)(I), the applicable percentage shall be determined in 
     accordance with the following table:

    ``In the case of any plan                            The applicable
      year beginning in--                               percentage is--
      2001.........................................................160 
      2002.........................................................165 
      2003......................................................170.''.
       (b) Amendment to ERISA.--Section 302(c)(7) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1082(c)(7)) 
     is amended--
       (1) by striking ``the applicable percentage'' in 
     subparagraph (A)(i)(I) and inserting ``in the case of plan 
     years beginning before January 1, 2004, the applicable 
     percentage'', and
       (2) by amending subparagraph (F) to read as follows:
       ``(F) Applicable percentage.--For purposes of subparagraph 
     (A)(i)(I), the applicable percentage shall be determined in 
     accordance with the following table:

    ``In the case of any plan                            The applicable
      year beginning in--                               percentage is--
      2001.........................................................160 
      2002.........................................................165 
      2003......................................................170.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after December 31, 2000.

     SEC. 342. 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. 343. EXCISE TAX RELIEF FOR SOUND PENSION FUNDING.

       (a) In General.--Subsection (c) of section 4972 (relating 
     to nondeductible contributions) is amended by adding at the 
     end the following new paragraph:
       ``(7) Defined benefit plan exception.--In determining the 
     amount of nondeductible contributions for any taxable year, 
     an employer may elect for such year not to take into account 
     any contributions to a defined benefit plan except to the 
     extent that such contributions exceed the full-funding 
     limitation (as defined in section 412(c)(7), determined 
     without regard to subparagraph (A)(i)(I) thereof). For 
     purposes of this paragraph, the deductible limits under 
     section 404(a)(7) shall first be applied to amounts 
     contributed to defined contribution plans and then to amounts 
     described in this paragraph. If an employer makes an election 
     under this paragraph for a taxable year, paragraph (6) shall 
     not apply to such employer for such taxable year.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2000.

     SEC. 344. 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 an applicable pension plan to meet the 
     requirements of subsection (e) with respect to any applicable 
     individual.
       ``(b) Amount of Tax.--
       ``(1) In general.--The amount of the tax imposed by 
     subsection (a) on any failure with respect to any applicable 
     individual shall be $100 for each day in the noncompliance 
     period with respect to such failure.
       ``(2) Noncompliance period.--For purposes of this section, 
     the term `noncompliance period' means, with respect to any 
     failure, the period beginning on the date the failure first 
     occurs and ending on the date the 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 defined benefit plan adopts an 
     amendment which has the effect of significantly reducing the 
     rate of future benefit accrual of 1 or more participants 
     (including any elimination or reduction of an early 
     retirement benefit or retirement-type subsidy), the plan 
     administrator shall, not later than the 30th day before the 
     effective date of the amendment, provide written notice to 
     each applicable individual (and to each employee organization 
     representing applicable individuals) which--
       ``(A) sets forth the plan amendment and its effective date, 
     and
       ``(B) includes sufficient information (as determined in 
     accordance with regulations prescribed by the Secretary) to 
     allow such participants and beneficiaries to understand how 
     the amendment generally affects different classes of 
     employees.
       ``(2) Additional notice required in certain cases.--
       ``(A) In general.--If a plan amendment to which paragraph 
     (1) applies--
       ``(i) either--

       ``(I) provides for a significant change in the manner in 
     which the accrued benefit of an applicable individual is 
     determined under the plan, or
       ``(II) requires an applicable individual to choose between 
     2 or more benefit formulas, and

       ``(ii) may reasonably be expected to affect such applicable 
     individual,
     the plan shall, not later than the date which is 6 months 
     after the effective date of the amendment, provide written 
     notice to such applicable individual which includes the 
     information described in subparagraph (B).
       ``(B) Additional information.--The notice under 
     subparagraph (A) shall include the following information:
       ``(i) The accrued benefit (and if the amendment adds the 
     option of an immediate lump sum distribution, the present 
     value of the accrued benefit) as of the effective date, 
     determined

[[Page 19047]]

     under the terms of the plan in effect immediately before the 
     effective date.
       ``(ii) The accrued benefit as of the effective date, 
     determined under the terms of the plan in effect on the 
     effective date and without regard to any minimum accrued 
     benefit required by reason of section 411(d)(6).
       ``(iii) Sufficient information (as determined in accordance 
     with regulations prescribed by the Secretary) for an 
     applicable individual to compute their projected accrued 
     benefit under the terms of the plan in effect on the 
     effective date or to acquire information necessary to compute 
     such projected accrued benefit.
       ``(C) Option to provide projected accrued benefit.--A plan 
     may, in lieu of the information described in subparagraph 
     (B)(iii), include a determination of an applicable 
     individual's projected accrued benefit under the terms of the 
     plan in effect on the effective date. Such determination 
     shall include a disclosure of the assumptions used by the 
     plan in determining such benefit and such assumptions must be 
     reasonable in the aggregate.
       ``(D) Rules for computing benefits.--For purposes of this 
     paragraph, an applicable individual's accrued benefit and 
     projected accrued benefit shall be computed--
       ``(i) as if the accrued benefit were in the form of a 
     single life annuity commencing at normal retirement age (and 
     by taking into account any early retirement subsidy), and
       ``(ii) by using the applicable mortality table and the 
     applicable interest rate under section 417(e)(3)(A).
       ``(3) Secretary may change notice and time for notice.--If 
     a plan amendment to which paragraph (1) applies requires an 
     applicable individual to choose between 2 or more benefit 
     formulas, the Secretary may, after consultation with the 
     Secretary of Labor--
       ``(A) require additional information to be provided in 
     either of the notices described in paragraph (1) or (2), and
       ``(B) require either of such notices to be provided at a 
     time other than the time required under either such 
     paragraph.
       ``(4) Notice before adoption of amendment.--A plan shall 
     not be treated as failing to meet the requirements of 
     paragraph (1) or (2) merely because notice is provided before 
     the adoption of the plan amendment if no material 
     modification of the amendment occurs before the amendment is 
     adopted.
       ``(5) Notice to designee.--Any notice under paragraph (1) 
     or (2) may be provided to a person designated, in writing, by 
     the person to which it would otherwise be provided.
       ``(f) Applicable Individual.--For purposes of this 
     section--
       ``(1) In general.--The term `applicable individual' means, 
     with respect to any plan amendment--
       ``(A) any participant in the plan, and
       ``(B) any beneficiary who is an alternate payee (within the 
     meaning of section 414(p)(8)) under an applicable qualified 
     domestic relations order (within the meaning of section 
     414(p)(1)(A)).
       ``(2) Exception for participants with less than 1 year of 
     participation.--Such term shall not include a participant who 
     has less than 1 year of participation (within the meaning of 
     section 411(b)(4)) under the plan as of the effective date of 
     the plan amendment.
       ``(3) Participants getting higher of benefits.--Such term 
     shall not include a participant or beneficiary who, under the 
     terms of the plan as of the effective date of the plan 
     amendment, is entitled to the greater of the accrued benefit 
     under such terms or the accrued benefit under the terms of 
     the plan in effect immediately before the effective date.
       ``(g) Applicable Pension Plan.--For purposes of this 
     section, the term `applicable pension plan' means--
       ``(1) a defined benefit plan, or
       ``(2) an individual account plan which is subject to the 
     funding standards of section 412.
     Such term shall not include a governmental plan (within the 
     meaning of section 414(d)) or a church plan (within the 
     meaning of section 414(e)) with respect to which an election 
     under section 410(d) has not been made.''.
       (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) Amendment to ERISA.--Section 204(h) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1054(h)) is 
     amended to read as follows:
       ``(h)(1) An applicable pension plan may not adopt an 
     amendment which has the effect of significantly reducing the 
     rate of future benefit accrual of 1 or more participants 
     (including any elimination or reduction of an early 
     retirement benefit or retirement-type subsidy) unless the 
     plan administrator provides, not later than the 30th day 
     before the effective date of the amendment, written notice to 
     each applicable individual (and to each employee organization 
     representing applicable individuals) which--
       ``(A) sets forth the plan amendment and its effective date, 
     and
       ``(B) includes sufficient information (as determined in 
     accordance with regulations prescribed by the Secretary of 
     the Treasury) to allow applicable individuals to understand 
     how the amendment generally affects different classes of 
     employees.
       ``(2)(A) If a plan amendment to which paragraph (1) 
     applies--
       ``(i) either--
       ``(I) provides for a significant change in the manner in 
     which the accrued benefit is determined under the plan, or
       ``(II) requires an applicable individual to choose between 
     2 or more benefit formulas, and
       ``(ii) may reasonably be expected to affect such applicable 
     individual,
     the plan shall, not later than the date which is 6 months 
     after the effective date of the amendment, provide written 
     notice to such applicable individual which includes the 
     information described in subparagraph (B).
       ``(B) The notice under subparagraph (A) shall include the 
     following information:
       ``(i) The accrued benefit (and if the amendment adds the 
     option of an immediate lump sum distribution, the present 
     value of the accrued benefit) as of the effective date, 
     determined under the terms of the plan in effect immediately 
     before the effective date.
       ``(ii) The accrued benefit as of the effective date, 
     determined under the terms of the plan in effect on the 
     effective date and without regard to any minimum accrued 
     benefit required by reason of section 204(g).
       ``(iii) Sufficient information (as determined in accordance 
     with regulations prescribed by the Secretary of the Treasury) 
     for an applicable individual to compute their projected 
     accrued benefit under the terms of the plan in effect on the 
     effective date or to acquire information necessary to compute 
     such projected accrued benefit.
       ``(C) A plan may, in lieu of the information described in 
     subparagraph (B)(iii), include a determination of an 
     applicable individual's projected accrued benefit under the 
     terms of the plan in effect on the effective date. Such 
     determination shall include a disclosure of the assumptions 
     used by the plan in determining such benefit and such 
     assumptions must be reasonable in the aggregate.
       ``(D) For purposes of this paragraph, an applicable 
     individual's accrued benefit and projected accrued benefit 
     shall be computed--
       ``(i) as if the accrued benefit were in the form of a 
     single life annuity commencing at normal retirement age (and 
     by taking into account any early retirement subsidy), and
       ``(ii) by using the applicable mortality table and the 
     applicable interest rate under section 205(g)(3)(A).
       ``(3) If a plan amendment to which paragraph (1) applies 
     requires an applicable individual to choose between 2 or more 
     benefit formulas, the Secretary of the Treasury may, after 
     consultation with the Secretary--
       ``(A) require additional information to be provided in 
     either of the notices described in paragraph (1) or (2), and
       ``(B) require either of such notices to be provided at a 
     time other than the time required under either such 
     paragraph.
       ``(4) A plan shall not be treated as failing to meet the 
     requirements of paragraph (1) or (2) merely because notice is 
     provided before the adoption of the plan amendment if no 
     material modification of the amendment occurs before the 
     amendment is adopted.
       ``(5) Any notice under paragraph (1) or (2) may be provided 
     to a person designated, in writing, by the person to which it 
     would otherwise be provided.
       ``(6)(A) For purposes of this subsection, the term 
     `applicable individual' means, with respect to any plan 
     amendment--
       ``(i) any participant in the plan, and
       ``(ii) any beneficiary who is an alternate payee (within 
     the meaning of section 206(d)(3)(K)) under an applicable 
     qualified domestic relations order (within the meaning of 
     section 206(d)(3)(B)).
       ``(B) Such term shall not include a participant who has 
     less than 1 year of participation (within the meaning of 
     section 204(b)(4)) under the plan as of the effective date of 
     the plan amendment.
       ``(C) Such term shall not include a participant or 
     beneficiary who, under the terms of the plan as of the 
     effective date of the plan amendment, is entitled to the 
     greater of the accrued benefit under such terms or the 
     accrued benefit under the terms of the plan in effect 
     immediately before the effective date.
       ``(7) For purposes of this subsection, the term `applicable 
     pension plan' means--
       ``(A) a defined benefit plan, or
       ``(B) an individual account plan which is subject to the 
     funding standards of section 302.
     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)) with respect to which an election 
     under section 410(d) of the Internal Revenue Code of 1986 has 
     not been made.''.
       (c) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to plan amendments taking effect on or after the date 
     of the enactment of this Act.
       (2) Special rule for collectively bargained plans.--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 the enactment of 
     this Act, the amendments made by this section shall not apply 
     to plan amendments taking effect 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, 2000, or
       (B) January 1, 2002.
       (3) Special rule.--The period for providing any notice 
     required by the amendments made by this section shall not end 
     before the date which

[[Page 19048]]

     is 3 months after the date of the enactment of this Act.

     SEC. 345. PROTECTION OF INVESTMENT OF EMPLOYEE CONTRIBUTIONS 
                   TO 401(K) PLANS.

       (a) In General.--Section 1524(b) of the Taxpayer Relief Act 
     of 1997 is amended to read as follows:
       ``(b) Effective Date.--
       ``(1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to elective 
     deferrals for plan years beginning after December 31, 1998.
       ``(2) Nonapplication to previously acquired property.--The 
     amendments made by this section shall not apply to any 
     elective deferral used to acquire an interest in the income 
     or gain from employer securities or employer real property 
     acquired--
       ``(A) before January 1, 1999, or
       ``(B) after such date pursuant to a written contract which 
     was binding on such date and at all times thereafter on such 
     plan.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply as if included in the provision of the Taxpayer 
     Relief Act of 1997 to which it relates.

     SEC. 346. 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) Application of Special Early Retirement Rules.--Section 
     415(b)(2)(F) (relating to plans maintained by governments and 
     tax-exempt organizations) is amended--
       (1) by inserting ``a multiemployer plan (within the meaning 
     of section 414(f)),'' after ``section 414(d)),'', and
       (2) by striking the heading and inserting:
       ``(F) Special early retirement rules for certain plans.--
     ''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 1999.

     SEC. 347. MAXIMUM CONTRIBUTION DEDUCTION RULES MODIFIED AND 
                   APPLIED TO ALL DEFINED BENEFIT PLANS.

       (a) In General.--Subparagraph (D) of section 404(a)(1) 
     (relating to special rule in case of certain plans) is 
     amended to read as follows:
       ``(D) Special rule in case of certain plans.--
       ``(i) In general.--In the case of any defined benefit plan, 
     except as provided in regulations, the maximum amount 
     deductible under the limitations of this paragraph shall not 
     be less than the unfunded termination liability (determined 
     as if the proposed termination date referred to in section 
     4041(b)(2)(A)(i)(II) of the Employee Retirement Income 
     Security Act of 1974 were the last day of the plan year).
       ``(ii) Plans with less than 100 participants.--For purposes 
     of this subparagraph, in the case of a plan which has less 
     than 100 participants for the plan year, termination 
     liability shall not include the liability attributable to 
     benefit increases for highly compensated employees (as 
     defined in section 414(q)) resulting from a plan amendment 
     which is made or becomes effective, whichever is later, 
     within the last 2 years before the termination date.
       ``(iii) Rule for determining number of participants.--For 
     purposes of determining whether a plan has more than 100 
     participants, all defined benefit plans maintained by the 
     same employer (or any member of such employer's controlled 
     group (within the meaning of section 412(l)(8)(C))) shall be 
     treated as 1 plan, but only employees of such member or 
     employer shall be taken into account.
       ``(iv) Plans established and maintain by professional 
     service employers.--Clause (i) shall not apply to a plan 
     described in section 4021(b)(13) of the Employee Retirement 
     Income Security Act of 1974.''.
       (b) Conforming Amendment.--Paragraph (6) of section 4972(c) 
     is amended to read as follows:
       ``(6) Exceptions.--In determining the amount of 
     nondeductible contributions for any taxable year, there shall 
     not be taken into account so much of the contributions to 1 
     or more defined contribution plans which are not deductible 
     when contributed solely because of section 404(a)(7) as does 
     not exceed the greater of--
       ``(A) the amount of contributions not in excess of 6 
     percent of compensation (within the meaning of section 
     404(a)) paid or accrued (during the taxable year for which 
     the contributions were made) to beneficiaries under the 
     plans, or
       ``(B) the sum of--
       ``(i) the amount of contributions described in section 
     401(m)(4)(A), plus
       ``(ii) the amount of contributions described in section 
     402(g)(3)(A).
     For purposes of this paragraph, the deductible limits under 
     section 404(a)(7) shall first be applied to amounts 
     contributed to a defined benefit plan and then to amounts 
     described in subparagraph (B).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after December 31, 2000.

     SEC. 348. INCREASE IN SECTION 415 EARLY RETIREMENT LIMIT FOR 
                   GOVERNMENTAL AND OTHER PLANS.

       (a) In General.--Subclause (II) of section 415(b)(2)(F)(i), 
     as amended by section 346(c), is amended--
       (1) by striking ``$75,000'' and inserting ``80 percent of 
     the dollar amount in effect under paragraph (1)(A)'', and
       (2) by striking ``the $75,000 limitation'' and inserting 
     ``80 percent of such dollar amount''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 1999.

              Subtitle F--Encouraging Retirement Education

     SEC. 351. PERIODIC PENSION BENEFITS STATEMENTS.

       (a) In General.--Section 105(a) of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1025 (a)) is amended 
     to read as follows:
       ``(a)(1) Except as provided in paragraph (2)--
       ``(A) the administrator of an individual account plan shall 
     furnish a pension benefit statement--
       ``(i) to a plan participant at least once annually, and
       ``(ii) to a plan beneficiary upon written request, and
       ``(B) the administrator of a defined benefit plan shall 
     furnish a pension benefit statement--
       ``(i) at least once every 3 years to each participant with 
     a nonforfeitable accrued benefit who is employed by the 
     employer maintaining the plan at the time the statement is 
     furnished to participants, and
       ``(ii) to a participant or beneficiary of the plan upon 
     written request.
       ``(2) Notwithstanding paragraph (1), the administrator of a 
     plan to which more than 1 unaffiliated employer is required 
     to contribute shall only be required to furnish a pension 
     benefit statement under paragraph (1) upon the written 
     request of a participant or beneficiary of the plan.
       ``(3) A pension benefit statement under paragraph (1)--
       ``(A) shall indicate, on the basis of the latest available 
     information--
       ``(i) the total benefits accrued, and
       ``(ii) the nonforfeitable pension benefits, if any, which 
     have accrued, or the earliest date on which benefits will 
     become nonforfeitable,
       ``(B) shall be written in a manner calculated to be 
     understood by the average plan participant, and
       ``(C) may be provided in written, electronic, telephonic, 
     or other appropriate form.
       ``(4) In the case of a defined benefit plan, the 
     requirements of paragraph (1)(B)(i) shall be treated as met 
     with respect to a participant if the administrator provides 
     the participant at least once each year with notice of the 
     availability of the pension benefit statement and the ways in 
     which the participant may obtain such statement. Such notice 
     shall be provided in written, electronic, telephonic, or 
     other appropriate form, and may be included with other 
     communications to the participant if done in a manner 
     reasonably designed to attract the attention of the 
     participant.''.
       (b) Conforming Amendments.--
       (1) Section 105 of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1025) is amended by striking 
     subsection (d).
       (2) Section 105(b) of such Act (29 U.S.C. 1025(b)) is 
     amended to read as follows:
       ``(b) In no case shall a participant or beneficiary of a 
     plan be entitled to more than one statement described in 
     subsection (a)(1)(A) or (a)(1)(B)(ii), whichever is 
     applicable, in any 12-month period.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after December 31, 2000.

     SEC. 352. CLARIFICATION OF TREATMENT OF EMPLOYER-PROVIDED 
                   RETIREMENT ADVICE.

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

[[Page 19049]]

       ``(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 G--Reducing Regulatory Burdens

     SEC. 361. FLEXIBILITY IN NONDISCRIMINATION AND COVERAGE 
                   RULES.

       (a) Nondiscrimination.--
       (1) In general.--The Secretary of the Treasury shall, by 
     regulation, provide that a plan shall be deemed to satisfy 
     the requirements of section 401(a)(4) of the Internal Revenue 
     Code of 1986 if such plan satisfies the facts and 
     circumstances test under section 401(a)(4) of such Code, as 
     in effect before January 1, 1994, but only if--
       (A) the plan satisfies conditions prescribed by the 
     Secretary to appropriately limit the availability of such 
     test, and
       (B) the plan is submitted to the Secretary for a 
     determination of whether it satisfies such test.
     Subparagraph (B) shall only apply to the extent provided by 
     the Secretary.
       (2) Effective dates.--
       (A) Regulations.--The regulation required by subsection (a) 
     shall apply to years beginning after December 31, 2000.
       (B) Conditions of availability.--Any condition of 
     availability prescribed by the Secretary under paragraph 
     (1)(A) shall not apply before the first year beginning not 
     less than 120 days after the date on which such condition is 
     prescribed.
       (b) Coverage Test.--
       (1) In general.--Section 410(b)(1) (relating to minimum 
     coverage requirements) is amended by adding at the end the 
     following:
       ``(D) In the case that the plan fails to meet the 
     requirements of subparagraphs (A), (B) and (C), the plan--
       ``(i) satisfies subparagraph (B), as in effect immediately 
     before the enactment of the Tax Reform Act of 1986,
       ``(ii) is submitted to the Secretary for a determination of 
     whether it satisfies the requirement described in clause (i), 
     and
       ``(iii) satisfies conditions prescribed by the Secretary by 
     regulation that appropriately limit the availability of this 
     subparagraph.
     Clause (ii) shall apply only to the extent provided by the 
     Secretary.''.
       (2) Effective dates.--
       (A) In general.--The amendment made by subsection (a) shall 
     apply to years beginning after December 31, 2000.
       (B) Conditions of availability.--Any condition of 
     availability prescribed by the Secretary under regulations 
     prescribed by the Secretary under section 410(b)(1)(D) of the 
     Internal Revenue Code of 1986 shall not apply before the 
     first year beginning not less than 120 days after the date on 
     which such condition is prescribed.

     SEC. 362. MODIFICATION OF TIMING OF PLAN VALUATIONS.

       (a) In General.--Section 412(c)(9) (relating to annual 
     valuation) is amended--
       (1) by striking ``For purposes'' and inserting the 
     following:
       ``(A) In general.--For purposes'', and
       (2) by adding at the end the following:
       ``(B) Election to use prior year valuation.--
       ``(i) In general.--Except as provided in clause (ii), if, 
     for any plan year--

       ``(I) an election is in effect under this subparagraph with 
     respect to a plan, and
       ``(II) the assets of the plan are not less than 125 percent 
     of the plan's current liability (as defined in paragraph 
     (7)(B)), determined as of the valuation date for the 
     preceding plan year,

     then this section shall be applied using the information 
     available as of such valuation date.
       ``(ii) Exceptions.--

       ``(I) Actual valuation every 3 years.--Clause (i) shall not 
     apply for more than 2 consecutive plan years and valuation 
     shall be under subparagraph (A) with respect to any plan year 
     to which clause (i) does not apply by reason of this 
     subclause.
       ``(II) Regulations.--Clause (i) shall not apply to the 
     extent that more frequent valuations are required under the 
     regulations under subparagraph (A).

       ``(iii) Adjustments.--Information under clause (i) shall, 
     in accordance with regulations, be actuarially adjusted to 
     reflect significant differences in participants.
       ``(iv) Election.--An election under this subparagraph, once 
     made, shall be irrevocable without the consent of the 
     Secretary.''.
       (b) Amendments to ERISA.--Paragraph (9) of section 302(c) 
     of the Employee Retirement Income Security Act of 1974 (29 
     U.S.C. 1053(c)) is amended--
       (1) by inserting ``(A)'' after ``(9)'', and
       (2) by adding at the end the following:
       ``(B)(i) Except as provided in clause (ii), if, for any 
     plan year--
       ``(I) an election is in effect under this subparagraph with 
     respect to a plan, and
       ``(II) the assets of the plan are not less than 125 percent 
     of the plan's current liability (as defined in paragraph 
     (7)(B)), determined as of the valuation date for the 
     preceding plan year,
     then this section shall be applied using the information 
     available as of such valuation date.
       ``(ii)(I) Clause (i) shall not apply for more than 2 
     consecutive plan years and valuation shall be under 
     subparagraph (A) with respect to any plan year to which 
     clause (i) does not apply by reason of this subclause.
       ``(II) Clause (i) shall not apply to the extent that more 
     frequent valuations are required under the regulations under 
     subparagraph (A).
       ``(iii) Information under clause (i) shall, in accordance 
     with regulations, be actuarially adjusted to reflect 
     significant differences in participants.
       ``(iv) An election under this subparagraph, once made, 
     shall be irrevocable without the consent of the Secretary of 
     the Treasury.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after December 31, 2000.

     SEC. 363. SUBSTANTIAL OWNER BENEFITS IN TERMINATED PLANS.

       (a) Modification of Phase-In of Guarantee.--Section 
     4022(b)(5) of the Employee Retirement Income Security Act of 
     1974 (29 U.S.C. 1322(b)(5)) is amended to read as follows:
       ``(5)(A) For purposes of this paragraph, the term `majority 
     owner' means an individual who, at any time during the 60-
     month period ending on the date the determination is being 
     made--
       ``(i) owns the entire interest in an unincorporated trade 
     or business,
       ``(ii) in the case of a partnership, is a partner who owns, 
     directly or indirectly, 50 percent or more of either the 
     capital interest or the profits interest in such partnership, 
     or
       ``(iii) in the case of a corporation, owns, directly or 
     indirectly, 50 percent or more in value of either the voting 
     stock of that corporation or all the stock of that 
     corporation.
     For purposes of clause (iii), the constructive ownership 
     rules of section 1563(e) of the Internal Revenue Code of 1986 
     shall apply (determined without regard to section 
     1563(e)(3)(C)).
       ``(B) In the case of a participant who is a majority owner, 
     the amount of benefits guaranteed under this section shall 
     equal the product of--
       ``(i) a fraction (not to exceed 1) the numerator of which 
     is the number of years from the later of the effective date 
     or the adoption date of the plan to the termination date, and 
     the denominator of which is 10, and
       ``(ii) the amount of benefits that would be guaranteed 
     under this section if the participant were not a majority 
     owner.''.
       (b) Modification of Allocation of Assets.--
       (1) Section 4044(a)(4)(B) of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1344(a)(4)(B)) is amended by 
     striking ``section 4022(b)(5)'' and inserting ``section 
     4022(b)(5)(B)''.
       (2) Section 4044(b) of such Act (29 U.S.C. 1344(b)) is 
     amended--
       (A) by striking ``(5)'' in paragraph (2) and inserting 
     ``(4), (5),'', and
       (B) by redesignating paragraphs (3) through (6) as 
     paragraphs (4) through (7), respectively, and by inserting 
     after paragraph (2) the following:
       ``(3) If assets available for allocation under paragraph 
     (4) of subsection (a) are insufficient to satisfy in full the 
     benefits of all individuals who are described in that 
     paragraph, the assets shall be allocated first to benefits 
     described in subparagraph (A) of that paragraph. Any 
     remaining assets shall then be allocated to benefits 
     described in subparagraph (B) of that paragraph. If assets 
     allocated to such subparagraph (B) are insufficient to 
     satisfy in full the benefits described in that subparagraph, 
     the assets shall be allocated pro rata among individuals on 
     the basis of the present value (as of the termination date) 
     of their respective benefits described in that 
     subparagraph.''.
       (c) Conforming Amendments.--
       (1) Section 4021 of the Employee Retirement Income Security 
     Act of 1974 (29 U.S.C. 1321) is amended--
       (A) in subsection (b)(9), by striking ``as defined in 
     section 4022(b)(6)'', and
       (B) by adding at the end the following:
       ``(d) For purposes of subsection (b)(9), the term 
     `substantial owner' means an individual who, at any time 
     during the 60-month period ending on the date the 
     determination is being made--
       ``(1) owns the entire interest in an unincorporated trade 
     or business,
       ``(2) in the case of a partnership, is a partner who owns, 
     directly or indirectly, more than 10 percent of either the 
     capital interest or the profits interest in such partnership, 
     or
       ``(3) in the case of a corporation, owns, directly or 
     indirectly, more than 10 percent in value of either the 
     voting stock of that corporation or all the stock of that 
     corporation.
     For purposes of paragraph (3), the constructive ownership 
     rules of section 1563(e) of the Internal Revenue Code of 1986 
     shall apply (determined without regard to section 
     1563(e)(3)(C)).''.
       (2) Section 4043(c)(7) of such Act (29 U.S.C. 1343(c)(7)) 
     is amended by striking ``section 4022(b)(6)'' and inserting 
     ``section 4021(d)''.
       (d) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to plan 
     terminations--
       (A) under section 4041(c) of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1341(c)) with respect to 
     which notices of intent to terminate are provided under 
     section 4041(a)(2) of such Act (29 U.S.C. 1341(a)(2)) after 
     December 31, 2000, and
       (B) under section 4042 of such Act (29 U.S.C. 1342) with 
     respect to which proceedings are instituted by the 
     corporation after such date.
       (2) Conforming amendments.--The amendments made by 
     subsection (c) shall take effect on the date of enactment of 
     this Act.

     SEC. 364. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT LOSS OF 
                   DIVIDEND DEDUCTION.

       (a) In General.--Section 404(k)(2)(A) (defining applicable 
     dividends) is amended by striking ``or'' at the end of clause 
     (ii), by redesignating

[[Page 19050]]

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

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

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

     SEC. 365. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.

       (a) Expansion of Period.--
       (1) In general.--
       (A) Amendment of internal revenue code of 1986.--
     Subparagraph (A) of section 417(a)(6) is amended by striking 
     ``90-day'' and inserting ``1-year''.
       (B) Amendment to erisa.--Subparagraph (A) of section 
     205(c)(7) of the Employee Retirement Income Security Act of 
     1974 (29 U.S.C. 1055(c)(7)) is amended by striking ``90-day'' 
     and inserting ``1-year''.
       (2) Modification of regulations.--The Secretary of the 
     Treasury shall modify the regulations under sections 402(f), 
     411(a)(11), and 417 of the Internal Revenue Code of 1986 to 
     substitute ``1-year'' for ``90 days'' each place it appears 
     in Treasury Regulations sections 1.402(f)-1, 1.411(a)-11(c), 
     and 1.417(e)-1(b).
       (3) Effective date.--The amendments made by paragraph (1) 
     and the modifications required by paragraph (2) shall apply 
     to years beginning after December 31, 2000.
       (b) Consent Regulation Inapplicable to Certain 
     Distributions.--
       (1) In general.--The Secretary of the Treasury shall modify 
     the regulations under section 411(a)(11) of the Internal 
     Revenue Code of 1986 to provide that the description of a 
     participant's right, if any, to defer receipt of a 
     distribution shall also describe the consequences of failing 
     to defer such receipt.
       (2) Effective date.--The modifications required by 
     paragraph (1) shall apply to years beginning after December 
     31, 2000.

     SEC. 366. REPEAL OF TRANSITION RULE RELATING TO CERTAIN 
                   HIGHLY COMPENSATED EMPLOYEES.

       (a) In General.--Paragraph (4) of section 1114(c) of the 
     Tax Reform Act of 1986 is hereby repealed.
       (b) Effective Date.--The repeal made by subsection (a) 
     shall apply to plan years beginning after December 31, 1999.

     SEC. 367. EMPLOYEES OF TAX-EXEMPT ENTITIES.

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

     SEC. 368. EXTENSION TO INTERNATIONAL ORGANIZATIONS OF 
                   MORATORIUM ON APPLICATION OF CERTAIN 
                   NONDISCRIMINATION RULES APPLICABLE TO STATE AND 
                   LOCAL PLANS.

       (a) In General.--Subparagraph (G) of section 401(a)(5), 
     subparagraph (H) of section 401(a)(26), subparagraph (G) of 
     section 401(k)(3), and paragraph (2) of section 1505(d) of 
     the Taxpayer Relief Act of 1997 are each amended by inserting 
     ``or by an international organization which is described in 
     section 414(d)'' after ``or instrumentality thereof)''.
       (b) Conforming Amendments.--
       (1) The headings for subparagraph (G) of section 401(a)(5) 
     and subparagraph (H) of section 401(a)(26) are each amended 
     by inserting ``and international organization'' after 
     ``governmental''.
       (2) Subparagraph (G) of section 401(k)(3) is amended by 
     inserting ``State and local governmental and international 
     organization plans.--'' after ``(G)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to years beginning after December 31, 2000.

     SEC. 369. ANNUAL REPORT DISSEMINATION.

       (a) In General.--Section 104(b)(3) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1024(b)(3)) 
     is amended by striking ``shall furnish'' and inserting 
     ``shall make available for examination (and, upon request, 
     shall furnish)''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to reports for years beginning after December 31, 
     1998.

     SEC. 370. MODIFICATION OF EXCLUSION FOR EMPLOYER PROVIDED 
                   TRANSIT PASSES AND PASSENGERS PERMITTED TO 
                   UTILIZE OTHERWISE EMPTY SEATS ON AIRCRAFT.

       (a) In General.--Section 132(f)(3) (relating to cash 
     reimbursements) is amended by striking the last sentence.
       (b) Subsection (h) of section 132 of the Internal Revenue 
     Code of 1986 (relating to certain fringe benefits) is amended 
     by adding at the end thereof the following new paragraph:
       ``(4) Special rule for passengers traveling on 
     noncommercial aircraft.--Any use of noncommercial air 
     transportation by an individual shall be treated as use by an 
     employee if no regularly scheduled commercial flight is 
     available that day from the air facility at the individual's 
     location.''.
       (c) Subsection (j) of section 132 of the Internal Revenue 
     Code of 1986 (relating to certain fringe benefits) is amended 
     by adding at the end thereof the following new paragraph:
       ``(9) Special rule for certain noncommercial air 
     transportation.--For the purposes of subsection (b) the term 
     `no-additional-cost service' includes the value of 
     transportation provided by an employer to an employee on a 
     noncommercially operated aircraft if--
       ``(A) such transportation is provided on a flight made in 
     the ordinary course of the trade or business of the employer 
     owning or leasing such aircraft for use in such trade or 
     business,
       ``(B) the flight on which the transportation is provided by 
     the employer would have been made whether or not such 
     employee was transported on the flight, and
       ``(C) the employer incurs no substantial additional cost in 
     providing such transportation to such employee.
     For purposes of this paragraph, an aircraft is 
     noncommercially operated if transportation provided by the 
     employer is not provided or made available to the general 
     public by purchase of a ticket or other fare.''.
       (d) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.

     SEC. 371. REPORTING SIMPLIFICATION.

       (a) Simplified Annual Filing Requirement for Owners and 
     Their Spouses.--
       (1) In general.--The Secretary of the Treasury shall modify 
     the requirements for filing annual returns with respect to 
     one-participant retirement plans to ensure that such plans 
     with assets of $500,000 or less as of the close of the plan 
     year need not file a return for that year.
       (2) One-participant retirement plan defined.--For purposes 
     of this subsection, the term ``one-participant retirement 
     plan'' means a retirement plan that--
       (A) on the first day of the plan year--
       (i) covered only the employer (and the employer's spouse) 
     and the employer owned the entire business (whether or not 
     incorporated), or
       (ii) covered only one or more partners (and their spouses) 
     in a business partnership (including partners in an S or C 
     corporation),
       (B) meets the minimum coverage requirements of section 
     410(b) of the Internal Revenue Code of 1986 without being 
     combined with any other plan of the business that covers the 
     employees of the business,
       (C) does not provide benefits to anyone except the employer 
     (and the employer's spouse) or the partners (and their 
     spouses),
       (D) does not cover a business that is a member of an 
     affiliated service group, a controlled group of corporations, 
     or a group of businesses under common control, and
       (E) does not cover a business that leases employees.
       (3) Other definitions.--Terms used in paragraph (2) which 
     are also used in section 414 of the Internal Revenue Code of 
     1986 shall have the respective meanings given such terms by 
     such section.
       (b) Simplified Annual Filing Requirement for Plans With 
     Fewer Than 25 Employees.--In the case of a retirement plan 
     which covers less than 25 employees on the 1st day of the 
     plan year and meets the requirements described in 
     subparagraphs (B), (D), and (E) of subsection (a)(2), the 
     Secretary of the Treasury shall provide for the filing of a 
     simplified annual return that is substantially similar to the 
     annual return required to be filed by a one-participant 
     retirement plan.
       (c) Effective Date.--The provisions of this section shall 
     take effect on January 1, 2001.

                      Subtitle H--Plan Amendments

     SEC. 381. PROVISIONS RELATING TO PLAN AMENDMENTS.

       (a) In General.--If this section applies to any plan or 
     contract amendment--
       (1) such plan or contract shall be treated as being 
     operated in accordance with the terms of the plan during the 
     period described in subsection (b)(2)(A), and
       (2) such plan shall not fail to meet the requirements of 
     section 411(d)(6) of the Internal Revenue Code of 1986 by 
     reason of such amendment.
       (b) Amendments to Which Section Applies.--
       (1) In general.--This section shall apply to any amendment 
     to any plan or annuity contract which is made--
       (A) pursuant to any amendment made by this title, or 
     pursuant to any regulation issued under this title, and
       (B) on or before the last day of the first plan year 
     beginning on or after January 1, 2003.
     In the case of a government plan (as defined in section 
     414(d) of the Internal Revenue Code of 1986), this paragraph 
     shall be applied by substituting ``2005'' for ``2003''.
       (2) Conditions.--This section shall not apply to any 
     amendment unless--
       (A) during the period--
       (i) beginning on the date the legislative or regulatory 
     amendment described in paragraph (1)(A) takes effect (or in 
     the case of a plan or contract amendment not required by such 
     legislative or regulatory amendment, the effective date 
     specified by the plan), and

[[Page 19051]]

       (ii) ending on the date described in paragraph (1)(B) (or, 
     if earlier, the date the plan or contract amendment is 
     adopted),
     the plan or contract is operated as if such plan or contract 
     amendment were in effect, and
       (B) such plan or contract amendment applies retroactively 
     for such period.

               TITLE IV--EDUCATION TAX RELIEF PROVISIONS

     SEC. 401. ELIMINATION OF 60-MONTH LIMIT AND INCREASE IN 
                   INCOME LIMITATION ON STUDENT LOAN INTEREST 
                   DEDUCTION.

       (a) Elimination of 60-Month Limit.--
       (1) In general.--Section 221 (relating to interest on 
     education loans) is amended by striking subsection (d) and by 
     redesignating subsections (e), (f), and (g) as subsections 
     (d), (e), and (f), respectively.
       (2) Conforming amendment.--Section 6050S(e) is amended by 
     striking ``section 221(e)(1)'' and inserting ``section 
     221(d)(1)''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply with respect to any loan interest paid after 
     December 31, 1999, in taxable years ending after such date.
       (b) Increase in Income Limitation.--
       (1) In general.--Section 221(b)(2)(B) (relating to amount 
     of reduction) is amended by striking clauses (i) and (ii) and 
     inserting the following:
       ``(i) the excess of--

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

       ``(ii) $15,000.''.
       (2) Conforming amendment.--Section 221(g)(1) is amended by 
     striking ``$40,000 and $60,000 amounts'' and inserting 
     ``$50,000 amount''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply to taxable years ending after December 31, 1999.

     SEC. 402. MODIFICATIONS TO QUALIFIED TUITION PROGRAMS.

       (a) Short Title.--This section may be cited as the 
     ``Collegiate Learning and Student Savings (CLASS) Act''.
       (b) 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''.
       (c) 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,''.
       (d) Coordination With Hope and Lifetime Learning Credits 
     and Qualified Tuition Programs.--
       (1) In general.--Section 530(d)(2)(C) is amended to read as 
     follows:
       ``(C) Coordination with hope and lifetime learning credits 
     and qualified tuition programs.--For purposes of subparagraph 
     (A)--
       ``(i) Credit coordination.--The total amount of qualified 
     higher education expenses with respect to an individual for 
     the taxable year shall be reduced--

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

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

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

     the taxpayer shall allocate such expenses among such 
     distributions for purposes of determining the amount of the 
     exclusion under subparagraph (A) and section 529(c)(3)(B).''.
       (2) Conforming amendments.--
       (A) Subsection (e) of section 25A is amended to read as 
     follows:
       ``(e) Election To Have Section Apply.--No credit shall be 
     allowed under subsection (a) for a taxable year with respect 
     to the qualified tuition and related expenses of an 
     individual unless the taxpayer elects to have this section 
     apply with respect to such individual for such year.''.
       (B) Section 135(d)(2)(A) is amended by striking 
     ``allowable'' and inserting ``allowed''.
       (C) Section 530(d)(2)(D) is amended--
       (i) by striking ``or credit'', and
       (ii) by striking ``credit or'' in the heading.
       (e) Rollover to Different Program for Benefit of Same 
     Designated Beneficiary.--Section 529(c)(3)(C) (relating to 
     change in beneficiaries) is amended--
       (1) by striking ``transferred to the credit'' in clause (i) 
     and inserting ``transferred--

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

       (2) by adding at the end the following new clause:
       ``(iii) Limitation on certain rollovers.--Clause (i)(I) 
     shall not apply to any amount transferred with respect to a 
     designated beneficiary if, at any time during the 1-year 
     period ending on the day of such transfer, any other amount 
     was transferred with respect to such beneficiary which was 
     not includible in gross income by reason of clause (i)(I).'', 
     and
       (3) by inserting ``or programs'' after ``beneficiaries'' in 
     the heading.
       (f) Member of Family Includes First Cousin.--Section 
     529(e)(2) (defining member of family) is amended by striking 
     ``and'' at the end of subparagraph (B), by striking the 
     period at the end of subparagraph (C) and by inserting ``; 
     and'', and by adding at the end the following new 
     subparagraph:
       ``(D) any first cousin of such beneficiary.''.
       (g) Definition of Qualified Higher Education Expenses.--
       (1) In general.--Subparagraph (A) of section 529(e)(3) 
     (relating to definition of qualified higher education 
     expenses) is amended to read as follows:
       ``(A) In general.--The term `qualified higher education 
     expenses' means--
       ``(i) tuition and fees required for the enrollment or 
     attendance of a designated beneficiary at an eligible 
     educational institution for courses of instruction of such 
     beneficiary at such institution, and
       ``(ii) expenses for books, supplies, and equipment which 
     are incurred in connection with such enrollment or 
     attendance, but not to exceed the allowance for books and 
     supplies included in the cost of attendance (as defined in 
     section 472 of the Higher Education Act of 1965 (20 U.S.C. 
     1087ll), as in effect on the date of enactment of the 
     Taxpayer Refund Act of 1999) as determined by the eligible 
     educational institution.''.
       (2) Exception for education involving sports, etc.--
     Paragraph (3) of section 529(e) (relating to qualified higher 
     education expenses) is amended by adding at the end the 
     following new subparagraph:
       ``(C) Exception for education involving sports, etc.--The 
     term `qualified higher education expenses' shall not include 
     expenses with

[[Page 19052]]

     respect to any course or other education involving sports, 
     games, or hobbies unless such course or other education is 
     part of the beneficiary's degree program or is taken to 
     acquire or improve job skills of the beneficiary.''.
       (h) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to taxable years beginning after December 31, 1999.
       (2) Qualified higher education expenses.--The amendments 
     made by subsection (g) shall apply to amounts paid for 
     courses beginning after December 31, 1999.

     SEC. 403. EXCLUSION OF CERTAIN AMOUNTS RECEIVED UNDER THE 
                   NATIONAL HEALTH SERVICE CORPS SCHOLARSHIP 
                   PROGRAM AND THE F. EDWARD HEBERT ARMED FORCES 
                   HEALTH PROFESSIONS SCHOLARSHIP AND FINANCIAL 
                   ASSISTANCE PROGRAM.

       (a) In General.--Section 117(c) (relating to the exclusion 
     from gross income amounts received as a qualified 
     scholarship) is amended--
       (1) by striking ``Subsections (a)'' and inserting the 
     following:
       ``(1) In general.--Except as provided in paragraph (2), 
     subsections (a)'', and
       (2) by adding at the end the following new paragraph:
       ``(2) Exceptions.--Paragraph (1) shall not apply to any 
     amount received by an individual under--
       ``(A) the National Health Service Corps Scholarship program 
     under section 338A(g)(1)(A) of the Public Health Service Act, 
     or
       ``(B) the Armed Forces Health Professions Scholarship and 
     Financial Assistance program under subchapter I of chapter 
     105 of title 10, United States Code.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to amounts received in taxable years beginning 
     after December 31, 1993.

     SEC. 404. EXTENSION OF EXCLUSION FOR EMPLOYER-PROVIDED 
                   EDUCATIONAL ASSISTANCE.

       (a) In General.--Section 127(d) (relating to termination of 
     exclusion for educational assistance programs) is amended by 
     striking ``May 31, 2000'' and inserting ``December 31, 
     2003''.
       (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. 405. 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, 1999.

     SEC. 406. TREATMENT OF QUALIFIED PUBLIC EDUCATIONAL FACILITY 
                   BONDS AS EXEMPT FACILITY BONDS.

       (a) Treatment as Exempt Facility Bond.--Subsection (a) of 
     section 142 (relating to exempt facility bond) is amended by 
     striking ``or'' at the end of paragraph (11), by striking the 
     period at the end of paragraph (12) and inserting ``, or'', 
     and by adding at the end the following new paragraph:
       ``(13) qualified public educational facilities.''.
       (b) Qualified Public Educational Facilities.--Section 142 
     (relating to exempt facility bond) is amended by adding at 
     the end the following new subsection:
       ``(k) Qualified Public Educational Facilities.--
       ``(1) In general.--For purposes of subsection (a)(13), the 
     term `qualified public educational facility' means any school 
     facility which is--
       ``(A) part of a public elementary school or a public 
     secondary school, and
       ``(B) owned by a private, for-profit corporation pursuant 
     to a public-private partnership agreement with a State or 
     local educational agency described in paragraph (2).
       ``(2) Public-private partnership agreement described.--A 
     public-private partnership agreement is described in this 
     paragraph if it is an agreement--
       ``(A) under which the corporation agrees--
       ``(i) to do 1 or more of the following: construct, 
     rehabilitate, refurbish, or equip a school facility, and
       ``(ii) at the end of the term of the agreement, to transfer 
     the school facility to such agency for no additional 
     consideration, and
       ``(B) the term of which does not exceed the 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, 1999.

     SEC. 407. FEDERAL GUARANTEE OF SCHOOL CONSTRUCTION BONDS BY 
                   FEDERAL HOME LOAN BANKS.

       (a) In General.--Section 149(b)(3) (relating to exceptions) 
     is amended by adding at the end the following new 
     subparagraph:
       ``(E) Certain guaranteed school construction bonds.--Any 
     bond issued as part of an issue 95 percent or more of the net 
     proceeds of which are used for public school construction 
     shall not be treated as federally guaranteed by reason of any 
     guarantee by any Federal Home Loan Bank under the Federal 
     Home Loan Bank Act (12 U.S.C. 1421 et seq.), to the extent 
     the Federal Housing Finance Board allocates authority to such 
     Bank to so guarantee such bond. For purposes of the preceding 
     sentence, the aggregate face amount of such bonds which may 
     be so guaranteed may not exceed $500,000,000 in any calendar 
     year.''.
       (b) Effective Date.--Subparagraph (E) of section 149(b)(3) 
     of the Internal Revenue Code of 1986, as added by the 
     amendment made by subsection (a), shall take effect upon the 
     enactment, after the date of the enactment of this Act, of 
     legislation authorizing the Federal Housing Finance Board to 
     allocate authority to Federal Home Loan Banks to guarantee 
     any bond described in such subparagraph, but only if such 
     legislation makes specific reference to such subparagraph.

     SEC. 408. CERTAIN EDUCATIONAL BENEFITS PROVIDED BY AN 
                   EMPLOYER TO CHILDREN OF EMPLOYEES EXCLUDABLE 
                   FROM GROSS INCOME AS A SCHOLARSHIP.

       (a) In General.--Section 117 (relating to qualified 
     scholarships) is amended by adding at the end the following:
       ``(e) Employer-Provided Educational Benefits Provided to 
     Children of Employees.--
       ``(1) In general.--In determining whether any amount is a 
     qualified scholarship for purposes of subsection (a), the 
     fact that such amount is provided in connection with an 
     employment relationship shall be disregarded if--
       ``(A) such amount is provided by the employer to a child 
     (as defined in section 161(c)(3)) of an employee of such 
     employer,
       ``(B) such amount is provided pursuant to a plan which 
     meets the nondiscrimination requirements of subsection 
     (d)(3), and
       ``(C) amounts provided under such plan are in addition to 
     any other compensation payable to employees and such plan 
     does not provide employees with a choice between such amounts 
     and any other benefit.
     For purposes of subparagraph (C), the business practices of 
     the employer (as well as such plan) shall be taken into 
     account.
       ``(2) Dollar limitations.--
       ``(A) Per child.--The amount excluded from the gross income 
     of the employee by reason of

[[Page 19053]]

     paragraph (1) for a taxable year with respect to amounts 
     provided to each child of such employee shall not exceed 
     $2,000.
       ``(B) Aggregate limit.--The amount excluded from the gross 
     income of the employee by reason of paragraph (1) for a 
     taxable year (after the application of subparagraph (A)) 
     shall not exceed the excess of the dollar amount contained in 
     section 127(a)(2) over the amount excluded from the 
     employee's gross income under section 127 for such year.
       ``(3) Principal shareholders and owners.--Paragraph (1) 
     shall not apply to any amount provided to any child of any 
     individual if such individual (or such individual's spouse) 
     owns (on any day of the year) more than 5 percent of the 
     stock or of the capital or profits interest in the employer.
       ``(4) Degree requirement not to apply.--In the case of an 
     amount which is treated as a qualified scholarship by reason 
     of this subsection, subsection (a) shall be applied without 
     regard to the requirement that the recipient be a candidate 
     for a degree.
       ``(5) Certain other rules to apply.--Rules similar to the 
     rules of paragraphs (4), (5), and (7) of section 127(c) shall 
     apply for purposes of this subsection.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after the date of 
     enactment of this Act.

               TITLE V--HEALTH CARE TAX RELIEF PROVISIONS

     SEC. 501. DEDUCTION FOR HEALTH AND LONG-TERM CARE INSURANCE 
                   COSTS OF INDIVIDUALS NOT PARTICIPATING IN 
                   EMPLOYER-SUBSIDIZED HEALTH PLANS.

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

     ``SEC. 222. HEALTH AND LONG-TERM CARE INSURANCE COSTS.

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

``For taxable years beginning                            The applicable
  in calendar year--                                    percentage is--
  2001, 2002, 2003.................................................25  
  2004 and 2005....................................................50  
  2006 and thereafter............................................100.  
       ``(c) Limitation Based on Other Coverage.--
       ``(1) Coverage under certain subsidized employer plans.--
       ``(A) In general.--Subsection (a) shall not apply to any 
     taxpayer for any calendar month for which the taxpayer 
     participates in any health plan maintained by any employer of 
     the taxpayer or of the spouse of the taxpayer if 50 percent 
     or more of the cost of coverage under such plan (determined 
     under section 4980B and without regard to payments made with 
     respect to any coverage described in subsection (e)) is paid 
     or incurred by the employer.
       ``(B) Employer contributions to cafeteria plans, flexible 
     spending arrangements, and medical savings accounts.--
     Employer contributions to a cafeteria plan, a flexible 
     spending or similar arrangement, or a medical savings account 
     which are excluded from gross income under section 106 shall 
     be treated for purposes of subparagraph (A) as paid by the 
     employer.
       ``(C) Aggregation of plans of employer.--A health plan 
     which is not otherwise described in subparagraph (A) shall be 
     treated as described in such subparagraph if such plan would 
     be so described if all health plans of persons treated as a 
     single employer under subsections (b), (c), (m), or (o) of 
     section 414 were treated as one health plan.
       ``(D) Separate application to health insurance and long-
     term care insurance.--Subparagraphs (A) and (C) shall be 
     applied separately with respect to--
       ``(i) plans which include primarily coverage for qualified 
     long-term care services or are qualified long-term care 
     insurance contracts, and
       ``(ii) plans which do not include such coverage and are not 
     such contracts.
       ``(2) Coverage under certain federal programs.--
       ``(A) In general.--Subsection (a) shall not apply to any 
     amount paid for any coverage for an individual for any 
     calendar month if, as of the first day of such month, the 
     individual is covered under any medical care program 
     described in--
       ``(i) title XVIII, XIX, or XXI of the Social Security Act,
       ``(ii) chapter 55 of title 10, United States Code,
       ``(iii) chapter 17 of title 38, United States Code,
       ``(iv) chapter 89 of title 5, United States Code, or
       ``(v) the Indian Health Care Improvement Act.
       ``(B) Exceptions.--
       ``(i) Qualified long-term care.--Subparagraph (A) shall not 
     apply to amounts paid for coverage under a qualified long-
     term care insurance contract.
       ``(ii) Continuation coverage of fehbp.--Subparagraph 
     (A)(iv) shall not apply to coverage which is comparable to 
     continuation coverage under section 4980B.
       ``(d) Long-Term Care Deduction Limited to Qualified Long-
     Term Care Insurance Contracts.--In the case of a qualified 
     long-term care insurance contract, only eligible long-term 
     care premiums (as defined in section 213(d)(10)) may be taken 
     into account under subsection (a).
       ``(e) Deduction Not Available for Payment of Ancillary 
     Coverage Premiums.--Any amount paid as a premium for 
     insurance which provides for--
       ``(1) coverage for accidents, disability, dental care, 
     vision care, or a specified illness, or
       ``(2) making payments of a fixed amount per day (or other 
     period) by reason of being hospitalized.
     shall not be taken into account under subsection (a).
       ``(f) Special Rules.--
       ``(1) Coordination with deduction for health insurance 
     costs of self-employed individuals.--The amount taken into 
     account by the taxpayer in computing the deduction under 
     section 162(l) shall not be taken into account under this 
     section.
       ``(2) Coordination with medical expense deduction.--The 
     amount taken into account by the taxpayer in computing the 
     deduction under this section shall not be taken into account 
     under section 213.
       ``(g) Regulations.--The Secretary shall prescribe such 
     regulations as may be appropriate to carry out this section, 
     including regulations requiring employers to report to their 
     employees and the Secretary such information as the Secretary 
     determines to be appropriate.''.
       (b) Deduction Allowed Whether or Not Taxpayer Itemizes 
     Other Deductions.--Subsection (a) of section 62 is amended by 
     inserting after paragraph (17) the following new item:
       ``(18) Health and 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. Health and 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. 502. LONG-TERM CARE INSURANCE PERMITTED TO BE OFFERED 
                   UNDER CAFETERIA PLANS AND FLEXIBLE SPENDING 
                   ARRANGEMENTS.

       (a) Cafeteria Plans.--
       (1) In general.--Subsection (f) of section 125 (defining 
     qualified benefits) is amended by inserting before the period 
     at the end ``; except that such term shall include the 
     payment of premiums for any qualified long-term care 
     insurance contract (as defined in section 7702B) to the 
     extent the amount of such payment does not exceed the 
     eligible long-term care premiums (as defined in section 
     213(d)(10)) for such contract.''.
       (b) Flexible Spending Arrangements.--Section 106 (relating 
     to contributions by employer to accident and health plans) is 
     amended by striking subsection (c).
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 503. ADDITIONAL PERSONAL EXEMPTION FOR TAXPAYER CARING 
                   FOR ELDERLY FAMILY MEMBER IN TAXPAYER'S HOME.

       (a) In General.--Section 151 (relating to allowance of 
     deductions for personal exemptions) is amended by adding at 
     the end redesignating subsection (e) as subsection (f) and by 
     inserting after subsection (d) the following new subsection:
       ``(e) Additional Exemption for Certain Elderly Family 
     Members Residing With Taxpayer.--
       ``(1) In general.--An exemption of the exemption amount for 
     each qualified family member of the taxpayer.
       ``(2) Qualified family member.--For purposes of this 
     subsection, the term `qualified family member' means, with 
     respect to any taxable year, any individual--
       ``(A) who is--
       ``(i) the father or mother, or an ancestor of either, or
       ``(ii) a stepfather or stepmother,
     of the taxpayer or of the taxpayer's spouse or former spouse,
       ``(B) who is a member for the entire taxable year of a 
     household maintained by the taxpayer, and
       ``(C) 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 paragraph (3) 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.
       ``(3) Individuals with long-term care needs.--An individual 
     is described in this paragraph if the individual--
       ``(A) is unable to perform (without substantial assistance 
     from another individual) at least 2 activities of daily 
     living (as defined in section 7702B(c)(2)(B)) due to a loss 
     of functional capacity, or

[[Page 19054]]

       ``(B) requires substantial supervision to protect such 
     individual from threats to health and safety due to severe 
     cognitive impairment and is unable to perform, without 
     reminding or cuing assistance, at least 1 activity of 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.
       ``(4) Special rules.--Rules similar to the rules of 
     paragraphs (1), (2), (3), (4), and (5) of section 21(e) shall 
     apply for purposes of this subsection.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.

     SEC. 504. INCLUSION OF CERTAIN VACCINES AGAINST STREPTOCOCCUS 
                   PNEUMONIAE TO LIST OF TAXABLE VACCINES; 
                   REDUCTION IN PER DOSE TAX RATE.

       (a) Inclusion of Vaccines.--
       (1) 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 
     pneumoniae.''.
       (2) Effective date.--
       (A) Sales.--The amendment made by this subsection 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, but shall 
     not take effect if subsection (c) does not take effect.
       (B) Deliveries.--For purposes of subparagraph (A), in the 
     case of sales on or before the date described in such 
     subparagraph for which delivery is made after such date, the 
     delivery date shall be considered the sale date.
       (b) Reduction in Per Dose Tax Rate.--
       (1) In general.--Section 4131(b)(1) (relating to amount of 
     tax) is amended by striking ``75 cents'' and inserting ``25 
     cents''.
       (2) Effective date.--
       (A) Sales.--The amendment made by this subsection shall 
     apply to vaccine sales after December 31, 2004, but shall not 
     take effect if subsection (c) does not take effect.
       (B) Deliveries.--For purposes of subparagraph (A), in the 
     case of sales on or before the date described in such 
     subparagraph for which delivery is made after such date, the 
     delivery date shall be considered the sale date.
       (3) Limitation on certain credits or refunds.--For purposes 
     of applying section 4132(b) of the Internal Revenue Code of 
     1986 with respect to any claim for credit or refund filed 
     after August 31, 2004, the amount of tax taken into account 
     shall not exceed the tax computed under the rate in effect on 
     January 1, 2005.
       (c) Vaccine Tax and Trust Fund Amendments.--
       (1) Sections 1503 and 1504 of the Vaccine Injury 
     Compensation Program Modification Act (and the amendments 
     made by such sections) are hereby repealed.
       (2) Subparagraph (A) of section 9510(c)(1) is amended by 
     striking ``August 5, 1997'' and inserting ``October 21, 
     1998''.
       (3) The amendments made by this subsection shall take 
     effect as if included in the provisions of the Tax and Trade 
     Relief Extension Act of 1998 to which they relate.
       (d) Report.--Not later than 1 year after the date of the 
     enactment of this Act, the Comptroller General of the United 
     States shall prepare and submit a report to the Committee on 
     Ways and Means of the House of Representatives and the 
     Committee on Finance of the Senate on the operation the 
     Vaccine Injury Compensation Trust Fund and on the adequacy of 
     such Fund to meet future claims made under the Vaccine Injury 
     Compensation Program.

             TITLE VI--SMALL BUSINESS TAX RELIEF PROVISIONS

     SEC. 601. DEDUCTION FOR 100 PERCENT OF HEALTH INSURANCE COSTS 
                   OF SELF-EMPLOYED INDIVIDUALS.

       (a) In General.--Paragraph (1) of section 162(l) is amended 
     to read as follows:
       ``(1) Allowance of deduction.--In the case of an individual 
     who is an employee within the meaning of section 401(c)(1), 
     there shall be allowed as a deduction under this section an 
     amount equal to 100 percent of the amount paid during the 
     taxable year for insurance which constitutes medical care for 
     the taxpayer and the taxpayer's spouse and dependents.''.
       (b) Clarification of Limitations on Other Coverage.--The 
     first sentence of section 162(l)(2)(B) of the Internal 
     Revenue Code of 1986 is amended to read as follows: 
     ``Paragraph (1) shall not apply to any taxpayer for any 
     calendar month for which the taxpayer participates in any 
     subsidized health plan maintained by any employer (other than 
     an employer described in section 401(c)(4)) of the taxpayer 
     or the spouse of the taxpayer.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.

      SEC. 602. INCREASE IN EXPENSE TREATMENT FOR SMALL 
                   BUSINESSES.

       (a) In General.--Paragraph (1) of section 179(b) (relating 
     to dollar limitation) is amended to read as follows:
       ``(1) Dollar limitation.--The aggregate cost which may be 
     taken into account under subsection (a) for any taxable year 
     shall not exceed $30,000.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.

     SEC. 603. REPEAL OF FEDERAL UNEMPLOYMENT SURTAX.

       Section 3301 (relating to rate of Federal unemployment tax) 
     is amended--
       (1) by striking ``2007'' and inserting ``2004'', and
       (2) by striking ``2008'' and inserting ``2005''.

     SEC. 604. INCOME AVERAGING FOR FARMERS AND FISHERMEN NOT TO 
                   INCREASE ALTERNATIVE MINIMUM TAX LIABILITY.

       (a) In General.--Section 55(c) (defining regular tax) is 
     amended by redesignating paragraph (2) as paragraph (3) and 
     by inserting after paragraph (1) the following:
       ``(2) Coordination with income averaging for farmers and 
     fishermen.--Solely for purposes of this section, section 1301 
     (relating to averaging of farm and fishing income) shall not 
     apply in computing the regular tax.''.
       (b) Allowing Income Averaging for Fishermen.--(1) Section 
     1301(a) of the Internal Revenue Code of 1986 is amended by 
     striking ``farming business'' and inserting ``farming 
     business or fishing business,''.
       (2) Section 1301(b)(1)(A)(i) is amended by striking ``and'' 
     and inserting ``or'', and by striking subsection 
     (b)(1)(A)(ii) and replacing it with ``(b)(1)(A)(ii) a fishing 
     business; and'' and by redesignating subsection (b)(1)(A)(ii) 
     as subsection (b)(1)(A)(iii).
       (3) Section 1301(b) is amended by inserting the following 
     paragraph after subsection (b)(3):
       ``(4) Fishing business.--The term fishing business means 
     the conduct of commercial fishing as defined in section 3 of 
     the Magnuson-Stevens Fishery Conservation and Management Act 
     (16 U.S.C. 1802).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.

     SEC. 605. FARM, FISHING, 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 or commercial 
     fishing, 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, Fishing, and Ranch Risk 
     Management Account (hereinafter referred to as the `FFARRM 
     Account').
       ``(b) Limitation.--(1) The amount which a taxpayer may pay 
     into the FFARRM 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 or commercial 
     fishing.
       ``(2) Distributions from a FFARRM Account may not be used 
     to purchase, lease, or finance any new fishing vessel, add 
     capacity to any fishery, or otherwise contribute to the 
     overcapitalization of any fishery. The Secretary of Commerce 
     shall implement regulations to enforce this paragraph.
       ``(c) Eligible Farming Business.--(1) 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.
       ``(2) Commercial Fishing.--For purposes of this section, 
     the term `commercial fishing' is defined under section (3) of 
     the Magnuson-Stevens Fishery Conservation and Management Act 
     (16 U.S.C. 1802).
       ``(d) FFARRM Account.--For purposes of this section--
       ``(1) In general.--The term `FFARRM 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 
     FFARRM Account shall be treated for purposes of this title as 
     the owner of such Account and shall be subject to tax thereon 
     in accordance with subpart E of part I of subchapter J of 
     this chapter (relating to grantors and others treated as 
     substantial owners).
       ``(e) Inclusion of Amounts Distributed.--
       ``(1) In general.--Except as provided in paragraph (2), 
     there shall be includible in the gross income of the taxpayer 
     for any taxable year--
       ``(A) any amount distributed from a FFARRM Account of the 
     taxpayer during such taxable year, and
       ``(B) any deemed distribution under--

[[Page 19055]]

       ``(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 FFARRM 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 FFARRM 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 FFARRM Account (other than distributions 
     of current income) shall be treated as made from deposits in 
     the order in which such deposits were made, beginning with 
     the earliest deposits.
       ``(2) Cessation in eligible business.--At the close of the 
     first disqualification period after a period for which the 
     taxpayer was engaged in an eligible farming business or 
     commercial fishing, there shall be deemed distributed from 
     the FFARRM 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 or commercial 
     fishing.
       ``(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 FFARRM 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 FFARRM 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 304(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 FFARRM Account (within the meaning of section 
     468C(d)), or''.
       (2) Section 4973, as amended by section 304(b)(2), is 
     amended by adding at the end the following:
       ``(h) Excess Contributions to FFARRM Accounts.--For 
     purposes of this section, in the case of a FFARRM 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 
     FFARRM 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 ffarrm accounts.--A person for whose 
     benefit a FFARRM 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 FFARRM 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 FFARRM Account described in section 468C(d),''.
       (d) Failure To Provide Reports on FFARRM Accounts.--
     Paragraph (2) of section 6693(a) (relating to failure to 
     provide reports on certain tax-favored accounts or 
     annuities), as amended by section 304(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 FFARRM 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, Fishing 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. 606. 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, 
     1999.

     SEC. 607. 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

[[Page 19056]]

     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, 
     1999.

     SEC. 608. 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 
     ``$1,975,000''.
       (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 ``$1,975,000''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to estates of decedents dying after December 31, 
     2000.

     SEC. 609. CREDIT FOR EMPLOYEE HEALTH INSURANCE 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. 45E. EMPLOYEE HEALTH INSURANCE EXPENSES.

       ``(a) General Rule.--For purposes of section 38, in the 
     case of a small employer, the employee health insurance 
     expenses credit determined under this section is an amount 
     equal to the applicable percentage of the amount paid by the 
     taxpayer during the taxable year for qualified employee 
     health insurance expenses.
       ``(b) Applicable Percentage.--For purposes of subsection 
     (a), the applicable percentage is equal to--
       ``(1) 60 percent in the case of self-only coverage, and
       ``(2) 70 percent in the case of family coverage (as defined 
     in section 220(c)(5)).
       ``(c) Per Employee Dollar Limitation.--The amount of 
     qualified employee health insurance expenses taken into 
     account under subsection (a) with respect to any qualified 
     employee for any taxable year shall not exceed--
       ``(1) $1,000 in the case of self-only coverage, and
       ``(2) $1,715 in the case of family coverage (as so 
     defined).
       ``(d) Definitions.--For purposes of this section--
       ``(1) Small employer.--
       ``(A) In general.--The term `small employer' means, with 
     respect to any calendar year, any employer if such employer 
     employed an average of 9 or fewer employees on business days 
     during either of the 2 preceding calendar years. For purposes 
     of the preceding sentence, a preceding calendar year may be 
     taken into account only if the employer was in existence 
     throughout such year.
       ``(B) Employers not in existence in preceding year.--In the 
     case of an employer which was not in existence throughout the 
     1st preceding calendar year, the determination under 
     subparagraph (A) shall be based on the average number of 
     employees that it is reasonably expected such employer will 
     employ on business days in the current calendar year.
       ``(2) Qualified employee health insurance expenses.--
       ``(A) In general.--The term `qualified employee health 
     insurance expenses' means any amount paid by an employer for 
     health insurance coverage to the extent such amount is 
     attributable to coverage provided to any employee while such 
     employee is a qualified employee.
       ``(B) Exception for amounts paid under salary reduction 
     arrangements.--No amount paid or incurred for health 
     insurance coverage pursuant to a salary reduction arrangement 
     shall be taken into account under subparagraph (A).
       ``(C) Health insurance coverage.--The term `health 
     insurance coverage' has the meaning given such term by 
     section 9832(b)(1).
       ``(3) Qualified employee.--
       ``(A) In general.--The term `qualified employee' means, 
     with respect to any period, an employee of an employer if the 
     total amount of wages paid or incurred by such employer to 
     such employee at an annual rate during the taxable year 
     exceeds $5,000 but does not exceed $16,000.
       ``(B) Treatment of certain employees.--For purposes of 
     subparagraph (A), the term `employee'--
       ``(i) shall not include an employee within the meaning of 
     section 401(c)(1), but
       ``(ii) shall include a leased employee within the meaning 
     of section 414(n).
       ``(C) Wages.--The term `wages' has the meaning given such 
     term by section 3121(a) (determined without regard to any 
     dollar limitation contained in such section).
       ``(D) Inflation adjustment.--
       ``(i) In general.--In the case of any taxable year 
     beginning in a calendar year after 2001, the $16,000 amount 
     contained in subparagraph (A) shall be increased by an amount 
     equal to--

       ``(I) such dollar amount, multiplied by
       ``(II) 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 2000' for `calendar 
     year 1992' in subparagraph (B) thereof.

       ``(ii) Rounding.--If any increase determined under clause 
     (i) is not a multiple of $100, such amount shall be rounded 
     to the nearest multiple of $100.
       ``(e) Certain rules made applicable.--For purposes of this 
     section, rules similar to the rules of section 52 shall 
     apply.
       ``(f) Denial of Double Benefit.--No deduction or credit 
     under any other provision of this chapter shall be allowed 
     with respect to qualified employee health insurance expenses 
     taken into account under subsection (a).''.
       (b) Credit To Be Part of General Business Credit.--Section 
     38(b) (relating to current year business credit) 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 employee health insurance expenses credit 
     determined under section 45E.''.
       (c) No Carrybacks.--Subsection (d) of section 39 (relating 
     to carryback and carryforward of unused credits) is amended 
     by adding at the end the following:
       ``(10) No carryback of section 45E credit before effective 
     date.--No portion of the unused business credit for any 
     taxable year which is attributable to the employee health 
     insurance expenses credit determined under section 45E may be 
     carried back to a taxable year ending before January 1, 
     2001.''.
       (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. 45E. Employee health insurance expenses.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to amounts paid or incurred in taxable years 
     beginning after December 31, 2000.

            TITLE VII--ESTATE AND GIFT TAX RELIEF PROVISIONS

    Subtitle A--Reductions of Estate, Gift, and Generation-Skipping 
                             Transfer Taxes

     SEC. 701. REDUCTIONS OF ESTATE, GIFT, AND GENERATION-SKIPPING 
                   TRANSFER TAXES.

       (a) Maximum Rate of Tax Reduced to 53 Percent.--The table 
     contained in section 2001(c)(1) is amended by striking the 2 
     highest brackets and inserting the following:

$1,025,800, plus 53% of the excess over $2,500,000.''..................
       (b) Repeal of Phaseout of Graduated Rates.--Subsection (c) 
     of section 2001 is amended by striking paragraph (2).
       (c) Effective Dates.--
       (1) Subsection (a).--The amendment made by subsection (a) 
     shall apply to estates of decedents dying, and gifts made, 
     after December 31, 2000.
       (2) Subsection (b).--The amendment made by subsection (b) 
     shall apply to estates of decedents dying, and gifts made, 
     after December 31, 2003.

     SEC. 702. UNIFIED CREDIT AGAINST ESTATE AND GIFT TAXES 
                   REPLACED WITH UNIFIED EXEMPTION AMOUNT.

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

     ``SEC. 2052. EXEMPTION.

       ``(a) In general.--For purposes of the tax imposed by 
     section 2001, the value of the taxable estate shall be 
     determined by deducting from the value of the gross estate an 
     amount equal to the excess (if any) of--
       ``(1) the exemption amount for the calendar year in which 
     the decedent died, over
       ``(2) the sum of--
       ``(A) the aggregate amount allowed as an exemption under 
     section 2521 with respect to gifts made by the decedent after 
     December 31, 2003, and
       ``(B) the aggregate amount of gifts made by the decedent 
     for which credit was allowed by section 2505 (as in effect on 
     the day before the date of the enactment of the Taxpayer 
     Refund Act of 1999).

     Gifts which are includible in the gross estate of the 
     decedent shall not be taken into account in determining the 
     amounts under paragraph (2).
       ``(b) Exemption Amount.--For purposes of subsection (a), 
     the term `exemption amount' means the amount determined in 
     accordance with the following table:

``In the case of                                         calendar year:
                                                             amount is:
      2004....................................................$850,000 
      2005....................................................$950,000 
      2006..................................................$1,000,000 
      2007 or thereafter.................................$1,500,000.''.
       (2) Gift tax.--Subchapter C of chapter 12 (relating to 
     deductions) is amended by inserting before section 2522 the 
     following new section:

     ``SEC. 2521. EXEMPTION.

       ``(a) In General.--In computing taxable gifts for any 
     calendar year, there shall be allowed as a deduction in the 
     case of a citizen or resident of the United States an amount 
     equal to the excess of--
       ``(1) the exemption amount determined under section 2052 
     for such calendar year, over
       ``(2) the sum of--
       ``(A) the aggregate amount allowed as an exemption under 
     this section for all preceding calendar years after 2003, and
       ``(B) the aggregate amount of gifts for which credit was 
     allowed by section 2505 (as in effect on the day before the 
     date of the enactment of the Taxpayer Refund Act of 1999).''.
       (b) Repeal of Unified Credits.--
       (1) Section 2010 (relating to unified credit against estate 
     tax) is hereby repealed.

[[Page 19057]]

       (2) Section 2505 (relating to unified credit against gift 
     tax) is hereby repealed.
       (c) Conforming Amendments.--
       (1)(A) Subparagraph (B) of section 2001(b)(1) is amended by 
     inserting before the comma ``reduced by the amount described 
     in section 2052(a)(2)''.
       (B) Subsection (b) of section 2001 is amended by adding at 
     the end the following new sentence: ``For purposes of 
     paragraph (2), the amount of the tax payable under chapter 12 
     shall be determined without regard to the credit provided by 
     section 2505 (as in effect on the day before the date of the 
     enactment of the Taxpayer Refund Act of 1999).''.
       (2) Subsection (f) of section 2011 is amended by striking 
     ``, reduced by the amount of the unified credit provided by 
     section 2010''.
       (3) Subsection (a) of section 2012 is amended by striking 
     ``and the unified credit provided by section 2010''.
       (4) Subsection (b) of section 2013 is amended by inserting 
     before the period at the end of the first sentence ``and 
     increased by the exemption allowed under section 2052 or 
     2106(a)(4) (or the corresponding provisions of prior law) in 
     determining the taxable estate of the transferor for purposes 
     of the estate tax''.
       (5) Subparagraph (A) of section 2013(c)(1) is amended by 
     striking ``2010,''.
       (6) Paragraph (2) of section 2014(b) is amended by striking 
     ``2010,''.
       (7) Clause (ii) of section 2056A(b)(12)(C) is amended to 
     read as follows:
       ``(ii) to treat any reduction in the tax imposed by 
     paragraph (1)(A) by reason of the credit allowable under 
     section 2010 (as in effect on the day before the date of the 
     enactment of the Taxpayer Refund Act of 1999) or the 
     exemption allowable under section 2052 with respect to the 
     decedent as such a credit or exemption (as the case may be) 
     allowable to such surviving spouse for purposes of 
     determining the amount of the exemption allowable under 
     section 2521 with respect to taxable gifts made by the 
     surviving spouse during the year in which the spouse becomes 
     a citizen or any subsequent year,''.
       (8) Section 2102 is amended by striking subsection (c).
       (9) Subsection (a) of section 2106 is amended by adding at 
     the end the following new paragraph:
       ``(4) Exemption.--
       ``(A) In general.--An exemption of $60,000.
       ``(B) Residents of possessions of the United States.--In 
     the case of a decedent who is considered to be a nonresident 
     not a citizen of the United States under section 2209, the 
     exemption under this paragraph shall be the greater of--
       ``(i) $60,000, or
       ``(ii) that proportion of $175,000 which the value of that 
     part of the decedent's gross estate which at the time of his 
     death is situated in the United States bears to the value of 
     his entire gross estate wherever situated.
       ``(C) Special rules.--
       ``(i) Coordination with treaties.--To the extent required 
     under any treaty obligation of the United States, the 
     exemption allowed under this paragraph shall be equal to the 
     amount which bears the same ratio to the exemption amount 
     under section 2052 (for the calendar year in which the 
     decedent died) as the value of the part of the decedent's 
     gross estate which at the time of his death is situated in 
     the United States bears to the value of his entire gross 
     estate wherever situated. For purposes of the preceding 
     sentence, property shall not be treated as situated in the 
     United States if such property is exempt from the tax imposed 
     by this subchapter under any treaty obligation of the United 
     States.
       ``(ii) Coordination with gift tax exemption and unified 
     credit.--If an exemption has been allowed under section 2521 
     (or a credit has been allowed under section 2505 as in effect 
     on the day before the date of the enactment of the Taxpayer 
     Refund Act of 1999) with respect to any gift made by the 
     decedent, each dollar amount contained in subparagraph (A) or 
     (B) or the exemption amount applicable under clause (i) of 
     this subparagraph (whichever applies) shall be reduced by the 
     exemption so allowed under 2521 (or, in the case of such a 
     credit, by the amount of the gift for which the credit was so 
     allowed).''.
       (10) Subsection (c) of section 2107 is amended--
       (A) by striking paragraph (1) and by redesignating 
     paragraphs (2) and (3) as paragraphs (1) and (2), 
     respectively, and
       (B) by striking the second sentence of paragraph (2) (as so 
     redesignated).
       (11) Section 2206 is amended by striking ``the taxable 
     estate'' in the first sentence and inserting ``the sum of the 
     taxable estate and the amount of the exemption allowed under 
     section 2052 or 2106(a)(4) in computing the taxable estate''.
       (12) Section 2207 is amended by striking ``the taxable 
     estate'' in the first sentence and inserting ``the sum of the 
     taxable estate and the amount of the exemption allowed under 
     section 2052 or 2106(a)(4) in computing the taxable estate''.
       (13) Subparagraph (B) of section 2207B(a)(1) is amended to 
     read as follows:
       ``(B) the sum of the taxable estate and the amount of the 
     exemption allowed under section 2052 or 2106(a)(4) in 
     computing the taxable estate.''.
       (14) Subsection (a) of section 2503 is amended by striking 
     ``section 2522'' and inserting ``section 2521''.
       (15) Paragraph (1) of section 6018(a) is amended by 
     striking ``the applicable exclusion amount'' and inserting 
     ``the exemption amount under section 2052 for the calendar 
     year which includes the date of death''.
       (16) Subparagraph (A) of section 6601(j)(2) is amended to 
     read as follows:
       ``(A)(i) the amount of the tax which would be imposed by 
     chapter 11 on an amount of taxable estate equal to the sum of 
     $1,000,000 and the exemption amount allowable under section 
     2052, reduced by
       ``(ii) the amount of tax which would be so imposed if the 
     taxable estate equaled such exemption amount, or''.
       (17) The table of sections for part II of subchapter A of 
     chapter 11 is amended by striking the item relating to 
     section 2010.
       (18) The table of sections for subchapter A of chapter 12 
     is amended by striking the item relating to section 2505.
       (d) Effective Date.--The amendments made by this section--
       (1) insofar as they relate to the tax imposed by chapter 11 
     of the Internal Revenue Code of 1986, shall apply to estates 
     of decedents dying after December 31, 2003, and
       (2) insofar as they relate to the tax imposed by chapter 12 
     of such Code, shall apply to gifts made after December 31, 
     2003.

                   Subtitle B--Conservation Easements

     SEC. 711. EXPANSION OF ESTATE TAX RULE FOR CONSERVATION 
                   EASEMENTS.

       (a) Where Land Is Located.--
       (1) In general.--Clause (i) of section 2031(c)(8)(A) 
     (defining land subject to a conservation easement) is 
     amended--
       (A) by striking ``25 miles'' both places it appears and 
     inserting ``50 miles'', and
       (B) striking ``10 miles'' and inserting ``25 miles''.
       (2) Effective date.--The amendments made by this subsection 
     shall apply to estates of decedents dying after December 31, 
     1999.
       (b) Clarification of Date for Determining Value of Land and 
     Easement.--
       (1) In general.--Section 2031(c)(2) (defining applicable 
     percentage) is amended by adding at the end the following new 
     sentence: ``The values taken into account under the preceding 
     sentence shall be such values as of the date of the 
     contribution referred to in paragraph (8)(B).''.
       (2) Effective date.--The amendment made by this subsection 
     shall apply to estates of decedents dying after December 31, 
     1997.

                   Subtitle C--Annual Gift Exclusion

     SEC. 721. INCREASE IN ANNUAL GIFT EXCLUSION.

       (a) In General.--Section 2503(b) (relating to exclusions 
     from gifts) is amended--
       (1) by striking the following:
       ``(b) Exclusions From Gifts.--
       ``(1) In general.--In the case of gifts'',
       (2) by inserting the following:
       ``(b) Exclusions From Gifts.--In the case of gifts'',
       (3) by striking paragraph (2), and
       (4) by striking ``$10,000'' and inserting ``$20,000''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to gifts made after December 31, 2004.

     Subtitle D--Simplification of Generation-Skipping Transfer Tax

     SEC. 731. RETROACTIVE ALLOCATION OF GST EXEMPTION.

       (a) In General.--Section 2632 (relating to special rules 
     for allocation of GST exemption) is amended by redesignating 
     subsection (c) as subsection (d) and by inserting after 
     subsection (b) the following new subsection:
       ``(c) Retroactive Allocations.--
       ``(1) In general.--If--
       ``(A) a non-skip person has an interest or a future 
     interest in a trust to which any transfer has been made,
       ``(B) such person--
       ``(i) is a lineal descendant of a grandparent of the 
     transferor or of a grandparent of the transferor's spouse, 
     and
       ``(ii) is assigned to a generation below the generation 
     assignment of the transferor, and
       ``(C) such person predeceases the transferor,
     then the transferor may make an allocation of any of such 
     transferor's unused GST exemption to any previous transfer or 
     transfers to the trust on a chronological basis.
       ``(2) Special rules.--If the allocation under paragraph (1) 
     by the transferor is made on a gift tax return filed on or 
     before the date prescribed by section 6075(b) for gifts made 
     within the calendar year within which the non-skip person's 
     death occurred--
       ``(A) the value of such transfer or transfers for purposes 
     of section 2642(a) shall be determined as if such allocation 
     had been made on a timely filed gift tax return for each 
     calendar year within which each transfer was made,
       ``(B) such allocation shall be effective immediately before 
     such death, and
       ``(C) the amount of the transferor's unused GST exemption 
     available to be allocated shall be determined immediately 
     before such death.
       ``(3) Future interest.--For purposes of this subsection, a 
     person has a future interest in a trust if the trust may 
     permit income or corpus to be paid to such person on a date 
     or dates in the future.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to deaths of non-skip persons occurring after the 
     date of the enactment of this Act.

     SEC. 732. SEVERING OF TRUSTS.

       (a) In General.--Subsection (a) of section 2642 (relating 
     to inclusion ratio) is amended by adding at the end the 
     following new paragraph:
       ``(3) Severing of trusts.--
       ``(A) In general.--If a trust is severed in a qualified 
     severance, the trusts resulting from

[[Page 19058]]

     such severance shall be treated as separate trusts thereafter 
     for purposes of this chapter.
       ``(B) Qualified severance.--For purposes of subparagraph 
     (A)--
       ``(i) In general.--The term `qualified severance' means the 
     division of a single trust and the creation (by any means 
     available under the governing instrument or under local law) 
     of 2 or more trusts if--

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

       ``(ii) Trusts with inclusion ratio greater than zero.--If a 
     trust has an inclusion ratio of greater than zero and less 
     than 1, a severance is a qualified severance only if the 
     single trust is divided into 2 trusts, one of which receives 
     a fractional share of the total value of all trust assets 
     equal to the applicable fraction of the single trust 
     immediately before the severance. In such case, the trust 
     receiving such fractional share shall have an inclusion ratio 
     of zero and the other trust shall have an inclusion ratio of 
     1.
       ``(iii) Regulations.--The term `qualified severance' 
     includes any other severance permitted under regulations 
     prescribed by the Secretary.
       ``(C) Timing and manner of severances.--A severance 
     pursuant to this paragraph may be made at any time. The 
     Secretary shall prescribe by forms or regulations the manner 
     in which the qualified severance shall be reported to the 
     Secretary.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to severances after the date of the enactment of 
     this Act.

     SEC. 733. MODIFICATION OF CERTAIN VALUATION RULES.

       (a) Gifts for Which Gift Tax Return Filed or Deemed 
     Allocation Made.--Paragraph (1) of section 2642(b) (relating 
     to valuation rules, etc.) is amended to read as follows:
       ``(1) Gifts for which gift tax return filed or deemed 
     allocation made.--If the allocation of the GST exemption to 
     any transfers of property is made on a gift tax return filed 
     on or before the date prescribed by section 6075(b) for such 
     transfer or is deemed to be made under section 2632(b)(1)--
       ``(A) the value of such property for purposes of subsection 
     (a) shall be its value as finally determined for purposes of 
     chapter 12 (within the meaning of section 2001(f)(2)), or, in 
     the case of an allocation deemed to have been made at the 
     close of an estate tax inclusion period, its value at the 
     time of the close of the estate tax inclusion period, and
       ``(B) such allocation shall be effective on and after the 
     date of such transfer, or, in the case of an allocation 
     deemed to have been made at the close of an estate tax 
     inclusion period, on and after the close of such estate tax 
     inclusion period.''.
       (b) Transfers at Death.--Subparagraph (A) of section 
     2642(b)(2) is amended to read as follows:
       ``(A) Transfers at death.--If property is transferred as a 
     result of the death of the transferor, the value of such 
     property for purposes of subsection (a) shall be its value as 
     finally determined for purposes of chapter 11; except that, 
     if the requirements prescribed by the Secretary respecting 
     allocation of post-death changes in value are not met, the 
     value of such property shall be determined as of the time of 
     the distribution concerned.''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect as if included in the amendments made by 
     section 1431 of the Tax Reform Act of 1986.

     SEC. 734. RELIEF PROVISIONS.

       (a) In General.--Section 2642 is amended by adding at the 
     end the following new subsection:
       ``(g) Relief Provisions.--
       ``(1) Relief for late elections.--
       ``(A) In general.--The Secretary shall by regulation 
     prescribe such circumstances and procedures under which 
     extensions of time will be granted to make--
       ``(i) an allocation of GST exemption described in paragraph 
     (1) or (2) of subsection (b), and
       ``(ii) an election under section 2632(b)(3).

     Such regulations shall include procedures for requesting 
     comparable relief with respect to transfers made before the 
     date of enactment of this paragraph.
       ``(B) Basis for determinations.--In determining whether to 
     grant relief under this paragraph, the Secretary shall take 
     into account all relevant circumstances, including evidence 
     of intent contained in the trust instrument or instrument of 
     transfer and such other factors as the Secretary deems 
     relevant. For purposes of determining whether to grant relief 
     under this paragraph, the time for making the allocation (or 
     election) shall be treated as if not expressly prescribed by 
     statute.
       ``(2) Substantial compliance.--An allocation of GST 
     exemption under section 2632 that demonstrates an intent to 
     have the lowest possible inclusion ratio with respect to a 
     transfer or a trust shall be deemed to be an allocation of so 
     much of the transferor's unused GST exemption as produces the 
     lowest possible inclusion ratio. In determining whether there 
     has been substantial compliance, all relevant circumstances 
     shall be taken into account, including evidence of intent 
     contained in the trust instrument or instrument of transfer 
     and such other factors as the Secretary deems relevant.''.
       (b) Effective Dates.--
       (1) Relief for late elections.--Section 2642(g)(1) (as 
     added by subsection (a)) shall apply to requests pending on, 
     or filed after, the date of the enactment of this Act.
       (2) Substantial compliance.--Section 2642(g)(2) (as so 
     added) shall take effect on the date of the enactment of this 
     Act and shall apply to allocations made prior to such date 
     for purposes of determining the tax consequences of 
     generation-skipping transfers with respect to which the 
     period of time for filing claims for refund has not expired. 
     No implication is intended with respect to the availability 
     of relief for late elections or the application of a rule of 
     substantial compliance before the enactment of this 
     amendment.

            TITLE VIII--TAX EXEMPT ORGANIZATIONS PROVISIONS

     SEC. 801. 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, 
     1999.

     SEC. 802. MODIFICATIONS TO SECTION 512(B)(13).

       (a) In General.--Paragraph (13) of section 512(b) is 
     amended by redesignating subparagraph (E) as subparagraph (F) 
     and by inserting after subparagraph (D) the following new 
     paragraph:
       ``(E) Paragraph to apply only to excess payments.--
       ``(i) In general.--Subparagraph (A) shall apply only to the 
     portion of a specified payment

[[Page 19059]]

     received by the controlling organization which exceeds the 
     amount which would have been paid if such payment met the 
     requirements prescribed under section 482.
       ``(ii) Addition to tax for valuation misstatements.--The 
     tax imposed by this chapter on the controlling organization 
     shall be increased by an amount equal to 20 percent of such 
     excess.''.
       (b) Effective Date.--
       (1) In general.--The amendment made by this section shall 
     apply to payments received or accrued after December 31, 
     1999.
       (2) Payments subject to binding contract transition rule.--
     If the amendments made by section 1041 of the Taxpayer Relief 
     Act of 1997 do not apply to any amount received or accrued 
     after the date of the enactment of this Act under any 
     contract described in subsection (b)(2) of such section, such 
     amendments also shall not apply to amounts received or 
     accrued under such contract before January 1, 2000.

     SEC. 803. SIMPLIFICATION OF LOBBYING EXPENDITURE LIMITATION.

       (a) Repeal of Grassroots Expenditure Limit.--Paragraph (1) 
     of section 501(h) (relating to expenditures by public 
     charities to influence legislation) is amended to read as 
     follows:
       ``(1) General rule.--In the case of an organization to 
     which this subsection applies, exemption from taxation under 
     subsection (a) shall be denied because a substantial part of 
     the activities of such organization consists of carrying on 
     propaganda, or otherwise attempting, to influence 
     legislation, but only if such organization normally makes 
     lobbying expenditures in excess of the lobbying ceiling 
     amount for such organization for each taxable year.''.
       (b) Conforming Amendments.--
       (1) Section 501(h)(2) is amended by striking subparagraphs 
     (C) and (D).
       (2) Section 4911(b) is amended to read as follows:
       ``(b) Excess Lobbying Expenditures.--For purposes of this 
     section, the term `excess lobbying expenditures' means, for a 
     taxable year, the amount by which the lobbying expenditures 
     made by the organization during the taxable year exceed the 
     lobbying nontaxable amount for such organization for such 
     taxable year.''.
       (3) Section 4911(c) is amended by striking paragraphs (3) 
     and (4).
       (4) Paragraph (1)(A) of section 4911(f) is amended by 
     striking ``limits of section 501(h)(1) have'' and inserting 
     ``limit of section 501(h)(1) has''.
       (5) Paragraph (1)(C) of section 4911(f) is amended by 
     striking ``limits of section 501(h)(1) are'' and inserting 
     ``limit of section 501(h)(1) is''.
       (6) Paragraphs (4)(A) and (4)(B) of section 4911(f) are 
     each amended by striking ``limits of section 501(h)(1)'' and 
     inserting ``limit of section 501(h)(1)''.
       (7) Paragraph (8) of section 6033(b) (relating to certain 
     organizations described in section 501(c)(3)) is amended by 
     inserting ``and'' at the end of subparagraph (A) and by 
     striking subparagraphs (C) and (D).
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.

     SEC. 804. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT 
                   ACCOUNTS FOR CHARITABLE PURPOSES.

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

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

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

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

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

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

       ``(D) Denial of deduction.--The amount allowable as a 
     deduction to the taxpayer for the taxable year under section 
     170 for qualified charitable distributions shall be reduced 
     (but not below zero) by the sum of the amounts of the 
     qualified charitable distributions during such year which 
     (but for this paragraph) would have been includible in the 
     gross income of the taxpayer for such year.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     2000.

     SEC. 805. MILEAGE REIMBURSEMENTS TO CHARITABLE VOLUNTEERS 
                   EXCLUDED FROM GROSS INCOME.

       (a) In General.--Part III of subchapter B of chapter 1 is 
     amended by inserting after section 138 the following new 
     section:

     ``SEC. 138A. MILEAGE REIMBURSEMENTS TO CHARITABLE VOLUNTEERS.

       ``(a) In General.--Gross income of an individual does not 
     include amounts received, from an organization described in 
     section 170(c), as reimbursement of operating expenses with 
     respect to use of a passenger automobile for the benefit of 
     such organization for which a deduction would otherwise be 
     allowable under section 170. The preceding sentence shall 
     apply only to the extent that such reimbursement would be 
     deductible under section 274(d) (determined by applying the 
     standard business mileage rate established pursuant to 
     section 274(d)) if the organization were not so described and 
     such individual were an employee of such organization.
       ``(b) No Double Benefit.--Subsection (a) shall not apply 
     with respect to any expenses if the individual claims a 
     deduction or credit for such expenses under any other 
     provision of this title.
       ``(c) Exemption From Reporting Requirements.--Section 6041 
     shall not apply with respect to reimbursements excluded from 
     income under subsection (a).''.
       (b) Clerical Amendment.--The table of sections for part III 
     of subchapter B of chapter 1 is amended by inserting after 
     the item relating to section 138 the following new items:

``Sec. 138A. Reimbursement for use of passenger automobile for 
              charity.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.

     SEC. 806. CHARITABLE CONTRIBUTION DEDUCTION FOR CERTAIN 
                   EXPENSES INCURRED IN SUPPORT OF NATIVE ALASKAN 
                   SUBSISTENCE WHALING.

       (a) In General.--Section 170 (relating to charitable, etc., 
     contributions and gifts) is amended by redesignating 
     subsection (m) as subsection (n) and by inserting after 
     subsection (l) the following new subsection:
       ``(m) Expenses Paid by Certain Whaling Captains in Support 
     of Native Alaskan Subsistence Whaling.--
       ``(1) In general.--In the case of an individual who is 
     recognized by the Alaska Eskimo Whaling Commission as a 
     whaling captain charged with the responsibility of 
     maintaining and carrying out sanctioned whaling activities 
     and who engages in such activities during the taxable year, 
     the amount described in paragraph (2) (to the extent such 
     amount does not exceed $7,500 for the taxable year) shall be 
     treated for purposes of this section as a charitable 
     contribution.
       ``(2) Amount described.--
       ``(A) In general.--The amount described in this paragraph 
     is the aggregate of the reasonable and necessary whaling 
     expenses paid by the taxpayer during the taxable year in 
     carrying out sanctioned whaling activities.
       ``(B) Whaling expenses.--For purposes of subparagraph (A), 
     the term `whaling expenses' includes expenses for--
       ``(i) the acquisition and maintenance of whaling boats, 
     weapons, and gear used in sanctioned whaling activities,
       ``(ii) the supplying of food for the crew and other 
     provisions for carrying out such activities, and
       ``(iii) storage and distribution of the catch from such 
     activities.
       ``(3) Sanctioned whaling activities.--For purposes of this 
     subsection, the term `sanctioned whaling activities' means 
     subsistence bowhead whale hunting activities conducted 
     pursuant to the management plan of the Alaska Eskimo Whaling 
     Commission.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     1999.

     SEC. 807. 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

[[Page 19060]]

     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, 
     1999.

     SEC. 808. DEDUCTION FOR PORTION OF CHARITABLE CONTRIBUTIONS 
                   TO BE ALLOWED TO INDIVIDUALS WHO DO NOT ITEMIZE 
                   DEDUCTIONS.

       (a) In General.--Section 170 (relating to charitable, etc., 
     contributions and gifts), as amended by section 806, is 
     amended by redesignating subsection (n) as subsection (o) and 
     by inserting after subsection (m) the following new 
     subsection:
       ``(n) Deduction for Individuals Not Itemizing Deductions.--
     In the case of an individual who does not itemize his 
     deductions for the taxable year, there shall be taken into 
     account as a direct charitable deduction under section 63 an 
     amount equal to the lesser of--
       ``(1) the amount allowable as a deduction under subsection 
     (a) for the taxable year, or
       ``(2) $50 ($100 in the case of a joint return).''.
       (b) Direct Charitable Deduction.--
       (1) In general.--Subsection (b) of section 63 is amended by 
     striking ``and'' at the end of paragraph (1), by striking the 
     period at the end of paragraph (2) and inserting ``, and'', 
     and by adding at the end thereof the following new paragraph:
       ``(3) the direct charitable deduction.''.
       (2) Definition.--Section 63 is amended by redesignating 
     subsection (g) as subsection (h) and by inserting after 
     subsection (f) the following new subsection:
       ``(g) Direct Charitable Deduction.--For purposes of this 
     section, the term `direct charitable deduction' means that 
     portion of the amount allowable under section 170(a) which is 
     taken as a direct charitable deduction for the taxable year 
     under section 170(n).''.
       (3) Conforming amendment.--Subsection (d) of section 63 is 
     amended by striking ``and'' at the end of paragraph (1), by 
     striking the period at the end of paragraph (2) and inserting 
     ``, and'', and by adding at the end thereof the following new 
     paragraph:
       ``(3) the direct charitable deduction.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2004, and before January 1, 2007.

     SEC. 809. INCREASE IN LIMIT ON CHARITABLE CONTRIBUTIONS AS 
                   PERCENTAGE OF AGI.

       (a) In General.--
       (1) Individual limit.--Section 170(b)(1) (relating to 
     percentage limitations) is amended--
       (A) by striking ``50 percent'' in subparagraph (A) and 
     inserting ``the applicable percentage'', and
       (B) by striking ``30 percent'' each place it appears in 
     subparagraph (C) and inserting ``the applicable percentage''.
       (2) Corporate limit.--Section 170(b)(2) is amended by 
     striking ``10 percent'' and inserting ``the applicable 
     percentage''.
       (b) Applicable Percentage.--Section 170(b) is amended by 
     adding at the end the following new paragraph:
       ``(3) Applicable percentage.--For purposes of this 
     subsection, the applicable percentage shall be determined 
     under the following tables:
       ``(A) In the case of paragraph (1)(A):

``For taxable year--                     The applicable percentage is--
      2002..........................................................52 
      2003..........................................................54 
      2004..........................................................56 
      2005..........................................................58 
      2006..........................................................60 
      2007 and thereafter...........................................70.
       ``(B) In the case of paragraph (1)(C):

``For taxable year--                     The applicable percentage is--
      2002..........................................................32 
      2003..........................................................34 
      2004..........................................................36 
      2005..........................................................38 
      2006..........................................................40 
      2007 and thereafter...........................................50.
       ``(C) In the case of paragraph (2):

``For taxable year--                     The applicable percentage is--
      2002..........................................................12 
      2003..........................................................14 
      2004..........................................................16 
      2005..........................................................18 
      2006 and thereafter........................................20.''.
       (c) Conforming Amendment.--Section 170(d)(1)(A) is amended 
     by striking ``50 percent'' each place it appears and 
     inserting ``the applicable percentage in effect under 
     subsection (b)(1)(A)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2001.

     SEC. 810. LIMITED EXCEPTION TO EXCESS BUSINESS HOLDINGS RULE.

       (a) In General.--Section 4943(c)(2) (relating to permitted 
     holdings in a corporation) is amended by adding at the end 
     the following new subparagraphs:
       ``(D) Rule where voting stock is publicly traded.--
       ``(i) In general.--If--

       ``(I) the private foundation and all disqualified persons 
     together do not own more than the applicable percentage of 
     the voting stock and not more than the applicable percentage 
     in value of all outstanding shares of all classes of stock of 
     an incorporated business enterprise,
       ``(II) the voting stock owned by the private foundation and 
     all disqualified persons together is stock for which market 
     quotations are readily available on an established securities 
     market, and
       ``(III) the requirements of clause (ii) are met,

     then subparagraph (A) shall be applied by substituting `the 
     applicable percentage' for `20 percent'.
       ``(ii) Requirements to be met.--The requirements of this 
     clause are met during any taxable year--

       ``(I) in which disqualified persons with respect to the 
     private foundation do not receive compensation (as an 
     employee or otherwise) from the corporation or engage in any 
     act with such corporation which would constitute self-dealing 
     within the meaning of section 4941(d) if such corporation 
     were a private foundation and if each such disqualified 
     person were a disqualified person with respect to such 
     corporation,
       ``(II) in which disqualified persons with respect to such 
     private foundation do not own in the aggregate more than 2 
     percent of the voting stock and not more than 2 percent in 
     value of all outstanding shares of all classes of stock in 
     such corporation, and
       ``(III) for which there is submitted with the annual return 
     of the private foundation for such year (filed within the 
     time prescribed by law, including extensions, for filing such 
     return) a certification which is signed by all the members of 
     an audit committee of the Board of Directors of such 
     corporation consisting of a majority of persons who are not 
     disqualified persons with respect to such private foundation 
     and which certifies that such members, after due inquiry, are 
     not aware that any disqualified person has received 
     compensation from such corporation or has engaged in any act 
     with such corporation that would constitute self-dealing 
     within the meaning of section 4941(d) if such corporation 
     were a private foundation and if each such disqualified 
     person were a disqualified person with respect to such 
     corporation.

     For purposes of this clause, the fact that a disqualified 
     person has received compensation from such corporation or has 
     engaged in any act with such corporation which would 
     constitute self-dealing within the meaning of section 4941(d) 
     shall be disregarded if such receipt or act is corrected not 
     later than the due date (not including extensions thereof) 
     for the filing of the private foundation's annual return for 
     the year in which the receipt or act occurs and on the terms 
     that would be necessary to correct such receipt or act and 
     thereby avoid imposition of tax under section 4941(b).
       ``(E) Applicable percentage.--For purposes of this 
     paragraph, the applicable percentage shall be determined 
     under the following table:

``For taxable year--                     The applicable percentage is--
      2007..........................................................40 
      2008 and thereafter........................................49.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to foundations established by bequest of 
     decedents dying after December 31, 2006.

     SEC. 811. 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

[[Page 19061]]

     101(14) of the Comprehensive Environmental Response, 
     Compensation, and Liability Act of 1980 (42 U.S.C. 9601(14)).

     SEC. 812. 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.

                   TITLE IX--INTERNATIONAL TAX RELIEF

     SEC. 901. INTEREST ALLOCATION RULES.

       (a) Election To Allocate Interest on a Worldwide Basis.--
     Subsection (e) of section 864 (relating to rules for 
     allocating interest, etc.) is amended by redesignating 
     paragraphs (6) and (7) as paragraphs (7) and (8), 
     respectively, and by inserting after paragraph (5) the 
     following new paragraph:
       ``(6) Election to allocate interest on a worldwide basis.--
       ``(A) In general.--Except as provided in this paragraph, 
     this subsection shall be applied by treating a worldwide 
     affiliated group for which an election is in effect under 
     this paragraph as an affiliated group solely for purposes of 
     allocating and apportioning interest expense of each domestic 
     corporation which is a member of such group.
       ``(B) Worldwide affiliated group.--For purposes of this 
     paragraph, the term `worldwide affiliated group' means the 
     group of corporations which consists of--
       ``(i) all corporations in an affiliated group (as defined 
     in paragraph (5)(A), except that section 1504 shall also be 
     applied without regard to subsection (b)(2) thereof), and
       ``(ii) all foreign corporations (other than a FSC, as 
     defined in section 922(a)) which would be a member of such 
     affiliated group if paragraph (3) of section 1504 (b) did not 
     apply.
       ``(C) Treatment of worldwide affiliated group.--For 
     purposes of applying paragraph (1), the taxable income of the 
     domestic members of a worldwide affiliated group from sources 
     outside the United States shall be determined by allocating 
     and apportioning the interest expense of such domestic 
     members to such income in an amount equal to the excess (if 
     any) of--
       ``(i) the total interest expense of the worldwide 
     affiliated group multiplied by the ratio which the foreign 
     assets of the worldwide affiliated group bears to all the 
     assets of the worldwide affiliated group, over
       ``(ii) the interest expense of all foreign corporations 
     which are members of the worldwide affiliated group to the 
     extent such interest expense of such foreign corporations 
     would have been allocated and apportioned to foreign source 
     income if this subsection were applied to a group consisting 
     of all the foreign corporations in such worldwide affiliated 
     group.
       ``(D) Election.--An election under this paragraph with 
     respect to any worldwide affiliated group may be made only by 
     the common parent of the affiliated group referred to in 
     subparagraph (B)(i) and may be made only for the first 
     taxable year beginning after December 31, 2004, in which a 
     worldwide affiliated group exists which includes such 
     affiliated group and at least 1 corporation described in 
     subparagraph (B)(ii). Such an election, once made, shall 
     apply to such common parent and all other corporations which 
     are members of such worldwide affiliated group for such 
     taxable year and all subsequent years unless revoked with the 
     consent of the Secretary.''.
       (b) Election To Expand Financial Institution Group of 
     Worldwide Group.--Section 864 is amended by redesignating 
     subsection (f) as subsection (g) and by inserting after 
     subsection (e) the following new subsection:
       ``(f) Election To Expand Financial Institution Group of 
     Worldwide Group.--
       ``(1) In general.--If a worldwide affiliated group for 
     which an election under subsection (e)(6) is in effect elects 
     the application of this subsection, all financial 
     corporations which--
       ``(A) are members of such worldwide affiliated group, but
       ``(B) are not corporations described in subsection 
     (e)(5)(C),

     shall be treated as described in subsection (e)(5)(C) for 
     purposes of applying subsection (e)(5)(B). Subsection (e) 
     shall apply to any such group in the same manner as 
     subsection (e) applies to the pre-election worldwide 
     affiliated group of which such group is a part.
       ``(2) Financial corporation.--For purposes of this 
     subsection, the term `financial corporation' means any 
     corporation if at least 80 percent of its gross income is 
     income described in section 904(d)(2)(C)(ii) and the 
     regulations thereunder which is derived from transactions 
     with persons not bearing a relationship described in section 
     267(b) or 707(b)(1) to the corporation.
       ``(3) Antiabuse rules.--In the case of a corporation which 
     is a member of an electing financial institution group, to 
     the extent that such corporation--
       ``(A) distributes dividends or makes other distributions 
     with respect to its stock after the date of the enactment of 
     this paragraph to any member of the pre-election worldwide 
     affiliated group (other than to a member of the electing 
     financial institution group) in excess of the greater of--
       ``(i) its average annual dividend (expressed as a 
     percentage of current earnings and profits) during the 5-
     taxable-year period ending with the taxable year preceding 
     the taxable year, or
       ``(ii) 25 percent of its average annual earnings and 
     profits for such 5 taxable year period, or
       ``(B) deals with any person in any manner not clearly 
     reflecting the income of the corporation (as determined under 
     principles similar to the principles of section 482),

     an amount of indebtedness of the electing financial 
     institution group equal to the excess distribution or the 
     understatement or overstatement of income, as the case may 
     be, shall be recharacterized (for the taxable year and 
     subsequent taxable years) for purposes of this subsection as 
     indebtedness of the worldwide affiliated group (excluding the 
     electing financial institution group). If a corporation has 
     not been in existence for 5 taxable years, this subparagraph 
     shall be applied with respect to the period it was in 
     existence.
       ``(4) Election.--An election under this subsection with 
     respect to any financial institution group may be made only 
     by the common parent of the pre-election worldwide affiliated 
     group and may be made only for the first taxable year 
     beginning after December 31, 2004, in which such affiliated 
     group includes 1 or more financial corporations described in 
     paragraph (1)(B). Such an election, once made, shall apply to 
     all financial corporations which are members of the electing 
     financial institution group for such taxable year and all 
     subsequent years unless revoked with the consent of the 
     Secretary.
       ``(5) Definitions relating to groups.--For purposes of this 
     subsection--
       ``(A) Pre-election worldwide affiliated group.--The term 
     `pre-election worldwide affiliated group' means, with respect 
     to a corporation, the worldwide affiliated group of which 
     such corporation would (but for an election under this 
     subsection) be a member for purposes of applying subsection 
     (e).
       ``(B) Electing financial institution group.--The term 
     `electing financial institution group' means the group of 
     corporations to which subsection (e) applies separately by 
     reason of the application of subsection (e)(5)(B) and which 
     includes financial corporations by reason of an election 
     under paragraph (1).
       ``(6) Regulations.--The Secretary shall prescribe such 
     regulations as may be appropriate to carry out this 
     subsection and subsection (e), including regulations--
       ``(A) providing for the direct allocation of interest 
     expense in other circumstances where such allocation would be 
     appropriate to carry out the purposes of this subsection,
       ``(B) preventing assets or interest expense from being 
     taken into account more than once, and
       ``(C) dealing with changes in members of any group (through 
     acquisitions or otherwise) treated under this subsection as 
     an affiliated group for purposes of subsection (e).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2004.

     SEC. 902. LOOK-THRU RULES TO APPLY TO DIVIDENDS FROM 
                   NONCONTROLLED SECTION 902 CORPORATIONS.

       (a) In General.--Section 904(d)(4) (relating to application 
     of look-thru rules to dividends from noncontrolled section 
     902 corporations) is amended to read as follows:
       ``(4) Look-thru applies to dividends from noncontrolled 
     section 902 corporations.--
       ``(A) In general.--For purposes of this subsection, any 
     dividend from a noncontrolled section 902 corporation with 
     respect to the taxpayer shall be treated as income in a 
     separate category in proportion to the ratio of--
       ``(i) the portion of earnings and profits attributable to 
     income in such category, to
       ``(ii) the total amount of earnings and profits.
       ``(B) Special rules.--For purposes of this paragraph--
       ``(i) In general.--Rules similar to the rules of paragraph 
     (3)(F) shall apply, except that the term `separate category' 
     shall include the category of income described in paragraph 
     (1)(I).
       ``(ii) Earnings and profits.--

       ``(I) In general.--The rules of section 316 shall apply.
       ``(II) Regulations.--The Secretary may prescribe 
     regulations regarding the treatment of distributions out of 
     earnings and profits for periods before the taxpayer's 
     acquisition of the stock to which the distributions relate.

       ``(iii) Dividends not allocable to separate category.--The 
     portion of any dividend from a noncontrolled section 902 
     corporation which is not treated as income in a separate 
     category under subparagraph (A) shall be treated as a 
     dividend to which subparagraph (A) does not apply.
       ``(iv) Look-thru with respect to carryforwards of credit.--
     Rules similar to subparagraph (A) also shall apply to any 
     carryforward under subsection (c) from a taxable year 
     beginning before January 1, 2005, of tax allocable to a 
     dividend from a noncontrolled section 902 corporation with 
     respect to the taxpayer.''.
       (b) Conforming Amendments.--
       (1) Subparagraph (E) of section 904(d)(1), as in effect 
     both before and after the amendments made by section 1105 of 
     the Taxpayer Relief Act of 1997, is hereby repealed.
       (2) Section 904(d)(2)(C)(iii), as so in effect, is amended 
     by striking subclause (II) and by redesignating subclause 
     (III) as subclause (II).
       (3) The last sentence of section 904(d)(2)(D), as so in 
     effect, is amended to read as follows: ``Such term does not 
     include any financial services income.''.
       (4) Section 904(d)(2)(E) is amended by striking clauses 
     (ii) and (iv) and by redesignating clause (iii) as clause 
     (ii).

[[Page 19062]]

       (5) Section 904(d)(3)(F) is amended by striking ``(D), or 
     (E)'' and inserting ``or (D)''.
       (6) Section 864(d)(5)(A)(i) is amended by striking 
     ``(C)(iii)(III)'' and inserting ``(C)(iii)(II)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2004.

     SEC. 903. CLARIFICATION OF TREATMENT OF PIPELINE 
                   TRANSPORTATION INCOME.

       (a) In General.--Section 954(g)(1) (defining foreign base 
     company oil related income) is amended by striking ``or'' at 
     the end of subparagraph (A), by striking the period at the 
     end of subparagraph (B) and inserting ``, or'', and by 
     inserting after subparagraph (B) the following new 
     subparagraph:
       ``(C) the pipeline transportation of oil or gas within such 
     foreign country.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years of controlled foreign 
     corporations beginning after December 31, 2002, and taxable 
     years of United States shareholders with or within which such 
     taxable years of controlled foreign corporations end.

     SEC. 904. SUBPART F TREATMENT OF INCOME FROM TRANSMISSION OF 
                   HIGH VOLTAGE ELECTRICITY.

       (a) In General.--Paragraph (2) of section 954(e) (relating 
     to foreign base company services income) is amended by 
     striking ``or'' at the end of subparagraph (A), by striking 
     the period at the end of subparagraph (B) and inserting ``, 
     or'', and by inserting after subparagraph (B) the following 
     new subparagraph:
       ``(C) the transmission of high voltage electricity.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years of controlled foreign 
     corporations beginning after December 31, 2002, and taxable 
     years of United States shareholders with or within which such 
     taxable years of controlled foreign corporations end.

     SEC. 905. ADVANCE PRICING AGREEMENTS TREATED AS CONFIDENTIAL 
                   TAXPAYER INFORMATION.

       (a) In General.--
       (1) Treatment as return information.--Paragraph (2) of 
     section 6103(b) (defining return information) is amended by 
     striking ``and'' at the end of subparagraph (A), by inserting 
     ``and'' at the end of subparagraph (B), and by inserting 
     after subparagraph (B) the following new subparagraph:
       ``(C) any advance pricing agreement entered into by a 
     taxpayer and the Secretary and any background information 
     related to such agreement or any application for an advance 
     pricing agreement,''.
       (2) Exception from public inspection as written 
     determination.--Paragraph (1) of section 6110(b) (defining 
     written determination) is amended by adding at the end the 
     following new sentence: ``Such term shall not include any 
     advance pricing agreement entered into by a taxpayer and the 
     Secretary and any background information related to such 
     agreement or any application for an advance pricing 
     agreement.''.
       (3) Effective date.--The amendments made by this subsection 
     shall take effect on the date of the enactment of this Act.
       (b) Annual Report Regarding Advance Pricing Agreements.--
       (1) In general.--Not later than 90 days after the end of 
     each calendar year, the Secretary of the Treasury shall 
     prepare and publish a report regarding advance pricing 
     agreements.
       (2) Contents of report.--The report shall include the 
     following for the calendar year to which such report relates:
       (A) Information about the structure, composition, and 
     operation of the advance pricing agreement program office.
       (B) A copy of each model advance pricing agreement.
       (C) The number of--
       (i) applications filed during such calendar year for 
     advanced pricing agreements;
       (ii) advance pricing agreements executed cumulatively to 
     date and during such calendar year;
       (iii) renewals of advanced pricing agreements issued;
       (iv) pending requests for advance pricing agreements;
       (v) pending renewals of advance pricing agreements;
       (vi) for each of the items in clauses (ii) through (v), the 
     number that are unilateral, bilateral, and multilateral, 
     respectively;
       (vii) advance pricing agreements revoked or canceled, and 
     the number of withdrawals from the advance pricing agreement 
     program; and
       (viii) advanced pricing agreements finalized or renewed by 
     industry.
       (D) General descriptions of--
       (i) the nature of the relationships between the related 
     organizations, trades, or businesses covered by advance 
     pricing agreements;
       (ii) the covered transactions and the business functions 
     performed and risks assumed by such organizations, trades, or 
     businesses;
       (iii) the related organizations, trades, or businesses 
     whose prices or results are tested to determine compliance 
     with transfer pricing methodologies prescribed in advanced 
     pricing agreements;
       (iv) methodologies used to evaluate tested parties and 
     transactions and the circumstances leading to the use of 
     those methodologies;
       (v) critical assumptions made and sources of comparables 
     used;
       (vi) comparable selection criteria and the rationale used 
     in determining such criteria;
       (vii) the nature of adjustments to comparables or tested 
     parties;
       (viii) the nature of any ranges agreed to, including 
     information regarding when no range was used and why, when 
     interquartile ranges were used, and when there was a 
     statistical narrowing of the comparables;
       (ix) adjustment mechanisms provided to rectify results that 
     fall outside of the agreed upon advance pricing agreement 
     range;
       (x) the various term lengths for advance pricing 
     agreements, including rollback years, and the number of 
     advance pricing agreements with each such term length;
       (xi) the nature of documentation required; and
       (xii) approaches for sharing of currency or other risks.
       (E) Statistics regarding the amount of time taken to 
     complete new and renewal advance pricing agreements.
       (3) Confidentiality.--The reports required by this 
     subsection shall be treated as authorized by the Internal 
     Revenue Code of 1986 for purposes of section 6103 of such 
     Code, but the reports shall not include information--
       (A) which would not be permitted to be disclosed under 
     section 6110(c) of such Code if such report were a written 
     determination as defined in section 6110 of such Code, or
       (B) which can be associated with, or otherwise identify, 
     directly or indirectly, a particular taxpayer.
       (4) First report.--The report for calendar year 1999 shall 
     include prior calendar years after 1990.
       (c) User Fee.--Section 7527, as added by this Act, is 
     amended by redesignating subsection (c) as subsection (d) and 
     by inserting after subsection (b) the following new 
     subsection:
       ``(c) Advance Pricing Agreements.--
       ``(1) In general.--In addition to any fee otherwise imposed 
     under this section, the fee imposed for requests for advance 
     pricing agreements shall be increased by $500.
       ``(2) Reduced fee for small businesses.--The Secretary 
     shall provide an appropriate reduction in the amount imposed 
     by reason of paragraph (1) for requests for advance pricing 
     agreements for small businesses.''.
       (d) Regulations.--The Secretary of the Treasury or the 
     Secretary's delegate shall prescribe such regulations as may 
     be necessary or appropriate to carry out the purposes of 
     section 6103(b)(2)(C), and the last sentence of section 
     6110(b)(1), of the Internal Revenue Code of 1986, as added by 
     this section.

     SEC. 906. AIRLINE MILEAGE AWARDS TO CERTAIN FOREIGN PERSONS.

       (a) In General.--The last sentence of section 4261(e)(3)(C) 
     (relating to regulations) is amended by inserting ``and 
     mileage awards which are issued to individuals whose mailing 
     addresses on record with the person providing the right to 
     air transportation are outside the United States'' before the 
     period at the end thereof.
       (b) Effective Date.--The amendment made by this section 
     shall apply to amounts paid after December 31, 2004.

     SEC. 907. 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, 
     2004.

     SEC. 908. TREATMENT OF MILITARY PROPERTY OF FOREIGN SALES 
                   CORPORATIONS.

       (a) In General.--Section 923(a) (defining exempt foreign 
     trade income) is amended by striking paragraph (5) and by 
     redesignating paragraph (6) as paragraph (5).
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2004.

         TITLE X--HOUSING AND REAL ESTATE TAX RELIEF PROVISIONS

                 Subtitle A--Low-Income Housing Credit

     SEC. 1001. MODIFICATION OF STATE CEILING ON LOW-INCOME 
                   HOUSING CREDIT.

       (a) In General.--Clauses (i) and (ii) of section 
     42(h)(3)(C) (relating to State housing credit ceiling) are 
     amended to read as follows:
       ``(i) the unused State housing credit ceiling (if any) of 
     such State for the preceding calendar year,
       ``(ii) the greater of--

       ``(I) the applicable amount under subparagraph (H) 
     multiplied by the State population, or
       ``(II) $2,000,000,''.

       (b) Applicable Amount.--Paragraph (3) of section 42(h) 
     (relating to housing credit dollar amount for agencies) is 
     amended by adding at the end the following new subparagraph:
       ``(H) Applicable amount of state ceiling.--For purposes of 
     subparagraph (C)(ii), the applicable amount shall be 
     determined under the following table:

``For calendar year--                        The applicable amount is--
      2001.......................................................$1.35 
      2002......................................................  1.45 
      2003......................................................  1.55 
      2004......................................................  1.65 
      2005 and thereafter....................................  1.75.''.
       (c) Adjustment of State Ceiling for Increases in Cost-of-
     Living.--Paragraph (3) of section 42(h) (relating to housing 
     credit dollar amount for agencies), as amended by subsection

[[Page 19063]]

     (b), is amended by adding at the end the following new 
     subparagraph:
       ``(I) Cost-of-living adjustment.--
       ``(i) In general.--In the case of a calendar year after 
     2005, the $1.75 amount in subparagraph (H) 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 such calendar year by substituting 
     `calendar year 2004' for `calendar year 1992' in subparagraph 
     (B) thereof.

       ``(ii) Rounding.--Any increase under clause (i) which is 
     not a multiple of 5 cents shall be rounded to the next lowest 
     multiple of 5 cents.''.
       (d) Conforming Amendments.--
       (1) Section 42(h)(3)(C), as amended by subsection (a), is 
     amended--
       (A) by striking ``clause (ii)'' in the matter following 
     clause (iv) and inserting ``clause (i)'', and
       (B) by striking ``clauses (i)'' in the matter following 
     clause (iv) and inserting ``clauses (ii)''.
       (2) Section 42(h)(3)(D)(ii) is amended--
       (A) by striking ``subparagraph (C)(ii)'' and inserting 
     ``subparagraph (C)(i)'', and
       (B) by striking ``clauses (i)'' in subclause (II) and 
     inserting ``clauses (ii)''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to calendar years after 2000.

                       Subtitle B--Historic Homes

     SEC. 1011. TAX CREDIT FOR RENOVATING HISTORIC HOMES.

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

     ``SEC. 25B. HISTORIC HOMEOWNERSHIP REHABILITATION CREDIT.

       ``(a) General Rule.--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 20 percent of 
     the qualified rehabilitation expenditures made by the 
     taxpayer with respect to a qualified historic home.
       ``(b) Dollar Limitation.--The credit allowed by subsection 
     (a) with respect to any residence of a taxpayer shall not 
     exceed $20,000 ($10,000 in the case of a married individual 
     filing a separate return).
       ``(c) Qualified Rehabilitation Expenditure.--For purposes 
     of this section--
       ``(1) In general.--The term `qualified rehabilitation 
     expenditure' means any amount properly chargeable to capital 
     account--
       ``(A) in connection with the certified rehabilitation of a 
     qualified historic home, and
       ``(B) for property for which depreciation would be 
     allowable under section 168 if the qualified historic home 
     were used in a trade or business.
       ``(2) Certain expenditures not included.--
       ``(A) Exterior.--Such term shall not include any 
     expenditure in connection with the rehabilitation of a 
     building unless at least 5 percent of the total expenditures 
     made in the rehabilitation process are allocable to the 
     rehabilitation of the exterior of such building.
       ``(B) Other rules to apply.--Rules similar to the rules of 
     clauses (ii) and (iii) of section 47(c)(2)(B) shall apply.
       ``(3) Mixed use or multifamily building.--If only a portion 
     of a building is used as the principal residence of the 
     taxpayer, only qualified rehabilitation expenditures which 
     are properly allocable to such portion shall be taken into 
     account under this section.
       ``(d) Certified Rehabilitation.--For purposes of this 
     section:
       ``(1) In general.--Except as otherwise provided in this 
     subsection, the term `certified rehabilitation' has the 
     meaning given such term by section 47(c)(2)(C).
       ``(2) Factors to be considered in the case of targeted area 
     residences, etc.--
       ``(A) In general.--For purposes of applying section 
     47(c)(2)(C) under this section with respect to the 
     rehabilitation of a building to which this paragraph applies, 
     consideration shall be given to--
       ``(i) the feasibility of preserving existing architectural 
     and design elements of the interior of such building,
       ``(ii) the risk of further deterioration or demolition of 
     such building in the event that certification is denied 
     because of the failure to preserve such interior elements, 
     and
       ``(iii) the effects of such deterioration or demolition on 
     neighboring historic properties.
       ``(B) Buildings to which this paragraph applies.--This 
     paragraph shall apply with respect to any building--
       ``(i) any part of which is a targeted area residence within 
     the meaning of section 143(j)(1), or
       ``(ii) which is located within an enterprise community or 
     empowerment zone as designated under section 1391,

     but shall not apply with respect to any building which is 
     listed in the National Register.
       ``(3) Approved state program.--The term `certified 
     rehabilitation' includes a certification made by--
       ``(A) a State Historic Preservation Officer who administers 
     a State Historic Preservation Program approved by the 
     Secretary of the Interior pursuant to section 101(b)(1) of 
     the National Historic Preservation Act, as in effect on July 
     21, 1999, or
       ``(B) a local government, certified pursuant to section 
     101(c)(1) of the National Historic Preservation Act, as in 
     effect on July 21, 1999, and authorized by a State Historic 
     Preservation Officer, or the Secretary of the Interior where 
     there is no approved State program),

     subject to such terms and conditions as may be specified by 
     the Secretary of the Interior for the rehabilitation of 
     buildings within the jurisdiction of such officer (or local 
     government) for purposes of this section.
       ``(e) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Qualified historic home.--The term `qualified 
     historic home' means a certified historic structure--
       ``(A) which has been substantially rehabilitated, and
       ``(B) which (or any portion of which)--
       ``(i) is owned by the taxpayer, and
       ``(ii) is used (or will, within a reasonable period, be 
     used) by such taxpayer as his principal residence.
       ``(2) Substantially rehabilitated.--The term `substantially 
     rehabilitated' has the meaning given such term by section 
     47(c)(1)(C); except that, in the case of any building 
     described in subsection (d)(2), clause (i)(I) thereof shall 
     not apply.
       ``(3) Principal residence.--The term `principal residence' 
     has the same meaning as when used in section 121.
       ``(4) Certified historic structure.--
       ``(A) In general.--The term `certified historic structure' 
     means any building (and its structural components) which--
       ``(i) is listed in the National Register, or
       ``(ii) is located in a registered historic district (as 
     defined in section 47(c)(3)(B)) within which only qualified 
     census tracts (or portions thereof) are located, and is 
     certified by the Secretary of the Interior to the Secretary 
     as being of historic significance to the district.
       ``(B) Certain structures included.--Such term includes any 
     building (and its structural components) which is designated 
     as being of historic significance under a statute of a State 
     or local government, if such statute is certified by the 
     Secretary of the Interior to the Secretary as containing 
     criteria which will substantially achieve the purpose of 
     preserving and rehabilitating buildings of historic 
     significance.
       ``(C) Qualified census tracts.--For purposes of 
     subparagraph (A)(ii)--
       ``(i) In general.--The term `qualified census tract' means 
     a census tract in which the median family income is less than 
     twice the statewide median family income.
       ``(ii) Data used.--The determination under clause (i) shall 
     be made on the basis of the most recent decennial census for 
     which data are available.
       ``(5) Rehabilitation not complete before certification.--A 
     rehabilitation shall not be treated as complete before the 
     date of the certification referred to in subsection (d).
       ``(6) Lessees.--A taxpayer who leases his principal 
     residence shall, for purposes of this section, be treated as 
     the owner thereof if the remaining term of the lease (as of 
     the date determined under regulations prescribed by the 
     Secretary) is not less than such minimum period as the 
     regulations require.
       ``(7) Tenant-stockholder in cooperative housing 
     corporation.--If the taxpayer holds stock as a tenant-
     stockholder (as defined in section 216) in a cooperative 
     housing corporation (as defined in such section), such 
     stockholder shall be treated as owning the house or apartment 
     which the taxpayer is entitled to occupy as such stockholder.
       ``(8) Allocation of expenditures relating to exterior of 
     building containing cooperative or condominium units.--The 
     percentage of the total expenditures made in the 
     rehabilitation of a building containing cooperative or 
     condominium residential units allocated to the rehabilitation 
     of the exterior of the building shall be attributed 
     proportionately to each cooperative or condominium 
     residential unit in such building for which a credit under 
     this section is claimed.
       ``(f) When Expenditures Taken Into Account.--In the case of 
     a building other than a building to which subsection (g) 
     applies, qualified rehabilitation expenditures shall be 
     treated for purposes of this section as made on the date the 
     rehabilitation is completed.
       ``(g) Allowance of Credit for Purchase of Rehabilitated 
     Historic Home.--
       ``(1) In general.--In the case of a qualified purchased 
     historic home, the taxpayer shall be treated as having made 
     (on the date of purchase) the qualified rehabilitation 
     expenditures made by the seller of such home. For purposes of 
     the preceding sentence, expenditures made by the seller shall 
     be deemed to be qualified rehabilitation expenditures if such 
     expenditures, if made by the purchaser, would be qualified 
     rehabilitation expenditures.
       ``(2) Qualified purchased historic home.--For purposes of 
     this subsection, the term `qualified purchased historic home' 
     means any substantially rehabilitated certified historic 
     structure purchased by the taxpayer if--
       ``(A) the taxpayer is the first purchaser of such structure 
     after the date rehabilitation is completed, and the purchase 
     occurs within 5 years after such date,
       ``(B) the structure (or a portion thereof) will, within a 
     reasonable period, be the principal residence of the 
     taxpayer,
       ``(C) no credit was allowed to the seller under this 
     section or section 47 with respect to such rehabilitation, 
     and
       ``(D) the taxpayer is furnished with such information as 
     the Secretary determines is necessary to determine the credit 
     under this subsection.
       ``(h) Historic Rehabilitation Mortgage Credit 
     Certificate.--
       ``(1) In general.--The taxpayer may elect, in lieu of the 
     credit otherwise allowable under this

[[Page 19064]]

     section, to receive a historic rehabilitation mortgage credit 
     certificate. An election under this paragraph shall be made--
       ``(A) in the case of a building to which subsection (g) 
     applies, at the time of purchase, or
       ``(B) in any other case, at the time rehabilitation is 
     completed.
       ``(2) Historic rehabilitation mortgage credit 
     certificate.--For purposes of this subsection, the term 
     `historic rehabilitation mortgage credit certificate' means a 
     certificate--
       ``(A) issued to the taxpayer, in accordance with procedures 
     prescribed by the Secretary, with respect to a certified 
     rehabilitation,
       ``(B) the face amount of which shall be equal to the credit 
     which would (but for this subsection) be allowable under 
     subsection (a) to the taxpayer with respect to such 
     rehabilitation,
       ``(C) which may only be transferred by the taxpayer to a 
     lending institution (including a non-depository institution) 
     in connection with a loan--
       ``(i) that is secured by the building with respect to which 
     the credit relates, and
       ``(ii) the proceeds of which may not be used for any 
     purpose other than the acquisition or rehabilitation of such 
     building, and
       ``(D) in exchange for which such lending institution 
     provides the taxpayer--
       ``(i) a reduction in the rate of interest on the loan which 
     results in interest payment reductions which are 
     substantially equivalent on a present value basis to the face 
     amount of such certificate, or
       ``(ii) if the taxpayer so elects with respect to a 
     specified amount of the face amount of such a certificate 
     relating to a building--

       ``(I) which is a targeted area residence within the meaning 
     of section 143(j)(1), or
       ``(II) which is located in an enterprise community or 
     empowerment zone as designated under section 1391,

     a payment which is substantially equivalent to such specified 
     amount to be used to reduce the taxpayer's cost of purchasing 
     the building (and only the remainder of such face amount 
     shall be taken into account under clause (i)).
       ``(3) Method of discounting.--The present value under 
     paragraph (2)(D)(i) shall be determined--
       ``(A) for a period equal to the term of the loan referred 
     to in subparagraph (D)(i),
       ``(B) by using the convention that any payment on such loan 
     in any taxable year within such period is deemed to have been 
     made on the last day of such taxable year,
       ``(C) by using a discount rate equal to 65 percent of the 
     average of the annual Federal mid-term rate and the annual 
     Federal long-term rate applicable under section 1274(d)(1) to 
     the month in which the taxpayer makes an election under 
     paragraph (1) and compounded annually, and
       ``(D) by assuming that the credit allowable under this 
     section for any year is received on the last day of such 
     year.
       ``(4) Use of certificate by lender.--The amount of the 
     credit specified in the certificate shall be allowed to the 
     lender only to offset the regular tax (as defined in section 
     55(c)) of such lender. The lender may carry forward all 
     unused amounts under this subsection until exhausted.
       ``(5) Historic rehabilitation mortgage credit certificate 
     not treated as taxable income.--Notwithstanding any other 
     provision of law, no benefit accruing to the taxpayer through 
     the use of an historic rehabilitation mortgage credit 
     certificate shall be treated as taxable income for purposes 
     of this title.
       ``(i) Recapture.--
       ``(1) In general.--If, before the end of the 5-year period 
     beginning on the date on which the rehabilitation of the 
     building is completed (or, if subsection (g) applies, the 
     date of purchase of such building by the taxpayer, or, if 
     subsection (h) applies, the date of the loan)--
       ``(A) the taxpayer disposes of such taxpayer's interest in 
     such building, or
       ``(B) such building ceases to be used as the principal 
     residence of the taxpayer,

     the taxpayer's tax imposed by this chapter for the taxable 
     year in which such disposition or cessation occurs shall be 
     increased by the recapture percentage of the credit allowed 
     under this section for all prior taxable years with respect 
     to such rehabilitation.
       ``(2) Recapture percentage.--For purposes of paragraph (1), 
     the recapture percentage shall be determined in accordance 
     with the following table:

The recapture percentage is--tion occurs within--
  (i) One full year after the taxpayer becomes entitled to the 100 it..

  (ii) One full year after the close of the period described in clause 
    (i).........................................................80 ....

  (iii) One full year after the close of the period described in clause 
    (ii)........................................................60 ....

  (iv) One full year after the close of the period described in clause 
    (iii).......................................................40 ....

  (v) One full year after the close of the period described in clause 
    (iv).....................................................20.''.....

       ``(j) Basis Adjustments.--For purposes of this subtitle, if 
     a credit is allowed under this section for any expenditure 
     with respect to any property (including any purchase under 
     subsection (g) and any transfer under subsection (h)), 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.
       ``(k) Denial of Double Benefit.--No credit shall be allowed 
     under this section for any amount for which credit is allowed 
     under section 47.
       ``(l) Regulations.--The Secretary shall prescribe such 
     regulations as may be appropriate to carry out the purposes 
     of this section, including regulations where less than all of 
     a building is used as a principal residence and where more 
     than 1 taxpayer use the same dwelling unit as their principal 
     residence.''.
       (b) Conforming Amendment.--Subsection (a) of section 1016 
     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 
     new item:
       ``(28) to the extent provided in section 25B(j).''.
       (c) Clerical Amendment.--The table of sections for subpart 
     A of part IV of subchapter A of chapter 1 is amended by 
     inserting after the item relating to section 25A the 
     following new item:

``Sec. 25B. Historic homeownership rehabilitation credit.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to expenses paid or incurred in taxable years 
     beginning after December 31, 1999.

    Subtitle C--Provisions Relating to Real Estate Investment Trusts

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

     SEC. 1021. 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. 1022. 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

[[Page 19065]]

     business of operating qualified lodging facilities for any 
     person who is not a related person with respect to the real 
     estate investment trust or the taxable REIT subsidiary.
       ``(B) Special rules.--Solely for purposes of this paragraph 
     and paragraph (8)(B), a person shall not fail to be treated 
     as an independent contractor with respect to any qualified 
     lodging facility by reason of any of the following:
       ``(i) The taxable REIT subsidiary bears the expenses for 
     the operation of the facility pursuant to the management 
     agreement or other similar service contract.
       ``(ii) The taxable REIT subsidiary receives the revenues 
     from the operation of such facility, net of expenses for such 
     operation and fees payable to the operator pursuant to such 
     agreement or contract.
       ``(iii) The real estate investment trust receives income 
     from such person with respect to another property that is 
     attributable to a lease of such other property to such person 
     that was in effect as 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)''.
       (3) Determining rents from real property.--
       (A)(i) Paragraph (1) of section 856(d) is amended by 
     striking ``adjusted bases'' in each place that it occurs and 
     inserting ``fair market values'' in each such place.
       (ii) The amendment made by this paragraph shall apply to 
     taxable years beginning after December 31, 1999.
       (B)(i) Clause (i) of section 856(d)(2)(B) is amended by 
     striking ``number'' and inserting ``value''.
       (ii) The amendment made by this paragraph shall apply to 
     amounts received or accrued in taxable years beginning after 
     December 31, 1999, except for amounts paid pursuant to leases 
     in effect on July 12, 1999 or pursuant to a binding contract 
     in effect on such date and at all times thereafter.

     SEC. 1023. 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. 1024. 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. 1025. 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.

[[Page 19066]]

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

     SEC. 1026. 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 1021.--
       (1) Existing arrangements.--
       (A) In general.--Except as otherwise provided in this 
     paragraph, the amendment made by section 1021 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.

     Notwithstanding the preceding sentence, such securities shall 
     be taken into account in determining whether such trust fails 
     to meet the requirements of section 856(c)(4)(B) of such Code 
     (as amended by such amendments) if such trust acquires or 
     receives securities to which the preceding sentence does not 
     apply.
       (B) New trade or business or substantial new assets.--
     Subparagraph (A) shall cease to apply to securities of a 
     corporation as of the first day after July 12, 1999, on which 
     such corporation engages in a substantial new line of 
     business, or acquires any substantial asset, other than--
       (i) pursuant to a binding contract in effect on such date 
     and at all times thereafter before the acquisition of such 
     asset,
       (ii) in a transaction in which gain or loss is not 
     recognized by reason of section 1031 or 1033 of the Internal 
     Revenue Code of 1986, or
       (iii) in a reorganization (as so defined) with another 
     corporation the securities of which are described in 
     paragraph (1)(A) of this subsection.
       (C) Limitation on transition rules.--Subparagraph (A) shall 
     cease to apply to securities of a corporation held, acquired, 
     or received, directly or indirectly, by a real estate 
     investment trust as of the first day after July 12, 1999, on 
     which such trust acquires any additional securities of such 
     corporation other than--
       (i) pursuant to a binding contract in effect on such date 
     and at all times thereafter, or
       (ii) in a reorganization (as so defined) with another 
     corporation the securities of which are described in 
     paragraph (1)(A) of this subsection.
       (2) Tax-free conversion.--If--
       (A) at the time of an election for a corporation to become 
     a taxable REIT subsidiary, the amendment made by section 1021 
     does not apply to such corporation by reason of paragraph 
     (1), and
       (B) such election first takes effect before January 1, 
     2004,

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

                       PART II--HEALTH CARE REITS

     SEC. 1031. 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. 1041. 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. 1051. 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. 1061. MODIFICATION OF EARNINGS AND PROFITS RULES.

       (a) Rules for Determining Whether Regulated Investment 
     Company Has Earnings and

[[Page 19067]]

     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.

          PART VI--STUDY RELATING TO TAXABLE REIT SUBSIDIARIES

     SEC. 1071. STUDY RELATING TO TAXABLE REIT SUBSIDIARIES.

       The Commissioner of the Internal Revenue shall conduct a 
     study to determine how many taxable REIT subsidiaries are in 
     existence and the aggregate amount of taxes paid by such 
     subsidiaries. The Secretary shall submit a report to the 
     Congress describing the results of such study.

              Subtitle D--Private Activity Bond Volume Cap

     SEC. 1081. 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.

            Subtitle E--Leasehold Improvements Depreciation

     SEC. 1091. 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, 2002,
       ``(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, 2002.

                   TITLE XI--MISCELLANEOUS PROVISIONS

     SEC. 1101. REPEAL OF CERTAIN MOTOR FUEL EXCISE TAXES ON FUEL 
                   USED BY RAILROADS AND ON INLAND WATERWAY 
                   TRANSPORTATION.

       (a) Repeal of 4.3-Cent Motor Fuel Excise Taxes on Railroads 
     and Inland Waterway Transportation Which Remain in General 
     Fund.--
       (1) Taxes on trains.--
       (A) In general.--Subparagraph (A) of section 4041(a)(1) is 
     amended by striking ``or a diesel-powered train'' each place 
     it appears and by striking ``or train''.
       (B) Conforming amendments.--
       (i) Subparagraph (C) of section 4041(a)(1) is amended by 
     striking clause (ii) and by redesignating clause (iii) as 
     clause (ii).
       (ii) Subparagraph (C) of section 4041(b)(1) is amended by 
     striking all that follows ``section 6421(e)(2)'' and 
     inserting a period.
       (iii) Paragraph (3) of section 4083(a) is amended by 
     striking ``or a diesel-powered train''.
       (iv) Section 6427(l) is amended by striking paragraph (3) 
     and by redesignating paragraphs (4) and (5) as paragraphs (3) 
     and (4), respectively.
       (2) Fuel used on inland waterways.--
       (A) In general.--Paragraph (1) of section 4042(b) is 
     amended by adding ``and'' at the end of subparagraph (A), by 
     striking ``, and'' at the end of subparagraph (B) and 
     inserting a period, and by striking subparagraph (C).
       (B) Conforming amendment.--Paragraph (2) of section 4042(b) 
     is amended by striking subparagraph (C).
       (b) Effective Date.--The amendments made by this subsection 
     shall take effect on October 1, 2000.

     SEC. 1102. TAX TREATMENT OF ALASKA NATIVE SETTLEMENT TRUSTS.

       (a) Tax Exemption.--Section 501(c), as amended by section 
     801(a), is amended by adding at the end the following new 
     paragraph:
       ``(29) A trust which--
       ``(A) constitutes a Settlement Trust under section 39 of 
     the Alaska Native Claims Settlement Act (43 U.S.C. 1629e), 
     and
       ``(B) with respect to which an election under subsection 
     (p)(2) is in effect.''.
       (b) Special Rules Relating to Taxation of Alaska Native 
     Settlement Trusts.--Section 501 is amended by redesignating 
     subsection (p) as subsection (q) and by inserting after 
     subsection (o) the following new subsection:
       ``(p) Special Rules for Taxation of Alaska Native 
     Settlement Trusts.--
       ``(1) In general.--For purposes of this title, the 
     following rules shall apply in the case of a Settlement 
     Trust:
       ``(A) Electing trust.--If an election under paragraph (2) 
     is in effect for any taxable year--
       ``(i) no amount shall be includible in the gross income of 
     a beneficiary of the Settlement Trust by reason of a 
     contribution to the Settlement Trust made during such taxable 
     year, and
       ``(ii) except as provided in this subsection, the 
     provisions of subchapter J and section 1(e) shall not apply 
     to the Settlement Trust and its beneficiaries for such 
     taxable year.
       ``(B) Nonelecting trust.--If an election is not in effect 
     under paragraph (2) for any taxable year, the provisions of 
     subchapter J and section 1(e) shall apply to the Settlement 
     Trust and its beneficiaries for such taxable year.
       ``(2) One-time election.--
       ``(A) In general.--A Settlement Trust may elect to have the 
     provisions of this subsection and subsection (c)(29) apply to 
     the trust and its beneficiaries.
       ``(B) Time and method of election.--An election under 
     subparagraph (A) shall be made--
       ``(i) on or before the due date (including extensions) for 
     filing the Settlement Trust's return of tax for the 1st 
     taxable year of the Settlement Trust ending after December 
     31, 1999, and
       ``(ii) by attaching to such return of tax a statement 
     specifically providing for such election.
       ``(C) Period election in effect.--Except as provided in 
     paragraph (3), an election under subparagraph (A)--
       ``(i) shall apply to the 1st taxable year described in 
     subparagraph (B)(i) and all subsequent taxable years, and
       ``(ii) may not be revoked once it is made.
       ``(3) Special rules where transfer restrictions modified.--
       ``(A) Transfer of beneficial interests.--If, at any time, a 
     beneficial interest in a Settlement Trust may be disposed of 
     in a manner which would not be permitted by section 7(h) of 
     the Alaska Native Claims Settlement Act (43 U.S.C. 1606(h)) 
     if the interest were Settlement Common Stock--
       ``(i) no election may be made under paragraph (2)(A) with 
     respect to such trust, and
       ``(ii) if an election under paragraph (2)(A) is in effect 
     as of such time--

       ``(I) such election is revoked as of the 1st day of the 
     taxable year following the taxable year in which such 
     disposition is first permitted, and
       ``(II) there is hereby imposed on such trust a tax equal to 
     the product of the fair market value of the assets held by 
     the trust as of the close of the taxable year in which such 
     disposition is first permitted and the highest rate of tax 
     under section 1(e) for such taxable year.

     The tax imposed by clause (ii)(II) shall be in lieu of any 
     other tax imposed by this chapter for the taxable year.

[[Page 19068]]

       ``(B) Stock in corporation.--If--
       ``(i) the Settlement Common Stock in any Native Corporation 
     which transferred assets to a Settlement Trust making an 
     election under paragraph (2)(A) may be disposed of in a 
     manner not permitted by section 7(h) of the Alaska Native 
     Claims Settlement Act (43 U.S.C. 1606(h)), and
       ``(ii) at any time after such disposition of stock is first 
     permitted, such corporation transfers assets to such trust,
     clause (ii) of subparagraph (A) shall be applied to such 
     trust on and after the date of the transfer in the same 
     manner as if the trust permitted dispositions of beneficial 
     interests in the trust in a manner not permitted by such 
     section 7(h).
       ``(C) Administrative provisions.--For purposes of subtitle 
     F, any tax imposed by subparagraph (A)(ii)(II) shall be 
     treated as an excise tax with respect to which the deficiency 
     procedures of such subtitle apply.
       ``(4) Distribution requirement on electing settlement 
     trust.--
       ``(A) In general.--If an election is in effect under 
     paragraph (2) for any taxable year, a Settlement Trust shall 
     distribute at least 55 percent of its adjusted taxable income 
     for such taxable year.
       ``(B) Tax imposed if insufficient distribution.--If a 
     Settlement Trust fails to meet the distribution requirement 
     of subparagraph (A) for any taxable year, then, 
     notwithstanding subsection (c)(29), a tax shall be imposed on 
     the trust under section 1(e) on an amount of taxable income 
     equal to the amount of such failure.
       ``(C) Designation of distribution.--Solely for purposes of 
     meeting the requirements of this paragraph, a Settlement 
     Trust may elect to treat any distribution (or portion) during 
     the 65-day period following the close of any taxable year as 
     made on the last day of such taxable year. Any such 
     distribution (or portion) may not be taken into account under 
     this paragraph for any other taxable year.
       ``(D) Adjusted taxable income.--For purposes of this 
     paragraph, the term `adjusted taxable income' means taxable 
     income determined under section 641(b) without regard to any 
     deduction under section 651 or 661.
       ``(5) Tax treatment of distributions to beneficiaries.--
       ``(A) Electing trust.--If an election is in effect under 
     paragraph (2) for any taxable year, any distribution to a 
     beneficiary shall be included in gross income of the 
     beneficiary as ordinary income.
       ``(B) Nonelecting trusts.--Any distribution to a 
     beneficiary from a Settlement Trust not described in 
     subparagraph (A) shall be includible in income as provided 
     under subchapter J.
       ``(C) Earnings and profits.--The earnings and profits of 
     any Native Corporation making a contribution to a Settlement 
     Trust shall not be reduced on account thereof at the time of 
     such contribution, but such earnings and profits shall be 
     reduced (up to the amount of such contribution) as 
     distributions are thereafter made by the Settlement Trust 
     which exceed the sum of--
       ``(i) such Trust's total undistributed net income for all 
     prior years during which an election under paragraph (2) is 
     in effect, and
       ``(ii) such Trust's distributable net income.
       ``(6) Definitions.--For purposes of this subsection--
       ``(A) Native corporation.--The term `Native Corporation' 
     has the meaning given such term by section 3(m) of the Alaska 
     Native Claims Settlement Act (43 U.S.C. 1602(m)).
       ``(B) Settlement trust.--The term `Settlement Trust' means 
     a trust which constitutes a Settlement Trust under section 39 
     of the Alaska Native Claims Settlement Act (43 U.S.C. 
     1629e).''.
       (c) Withholding on Distributions by Electing ANCSA 
     Settlement Trusts.--Section 3402 is amended by adding at the 
     end the following new subsection:
       ``(t) Tax Withholding on Distributions by Electing ANCSA 
     Settlement Trusts.--
       ``(1) In general.--Any Settlement Trust (as defined in 
     section 501(p)(6)(B)) which is exempt from income tax under 
     section 501(c)(29) (in this subsection referred to as an 
     `electing trust') and which makes a payment to any 
     beneficiary shall deduct and withhold from such payment a tax 
     in an amount equal to such payment's proportionate share of 
     the annualized tax.
       ``(2) Exception.--The tax imposed by paragraph (1) shall 
     not apply to any payment to the extent that such payment, 
     when annualized, does not exceed an amount equal to the 
     amount in effect under section 6012(a)(1)(A)(i) for taxable 
     years beginning in the calendar year in which the payment is 
     made.
       ``(3) Annualized tax.--For purposes of paragraph (1), the 
     term `annualized tax' means, with respect to any payment, the 
     amount of tax which would be imposed by section 1(c) 
     (determined without regard to any rate of tax in excess of 31 
     percent) on an amount of taxable income equal to the excess 
     of--
       ``(A) the annualized amount of such payment, over
       ``(B) the amount determined under paragraph (2).
       ``(4) Annualization.--For purposes of this subsection, 
     amounts shall be annualized in the manner prescribed by the 
     Secretary.
       ``(5) Alternate withholding procedures.--At the election of 
     an electing trust, the tax imposed by this subsection on any 
     payment made by such trust shall be determined in accordance 
     with such tables or computational procedures as may be 
     specified in regulations prescribed by the Secretary (in lieu 
     of in accordance with paragraphs (2) and (3)).
       ``(6) Coordination with other sections.--For purposes of 
     this chapter and so much of subtitle F as relates to this 
     chapter, payments which are subject to withholding under this 
     subsection shall be treated as if they were wages paid by an 
     employer to an employee.''.
       (d) Reporting.--Section 6041 is amended by adding at the 
     end the following new subsection:
       ``(f) Application to Alaska Native Settlement Trusts.--In 
     the case of any distribution from a Settlement Trust (as 
     defined in section 501(p)(6)(B)) to a beneficiary, this 
     section shall apply, except that--
       ``(1) this section shall apply to such distribution without 
     regard to the amount thereof,
       ``(2) the Settlement Trust shall include on any return or 
     statement required by this section information as to the 
     character of such distribution (if applicable) and the amount 
     of tax imposed by chapter 1 which has been deducted and 
     withheld from such distribution, and
       ``(3) the filing of any return or statement required by 
     this section shall satisfy any requirement to file any other 
     form or schedule under this title with respect to 
     distributive share information (including any form or 
     schedule to be included with the trust's tax return).''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years of Settlement Trusts ending 
     after December 31, 1999, and to contributions to such trusts 
     after such date.

     SEC. 1103. 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) 50 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 
     ending before the 5th taxable year immediately preceding the 
     taxable year for which the determination is being made.
       ``(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, 
     2003.

     SEC. 1104. 5-YEAR NET OPERATING LOSS CARRYBACK FOR LOSSES 
                   ATTRIBUTABLE TO OPERATING MINERAL INTERESTS OF 
                   INDEPENDENT OIL AND GAS PRODUCERS.

       (a) In General.--Paragraph (1) of section 172(b) (relating 
     to years to which loss may be carried) is amended by adding 
     at the end the following new subparagraph:
       ``(H) Losses on operating mineral interests of independent 
     oil and gas producers.--In the case of a taxpayer--
       ``(i) which has an eligible oil and gas loss (as defined in 
     subsection (j)) for a taxable year, and
       ``(ii) which is not an integrated oil company (as defined 
     in section 291(b)(4)),
     such eligible oil and gas loss shall be a net operating loss 
     carryback to each of the 5 taxable years preceding the 
     taxable year of such loss.''.
       (b) Eligible Oil and Gas Loss.--Section 172 is amended by 
     redesignating subsection (j) as subsection (k) and by 
     inserting after subsection (i) the following new subsection:
       ``(j) Eligible Oil and Gas Loss.--For purposes of this 
     section--
       ``(1) In general.--The term `eligible oil and gas loss' 
     means the lesser of--
       ``(A) the amount which would be the net operating loss for 
     the taxable year if only income and deductions attributable 
     to operating mineral interests (as defined in section 614(d)) 
     in oil and gas wells are taken into account, or
       ``(B) the amount of the net operating loss for such taxable 
     year.
       ``(2) Coordination with subsection (b)(2).--For purposes of 
     applying subsection (b)(2), an eligible oil and gas loss for 
     any taxable year shall be treated in a manner similar to the 
     manner in which a specified liability loss is treated.
       ``(3) Election.--Any taxpayer entitled to a 5-year 
     carryback under subsection (b)(1)(H) from any loss year may 
     elect to have the carryback

[[Page 19069]]

     period with respect to such loss year determined without 
     regard to subsection (b)(1)(H).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to net operating losses for taxable years 
     beginning after December 31, 1998.

     SEC. 1105. ELECTION TO EXPENSE GEOLOGICAL AND GEOPHYSICAL 
                   EXPENDITURES.

       (a) In General.--Section 263 (relating to capital 
     expenditures) is amended by adding at the end the following:
       ``(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.''.
       (b) Conforming Amendment.--Section 263A(c)(3) is amended by 
     inserting ``263(j),'' after ``263(i),''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to expenses paid or incurred in taxable years 
     beginning after December 31, 1999.

     SEC. 1106. ELECTION TO EXPENSE DELAY RENTAL PAYMENTS

       (a) In general.--Section 263 (relating to capital 
     expenditures), as amended by section 1105(a), is amended by 
     adding at the end the following:
       ``(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.''.
       (b) Conforming Amendment.--Section 263A(c)(3), as amended 
     by section 1105(b), is amended by inserting ``263(k),'' after 
     ``263(j),''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to payments made or incurred in taxable years 
     beginning after December 31, 1999.

     SEC. 1107. MODIFICATION OF ACTIVE BUSINESS DEFINITION UNDER 
                   SECTION 355.

       (a) In General.--Section 355(b) (defining active conduct of 
     a trade or business) is amended by adding at the end the 
     following new paragraph:
       ``(3) Special rules relating to active business 
     requirement.--
       ``(A) In general.--For purposes of determining whether a 
     corporation meets the requirement of paragraph (2)(A), all 
     members of such corporation's separate affiliated group shall 
     be treated as 1 corporation. For purposes of the preceding 
     sentence, a corporation's separate affiliated group is the 
     affiliated group which would be determined under section 
     1504(a) if such corporation were the common parent and 
     section 1504(b) did not apply.
       ``(B) Control.--For purposes of paragraph (2)(D), all 
     distributee corporations which are members of the same 
     affiliated group (as defined in section 1504(a) without 
     regard to section 1504(b)) shall be treated as 1 distributee 
     corporation.''.
       (b) Conforming Amendments.--
       (1) Subparagraph (A) of section 355(b)(2) is amended to 
     read as follows:
       ``(A) it is engaged in the active conduct of a trade or 
     business,''.
       (2) Section 355(b)(2) is amended by striking the last 
     sentence.
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply to distributions after the date of the enactment of 
     this Act.
       (2) Transition rule.--The amendments made by this section 
     shall not apply to any distribution pursuant to a transaction 
     which is--
       (A) made pursuant to an agreement which was binding on such 
     date and at all times thereafter,
       (B) described in a ruling request submitted to the Internal 
     Revenue Service on or before such date, or
       (C) described on or before such date in a public 
     announcement or in a filing with the Securities and Exchange 
     Commission.
       (3) Election to have amendments apply.--Paragraph (2) shall 
     not apply if the distributing corporation elects not to have 
     such paragraph apply to distributions of such corporation. 
     Any such election, once made, shall be irrevocable.

     SEC. 1108. TEMPORARY SUSPENSION OF MAXIMUM AMOUNT OF 
                   AMORTIZABLE REFORESTATION EXPENDITURES.

       (a) Increase in Dollar Limitation.--Paragraph (1) of 
     section 194(b) (relating to amortization of reforestation 
     expenditures) is amended by striking ``$10,000 ($5,000'' and 
     inserting ``$25,000 ($12,500''.
       (b) Temporary Suspension of Increased Dollar Limitation.--
     Subsection (b) of section 194(b) (relating to amortization of 
     reforestation expenditures) is amended by adding at the end 
     the following new paragraph:
       ``(5) Suspension of dollar limitation.--Paragraph (1) shall 
     not apply to taxable years beginning after December 31, 1999, 
     and before January 1, 2004.
       (c) Conforming Amendment.--Paragraph (1) of section 48(b) 
     is amended by striking ``section 194(b)(1)'' and inserting 
     ``section 194(b)(1) and without regard to section 
     194(b)(5)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.

     SEC. 1109. MODIFICATION OF EXCISE TAX IMPOSED ON ARROW 
                   COMPONENTS.

       (a) In General.--Paragraph (2) of section 4161(b) (relating 
     to bows and arrows, etc.) is amended to read as follows:
       ``(2) Arrows.--
       ``(A) In general.--There is hereby imposed on the sale by 
     the manufacturer, producer, or importer of any shaft, point, 
     article used to attach a point to a shaft, nock, or vane of a 
     type used in the manufacture of any arrow which after its 
     assembly--
       ``(i) measures 18 inches overall or more in length, or
       ``(ii) measures less than 18 inches overall in length but 
     is suitable for use with a bow described in paragraph (1)(A),
     a tax equal to 12.4 percent of the price for which so sold.
       ``(B) Reduced rate on certain hunting points.--Subparagraph 
     (A) shall be applied by substituting `11 percent' for `12.4 
     percent' in the case of a point which is designed primarily 
     for use in hunting fish or large animals.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to articles sold by the manufacturer, producer, 
     or importer after the close of the first calendar month 
     ending more than 30 days after the date of the enactment of 
     this Act.

     SEC. 1110. INCREASE IN THRESHOLD FOR JOINT COMMITTEE REPORTS 
                   ON REFUNDS AND CREDITS.

       (a) General Rule.--Subsections (a) and (b) of section 6405 
     are each amended by striking ``$1,000,000'' and inserting 
     ``$2,000,000''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on the date of the enactment of this Act, 
     except that such amendment shall not apply with respect to 
     any refund or credit with respect to a report that has been 
     made before such date of enactment under section 6405 of the 
     Internal Revenue Code of 1986.

     SEC. 1111. MODIFICATION OF RURAL AIRPORT DEFINITION.

       (a) In General.--Clause (ii) of section 4261(e)(1)(B) 
     (defining rural airport) is amended by striking the period at 
     the end of subclause (II) and inserting ``, or'', and by 
     adding at the end the following new subclause:

       ``(III) is not connected by paved roads to another 
     airport.''.

       (b) Effective Date.--The amendments made by this section 
     shall apply to calendar years beginning after 1999.

     SEC. 1112. PAYMENT OF DIVIDENDS ON STOCK OF COOPERATIVES 
                   WITHOUT REDUCING PATRONAGE DIVIDENDS.

       (a) In General.--Subsection (a) of section 1388 (relating 
     to patronage dividend defined) is amended by adding at the 
     end the following: ``For purposes of paragraph (3), net 
     earnings shall not be reduced by amounts paid during the year 
     as dividends on capital stock or other proprietary capital 
     interests of the organization to the extent that the articles 
     of incorporation or bylaws of such organization or other 
     contract with patrons provide that such dividends are in 
     addition to amounts otherwise payable to patrons which are 
     derived from business done with or for patrons during the 
     taxable year.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to distributions in taxable years beginning after 
     the date of the enactment of this Act.

     SEC. 1113. CONSOLIDATION OF LIFE INSURANCE COMPANIES WITH 
                   OTHER CORPORATIONS.

       (a) In General.--Section 1504(b) (defining includible 
     corporation) is amended by striking paragraph (2).
       (b) Conforming Amendments.--
       (1) Section 1504 is amended by striking subsection (c) and 
     by redesignating subsections (d), (e), and (f) as subsections 
     (c), (d), and (e), respectively.
       (2) Section 1503(c)(1) (relating to special rule for 
     application of certain losses against income of insurance 
     companies taxed under section 801) is amended by striking 
     ``an election under section 1504(c)(2) is in effect for the 
     taxable year and''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000.
       (d) No Carryback Before January 1, 2001.--To the extent 
     that a consolidated net operating loss is allowed or 
     increased by reason of the amendments made by this section, 
     such loss may not be carried back to a taxable year beginning 
     before January 1, 2001.
       (e) Nontermination of Group.--No affiliated group shall 
     terminate solely as a result of the amendments made by this 
     section.
       (f) Waiver of 5-Year Waiting Period.--Under regulations 
     prescribed by the Secretary of the Treasury or his delegate, 
     an automatic waiver from the 5-year waiting period for 
     reconsolidation provided in section 1504(a)(3) of the 
     Internal Revenue Code of 1986 shall be granted to any 
     corporation which was previously an includible corporation 
     but was subsequently deemed a nonincludible corporation as a 
     result of becoming a subsidiary of a corporation which was 
     not an includible corporation solely by operation of section 
     1504(c)(2) of such Code (as in effect on the day before the 
     date of the enactment of this Act).

[[Page 19070]]



     SEC. 1114. EXPANSION OF EXEMPTION FROM PERSONAL HOLDING 
                   COMPANY TAX FOR LENDING OR FINANCE COMPANIES.

       (a) In General.--Paragraph (6) of section 542(c) (defining 
     personal holding company) is amended--
       (1) by striking ``rents,'' in subparagraph (B), and
       (2) by adding ``and'' at the end of subparagraph (B),
       (3) by striking subparagraph (C), and
       (4) by redesignating subparagraph (D) as subparagraph (C).
       (b) Exception for Lending or Finance Companies Determined 
     on Affiliated Group Basis.--Subsection (d) of section 542 is 
     amended by striking paragraphs (1) and (2) and inserting the 
     following new paragraphs:
       ``(1) Lending or finance business defined.-- For purposes 
     of subsection (c)(6), the term `lending or finance business' 
     means a business of--
       ``(A) making loans,
       ``(B) purchasing or discounting accounts receivable, notes, 
     or installment obligations,
       ``(C) engaging in leasing (including entering into leases 
     and purchasing, servicing, and disposing of leases and leased 
     assets),
       ``(D) rendering services or making facilities available in 
     the ordinary course of a lending or finance business.
       ``(E) rendering services or making facilities available in 
     connection with activities described in subparagraphs (A), 
     (B), and (C) carried on by the corporation rendering services 
     or making facilities available, or
       ``(F) rendering services or making facilities available to 
     another corporation which is engaged in the lending or 
     finance business (within the meaning of this paragraph), if 
     such services or facilities are related to the lending or 
     finance business (within such meaning) of such other 
     corporation and such other corporation and the corporation 
     rendering services or making facilities available are members 
     of the same affiliated group (as defined in section 1504).
       ``(2) Exception determined on an affiliated group basis.--
     In the case of a lending or finance company which is a member 
     of an affiliated group (as defined in section 1504), such 
     company shall be treated as meeting the requirements of 
     subsection (c)(6) if such group (determined by taking into 
     account only members of such group which are engaged in a 
     lending or finance business) meets such requirements.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years ending after December 31, 1999.

     SEC. 1115. CREDIT FOR MODIFICATIONS TO INTER-CITY BUSES 
                   REQUIRED UNDER THE AMERICANS WITH DISABILITIES 
                   ACT OF 1990.

       (a) In General.--Subsection (a) of section 44 (relating to 
     expenditures to provide access to disabled individuals) is 
     amended to read as follows:
       ``(a) General Rule.--For purposes of section 38, the amount 
     of the disabled access credit determined under this section 
     for any taxable year shall be an amount equal to the sum of--
       ``(1) in the case of an eligible small business, 50 percent 
     of so much of the eligible access expenditures for the 
     taxable year as exceed $250 but do not exceed $10,250, and
       ``(2) 50 percent of so much of the eligible bus access 
     expenditures for the taxable year with respect to each 
     eligible bus as exceed $250 but do not exceed $30,250.''.
       (b) Eligible Bus Access Expenditures.--Section 44 is 
     amended by redesignating subsections (d) and (e) as 
     subsections (e) and (f), respectively, and by inserting after 
     subsection (c) the following new subsection:
       ``(d) Eligible Bus Access Expenditures.--For purposes of 
     this section--
       ``(1) In general.--The term `eligible bus access 
     expenditures' means amounts paid or incurred by the taxpayer 
     for the purpose of enabling the taxpayer's eligible bus to 
     comply with applicable requirements under the Americans With 
     Disabilities Act of 1990 (as in effect on the date of the 
     enactment of this subsection).
       ``(2) Certain expenditures not included.--The amount of 
     eligible bus access expenditures otherwise taken into account 
     under subsection (a)(2) shall be reduced to the extent that 
     funds for such expenditures are received under any Federal, 
     State, or local program.
       ``(3) Eligible bus.--The term `eligible bus' means any 
     automobile bus eligible for a refund under section 6427(b) by 
     reason of transportation described in section 
     6427(b)(1)(A).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1999, and before January 1, 2012.

     SEC. 1116. INCREASED DEDUCTIBILITY OF BUSINESS MEAL EXPENSES 
                   FOR INDIVIDUALS SUBJECT TO FEDERAL LIMITATIONS 
                   ON HOURS OF SERVICE.

       The table in section 274(n)(3)(B) (relating to special rule 
     for individuals subject to Federal hours of service) is 
     amended--
       (1) by striking ``or 2007'', and
       (2) by striking ``2008'' and inserting ``2007''.

     SEC. 1117. TAX-EXEMPT FINANCING OF QUALIFIED HIGHWAY 
                   INFRASTRUCTURE CONSTRUCTION.

       (a) Treatment as Exempt Facility Bond.--A bond described in 
     subsection (b) shall be treated as described in section 
     141(e)(1)(A) of the Internal Revenue Code of 1986, except 
     that--
       (1) section 146 of such Code shall not apply to such bond, 
     and
       (2) section 147(c)(1) of such Code shall be applied by 
     substituting ``any portion of'' for ``25 percent or more''.
       (b) Bond Described.--
       (1) In general.--A bond is described in this subsection if 
     such bond is issued after December 31, 1999, as part of an 
     issue--
       (A) 95 percent or more of the net proceeds of which are to 
     be used to provide a qualified highway infrastructure 
     project, and
       (B) to which there has been allocated a portion of the 
     allocation to the project under paragraph (2)(C)(ii) which is 
     equal to the aggregate face amount of bonds to be issued as 
     part of such issue.
       (2) Qualified highway infrastructure projects.--
       (A) In general.--For purposes of paragraph (1), the term 
     ``qualified highway infrastructure project'' means a 
     project--
       (i) for the construction or reconstruction of a highway, 
     and
       (ii) designated under subparagraph (B) as an eligible pilot 
     project.
       (B) Eligible pilot project.--
       (i) In general.--The Secretary of Transportation, in 
     consultation with the Secretary of the Treasury, shall select 
     not more than 15 highway infrastructure projects to be pilot 
     projects eligible for tax-exempt financing.
       (ii) Eligibility criteria.--In determining the criteria 
     necessary for the eligibility of pilot projects, the 
     Secretary of Transportation shall include the following:

       (I) The project must serve the general public.
       (II) The project is necessary to evaluate the potential of 
     the private sector's participation in the provision of the 
     highway infrastructure of the United States.
       (III) The project must be located on publicly-owned rights-
     of-way.
       (IV) The project must be publicly owned or the ownership of 
     the highway constructed or reconstructed under the project 
     must revert to the public.
       (V) The project must be consistent with a transportation 
     plan developed pursuant to section 134(g) or 135(e) of title 
     23, United States Code.

       (C) Aggregate face amount of tax-exempt financing.--
       (i) In general.--The aggregate face amount of bonds issued 
     pursuant to this section shall not exceed $15,000,000,000, 
     determined without regard to any bond the proceeds of which 
     are used exclusively to refund (other than to advance refund) 
     a bond issued pursuant to this section (or a bond which is a 
     part of a series of refundings of a bond so issued) if the 
     amount of the refunding bond does not exceed the outstanding 
     amount of the refunded bond.
       (ii) Allocation.--The Secretary of Transportation, in 
     consultation with the Secretary of the Treasury, shall 
     allocate the amount described in clause (i) among the 
     eligible pilot projects designated under subparagraph (B).
       (iii) Reallocation.--If any portion of an allocation under 
     clause (ii) is unused on the date which is 3 years after such 
     allocation, the Secretary of Transportation, in consultation 
     with the Secretary of the Treasury, may reallocate such 
     portion among the remaining eligible pilot projects.
       (c) Report.--
       (1) In general.--Not later than the earlier of--
       (A) 1 year after either \1/2\ of the projects authorized 
     under this section have been identified or \1/2\ of the total 
     bonds allowable for the projects under this section have been 
     issued, or
       (B) 7 years after the date of the enactment of this Act,

     the Secretary of Transportation, in consultation with the 
     Secretary of the Treasury, shall submit the report described 
     in paragraph (2) to the Committees on Finance and on 
     Environment and Public Works of the Senate and the Committees 
     on Ways and Means and on Transportation and Infrastructure of 
     the House of Representatives.
       (2) Contents.--The report under paragraph (1) shall 
     evaluate the overall success of the program conducted 
     pursuant to this section, including--
       (A) a description of each project under the program,
       (B) the extent to which the projects used new technologies, 
     construction techniques, or innovative cost controls that 
     resulted in savings in building the project, and
       (C) the use and efficiency of the Federal tax subsidy 
     provided by the bond financing.

     SEC. 1118. EXPANSION OF DC HOMEBUYER TAX CREDIT.

       (a) Extension.--Section 1400C(i) (relating to application 
     of section) is amended by striking ``2001'' and inserting 
     ``2002''.
       (b) Expansion of Income Limitation.--Section 1400C(b)(1) 
     (relating to limitation based on modified adjusted gross 
     income) is amended--
       (1) by striking ``$110,000'' in subparagraph (A)(i) and 
     inserting ``$140,000'', and
       (2) by inserting ``($40,000 in the case of a joint 
     return)'' after ``$20,000'' in subparagraph (B).
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.

     SEC. 1119. EXTENSION OF DC ZERO PERCENT CAPITAL GAINS RATE.

       (a) In General.--Section 1400B (relating to zero percent 
     capital gains rate) is amended by adding at the end the 
     following new subsection:
       ``(h) Extension to Entire District of Columbia.--In 
     determining whether any stock or partnership interest which 
     is originally issued after December 31, 1999, or any tangible 
     property acquired by the taxpayer by purchase after December 
     31, 1999, is a DC Zone asset, subsection (d) shall be applied 
     without regard to paragraph (2) thereof.''.
       (b) Effective Date.--The amendment made by this section 
     shall take effect on January 1, 2000.

[[Page 19071]]



     SEC. 1120. NATURAL GAS GATHERING LINES TREATED AS 7-YEAR 
                   PROPERTY.

       (a) In General.--Subparagraph (C) of section 168(e)(3) 
     (relating to classification of certain property) is amended 
     by redesignating clause (ii) as clause (iii) and by inserting 
     after clause (i) the following new clause:
       ``(ii) any natural gas gathering line, and''.
       (b) Natural Gas Gathering Line.--Subsection (i) of section 
     168 is amended by adding at the end the following new 
     paragraph:
       ``(15) Natural gas gathering line.--The term `natural gas 
     gathering line' means--
       ``(A) the pipe, equipment, and appurtenances determined to 
     be a gathering line by the Federal Energy Regulatory 
     Commission, or
       ``(B) the pipe, equipment, and appurtenances used to 
     deliver natural gas from the wellhead or a common point to 
     the point at which such gas first reaches--
       ``(i) a gas processing plant,
       ``(ii) an interconnection with a transmission pipeline 
     certificated by the Federal Energy Regulatory Commission as 
     an interstate transmission pipeline,
       ``(iii) an interconnection with an intrastate transmission 
     pipeline, or
       ``(iv) a direct interconnection with a local distribution 
     company, a gas storage facility, or an industrial 
     consumer.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to property placed in service on or after the 
     date of the enactment of this Act.

     SEC. 1121. EXEMPTION FROM TICKET TAXES FOR CERTAIN 
                   TRANSPORTATION PROVIDED BY SMALL SEAPLANES.

       (a) In General.--Section 4281 (relating to small aircraft 
     on nonestablished lines) is amended to read as follows:

     ``SEC. 4281. SMALL AIRCRAFT.

       ``The taxes imposed by sections 4261 and 4271 shall not 
     apply to--
       ``(1) transportation by an aircraft having a maximum 
     certificated takeoff weight of 6,000 pounds or less, except 
     when such aircraft is operated on an established line, and
       ``(2) transportation by a seaplane having a maximum 
     certificated takeoff weight of 6,000 pounds or less with 
     respect to any segment consisting of a takeoff from, and a 
     landing on, water.

     For purposes of the preceding sentence, the term `maximum 
     certificated takeoff weight' means the maximum such weight 
     contained in the type certificate or airworthiness 
     certificate.''.
       (b) Clerical Amendment.--The table of sections for part III 
     of subchapter C of chapter 33 is amended by striking ``on 
     nonestablished lines'' in the item relating to section 4281.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act 
     but shall not apply to any amount paid on or before such date 
     with respect to taxes imposed by sections 4261 and 4271 of 
     the Internal Revenue Code of 1986.

     SEC. 1122. NO FEDERAL INCOME TAX ON AMOUNTS AND LANDS 
                   RECEIVED BY HOLOCAUST VICTIMS OR THEIR HEIRS.

       (a) In General.--For purposes of the Internal Revenue Code 
     of 1986, gross income shall not include--
       (1) any amount received by an individual (or any heir of 
     the individual)--
       (A) from the Swiss Humanitarian Fund established by the 
     Government of Switzerland or from any similar fund 
     established by any foreign country, or
       (B) 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; and
       (2) the value of any land (including structures thereon) 
     recovered by an individual (or any heir of the individual) 
     from a government of a foreign country as a result of a 
     settlement of a claim arising out of the confiscation of such 
     land in connection with the Holocaust.
       (b) Effective Date.--This section shall apply to any amount 
     received before, on, or after the date of the enactment of 
     this Act.

     SEC. 1123. 2-PERCENT FLOOR ON MISCELLANEOUS ITEMIZED 
                   DEDUCTIONS NOT TO APPLY TO QUALIFIED 
                   PROFESSIONAL DEVELOPMENT EXPENSES AND QUALIFIED 
                   INCIDENTAL EXPENSES OF ELEMENTARY AND SECONDARY 
                   SCHOOL TEACHERS.

       (a) Qualified Professional Development Expenses 
     Deduction.--
       (1) In general.--Section 67(b) (defining miscellaneous 
     itemized deductions) is amended by striking ``and'' at the 
     end of paragraph (11), by striking the period at the end of 
     paragraph (12) and inserting ``, and'', and by adding at the 
     end the following new paragraph:
       ``(13) any deduction allowable for the qualified 
     professional development expenses of an eligible teacher.''.
       (2) Definitions.--Section 67 (relating to 2-percent floor 
     on miscellaneous itemized deductions) is amended by adding at 
     the end the following new subsection:
       ``(g) Qualified Professional Development Expenses of 
     Eligible Teachers.--For purposes of subsection (b)(13)--
       ``(1) Qualified professional development expenses.--
       ``(A) In general.--The term `qualified professional 
     development expenses' means expenses--
       ``(i) for tuition, fees, books, supplies, equipment, and 
     transportation required for the enrollment or attendance of 
     an individual in a qualified course of instruction, and
       ``(ii) with respect to which a deduction is allowable under 
     section 162 (determined without regard to this section).
       ``(B) Qualified course of instruction.--The term `qualified 
     course of instruction' means a course of instruction which--
       ``(i) is--

       ``(I) at an institution of higher education (as defined in 
     section 481 of the Higher Education Act of 1965 (20 U.S.C. 
     1088), as in effect on the date of the enactment of this 
     subsection), or
       ``(II) a professional conference, and

       ``(ii) is part of a program of professional development 
     which is approved and certified by the appropriate local 
     educational agency as furthering the individual's teaching 
     skills.
       ``(C) Local educational agency.--The term `local 
     educational agency' has the meaning given such term by 
     section 14101 of the Elementary and Secondary Education Act 
     of 1965, as so in effect.
       ``(2) Eligible teacher.--
       ``(A) In general.--The term `eligible teacher' means an 
     individual who is a kindergarten through grade 12 classroom 
     teacher, instructor, counselor, aide, or principal in an 
     elementary or secondary school.
       ``(B) Elementary or secondary school.--The terms 
     `elementary school' and `secondary school' have the meanings 
     given such terms by section 14101 of the Elementary and 
     Secondary Education Act of 1965 (20 U.S.C. 8801), as so in 
     effect.''.
       (3) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000, and ending before December 31, 2004.
       (b) Qualified Incidental Expenses.--
       (1) In general.--Section 67(g)(1)(A), as added by 
     subsection (a)(2), is amended by striking ``and'' at the end 
     of clause (i), by redesignating clause (ii) as clause (iii), 
     and by inserting after clause (i) the following new clause:
       ``(ii) for qualified incidental expenses, and''.
       (2) Definition.--Section 67(g), as added by subsection 
     (a)(2), is amended by adding at the end the following new 
     paragraph:
       ``(3) Qualified incidental expenses.--
       ``(A) In general.--The term `qualified incidental expenses' 
     means expenses paid or incurred by an eligible teacher in an 
     amount not to exceed $125 for any taxable year for books, 
     supplies, and equipment related to instruction, teaching, or 
     other educational job-related activities of such eligible 
     teacher.
       ``(B) Special rule for homeschooling.--Such term shall 
     include expenses described in subparagraph (A) in connection 
     with education provided by homeschooling if the requirements 
     of any applicable State or local law are met with respect to 
     such education.''.
       (3) Effective date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2000, and ending before December 31, 2004.

     SEC. 1124. EXPANSION OF DEDUCTION FOR COMPUTER DONATIONS TO 
                   SCHOOLS.

       (a) Extension of Age of Eligible Computers.--Section 
     170(e)(6)(B)(ii) (defining qualified elementary or secondary 
     educational contribution) is amended--
       (1) by striking ``2 years'' and inserting ``3 years'', and
       (2) by inserting ``for the taxpayer's own use'' after 
     ``constructed by the taxpayer''.
       (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) Conforming amendment.--Section 170(e)(6)(B)(ii) is 
     amended by inserting ``or reacquired'' after ``acquired''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to contributions made in taxable years ending 
     after the date of the enactment of this Act.

     SEC. 1125. CREDIT FOR COMPUTER DONATIONS TO SCHOOLS AND 
                   SENIOR CENTERS.

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

     ``SEC. 45E. CREDIT FOR COMPUTER DONATIONS TO SCHOOLS AND 
                   SENIOR CENTERS.

       ``(a) General Rule.--For purposes of section 38, the 
     computer donation credit determined under this section is an 
     amount equal to 30 percent of the qualified computer 
     contributions made by the taxpayer during the taxable year.
       ``(b) Qualified Computer Contribution.--For purposes of 
     this section, the term `qualified computer contribution' has 
     the meaning given the term `qualified elementary or secondary 
     educational contribution' by section 170(e)(6)(B), except 
     that--
       ``(1) such term shall include the contribution of a 
     computer (as defined in section 168(i)(2)(B)(ii)) only if 
     computer software (as defined in section 197(e)(3)(B)) that 
     serves as a computer operating system has been lawfully 
     installed in such computer, and
       ``(2) for purposes of clauses (i) and (iv) of section 
     170(e)(6)(B), such term shall include the contribution of 
     computer technology or equipment to multipurpose senior 
     centers (as defined in section 102(35) of the Older Americans 
     Act of 1965 (42 U.S.C. 3002(35)) to be used by individuals 
     who have attained 60 years of age to improve job skills in 
     computers.
       ``(c) Increased Percentage for Contributions to Entities in 
     Empowerment Zones, Enterprise Communities, and Indian 
     Reservations.--In the case of a qualified computer 
     contribution to an entity located in an empowerment zone or 
     enterprise community designated under section 1391 or an 
     Indian reservation (as defined in section 168(j)(6)), 
     subsection (a) shall be applied by substituting `50 percent' 
     for `30 percent'.

[[Page 19072]]

       ``(d) Certain Rules Made Applicable.--For purposes of this 
     section, rules similar to the rules of paragraphs (1) and (2) 
     of section 41(f) and of section 170(e)(6)(A) shall apply.
       ``(e) Termination.--This section shall not apply to taxable 
     years beginning on or after the date which is 3 years after 
     the date of the enactment of the Taxpayer Refund Act of 
     1999.''.
       (b) Current Year Business Credit Calculation.--Section 
     38(b) (relating to current year business credit), as amended 
     by this Act, 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 computer donation credit determined under 
     section 45E(a).''.
       (c) Disallowance of Deduction by Amount of Credit.--Section 
     280C (relating to certain expenses for which credits are 
     allowable) is amended by adding at the end the following:
       ``(d) Credit for Computer Donations.--No deduction shall be 
     allowed for that portion of the qualified computer 
     contributions (as defined in section 45E(b)) made during the 
     taxable year that is equal to the amount of credit determined 
     for the taxable year under section 45E(a). In the case of a 
     corporation which is a member of a controlled group of 
     corporations (within the meaning of section 52(a)) or a trade 
     or business which is treated as being under common control 
     with other trades or businesses (within the meaning of 
     section 52(b)), this subsection shall be applied under rules 
     prescribed by the Secretary similar to the rules applicable 
     under subsections (a) and (b) of section 52.''.
       (d) Limitation on Carryback.--Subsection (d) of section 39 
     (relating to carryback and carryforward of unused credits) is 
     amended by adding at the end the following:
       ``(9) No carryback of computer donation credit before 
     effective date.--No amount of unused business credit 
     available under section 45E may be carried back to a taxable 
     year beginning on or before the date of the enactment of this 
     paragraph.''.
       (e) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1, as amended by this 
     Act, is amended by inserting after the item relating to 
     section 45D the following:

``Sec. 45E. Credit for computer donations to schools and senior 
              centers.''.

       (f) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply to contributions 
     made in taxable years beginning after the date of the 
     enactment of this Act.
       (2) Certain contributions.--The amendments made by this 
     section shall apply to contributions made to an organization 
     or entity not described in section 45E(c) of the Internal 
     Revenue Code of 1986, as added by subsection (a), in taxable 
     years beginning after the date that is one year after the 
     date of the enactment of this Act.

     SEC. 1126. INCREASE IN MANDATORY SPENDING FOR CHILD CARE AND 
                   DEVELOPMENT BLOCK GRANT.

       Section 418(a)(3) of the Social Security Act (42 U.S.C. 
     618(a)(3)) is amended--
       (1) in subparagraph (E), by striking ``and'' at the end;
       (2) in subparagraph (F), by striking the period at the end 
     and inserting ``; and''; and
       (3) by adding at the end the following:
       ``(E) $3,918,000,000 for fiscal year 2002;
       ``(F) $3,979,000,000 for fiscal year 2003;
       ``(G) $4,010,000,000 for fiscal year 2004;
       ``(H) $3,860,000,000 for fiscal year 2005;
       ``(I) $3,954,000,000 for fiscal year 2006;
       ``(J) $4,004,000,000 for fiscal year 2007;
       ``(K) $4,073,000,000 for fiscal year 2008; and
       ``(L) $4,075,000,000 for fiscal year 2009.''.

     SEC. 1127. SENSE OF THE SENATE REGARDING SAVINGS INCENTIVES.

       It is the sense of the Senate that before December 31, 
     1999, Congress should pass legislation that creates savings 
     incentives by providing a partial Federal income tax 
     exclusion for income derived from interest and dividends of 
     no less than $400 for married taxpayers and $200 for single 
     taxpayers.

     SEC. 1128. SENSE OF CONGRESS REGARDING THE NEED FOR 
                   ADDITIONAL FEDERAL FUNDING AND TAX INCENTIVES 
                   FOR EMPOWERMENT ZONES AND ENTERPRISE 
                   COMMUNITIES AUTHORIZED AND DESIGNATED PURSUANT 
                   TO 1997 AND 1998 LAWS.

       (a) Findings.--The Senate finds that--
       (1) providing Federal tax incentives and other incentives 
     to distressed communities across the Nation to help them 
     rebuild and grow was one of the important goals of the 
     Taxpayer Relief Act of 1997 and the Omnibus Consolidated and 
     Emergency Supplemental Appropriations Act, 1999;
       (2) to help reach that goal, the Taxpayer Relief Act of 
     1997 authorized 20 additional empowerment zones, 15 urban and 
     5 rural, followed by 20 new rural enterprise communities 
     authorized in 1998;
       (3) the 1997 law authorizing this second round of 
     empowerment zones (EZs) was also significant and important 
     because it broadened empowerment zone eligibility, for the 
     first time, to Indian tribes and rural regions suffering from 
     massive out-migration;
       (4) many of our urban and rural communities are not sharing 
     in the benefits of the prolonged economic expansion now 
     enjoyed by many other parts of our country;
       (5) a total of more than 250 economically distressed urban 
     and rural communities competed for the 20 new empowerment 
     zones and 20 new rural enterprise communities, and those 
     areas designated as zones and communities should be provided 
     with the Federal incentives and encouragement they need to 
     attract new businesses, and the jobs they provide, in order 
     to stimulate economic growth and improvement;
       (6) unfortunately, those areas that are designated EZs or 
     ECs under the 1997 and 1998 laws or rural economic area 
     partnerships (REAPs) by the Department of Agriculture, are 
     not given the full advantage of Social Services Block Grant 
     funds, tax credits, and some other Federal incentives that 
     Congress provided to the first round of empowerment zones and 
     enterprise communities authorized pursuant to 1993 budget 
     legislation;
       (7) Congress should act swiftly to provide such designated 
     areas an equal share of tax incentives, grant benefits, and 
     other Federal support at aggregate levels of at least that 
     provided by Congress to distressed urban and rural 
     empowerment zones and enterprise communities pursuant to the 
     1993 omnibus budget reconciliation bill; and
       (8) a fully funded second round of EZs and ECs is estimated 
     to create and retain about 90,000 jobs and stimulate 
     $10,000,000,000 in private and public investments over the 
     next decade.
       (b) Sense of Congress.--It is the sense of Congress that--
       (1) if Congress and the President agree to a substantial 
     tax relief measure, it should ensure that such measure 
     includes full funding for the second round of empowerment 
     zones and enterprise communities authorized in 1997 and 1998 
     as well as those areas currently designated rural economic 
     area partnerships (REAPs) by the Department of Agriculture; 
     and
       (2) all such designated distressed areas, rural and urban, 
     should equally share at least the same aggregate level of 
     funding, tax incentives, and other Federal support that 
     Congress provided to urban and rural empowerment zones and 
     enterprise communities authorized by the 1993 omnibus budget 
     reconciliation bill.

     SEC. 1129. SENSE OF CONGRESS REGARDING THE NEED TO ENCOURAGE 
                   IMPROVEMENTS IN MAIN STREET BUSINESSES BY 
                   EXPANDING EXISTING SMALL BUSINESS TAX EXPENSING 
                   RULES TO INCLUDE INVESTMENTS IN BUILDINGS AND 
                   OTHER DEPRECIABLE REAL PROPERTY.

       (a) Findings.--Congress finds that--
       (1) under current tax law, small businesses can immediately 
     deduct, that is, ``expense'', up to $19,000 in purchases of 
     equipment and similar assets;
       (2) there is bipartisan support for increasing the amount 
     of this expensing provision because it helps many small 
     businesses make the investments in equipment and machinery 
     they need by allowing them to immediately write off the costs 
     of such investments and bolstering their cash flow;
       (3) this expensing provision, however, is not as helpful as 
     it could be for some small businesses because it does not 
     cover their investments in improving the storefront or the 
     buildings in which they conduct their business;
       (4) in many small towns, the local drug store, shoe store, 
     or grocery store doesn't have much need for new equipment, 
     but it does need to improve the storefront or the interior;
       (5) although such investments are good for Main Streets 
     across this Nation, our current tax law creates a 
     disincentive to make them by requiring a small business owner 
     to depreciate the costs of the building improvements over 39 
     years for tax purposes;
       (6) legislation to expand the current expensing provision 
     to cover investments in depreciable real property was 
     recently introduced in the Senate with broad bipartisan 
     cosponsorship, including the leaders of the Republican and 
     Democratic parties;
       (7) this proposal is also strongly supported by small 
     business-oriented trade groups, including the National 
     Federation of Independent Business, the Small Business 
     Legislative Council, and the National Association of 
     Realtors;
       (8) the Department of the Treasury is currently conducting 
     a comprehensive study of all depreciation provisions in our 
     tax laws; and
       (9) Congress should consider expanding the existing 
     expensing provision to cover investments in storefront 
     improvements and other depreciable real property in any 
     reform legislation that results from this study or, if 
     possible, in any earlier legislation.
       (b) Sense of Congress.--It is the sense of Congress that--
       (1) many small businesses trying to improve their 
     storefronts on Main Street or investing to upgrade their 
     property would benefit if Congress expanded the existing 
     expensing provision to cover investments in depreciable real 
     property; and
       (2) Congress should consider including this proposal in any 
     future tax legislation.

     SEC. 1130. CERTAIN NATIVE AMERICAN HOUSING ASSISTANCE 
                   DISREGARDED IN DETERMINING WHETHER BUILDING IS 
                   FEDERALLY SUBSIDIZED FOR PURPOSES OF THE LOW-
                   INCOME HOUSING CREDIT.

       (a) In General.--Subparagraph (E) of section 42(i)(2) of 
     the Internal Revenue Code of 1986 (relating to determination 
     of whether building is federally subsidized) is amended--
       (1) in clause (i), by inserting ``or the Native American 
     Housing Assistance and Self-Determination Act of 1996 (25 
     U.S.C. 4101 et seq.) (as in effect on October 1, 1997)'' 
     after ``this subparagraph)'', and
       (2) in the subparagraph heading, by inserting ``or native 
     american housing assistance'' after ``home assistance''.

[[Page 19073]]

       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to periods after the date of the enactment of 
     this Act.

     SEC. 1131. DISCLOSURE OF TAX INFORMATION TO FACILITATE 
                   COMBINED EMPLOYMENT TAX REPORTING.

       Section 6103(d)(5) of the Internal Revenue Code of 1986 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. 1132. TREATMENT OF MAPLE SYRUP PRODUCTION.

       Line 3 of subsection (k) of section 3306 of the Internal 
     Revenue Code of 1986 is amended by inserting after 
     ``chapter'' the following: ``agricultural labor includes 
     labor connected to the harvesting or production of maple sap 
     into maple syrup or sugar, and''.

     SEC. 1133. TREATMENT OF BONDS ISSUED TO ACQUIRE RENEWABLE 
                   RESOURCES ON LAND SUBJECT TO CONSERVATION 
                   EASEMENT.

       (a) In General.--Section 145 (defining qualified 501(c)(3) 
     bond) is amended by redesignating subsection (e) as 
     subsection (f) and by inserting after subsection (d) the 
     following new subsection:
       ``(e) Bonds Issued To Acquire Renewable Resources on Land 
     Subject to Conservation Easement.--
       ``(1) In general.--If--
       ``(A) the proceeds of any bond are used to acquire land (or 
     a long-term lease thereof) together with any renewable 
     resource associated with the land (including standing timber, 
     agricultural crops, or water rights) from an unaffiliated 
     person,
       ``(B) the land is subject to a conservation restriction--
       ``(i) which is granted in perpetuity to an unaffiliated 
     person that is--

       ``(I) a 501(c)(3) organization, or
       ``(II) a Federal, State, or local government conservation 
     organization,

       ``(ii) which meets the requirements of clauses (ii) and 
     (iii)(II) of section 170(h)(4)(A),
       ``(iii) which exceeds the requirements of relevant 
     environmental and land use statutes and regulations, and
       ``(iv) which obligates the owner of the land to pay the 
     costs incurred by the holder of the conservation restriction 
     in monitoring compliance with such restriction,
       ``(C) a management plan which meets the requirements of the 
     statutes and regulations referred to in subparagraph (B)(iii) 
     is developed for the conservation of the renewable resources, 
     and
       ``(D) such bond would be a qualified 501(c)(3) bond (after 
     the application of paragraph (2)) but for the failure to use 
     revenues derived by the 501(c)(3) organization from the sale, 
     lease, or other use of such resource as otherwise required by 
     this part,

     such bond shall not fail to be a qualified 501(c)(3) bond by 
     reason of the failure to so use such revenues if the revenues 
     which are not used as otherwise required by this part are 
     used in a manner consistent with the stated charitable 
     purposes of the 501(c)(3) organization.
       ``(2) Treatment of timber, etc.--
       ``(A) In general.--For purposes of subsection (a), the cost 
     of any renewable resource acquired with proceeds of any bond 
     described in paragraph (1) shall be treated as a cost of 
     acquiring the land associated with the renewable resource and 
     such land shall not be treated as used for a private business 
     use because of the sale or leasing of the renewable resource 
     to, or other use of the renewable resource by, an 
     unaffiliated person to the extent that such sale, leasing, or 
     other use does not constitute an unrelated trade or business, 
     determined by applying section 513(a).
       ``(B) Application of bond maturity limitation.--For 
     purposes of section 147(b), the cost of any land or renewable 
     resource acquired with proceeds of any bond described in 
     paragraph (1) shall have an economic life commensurate with 
     the economic and ecological feasibility of the financing of 
     such land or renewable resource.
       ``(C) Unaffiliated person.--For purposes of this 
     subsection, the term `unaffiliated person' means any person 
     who controls not more than 20 percent of the governing body 
     of another person.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to obligations issued after the date of the 
     enactment of this Act.

     SEC. 1134. MODIFICATION OF ALTERNATIVE MINIMUM TAX FOR 
                   INDIVIDUALS.

       Section 56(b)(1)(E), as amended by section 206, is amended 
     by striking ``$250'' and inserting ``$300''.

     SEC. 1135. EXCLUSION FROM INCOME OF SEVERANCE PAYMENT 
                   AMOUNTS.

       (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. 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 Date.--The amendments made by subsections (a) 
     and (b) shall apply to taxable years beginning after December 
     31, 2000, and before January 1, 2002.

     SEC. 1136. CAPITAL GAIN TREATMENT UNDER SECTION 631(B) TO 
                   APPLY TO OUTRIGHT SALES BY LAND OWNER.

       (a) In General.--Subsection (b) of section 631 (relating to 
     disposal of timber with a retained economic interest) is 
     amended--
       (1) by inserting ``and Outright Sales of Timber'' after 
     ``Economic Interest'' in the subsection heading, and
       (2) by adding before the last sentence the following new 
     sentence: ``The requirement in the first sentence of this 
     subsection to retain an economic interest in timber shall not 
     apply to an outright sale of such timber by the owner thereof 
     if such owner owned the land (at the time of such sale) from 
     which the timber is cut.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to sales after the date of the enactment of this 
     Act.

     SEC. 1137. 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 (as in effect on the 
     date of the enactment of this section),
       ``(ii) the date on which a license for such product is 
     issued under section 351 of the Public Health Service Act (as 
     so in effect), 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 (as so in effect).
       ``(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 by, or 
     affiliated with, an institution of higher education (as 
     defined 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

[[Page 19074]]

     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, 1998.
       ``(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 allowable under 
     section 41 or 45C for such taxable year.''.
       (b) Credit To Be Part of General Business Credit.--
       (1) In general.--Section 38(b) (relating to current year 
     business credits), as amended by this Act, 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 medical innovation expenses credit determined 
     under section 41A(a).''.
       (2) Transition rule.--Section 39(d), as amended by this 
     Act, is amended by adding at the end the following new 
     paragraph:
       ``(11) 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, as amended by 
     this Act, is amended by adding at the end the following new 
     subsection:
       ``(e) 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, 
     1998.

        TITLE XII--EXTENSION OF EXPIRED AND EXPIRING PROVISIONS

     SEC. 1201. 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.

     SEC. 1202. 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, 2005''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.

     SEC. 1203. TAXABLE INCOME LIMIT ON PERCENTAGE DEPLETION FOR 
                   MARGINAL PRODUCTION.

       (a) In General.--Subparagraph (H) of section 613A(c)(6) is 
     amended by striking ``January 1, 2000'' and inserting 
     ``January 1, 2005''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.

     SEC. 1204. 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, 2004''.
       (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. 1205. EXTENSION AND MODIFICATION OF CREDIT FOR PRODUCING 
                   ELECTRICITY FROM CERTAIN RENEWABLE RESOURCES.

       (a) 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 facility.--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) Closed-loop biomass facility.--In the case of a 
     facility using closed-loop biomass to produce electricity, 
     the term `qualified facility' means any facility owned by the 
     taxpayer which is originally placed in service after December 
     31, 1992, and before July 1, 2004.
       ``(C) Biomass facility.--In the case of a facility using 
     biomass (other than closed-loop biomass) to produce 
     electricity, the term `qualified facility' means any facility 
     owned by the taxpayer which is originally placed in service 
     before January 1, 2003.
       ``(D) Landfill gas or poultry waste facility.--
       ``(i) In general.--In the case of a facility using landfill 
     gas or poultry waste to produce electricity, the term 
     `qualified facility' means any facility of the taxpayer which 
     is originally placed in service after December 31, 1999, and 
     before July 1, 2004.
       ``(ii) Landfill gas.--In the case of a facility using 
     landfill gas, such term shall include equipment and housing 
     (not including wells and related systems required to collect 
     and transmit gas to the production facility) required to 
     generate electricity which are owned by the taxpayer and so 
     placed in service.
       ``(E) Special rule.--In the case of a qualified facility 
     described in subparagraph (C), the 10-year period referred to 
     in subsection (a) shall be treated as beginning no earlier 
     than January 1, 2000.''.
       (b) Expansion of Qualified Energy Resources.--
       (1) In general.--Section 45(c)(1) (defining qualified 
     energy resources) is amended by striking ``and'' at the end 
     of subparagraph (A), by striking the period at the end of 
     subparagraph (B) and inserting a comma, and by adding at the 
     end the following new subparagraphs:
       ``(C) biomass (other than closed-loop biomass),
       ``(B) landfill gas, and
       ``(C) poultry waste.''.
       (2) Definitions.--Section 45(c) is amended by redesignating 
     paragraph (3) as paragraph (6) and inserting after paragraph 
     (2) the following new paragraphs:
       ``(3) Biomass.--The term `biomass' means any solid, 
     nonhazardous, cellulosic waste material which is segregated 
     from other waste materials and which is derived from--
       ``(A) any of the following forest-related resources: mill 
     residues, precommercial thinnings, slash, and brush, but not 
     including old-growth timber,
       ``(B) 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 paper that is 
     commonly recycled, or
       ``(C) agriculture sources, including orchard tree crops, 
     vineyard, grain, legumes, sugar, and other crop by-products 
     or residues.
       ``(4) Landfill gas.--The term `landfill gas' means gas from 
     the decomposition of any household solid waste, commercial 
     solid waste, and industrial solid waste disposed of in a 
     municipal solid waste landfill unit (as such terms are 
     defined in regulations promulgated under subtitle D of the 
     Solid Waste Disposal Act (42 U.S.C. 6941 et seq.)).
       ``(5) Poultry waste.--The term `poultry waste' means 
     poultry manure and litter, including wood shavings, straw, 
     rice hulls, and other bedding material for the disposition of 
     manure.''.
       (c) Special Rules.--Section 45(d) (relating to definitions 
     and special rules) is amended by adding at the end the 
     following new paragraphs:
       ``(6) Credit eligibility in the case of government-owned 
     facilities using poultry waste.--In the case of a facility 
     using poultry waste to produce electricity and owned by a 
     governmental unit, the person eligible for the credit under 
     subsection (a) is the lessor or the operator of such 
     facility.

[[Page 19075]]

       ``(7) Proportional credit for facility using coal to co-
     fire with certain biomass.--In the case of a qualified 
     facility as defined in subsection (c)(3)(C) using coal to co-
     fire with biomass (other than closed-loop 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.''.
       (d) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act.

     SEC. 1206. ALASKA EXEMPTION FROM DYEING REQUIREMENTS.

       (a) Exception to Dyeing Requirements for Exempt Diesel Fuel 
     and Kerosene.--Paragraph (1) of section 4082(c) (relating to 
     exception to dyeing requirements) is amended to read as 
     follows:
       ``(1) removed, entered, or sold in the State of Alaska for 
     ultimate sale or use in such State, and''.
       (b) Effective Date.--The amendment made by this section 
     applies with respect to fuel removed, entered, or sold on or 
     after the date of the enactment of this Act.

     SEC. 1207. EXTENSION OF EXPENSING OF ENVIRONMENTAL 
                   REMEDIATION COSTS.

       (a) Extension of Termination Date.--Subsection (h) of 
     section 198 is amended by striking ``December 31, 2000'' and 
     inserting ``June 30, 2004''.
       (b) Expansion of Qualified Contaminated Site.--Section 
     198(c) is amended to read as follows:
       ``(c) Qualified Contaminated Site.--For purposes of this 
     section--
       ``(1) In general.--The term `qualified contaminated site' 
     means any area--
       ``(A) which is held by the taxpayer for use in a trade or 
     business or for the production of income, or which is 
     property described in section 1221(1) in the hands of the 
     taxpayer, and
       ``(B) at or on which there has been a release (or threat of 
     release) or disposal of any hazardous substance.
       ``(2) National priorities listed sites not included.--Such 
     term shall not include any site which is on, or proposed for, 
     the national priorities list under section 105(a)(8)(B) of 
     the Comprehensive Environmental Response, Compensation, and 
     Liability Act of 1980 (as in effect on the date of the 
     enactment of this section).
       ``(3) Taxpayer must receive statement from state 
     environmental agency.--An area shall be treated as a 
     qualified contaminated site with respect to expenditures paid 
     or incurred during any taxable year only if the taxpayer 
     receives a statement from the appropriate agency of the State 
     in which such area is located that such area meets the 
     requirement of paragraph (1)(B).
       ``(4) Appropriate state agency.--For purposes of paragraph 
     (2), the chief executive officer of each State may, in 
     consultation with the Administrator of the Environmental 
     Protection Agency, designate the appropriate State 
     environmental agency within 60 days of the date of the 
     enactment of this section. If the chief executive officer of 
     a State has not designated an appropriate State environmental 
     agency within such 60-day period, the appropriate 
     environmental agency for such State shall be designated by 
     the Administrator of the Environmental Protection Agency.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to expenditures paid or incurred after December 
     31, 1999.

                      TITLE XIII--REVENUE OFFSETS

                     Subtitle A--General Provisions

     SEC. 1301. 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. 1302. 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. 1303. 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. 1304. 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. 1305. TRANSFER OF EXCESS DEFINED BENEFIT PLAN ASSETS FOR 
                   RETIREE HEALTH BENEFITS.

       (a) Extension.--
       (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) Application of Minimum Cost Requirements.--
       (1) In general.--Paragraph (3) of section 420(c) is amended 
     to read as follows:
       ``(3) Minimum cost requirements.--
       ``(A) In general.--The requirements of this paragraph are 
     met if each group health plan or arrangement under which 
     applicable health benefits are provided provides that the 
     applicable employer cost for each taxable year during the 
     cost maintenance period shall not be less than the higher of 
     the applicable employer costs for each of the 2 taxable years 
     immediately preceding the taxable year of the qualified 
     transfer.
       ``(B) Applicable employer cost.--For purposes of this 
     paragraph, the term `applicable employer cost' means, with 
     respect to any taxable year, the amount determined by 
     dividing--
       ``(i) the qualified current retiree health liabilities of 
     the employer for such taxable year determined--

       ``(I) without regard to any reduction under subsection 
     (e)(1)(B), and
       ``(II) in the case of a taxable year in which there was no 
     qualified transfer, in the same manner as if there had been 
     such a transfer at the end of the taxable year, by

       ``(ii) the number of individuals to whom coverage for 
     applicable health benefits was provided during such taxable 
     year.
       ``(C) Election to compute cost separately.--An employer may 
     elect to have this paragraph applied separately with respect 
     to individuals eligible for benefits under title XVIII of the 
     Social Security Act at any time during the taxable year and 
     with respect to individuals not so eligible.
       ``(D) Cost maintenance period.--For purposes of this 
     paragraph, the term `cost maintenance period' means the 
     period of 5 taxable years beginning with the taxable year in 
     which the qualified transfer occurs. If a taxable year is in 
     2 or more overlapping cost maintenance periods, this 
     paragraph shall be applied by taking into account the highest 
     applicable employer cost required to be provided under 
     subparagraph (A) for such taxable year.''.
       (2) Conforming amendments.--
       (A) Clause (iii) of section 420(b)(1)(C) is amended by 
     striking ``benefits'' and inserting ``cost''.
       (B) Subparagraph (D) of section 420(e)(1) is amended by 
     striking ``and shall not be subject to the minimum benefit 
     requirements of subsection (c)(3)'' and inserting ``or in 
     calculating applicable employer cost under subsection 
     (c)(3)(B)''.

[[Page 19076]]

       (c) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to qualified transfers occurring after the date of the 
     enactment of this Act.
       (2) Transition rule.--If the cost maintenance period for 
     any qualified transfer after the date of the enactment of 
     this Act includes any portion of a benefit maintenance period 
     for any qualified transfer on or before such date, the 
     amendments made by subsection (b) shall not apply to such 
     portion of the cost maintenance period (and such portion 
     shall be treated as a benefit maintenance period).

     SEC. 1306. TAX TREATMENT OF INCOME AND LOSS ON DERIVATIVES.

       (a) In General.--Section 1221 (defining capital assets) is 
     amended--
       (1) by striking ``For purposes'' and inserting the 
     following:
       ``(a) In General.--For purposes'',
       (2) by striking the period at the end of paragraph (5) and 
     inserting a semicolon, and
       (3) by adding at the end the following:
       ``(6) any commodities derivative financial instrument held 
     by a commodities derivatives dealer, unless--
       ``(A) it is established to the satisfaction of the 
     Secretary that such instrument has no connection to the 
     activities of such dealer as a dealer, and
       ``(B) such instrument is clearly identified in such 
     dealer's records as being described in subparagraph (A) 
     before the close of the day on which it was acquired, 
     originated, or entered into (or such other time as the 
     Secretary may by regulations prescribe);
       ``(7) any hedging transaction which is clearly identified 
     as such before the close of the day on which it was acquired, 
     originated, or entered into (or such other time as the 
     Secretary may by regulations prescribe); or
       ``(8) supplies of a type regularly used or consumed by the 
     taxpayer in the ordinary course of a trade or business of the 
     taxpayer.
       ``(b) Definitions and Special Rules.--
       ``(1) Commodities derivative financial instruments.--For 
     purposes of subsection (a)(6)--
       ``(A) Commodities derivatives dealer.--The term 
     `commodities derivatives dealer' means a person which 
     regularly offers to enter into, assume, offset, assign, or 
     terminate positions in commodities derivative financial 
     instruments with customers in the ordinary course of a trade 
     or business.
       ``(B) Commodities derivative financial instrument.--
       ``(i) In general.--The term `commodities derivative 
     financial instrument' means any contract or financial 
     instrument with respect to commodities (other than a share of 
     stock in a corporation, a beneficial interest in a 
     partnership or trust, a note, bond, debenture, or other 
     evidence of indebtedness, or a section 1256 contract (as 
     defined in section 1256(b)), the value or settlement price of 
     which is calculated by or determined by reference to a 
     specified index.
       ``(ii) Specified index.--The term `specified index' means 
     any one or more or any combination of--

       ``(I) a fixed rate, price, or amount, or
       ``(II) a variable rate, price, or amount,

     which is based on any current, objectively determinable 
     financial or economic information with respect to commodities 
     which is not within the control of any of the parties to the 
     contract or instrument and is not unique to any of the 
     parties' circumstances.
       ``(2) Hedging transaction.--
       ``(A) In general.--For purposes of this section, the term 
     `hedging transaction' means any transaction entered into by 
     the taxpayer in the normal course of the taxpayer's trade or 
     business primarily--
       ``(i) to manage risk of price changes or currency 
     fluctuations with respect to ordinary property which is held 
     or to be held by the taxpayer,
       ``(ii) to manage risk of interest rate or price changes or 
     currency fluctuations with respect to borrowings made or to 
     be made, or ordinary obligations incurred or to be incurred, 
     by the taxpayer, or
       ``(iii) to manage such other risks as the Secretary may 
     prescribe in regulations.
       ``(B) Treatment of nonidentification or improper 
     identification of hedging transactions.--Notwithstanding 
     subsection (a)(7), the Secretary shall prescribe regulations 
     to properly characterize any income, gain, expense, or loss 
     arising from a transaction--
       ``(i) which is a hedging transaction but which was not 
     identified as such in accordance with subsection (a)(7), or
       ``(ii) which was so identified but is not a hedging 
     transaction.
       ``(3) Regulations.--The Secretary shall prescribe such 
     regulations as are appropriate to carry out the purposes of 
     paragraph (6) and (7) of subsection (a) in the case of 
     transactions involving related parties.''.
       (b) Management of Risk.--
       (1) Section 475(c)(3) is amended by striking ``reduces'' 
     and inserting ``manages''.
       (2) Section 871(h)(4)(C)(iv) is amended by striking ``to 
     reduce'' and inserting ``to manage''.
       (3) Clauses (i) and (ii) of section 988(d)(2)(A) are each 
     amended by striking ``to reduce'' and inserting ``to 
     manage''.
       (4) Paragraph (2) of section 1256(e) is amended to read as 
     follows:
       ``(2) Definition of hedging transaction.--For purposes of 
     this subsection, the term `hedging transaction' means any 
     hedging transaction (as defined in section 1221(b)(2)(A)) if, 
     before the close of the day on which such transaction was 
     entered into (or such earlier time as the Secretary may 
     prescribe by regulations), the taxpayer clearly identifies 
     such transaction as being a hedging transaction.''.
       (c) Conforming Amendments.--
       (1) Each of the following sections are amended by striking 
     ``section 1221'' and inserting ``section 1221(a)'':
       (A) Section 170(e)(3)(A).
       (B) Section 170(e)(4)(B).
       (C) Section 367(a)(3)(B)(i).
       (D) Section 818(c)(3).
       (E) Section 865(i)(1).
       (F) Section 1092(a)(3)(B)(ii)(II).
       (G) Subparagraphs (C) and (D) of section 1231(b)(1).
       (H) Section 1234(a)(3)(A).
       (2) Each of the following sections are amended by striking 
     ``section 1221(1)'' and inserting ``section 1221(a)(1)'':
       (A) Section 198(c)(1)(A)(i).
       (B) Section 263A(b)(2)(A).
       (C) Clauses (i) and (iii) of section 267(f)(3)(B).
       (D) Section 341(d)(3).
       (E) Section 543(a)(1)(D)(i).
       (F) Section 751(d)(1).
       (G) Section 775(c).
       (H) Section 856(c)(2)(D).
       (I) Section 856(c)(3)(C).
       (J) Section 856(e)(1).
       (K) Section 856(j)(2)(B).
       (L) Section 857(b)(4)(B)(i).
       (M) Section 857(b)(6)(B)(iii).
       (N) Section 864(c)(4)(B)(iii).
       (O) Section 864(d)(3)(A).
       (P) Section 864(d)(6)(A).
       (Q) Section 954(c)(1)(B)(iii).
       (R) Section 995(b)(1)(C).
       (S) Section 1017(b)(3)(E)(i).
       (T) Section 1362(d)(3)(C)(ii).
       (U) Section 4662(c)(2)(C).
       (V) Section 7704(c)(3).
       (W) Section 7704(d)(1)(D).
       (X) Section 7704(d)(1)(G).
       (Y) Section 7704(d)(5).
       (3) Section 818(b)(2) is amended by striking ``section 
     1221(2)'' and inserting ``section 1221(a)(2)''.
       (4) Section 1397B(e)(2) is amended by striking ``section 
     1221(4)'' and inserting ``section 1221(a)(4)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to any instrument held, acquired, or entered 
     into, any transaction entered into, and supplies held or 
     acquired on or after the date of enactment of this Act.

                      Subtitle B--Loophole Closers

     SEC. 1311. 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.--
       (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 
     over a period (not greater than 4 taxable years) beginning 
     with such first taxable year.

     SEC. 1312. 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 
     or 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 contributions is used for a purpose other than that 
     for which the contributions were made,


[[Page 19077]]


     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. 1313. 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) Accrual 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 (l)(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. 1314. 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 new 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) (compounded 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 for 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 purposes of this section--
       ``(1) In general.--The term `financial asset' means--
       ``(A) any equity interest in any pass-thru entity, and
       ``(B) to the extent provided in regulations--
       ``(i) any debt instrument, and
       ``(ii) any stock in a corporation which is 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,
       ``(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 taxpayer 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. 1315. 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:

[[Page 19078]]

       ``(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 (F) 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 indirect 
     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 without 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 respect 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 the 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 a 
     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 
     transfers 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. 1316. RESTRICTION ON USE OF REAL ESTATE INVESTMENT 
                   TRUSTS TO AVOID ESTIMATED TAX PAYMENT 
                   REQUIREMENTS.

       (a) In General.--Subsection (e) 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 (l)(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 
     (l)(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. 1317. 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--

[[Page 19079]]

       ``(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.

       ``(ii) Individual's share of unallocated stock.--For 
     purposes of clause (i)(II), an individual's share of 
     unallocated S corporation stock held by the trust is 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) Member of family.--For purposes of this paragraph, 
     the term `member of the family' means, with respect to any 
     individual--
       ``(i) the spouse of the individual,
       ``(ii) an ancestor or lineal descendant of the individual 
     or the individual's spouse,
       ``(iii) a brother or sister of the individual or the 
     individual's spouse and any lineal descendant of the brother 
     or sister, and
       ``(iv) the spouse of any 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, stock 
     appreciation right, phantom stock unit, performance unit, or 
     similar instrument 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 violates 
     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 case 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. 1318. 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. 1319. ALLOCATION OF BASIS ON TRANSFERS OF INTANGIBLES IN 
                   CERTAIN NONRECOGNITION TRANSACTIONS.

       (a) Transfers to Corporations.--Section 351 (relating to 
     transfer to corporation controlled by transferor) is amended 
     by redesignating subsection (h) as 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. 1320. 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 (l)); 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 269B(c)(2)) shall be 
     treated as 1 person.
       ``(4) Exception for certain new reits.--
       ``(A) In general.--The term `controlled entity' shall not 
     include an incubator REIT.
       ``(B) Incubator reit.--A corporation shall be treated as an 
     incubator REIT for any taxable year during the eligibility 
     period if it meets all the following requirements for such 
     year:
       ``(i) The corporation elects to be treated as an incubator 
     REIT.
       ``(ii) The corporation has only voting common stock 
     outstanding.
       ``(iii) Not more than 50 percent of the corporation's real 
     estate assets consist of mortgages.
       ``(iv) From not later than the beginning of the last half 
     of the second taxable year, at least 10 percent of the 
     corporation's capital is provided by lenders or equity 
     investors who are unrelated to the corporation's largest 
     shareholder.
       ``(v) The corporation annually increases the value of its 
     real estate assets by at least 10 percent.
       ``(vi) The directors of the corporation adopt a resolution 
     setting forth an intent to engage in a going public 
     transaction.

     No election may be made with respect to any REIT if an 
     election under this subsection was in effect for any 
     predecessor of such REIT.
       ``(C) Eligibility period.--
       ``(i) In general.--The eligibility period (for which an 
     incubator REIT election can be made) begins with the REIT's 
     second taxable year and ends at the close of the REIT's third 
     taxable year, except that the REIT may, subject to clauses 
     (ii), (iii), and (iv), elect to extend such period for an 
     additional 2 taxable years.
       ``(ii) Going public transaction.--A REIT may not elect to 
     extend the eligibility period under clause (i) unless it 
     enters into an agreement with the Secretary that if it does 
     not engage in a going public transaction by the end of the 
     extended eligibility period, it shall pay Federal income 
     taxes for the 2 years of the extended eligibility period as 
     if it had not made an incubator REIT election and had ceased 
     to qualify as a REIT for those 2 taxable years.
       ``(iii) Returns, interest, and notice.--

       ``(I) Returns.--In the event the corporation ceases to be 
     treated as a REIT by operation of clause (ii), the 
     corporation shall file any appropriate amended returns 
     reflecting the change in status within 3 months of the close 
     of the extended eligibility period.
       ``(II) Interest.--Interest shall be payable on any tax 
     imposed by reason of clause (ii) for any

[[Page 19080]]

     taxable year but, unless there was a finding under 
     subparagraph (D), no substantial underpayment penalties shall 
     be imposed.
       ``(III) Notice.--The corporation shall, at the same time it 
     files its returns under subclause (I), notify its 
     shareholders and any other persons whose tax position is, or 
     may reasonably be expected to be, affected by the change in 
     status so they also may file any appropriate amended returns 
     to conform their tax treatment consistent with the 
     corporation's loss of REIT status.
       ``(IV) Regulations.--The Secretary shall provide 
     appropriate regulations setting forth transferee liability 
     and other provisions to ensure collection of tax and the 
     proper administration of this provision.

       ``(iv) Clauses (ii) and (iii) shall not apply if the 
     corporation allows its incubator REIT status to lapse at the 
     end of the initial 2-year eligibility period without engaging 
     in a going public transaction if the corporation is not a 
     controlled entity as of the beginning of its fourth taxable 
     year. In such a case, the corporation's directors may still 
     be liable for the penalties described in subparagraph (D) 
     during the eligibility period.
       ``(D) Special penalties.--If the Secretary determines that 
     an incubator REIT election was filed for a principal purpose 
     other than as part of a reasonable plan to undertake a going 
     public transaction, an excise tax of $20,000 shall be imposed 
     on each of the corporation's directors for each taxable year 
     for which an election was in effect.
       ``(E) Going public transaction.--For purposes of this 
     paragraph, a going public transaction means--
       ``(i) a public offering of shares of the stock of the 
     incubator REIT;
       ``(ii) a transaction, or series of transactions, that 
     results in the stock of the incubator REIT being regularly 
     traded on an established securities market and that results 
     in at least 50 percent of such stock being held by 
     shareholders who are unrelated to persons who held such stock 
     before it began to be so regularly traded; or
       ``(iii) any transaction resulting in ownership of the REIT 
     by 200 or more persons (excluding the largest single 
     shareholder) who in the aggregate own at least 50 percent of 
     the stock of the REIT.

     For the purposes of this subparagraph, the rules of paragraph 
     (3) shall apply in determining the ownership of stock.
       ``(F) Definitions.--The term `established securities 
     market' shall have the meaning set forth in the regulations 
     under section 897.''.
       (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) Exception 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. 
     For purposes of the preceding sentence, an entity shall be 
     treated as such a controlled entity on July 14, 1999, if it 
     becomes such an entity after such date in a transaction--
       (A) made pursuant to a written agreement which was binding 
     on such date and at all times thereafter, or
       (B) described on or before such date in a filing with the 
     Securities and Exchange Commission required solely by reason 
     of the transaction.

     SEC. 1321. DISTRIBUTIONS TO A CORPORATE PARTNER OF STOCK IN 
                   ANOTHER CORPORATION.

       (a) 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 
     corporate 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 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 XIV--TECHNICAL CORRECTIONS

     SEC. 1401. AMENDMENTS RELATED TO TAX AND TRADE RELIEF 
                   EXTENSION ACT OF 1998.

       (a) Amendment Related to Section 1004(b) of the Act.--
     Subsection (d) of section 6104 is amended by adding at the 
     end the following new paragraph:
       ``(6) Application to nonexempt charitable trusts and 
     nonexempt private foundations.--The organizations referred to 
     in paragraphs (1) and (2) of section 6033(d) shall comply 
     with the requirements of this subsection relating to annual 
     returns filed under section 6033 in the same manner as the 
     organizations referred to in paragraph (1).''.
       (b) Amendment Related to Section 4003 of the Act.--
     Subsection (b) of section 4003 of the Tax and Trade Relief 
     Extension Act of 1998 is amended by inserting 
     ``(7)(A)(i)(II),'' after ``(5)(A)(ii)(I),''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect as if included in the provisions of the Tax 
     and Trade Relief Extension Act of 1998 to which they relate.

     SEC. 1402. AMENDMENTS RELATED TO INTERNAL REVENUE SERVICE 
                   RESTRUCTURING AND REFORM ACT OF 1998.

       (a) Amendment Related to 1103  of the Act.--Paragraph (6) 
     of section 6103(k) is amended--
       (1) by inserting ``and an officer or employee of the Office 
     of Treasury Inspector General for Tax Administration'' after 
     ``internal revenue officer or employee'', and
       (2) by striking ``internal revenue'' in the heading and 
     inserting ``certain''.
       (b) Amendment Related to Section 3509 of the Act.--
     Subparagraph (A) of section 6110(g)(5) is amended by 
     inserting ``, any Chief Counsel advice,'' after ``technical 
     advice memorandum''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect as if included in the provisions of the 
     Internal Revenue Service Restructuring and Reform Act of 1998 
     to which they relate.

     SEC. 1403. AMENDMENTS RELATED TO TAXPAYER RELIEF ACT OF 1997.

       (a) Amendment Related to Section 302 of the Act.--The last 
     sentence of section 3405(e)(1)(B) is amended by inserting 
     ``(other than a Roth IRA)'' after ``individual retirement 
     plan''.
       (b) Amendments Related to Section  1072 of the Act.--
       (1) Clause (ii) of section 415(c)(3)(D) and subparagraph 
     (B) of section 403(b)(3) are each amended by striking 
     ``section 125 or'' and inserting ``section 125, 132(f)(4), 
     or''.
       (2) Paragraph (2) of section 414(s) is amended by striking 
     ``section 125, 402(e)(3)'' and inserting ``section 125, 
     132(f)(4), 402(e)(3)''.
       (c) Amendment Related to Section  1454 of the Act.--
     Subsection (a) of section 7436 is amended by inserting before 
     the period at the end of the first sentence ``and the proper 
     amount of employment tax under such determination''.
       (d) Effective Date.--The amendments made by this section 
     shall take effect as if included in the provisions of the 
     Taxpayer Relief of 1997 to which they relate.

     SEC. 1404. OTHER TECHNICAL CORRECTIONS.

       (a) Affiliated Corporations in Context of Worthless 
     Securities.--

[[Page 19081]]

       (1) Subparagraph (A) of section 165(g)(3) is amended to 
     read as follows:
       ``(A) the taxpayer owns directly stock in such corporation 
     meeting the requirements of section 1504(a)(2), and''.
       (2) Paragraph (3) of section 165(g) is amended by striking 
     the last sentence.
       (3) The amendments made by this subsection shall apply to 
     taxable years beginning after December 31, 1984.
       (b) Reference to Certain State Plans.--
       (1) Subparagraph (B) of section 51(d)(2) is amended--
       (A) by striking ``plan approved'' and inserting ``program 
     funded'', and
       (B) by striking ``(relating to assistance for needy 
     families with minor children)''.
       (2) The amendment made by paragraph (1) shall take effect 
     as if included in the amendments made by section 1201 of the 
     Small Business Job Protection Act of 1996.
       (c) Amount of IRA Contribution of Lesser Earning Spouse.--
       (1) Clause (ii) of section 219(c)(1)(B) is amended by 
     striking ``and'' at the end of subclause (I), by 
     redesignating subclause (II) as subclause (III), and by 
     inserting after subclause (I) the following new subclause:

       ``(II) the amount of any designated nondeductible 
     contribution (as defined in section 408(o)) on behalf of such 
     spouse for such taxable year, and''.

       (2) The amendment made by paragraph (1) shall take effect 
     as if included in section 1427 of the Small Business Job 
     Protection Act of 1996.
       (d) Modified Endowment Contracts.--
       (1) Paragraph (2) of section 7702A(a) is amended by 
     inserting ``or this paragraph'' before the period.
       (2) Clause (ii) of section 7702A(c)(3)(A) is amended by 
     striking ``under the contract'' and inserting ``under the old 
     contract''.
       (3) The amendments made by this subsection shall take 
     effect as if included in the amendments made by section 5012 
     of the Technical and Miscellaneous Revenue Act of 1988.
       (e) Lump-Sum Distributions.--
       (1) Clause (ii) of section 401(k)(10)(B) is amended by 
     adding at the end the following new sentence: ``Such term 
     includes a distribution of an annuity contract from--

       ``(I) a trust which forms a part of a plan described in 
     section 401(a) and which is exempt from tax under section 
     501(a), or
       ``(II) an annuity plan described in section 403(a).''.

       (2) The amendment made by paragraph (1) shall take effect 
     as if included in section 1401 of the Small Business Job 
     Protection Act of 1996.
       (f) Tentative Carryback Adjustments of Losses From Section 
     1256 Contracts.--
       (1) Subsection (a) of section 6411 is amended by striking 
     ``section 1212(a)(1)'' and inserting ``subsection (a)(1) or 
     (c) of section 1212''.
       (2) The amendment made by paragraph (1) shall take effect 
     as if included in the amendments made by section 504 of the 
     Economic Recovery Tax Act of 1981.

     SEC. 1405. CLERICAL CHANGES.

       (1) Subsection (f) of section 67 is amended by striking 
     ``the last sentence'' and inserting ``the second sentence''.
       (2) The heading for paragraph (5) of section 408(d) is 
     amended to read as follows:
       ``(5) Distributions of excess contributions after due date 
     for taxable year and certain excess rollover contributions.--
     ''.
       (3) The heading for subparagraph (B) of section 529(e)(3) 
     is amended by striking ``under guaranteed plans''.
       (4)(A) Subsection (e) of section 678 is amended by striking 
     ``an electing small business corporation'' and inserting ``an 
     S corporation''.
       (B) Clause (v) of section 6103(e)(1)(D) is amended to read 
     as follows:
       ``(v) if the corporation was an S corporation, any person 
     who was a shareholder during any part of the period covered 
     by such return during which an election under section 1362(a) 
     was in effect, or''.
       (5) Subparagraph (B) of section 995(b)(3) is amended by 
     striking ``the Military Security Act of 1954 (22 U.S.C. 
     1934)'' and inserting ``section 38 of the International 
     Security Assistance and Arms Export Control Act of 1976 (22 
     U.S.C. 2778)''.
       (6) Subparagraph (B) of section 4946(c)(3) is amended by 
     striking ``the lowest rate of compensation prescribed for GS-
     16 of the General Schedule under section 5332'' and inserting 
     ``the lowest rate of basic pay for the Senior Executive 
     Service under section 5382''.

     SEC. 1406. 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''.

           TITLE XV--COMPLIANCE WITH CONGRESSIONAL BUDGET ACT

     SEC. 1501. 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.

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